Foreign Relations of the United States, 1977–1980, Volume XXIX, Panama

189. Memorandum From the President’s Deputy Assistant for National Security Affairs (Aaron) to President Carter ¹

Washington, July 28, 1978

SUBJECT

• Letter from General Torrijos on the Inter-American Development Bank

General Torrijos sent you a cable on June 30 (Tab B)² asking that we support continued eligibility for Panama, Costa Rica, and Jamaica to the soft-loan window (FSO) of the Inter-American Development Bank (IDB). This issue—the criterion for determining access to the FSO—is an important one in the current negotiations for the next IDB replenishment.

Treasury, State, NSC, and Henry Owen all agree that we should seek a formula that uses several social and economic indicators in addition to per capita income in determining access to the FSO; under this formula, the major share of FSO funds would clearly be reserved for the poorest countries of the hemisphere, but Panama, Costa Rica, and Jamaica would also have limited access to the FSO for projects that assist low-income groups.

Resolution of this issue will not alter our position on the level of FSO replenishment; all we are talking about is how to allocate these funds.

The issue which Torrijos raised proved to be a difficult one, and it has taken two weeks for the U.S. Government to decide on a position. The attached draft reply sets forth an approach which Treasury, State, NSC and Henry Owen all support.³

RECOMMENDATION:

OMB does not—McIntyre’s comment is attached.⁴

That you sign the letter to Torrijos at Tab A.⁵

The text has been approved by Jim Fallows.

1. Source: Carter Library, National Security Affairs, Brzezinski Material, President’s Correspondence with Foreign Leaders, Box 15, Panama: General Omar Torrijos Herrera, 8/78–12/79. Confidential. Sent for action. Carter initialed and wrote on the top-right corner of the memorandum: “This is more encouraging to Torrijos than I want. Make it more non-commital. ‘Other factors’—ok. ‘Promise to include Panama’—no.”
2. Tab B is not attached. A June 30 letter from the Panamanian Embassy to Jordan transmitted the June 30 cable from Torrijos. (Carter Library, National Security Affairs, Brzezinski Material, President’s Correspondence with Foreign Leaders, Box 15, Panama: General Omar Torrijos Herrera, 8/78–12/79)
3. Draft reply is not attached.
4. McIntyre’s comment is not attached. In an August 2 memorandum to Carter, McIntyre disagreed with State and NSC’s proposal that Carter respond positively to Torrijos’s request, arguing that proposed response undercut the “general approach of conserving soft loans for the poorest countries and permits ad hoc bilateral considerations to drive overall development assistance policy.” McIntyre recommended that Carter send a negative response to Torrijos. (Carter Library, National Security Affairs, Brzezinski Material, President’s Correspondence with Foreign Leaders, Box 15, Panama: General Omar Torrijos Herrera, 8/78–12/79)
5. There is no indication of approval or disapproval of the recommendation. However, on August 3, Carter sent a letter in response to Torrijos stating: “My administration believes a formula can be negotiated that will take account of several important social and economic indicators in determining access to the FSO.” Whatever the outcome, Carter expected that “a large majority of FSO funds would be reserved for the poorest countries and that any concessional funds for countries other than the poorest would be directed to projects that clearly assist low income groups.” (Carter Library, National Security Affairs, Brzezinski Material, President’s Correspondence with Foreign Leaders, Box 15, Panama: General Omar Torrijos Herrera, 8/78–12/79)