176. Action Memorandum From the Assistant Secretary of State for Inter-American Affairs (Todman) to Secretary of State Vance 1

Jamaica: Resumption of AID Lending

Issue for Decision

Whether to remove a 1975 restriction on AID capital lending to Jamaica.

Background/Analysis

In June, 1975, Secretary Kissinger decided that no further AID capital lending would be considered for Jamaica until there was a [Page 432]satisfactory solution of an investment dispute between the Jamaican Government and U.S. bauxite producers there.2

This restriction was imposed in connection with a decision to proceed with a $9 million Rural Education Loan that had been deferred for a year following the unilateral imposition of large new bauxite taxes by Jamaica in 1974. Both actions involved Department consultations with Treasury.

Following your meeting with Foreign Minister Patterson on March 3,3 the Jamaican Government requested an amendment adding $2 million to the $9 million Rural Education Loan. The Jamaicans are likely to view our response to their request as the first test of our sincerity in trying to cooperate with their development and to improve our bilateral relations. We are prepared to proceed if you remove the capital lending restriction.

This restriction is inconsistent with recent decisions made by you and the White House, reflecting a more forthcoming policy toward Jamaica:

—You agreed with Mr. Patterson that we should explore Jamaica’s economic requirements by establishing joint technical teams.

—The White House approved requesting $10 million in Supporting Assistance for Jamaica in FY 1978 in the latest Congressional Presentation, which also proposes $10 million in development loans for FY 1977 and $10 million in Housing Investment Guarantees for FY 78.

The bauxite dispute is largely resolved:

—The three major U.S. aluminum firms involved (Alcoa, Kaiser and Reynolds) have signed agreements with the GOJ.

—A fourth company, Revere, closed its plant and filed suit in the Jamaica courts, claiming the bauxite levy is illegal under Jamaica law. The court’s decision is expected this spring. Charging that GOJ actions are equivalent to expropriation, Revere also filed a claim for compensation under its political risk insurance with the Overseas Private Investment Corporation. Nevertheless, negotiations to settle the dispute have continued, with the USG urging flexibility on all sides. It is not at all clear that the Revere dispute involves expropriation as defined in relevant U.S. law and the case may not be settled for years.

The ban on capital lending has been an irritant in our relations and is inconsistent with our new initiatives.

[Page 433]

Recommendation:

That you rescind the 1975 Secretarial decision halting AID capital lending to Jamaica.4

  1. Source: National Archives, RG 59, Central Foreign Policy File, P770065–1631. Confidential. Drafted by Taher and Wheeler; concurred in by AA/LA, L/ARA, and EB/IFD/OIA. Sent through Habib.
  2. See Foreign Relations, 1969–1976, vol. E–11, Part 1, Documents on Mexico; Central America; and the Caribbean, 1973–1976, Document 446.
  3. See Document 175.
  4. Vance checked the approve option on April 22.