Foreign Relations of the United States, 1977–1980 Volume XXIV, South America; Latin America Region

304. Memorandum of Conversation¹

Washington, September 6, 1977, 2 p.m.

SUBJECT

• President Carter/President Morales Bermudez Bilateral

PARTICIPANTS

• PERU

  • General Francisco Morales Bermudez, President of Peru
  • Jose de la Puente, Foreign Minister of Peru
  • General Enrique Falconi Mejia, Chief of the Military Household
  • Ambassador Hubert Weiland
  • Ambassador Carlos Garcia Bedoya

• U.S.

  • President Carter
  • Vice President Mondale
  • Secretary Vance
  • Dr. Zbigniew Brzezinski
  • Assistant Secretary Todman
  • Robert Pastor, NSC
  • Harry W. Shlaudeman, U.S. Ambassador, Lima

Opening Remarks

The President opened the meeting welcoming Morales Bermudez to Washington and to this “historic occasion”. He particularly thanked Morales Bermudez for the warm reception given Mrs. Carter in Lima, noting that Mrs. Carter found the stop there the high point of her trip—but “please don’t tell the others”.

The President expressed his gratitude for Peru’s role in helping to lead the way toward important changes in South America, referring particularly to the Peruvian program of elections and a return to civilian government. The President expressed interest in learning more about the Peruvian Government’s decision to cut back on arms purchases, a decision he had heard about from Senator Hollings.² The President referred to the concerns of Peru’s neighbors with respect to these purchases and asked if the report from Senator Hollings was correct.

Morales Bermudez in opening his remarks thanked the President for the invitation to Washington, noted the importance that personal contact between the two Chiefs of State would have for future U.S.-Peruvian relations and said he would be pleased to address the President’s concerns.

The Peruvian President noted with respect to President Carter’s comments about his country’s political program that the nine years of government by the Armed Forces have brought important changes and reforms to Peru. The Government of the Armed Forces realizes that in the future these changes must be “maintained in a democratic setting” if they are to be made truly lasting. It is for this reason that the program for a return to democratic government has been established.

Arms Limitations

With regard to President Carter’s question on armaments, Morales Bermudez recalled his very frank dialogue with the two U.S. congressional delegations that recently visited in Peru.³ He had explained that reports of Peru’s “armamentismo” were “distortions, misrepresentations and frequently tendentious”. Peru has a pacific policy and no offensive plans. Morales Bermudez referred to the numerous aggressions practiced against Peru in her past and to the territories lost as a result. He said that all Peru has done has been to cover its minimum security needs, replacing obsolete equipment in the process. Morales Bermudez asserted that the effort to cover those needs is now “for all practical purposes” (practicamente) completed.

The word practicamente did not come out in the interpretation and the President, having picked it up in the Spanish, asked Morales Bermudez if he meant to say that Peru’s arms purchases were “practically completed”. Morales Bermudez reformulated his response, saying that Peru has now achieved the level of armaments necessary to guarantee its national security and maintain parity with its neighbors. From this point on Peru will seek only to maintain its equipment, its logistics systems and the like. The President said he hoped Chile and Ecuador could be reassured with the information that Peru has decided not to continue adding to its armaments. Morales Bermudez responded that Peru has excellent relations with its neighbors, that these relations are particularly strong among the armed forces of the three countries, and that a frank and ongoing dialogue is maintained.

Bolivian Access to Sea

The President next queried whether it would be appropriate for him to ask about Bolivia’s desire for access to the sea. The President said that he asked as an interested leader of the hemisphere rather than as one who wanted to intrude in the internal affairs of other countries. He said that he hoped our neighbors in South America could work together in harmony. What can be done about Bolivia’s problem?

Morales Bermudez said that Peru has worked for peace and harmony in the region, had participated in regional meetings at which this problem had been addressed in recent years and had supported Bolivia’s aspirations within that context. He noted that this is not a new problem, but rather a very old problem—a problem arising from a war in which Bolivia had lost substantial territory and natural riches. Morales Bermudez went on to make three points about Peru’s position on the access-to-the-sea problem:

1. The first phase in working toward a solution must be agreement between the two countries most concerned, Chile and Bolivia. The dialogue between these two countries is a necessary first step.

2. Peru fully respects its international obligations, including those imposed by the treaties of 1929.

3. Any solution—and all parties desire a solution—must permanently preserve the peace in the area.

Morales Bermudez noted that the Treaty of Ancon (1929) had preserved the peace—a peace that now had lasted almost a century (from 1883).

The President asked if the time has arrived for a new initiative. Morales Bermudez said that the dialogue between Chile and Bolivia should continue, that there should be progress, even though it comes “little by little”. President Carter noted that under the existing treaty, Peru must approve any corridor granted Bolivia. Morales Bermudez said that was correct. The President then said that if Morales Bermudez had no objection, then in the course of his meetings with the leaders of Chile and Bolivia, he would encourage them to reach an agreement.⁴

Peru’s Financial Crisis (also Sugar)

The President said Morales Bermudez had written him a very interesting letter about Peru’s economic difficulties.⁵ The President noted his satisfaction in receiving this personal communication, emphasizing that direct communication of such a kind serves to reinforce a sense of partnership. The President said that the United States is eager to cooperate with Peru in the economic sphere. He referred to the recent decision of the U.S. Government to grant Peru $57 million in CCC credits as an example.⁶ He added that there is a possibility for further assistance under Public Law 480. With respect to the IMF, the President said the U.S. would like to cooperate with Peru in its negotiations with the IMF,⁷ but he reminded Morales Bermudez that the United States is just a part of that organization. And while it is an important part, the U.S. does not control it.

The President referred to the problem posed for the United States by the distressingly low price of sugar.

He said the U.S. wants to be fair but the Peruvian Government will realize how difficult a problem it is for us all. The U.S. will do what it can to resolve it. He said that the U.S. also wanted to work out a new international agreement on the marketing of sugar.

The President referred again to our desire to cooperate with Peru in meeting its problems, including those involved in negotiating a standby with the IMF. He asked that Morales Bermudez communicate directly with him whenever a specific issue would seem to require it.

In response, Morales Bermudez expressed his appreciation for the cooperation already rendered, for the expression of concern with respect to the standby negotiations and for such future assistance as could be provided.

Trade Gap

Morales Bermudez said that Peru’s great difficulty arises from the instability in the prices paid for her traditional exports. All of Peru’s economic programs and efforts are distorted by the decline of those prices. For example, in June the Peruvian Government thought the country could finish the year with its “commercial balance” more or less in equilibrium. But now, because of the fall in the price of copper and in the prices of other commodities, the Government realizes that there will be a shortfall of around $300 million in that balance. Peru depends entirely for its well-being on these traditional exports, its industrial exports having reached only the embryonic stage.

Morales Bermudez noted the “new tonic” brought to relations between Latin America and the United States by the Carter Administration and expressed his hope that President Carter would be able to put forth formulas and solutions to help in overcoming this most difficult of all his country’s problems. He also referred to the heavy impact increases in the prices of Peru’s imports have on the Peruvian people at a time when the country’s export earnings are declining.

President Carter said that he saw a good opportunity to reach international agreement on the sugar price this year. He asked about the role of CIPEC in stabilizing copper prices. Morales Bermudez indicated that CIPEC had been unsuccessful in that respect.

Help with IMF

President Carter asked Morales Bermudez about the possibility of Ecuadorean access to the Amazon. Morales Bermudez said that before addressing that particular issue, he would like to return to Peru’s economic problems.

The Peruvian President asserted that the IMF tends to ignore political and social problems in prescribing economic measures for countries with financial difficulties. Morales Bermudez said the austerity program already in place in Peru had reached a stage where any further such measures would simply not be possible in terms of political and social costs. Consequently, “we need direct political support with the IMF”. Without such support there would be no reason for further negotiations. Morales Bermudez argued that if the Peruvian Government attempted to go further in imposing austerity, there would be no choice but to employ repression. A repressive policy would be against his Government’s desires and goals. He repeated that Peru must have direct political support in its negotiations with the IMF. He then referred to the fact that in the 50’s Peru received direct Treasury support during a time of similar economic crisis.

Political Stakes

Morales Bermudez stated that the political future of his country is at stake. In his view, if Peru does not emerge from its economic crisis, only two alternatives remain: repression or the rapid rise to power in the Government of the extreme left. A solution to the economic crisis is the only possible way to ensure democracy and free elections. With respect to the other two alternatives, Morales Bermudez said that in the Peruvian Government “we are pluralists. We respect the right of the Marxists and others to think as they wish”. But “we do not accept the possibility that they (the Marxists) would orient the country’s political thought”. Morales Bermudez concluded by asserting that what happened in Peru would have considerable impact throughout Latin America. He noted the country’s geo-political and geo-economic importance and offered the view that favorable developments in Peru would be favorable for the entire continent.

The President noted that the United States as a general proposition supports the IMF and specifically now supports its expansion. The U.S. Government also approves of measures of restraint of the kind proposed by the IMF—but within the bounds of a given country’s capabilities. President Carter also referred to the IMF “stamp of approval” as particularly helpful to a country in opening up opportunities for commercial bank loans and other economic support. He said that the U.S. Government would try to assist “as we cast our vote in the IMF”. “We know it will be difficult for you.” The President further emphasized that the United States does want to contribute as best it can to the resolution of Peru’s difficulties. He said that he was grateful for Peru’s accomplishments in human rights and in ratifying the Treaty of Tlatelolco.

Ecuadorean Access to Amazon

The President then expressed the hope that Morales Bermudez would take the initiative in relieving his neighbors’ concerns and in helping Bolivia realize its aspirations. He asked again about Ecuadorean access to the Amazon.

Morales Bermudez said that Article 6 of the Rio Protocol⁸ provided a “viable” means of addressing this problem. He said it would be “feasible” within that context and added that contacts have been established between the two Foreign Ministers on this issue and progress has been made.

Closing Remarks

Morales Bermudez in taking leave of the President expressed Peru’s appreciation for the new spirit the Carter Administration has brought to relations between the United States and Latin America. He assured the President that Peru is “very close” to the United States in terms of policies and aspiration. The President thanked him and reiterated the invitation for Morales Bermudez to communicate directly with him on matters of mutual concern.

Finally, the President asked after his friend and former classmate, Jorge Pequeras. Morales Bermudez noted that both he and the Foreign Minister had also been classmates of Captain Pequeras—in secondary school in Lima. The Peruvian President handed President Carter a letter from his wife for Mrs. Carter.⁹

1. Source: Carter Library, National Security Affairs, Staff Material, North/South, Pastor, Country Files, Peru, 2-12/77. Confidential. Drafted by Shlaudeman. The meeting took place in the White House Cabinet Room. According to the President’s Daily Diary, the meeting lasted until 3:10 p.m. (Carter Library, Presidential Materials, President’s Daily Diary)
2. Hollings visited Peru August 23–26 and met with Arbulu on August 25. (Telegram 6950 from Lima, August 16; National Archives, RG 59, Central Foreign Policy File, D770295-1117) (Telegram 7304 from Lima, August 25, National Archives, RG 59, Central Foreign Policy File, D770308-0271)
3. In telegram 7012 from Lima, August 18, the Embassy reported on Yatron and Wolff’s August 15 meeting with Morales Bermudez. (National Archives, RG 59, Central Foreign Policy File, D770298-0519)
4. See Documents 120 and 205. In telegram 7937 from Lima, September 13, the Embassy reported on Morales Bermudez and de la Puente’s reactions to the meeting with Pinochet and Banzer. (National Archives, RG 59, Central Foreign Policy File, D770331-0916)
5. Dated August 27. (Carter Library, National Security Affairs, Brzezinski Material, President’s Correspondence with Foreign Leaders, Box 16, Peru: President Francisco Morales Bermudez Cerutti, 5/77-6/80)
6. The credits were extended to finance the sale of U.S. wheat, corn and soybean oil to Peru. (Memorandum from Brzezinski to Carter, September 6; Carter Library, National Security Affairs, Brzezinski Material, Country File, Box 61, Panama Canal Treaties)
7. In telegram 7178, August 23, Shlaudeman summarized the Peruvian negotiations with the IMF regarding an austerity program: “The decision not to go through with the Piazza/IMF program of tough austerity was taken as a result of the GOP’s conclusion that the social and political costs would be too high. I believe that conclusion was probably correct.” (National Archives, RG 59, Central Foreign Policy File, D770304-0718)
8. See footnote 7, Document 1.
9. Not found.