Foreign Relations, 1977–1980, Volume XXIII, Mexico, Cuba, and the Caribbean

184. Memorandum of Conversation¹

Washington, December 16, 1977, 11:10 a.m.–12:15 p.m.

SUBJECT

• Summary of the President’s Meeting with Prime Minister Michael Manley

PARTICIPANTS

• President Jimmy Carter
• Vice President Walter Mondale
• Secretary of State Cyrus Vance
• Dr. Zbigniew Brzezinski, Assistant to the President for National Security Affairs
• David Aaron, Deputy Assistant to the President for National Security Affairs (lunch only)
• Terence A. Todman, Assistant Secretary of State for Inter-American Affairs
• Frederick Irving, American Ambassador to Jamaica
• Anthony M. Solomon, Under Secretary of the Treasury for Monetary Affairs (lunch only)
• Robert Pastor, NSC Staff Member
• Guy Erb, NSC Staff Member (lunch only)
• Prime Minister Michael Manley and Mrs. Manley
• P.J. Patterson, Minister of Foreign Affairs, Foreign Trade and Tourism
• Alfred Rattray, Jamaican Ambassador
• Richard Fletcher, Minister of State, Ministry of Finance
• Keith Rodd, Member of Parliament
• Owen Jefferson, Director, Program Division, Ministry of Finance and Planning
• Gordon Wells, Permanent Secretary, Office of the Prime Minister
• E. Frank Francis, Permanent Secretary, Ministry of Foreign Affairs, Foreign Trade and Tourism
• Herbert Walker, Permanent Representative to the Jamaican Mission to the Specialized Agencies of the United Nations at Geneva

The President opened the meeting with an expression of warm welcome to the Prime Minister and members of his delegation. He said that he recognized the strong role that the Prime Minister is playing in the Caribbean and in the Third World. He thanked the Prime Minister for the warm and friendly reception he gave to Mrs. Carter and later to Andy Young on their visits to Jamaica.² Both had reported back to him about their talks and the hospitality extended to them.

The President suggested dividing the meeting into two parts, the first in the Cabinet Room to concentrate on matters of concern to our two countries, to the Caribbean region as a whole, and to regional political matters like Cuba and Belize. During the luncheon, they could concentrate on North-South issues.

That schedule was agreeable to the Prime Minister, who also thanked the President for his kind and gracious welcome. He said he doesn’t really deserve the kind remarks about him and the role he is said to be playing in international affairs.

Manley said that he was particularly happy with the visit to Washington for two reasons. He described U.S.-Jamaican relations as historically friendly, which went through some strain in recent years, which he regrets. Secondly, he and others in Jamaica had watched with keen interest how President Carter had injected a new dimension into international relations—human rights. He said he felt human rights could be a touchstone in international affairs, and went on at some length to express his admiration for the President and the manner in which he is handling foreign affairs—contrasting it with the “pragmatic” approach to international relations taken by others. He concluded that Jamaica welcomes the President’s approach, noting that the moral leadership of the U.S. is more important and influential than its military power.

The Prime Minister then said he would like to touch quickly on five technical matters which arose in his discussions with the Presidents of the World Bank, the Inter-American Development Bank (IADB), and the IMF.

—First, the International Development Association needs to be replenished, and the U.S. contribution to that is very important.

—Secondly, he said that he supports Mr. McNamara’s views that the capital base of the World Bank must be expanded.

—Third, he feels it essential that the USG maintain its contribution to the Inter-American Development Bank.

—Fourth, he understood that the USG is trying to get the IADB to change its criteria for soft-lending to be more in line with those of the World Bank, using rather artificial per capita income criteria. He said that if this view prevails, Haiti would be the only country in the Caribbean which would be able to get a soft loan from the IADB.

—Fifth, with respect to the IMF, the Prime Minister said that he had a very good conversation with its Managing Director, Mr. Witteveen. Apparently, a logjam has developed in the supplemental funding facility toward the Third World. The Prime Minister asked that the President use his good offices to try to break that logjam.³

The President said that the Prime Minister had presented these points very well, and that he had some knowledge of all of them. Secretary Vance indicated that State had discussed this thoroughly with the Treasury, and Secretary Vance said that he would report back to him (the President) later in the day. The President introduced Under Secretary Cooper, who was the State Department’s expert on economic matters. Mr. Cooper would be talking with his counterpart in Treasury and will report back.

The President in further response to the points mentioned by the Prime Minister said that he would take to heart the requests being made today, that he hoped funding for the Caribbean would continue, but that, like every President, he has some problems with obtaining funds from the Congress.

The Prime Minister thanked the President for the USAID program in Jamaica, speaking very highly for its aid and effectiveness. The President facetiously interjected by asking if he found the amount of aid we were giving to Jamaica excessive, whereupon the Prime Minister replied that if he could make that statement he would be the happiest politician in the country.

The Prime Minister then, in pointing to Ambassador Irving, said that he wanted to thank the President for his appointment and pay tribute to the warm cooperation given to him in Jamaica by the new U.S. Ambassador.

The Prime Minister said that the economic recovery of Jamaica will depend on a number of things, the major one being exports, not only bauxite, but on a broad range of items including tourism and agriculture to many different markets. In the long term, an export-led recovery is the only way out of Jamaica’s problem. The Prime Minister said that at this point he would like to make a request. He said that he had heard that the USG was thinking of increasing its stockpile of alumina. The Prime Minister said it would be of very great value to Jamaica if the United States would look to Jamaica as one of the suppliers for that alumina.

In this connection, the Prime Minister mentioned the Revere problem, which he described as unfortunate in U.S.-Jamaican relations.⁴ He said the Revere project was not well planned, was based on low-grade bauxite, and was risky in terms of profitability. He said that the company had lost a lot of money, and that the government had tried to save it. But then Revere took the case to court and to OPIC, claiming that Jamaica’s actions constituted expropriation. The Prime Minister denied that it could be considered expropriation. He said that he had useful talks with Southwire Company, which is from the President’s own state, and they were interested in acquiring Revere’s interest in the bauxite enterprise. The President interjected by saying the Southwire Company was a very reliable company.

The Prime Minister said he was hoping to encourage Southwire into acquiring the interests of Revere and perhaps with Government of Jamaica participation get the enterprise going probably at a level of 100,000 tons of alumina a year. He said that he would like to propose that the United States buy this output for a five-year period for USG stockpiling purposes. He said that of course Jamaica would have to sell this to the United States at competitive prices and stated that the price could be made worthwhile to the United States. As an aside, the Prime Minister said he knew, of course, the United States would not use its stockpile to depress prices on the world market. The President said that it would be contrary to U.S. law and policy to misuse the strategic stockpile program for pricing purposes.

The President changed the subject by remarking that he understood the IMF was pleased with Jamaica’s efforts in eliminating its balance-of-payments deficit. The President remarked that he wishes the U.S. could eliminate its deficit so quickly. The Prime Minister responded by saying that the deficit was “almost” eliminated, but it wasn’t done without great strain and certain adverse effects on the social development of the country.

The Prime Minister brought the subject back to the strategic stockpiling matter by asking which USG agency had the major interest. The President and Secretary Vance replied that there are about three agencies, each with an interest, but that Under Secretary of State for Economic Affairs Cooper will follow through and advise the Jamaicans with whom to deal.

The Prime Minister then said that he would like to talk about the Caribbean Consortium, but first he wanted to mention to the President a project which he considers very exciting and which will be of tremendous economic and social value to Jamaica. He said he was referring to agricultural bench terracing. Hence, again, he paid great compliment to USAID for its Project Pinders River Valley which has shown the value of bench terracing.⁵

He said that 20 percent of Jamaica’s land is arable, but only 47 percent is presently cultivated. The only way to increase the productivity of agriculture in Jamaica was to use the hills and mountains. He said that individual farmers have neither the means nor the physical strength to do the project themselves even if they banded together in a cooperative venture. He said that unless the State helped, it wouldn’t be done. There are about 400,000 acres of hills which should be used. The social advantage was obvious in that it would increase employment; it would help the balance-of-payments by reducing the need to import food.

The Prime Minister then went on to discuss unemployment and crime, and the terracing project as a way to do something about that. He had thought about the idea in 1972, but regretted that he only began moving on it a year ago.

He said that the Norwegians and the FAO have expressed interest in it, but that help from more than one country would be necessary. He was hoping that the U.S. would take a greater interest in it. He thought that the project could also help Jamaica by arresting the migration to the urban areas.

The President asked whether in its agricultural development Jamaica was utilizing human labor or moving toward greater utilization of machinery. He also asked what the Jamaican wage scale was for unskilled labor.

The Prime Minister answered that such labor received the minimum wage, which is about $5.30 a day. He said that it was low, but even the labor unions accept this low rate of pay because it increases the number of places in the job market. (The Prime Minister did not specifically respond to the use of machinery versus human labor, but by his answer one could infer that human labor was preferred in those projects which had government participation.) The Prime Minister then described briefly the seriousness of the unemployment problem: over 30 percent of the youth, over 40 percent of women; and 24 percent overall for the nation. The Prime Minister said that what his Government is trying to do in Jamaica can be called “social engineering.”

The President asked if the USAID project on bench terracing was only a small pilot project. The Prime Minister said that it wasn’t; indeed, it covered 26,000 acres. He said that with AID’s help, Jamaica had worked out the kinks in the project, and was prepared to expand it to the 400,000 acres. The President said that Secretary Vance had just indicated to him that he would follow through and will give a report on the bench terracing proposal by the evening.

The Prime Minister remarked that he would like to talk about the two regional political issues—Belize and Cuba—later, and to talk about the Caribbean consortium now. He started by expressing his own strong appreciation and that of the Caribbean nations for Ambassador Todman’s role in this matter. The Prime Minister said that Jamaica was seriously concerned about Trinidad’s ambivalence toward the Caribbean group. The President interjected by asking whether any other country besides Trinidad, say Barbados, fit into that category. The Prime Minister replied that Trinidad was a special case, and the fact that it is the only donor country in the Caribbean, is not unrelated to its ambivalence. He believes that Trinidad’s attitude is largely due to its problems with CARICOM and partly to its Prime Minister, Eric Williams, who tends to retreat into silence when he has a problem. Also, Williams is probably preoccupied with other things, like the University and his plan for regional cooperation. The Prime Minister said that he hopes that CARICOM will get back on the right track next year. He said it would be very important to have Trinidad participate in the Caribbean group, and that he would do everything to try to get Trinidad involved. But he believes the best strategy would be not to push Williams, nor to make the establishment of the Caribbean Group conditional on his participation.

The Prime Minister said that Jamaica’s problems are an example of the problems most of the Third World nations face. He said that Jamaica is working hard with the IMF on a stabilization program, but remarked that it is not particularly helpful when a country has 24 percent unemployment.

He said that his government was working equally hard on a five-year plan which will be put into effect starting April 1, 1978. He did not describe its particulars, but said that it is a plan which emphasizes national “self-sacrifice” and structural change. He said the Plan is to maximize Jamaica’s national ingenuity. Jamaica is facing a situation of having to overcome the effects of 200 years of colonialism which has left Jamaica exporting essentially one product and importing all its food and much of its other needs. He said that this is something that cannot continue, and therefore he is trying to diversify the economic structure of Jamaica so that it can become self-reliant in the basics.

The President interrupted to say that he understood that Jamaica had met the IMF’s rigid requirements, and he asked whether relations had improved. The Prime Minister replied by saying it is not as bad as it was. The President asked whether the IMF’s constraints are compatible with Jamaica’s goals. The Prime Minister said that he hoped so. He said that they are trying to fine-tune the economy, and he has learned a great deal from the IMF. He hopes, however, that the IMF will learn about the social and political context within which the IMF rules must work. He said that in his conversation with Witteveen he mentioned that too much austerity would drive people into the streets. Witteveen listened “in a friendly manner.” The President asked the Prime Minister about the rate of inflation in Jamaica. The Prime Minister stated it is now about 13 percent, “which is better than Mr. Callaghan is doing.”

The Prime Minister said that in looking at the five-year plan and wanting to increase the country’s self-reliance by placing maximum emphasis on savings, the greatest stumbling block was the lack of foreign exchange. Up to 1972, Jamaica had a borrowing program that was both sensible and manageable, but when grain prices rose in 1973, Jamaica had to borrow “short.” Next year Jamaica will need $195 million to service the government’s debt, and $150 million to service the commercial debt. Energy will cost another $220 million. Eighty-one percent of total foreign exchange earnings next year will be spent on debts and on energy. The debt repayment problem is strangling Jamaica, and this is true of other LDCs. He mentioned Guyana as one of them. He said that Jamaica’s foreign exchange gap is running at $300–$400 million a year, which he said he hoped would be on a decreasing scale. If Jamaica restricted imports any more, there wouldn’t be any capital goods imported, and investment would be slowed even further. He said Jamaicans are serious people who are trying to move ahead—he hopes that unemployment would be reduced to 15 percent—but they need help.

The Prime Minister said that he didn’t want to do any special pleading, but Jamaica is one of the strongest democracies in the world. He said that Jamaica has a cantankerous press—second only to the US—but nevertheless it is a free press. He said that Jamaica is one of the few real democracies that is in such bad economic straits. It is essential that Jamaica be helped to demonstrate that in a democracy, development and the raising of standards of living can occur; that democracies can satisfy both social and basic needs as well as maintain freedom. He was concerned that economic constraints might overwhelm Jamaica’s democracy, and that a totalitarian solution might be the alternative.

The President remarked that the United States has a great interest in Jamaica, and that he had personally studied Jamaica’s financial problems. He wanted the Prime Minister to know that he saw another dimension in Jamaica’s economic plight—the relative unwillingness of U.S. business to invest in Jamaica because of the fear of expropriation. He said that private investors were apprehensive about the political stability of the country and its leaders’ future intentions. He said that if Roy Richards of Southwire should invest in Jamaica, that in itself would be a good sign that the climate for business is good. He suggested that Jamaica ought to encourage visits of delegations from the U.S. Chamber of Commerce or the National Association of Manufacturers to alleviate any concerns which U.S. business may have. The President also said that he would be glad to send down a team from the Department of Commerce to obtain information on the improved business climate in Jamaica and disseminate this information to U.S. business. It might be of interest to Jamaica for these organizations to make suggestions on ways to further encourage U.S. and domestic private investment and to identify constraints to such investment. The President said that if this tremendous source of development and jobs is not tapped, then Jamaica will be confined to searching for only government loans. In the U.S., we could not prosper without private investment; he suggested that Jamaica may want to look at such investment as an additional source of help to attain their development goals.

The Prime Minister said that these were very good suggestions and that he would follow through on them. He remarked that nationalism and Jamaica’s social welfare goals led to Jamaica’s wanting joint ventures to ensure that investment capital is in harmony with its development goals. He said, however, this does not mean that all U.S. investments must be joint ventures, but that is clearly Jamaica’s preference. He then remarked that he talked with officials of Anaconda the day before about the possible expansion of their investment in aluminum, and they were very surprised to hear of Jamaica’s interest. He said he felt that the meeting with Anaconda relieved some of their concerns.

The Prime Minister said that before discussing another subject, he wanted to emphasize that with regard to the Caribbean consortium, “speed is of the essence;” otherwise Jamaica’s five-year plans will be jeopardized, and her balance-of-payments problem will remain a powerful constraint.

The Prime Minister said that before coming to Washington he met with President Perez of Venezuela, and Perez authorized him to tell President Carter that he strongly supports Manley’s view that the consortium should address the debt problem as one of its top priorities.

The President said that he would be interested in hearing about the conference on Belize in Kingston on December 9.⁶

The Prime Minister responded by saying that there were some principles that have to be safeguarded in the Belize problem. He remarked that if we start ceding territories as a way to resolve disputes, then where will it stop? The consequences for Africa and Latin America would be very serious. He said that the British wanted to get Belize off their back, and are very vexed with him because he has been unwilling to push Belize into ceding some territory to Guatemala. He remarked that Britain’s only interest is to get the matter settled. He said that the countries that met in Kingston authorized him to tell the President that they would like him to make efforts to protect the independence and territorial integrity of Belize and to ensure that its borders will be secure. They felt that if the United States exerted moral pressure on Guatemala, Guatemala would back down and the issue could be solved without problems.

The President remarked that he had a long meeting with the President of Guatemala, and the Secretary of State has had many other meetings. He explained that because of its intimate involvement in the Middle East, the U.S. has been reluctant to get involved in other disputes. And so the United States has tried to stay aloof of the Belize problem. He then asked Secretary Vance to comment.

Secretary Vance said that he had talked to Price and others. We can understand the question of principle, but there is also a question of how to achieve a practical solution to this problem. Secretary Vance said that ceding some territory to Guatemala would not set a precedent if it is done voluntarily. He mentioned that even Venezuela is considering ceding some of its territory to Guyana to solve one of its festering problems.

Secretary Vance said there is a real danger of violence if a solution is not reached. He said that in the last analysis the parties in dispute really have to solve the problem themselves, but others may play a role in suggesting what is best for them. Therefore, we don’t want to get in the position of imposing a solution to the problem, but we also do not want to reject an agreeable solution either just because it contravenes a principle.

The President said that there were important precedents for ceding territory including Bolivia’s long-standing aspiration for a sovereign corridor to the sea. A voluntary agreement which cedes territory would not establish a bad precedent provided it was voluntary. The U.S. has supported the parties in trying to reach agreement, but we have stayed out of direct negotiations.

The President asked whether Guatemala and Belize are in direct negotiation, and the Prime Minister said that they weren’t, that the British and the Guatemalans have negotiated behind Price’s back. Also, he thought that the Mexicans were ambivalent about the issue and probably wanted the Belizeans to become independent without ceding territory.

Patterson, in summary, said that he understood why the U.S. for historical reasons had remained aloof from negotiations; but under President Carter, the U.S. had reasserted its political and moral leadership in the hemisphere, and the Belizean problem is one the U.S. could help to solve. He said that as long as the U.S. remains aloof, Guatemala will be reluctant to accept Belizean independence. The moment the U.S. gives some indication that it opposed territorial cession, and perhaps would assist in joint development projects between Belize and Guatemala, then Guatemala will re-think its position. Lastly, Belize should be involved in the negotiations; keeping them out only increases suspicion.

The President said that the U.S. position is not one of disinterest, but rather of deferring to the British, who have the responsibility for Belize.

The President announced that lunch was waiting and invited everyone to adjourn to the Family Dining Room to continue the discussions. He said he would like to talk to the Prime Minister about Cuba.

(There are no notes on the luncheon discussion between the President and the Prime Minister because the notetakers were not within earshot.)⁷

1. Source: Carter Library, National Security Affairs, Brzezinski Material, Brzezinski Office File, Country Chron, Box 23, Jamaica, 1978. Confidential. The meeting was held in the Cabinet Room. A briefing paper for the President’s meeting with Manley is attached to a memorandum from Christopher to Carter, December 12. (Ibid.)
2. See Document 178 and footnote 5, Document 181.
3. The Witteveen Facility, named after H. Johannes Witteveen, Managing Director of the IMF, provided emergency loans to developing nations struggling with the rising price of oil. On February 23, 1978, the House of Representatives approved U.S. participation in the Witteveen Facility. (Telegram 51940 to all East Asian and Pacific diplomatic posts, February 28, 1978; National Archives, RG 59, Central Foreign Policy File, D780093–0208) The Senate approved U.S. participation on July 31, 1978. (Telegram 200262 to all East Asian and Pacific diplomatic posts, August 8, 1978; National Archives, RG 59, Central Foreign Policy File, D780325–0510) Documentation on U.S. contributions to multilateral funding agencies and U.S. support for North-South economic initiatives is in Foreign Relations, 1977–1980, vol. III, Foreign Economic Policy.
4. See footnote 5, Document 175.
5. In telegram 7244 from Kingston, December 2, the Embassy described bench terracing as “a method of conserving the soil on slopes as to make the hills productive.” (National Archives, RG 59, Central Foreign Policy File, D770448–0375)
6. Foreign Ministers from seven Caribbean and Latin American countries met in Kingston December 9–10 to discuss Guatemala’s claims on Belize and Belize’s independence. The Embassy reported on the meeting in telegram 7450 from Kingston, December 12. (National Archives, RG 59, Central Foreign Policy File, D770462–0449) Documentation on the territorial dispute is in Foreign Relations, 1977–1980, vol. XV, Central America.
7. During the lunch, Carter and Manley discussed North-South issues, according to Manley’s December 22 letter to Carter. Carter replied to Manley in a January 25, 1978, letter, followed up by a more detailed letter on February 13. See Foreign Relations, 1977–1980, vol. III, Foreign Economic Policy, Document 294.