13. LATIN AMERICA GENERAL: VOLUME I

Table of Contents

<table><thead><tr><th>Title</th><th>Date</th></tr></thead><tbody><tr><td>BACKGROUND PAPERS</td><td></td></tr><tr><td>1. The Western Hemisphere in a Ten-Year Perspective (Plank)</td><td>2/15/60</td></tr><tr><td>2. Nationalism in Latin America (Whitaker)</td><td>1/27/60</td></tr><tr><td>3. Summary Paper</td><td>6/29/60</td></tr><tr><td>4. Study Papers on Latin America</td><td>11/23/60</td></tr><tr><td>5. Study of the Latin American Future</td><td>5/12/61</td></tr><tr><td>6. General</td><td>9/22/61</td></tr><tr><td>7. Alliance for Progress: Agrarian Reform</td><td>5/62</td></tr><tr><td>8. Two-Year Summary: General</td><td>1/63</td></tr><tr><td>9. Dominican Republic</td><td>1/7/63</td></tr><tr><td>10. Argentina</td><td>1/25/63</td></tr><tr><td>11. Venezuela's Position in Relation to U.S. Foreign Policy</td><td>2/21/63</td></tr><tr><td>12. Summaries of Lleras and Kubitschek Reports</td><td>7/29/63</td></tr><tr><td>13. The Wine is Bitter (Digest)</td><td>8/9/63</td></tr><tr><td>14. Summary of Academic Proposals for Latin American Policy</td><td>summer, 1963</td></tr><tr><td>15. The Crisis in Panama</td><td>1/13/64</td></tr><tr><td>16. Political Status of Puerto Rico</td><td>1/14/64</td></tr></tbody></table>

BACKGROUND PAPERS

<table><tr><td>17. Chilean Elections....................</td><td>1/21/64</td></tr><tr><td>18. Panama: Renegotiating the Treaty and Alleged text of JFK Commitment............</td><td>2/18/64</td></tr><tr><td>19. Panama: Proposals of Critical Issues Council....................................</td><td>4/9/64</td></tr><tr><td>20. Crisis in Panama Fact Sheet...............</td><td>4/13/64</td></tr><tr><td>21. Crisis in Panama Fact Sheet...............</td><td>5/5/64</td></tr></table>

POSITION PAPER C-1
Revision 2
(Preliminary)

by: J. V. Deaver

June 29, 1960

LATIN AMERICA

A. ISSUE

What should the United States do to strengthen its ties with Latin America and promote more rapid economic growth in that area?

B. SUGGESTED POSITION (Preliminary)

There is a mutuality of interest between the U. S. and the Latin American Republics that goes far back in our histories. In the late 18th and early 19th centuries two movements took shape in this hemisphere: one the desire to realize individual freedom, the basis of the American Revolution; the other a movement towards the free association of nations, initiated by Simon Bolivar and later strongly backed by Henry Clay. The first meeting of the Independent Nations of America was called by Simon Bolivar in 1826, and became the forerunner of the OAS. During the following century there evolved a community of nations in the Western Hemisphere based on the principles of free association and united by similar aspirations for the welfare and dignity of their citizens. The road has not always been smooth, but the trend towards regional cooperation has been unmistakable and has been based on four principles: non-intervention, consultation, common action and mutual security.

In the Western Hemisphere, perhaps more than anywhere else, the feature which distinguishes the economic system of the West from that of Communism is that economic development is not an end in itself but is sought as a means to enhance the well-being and dignity of the individual. In this respect Latin America is an area of crucial importance. There relations can still be worked out comparatively free from the immediate pressures of a Communist menace from without. A dynamic approach to economic development and rising standards of living through the cooperation of all the nations of the Western Hemisphere can create a model for many other nations of what freedom can achieve by its own mode of action and a standing reproach to those who seek economic development through enslavement of the individual.

1. The U. S. should propose an early meeting of the Western Hemisphere's foreign ministers under the OAS to consider some of the political problems threatening the unity and security of the Hemisphere.

a. In addition, this meeting should undertake to formulate positive goals to be achieved in the Hemisphere over a ten-year period.

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2. The U. S. should work toward the eventual establishment of a Pan American Economic Union which would bargain as a unit with other parts of the world and which would establish within the hemisphere a free flow of goods, capital and manpower. We might suggest a procedure to arrive at the long-term goal of a common market over a period of ten to fifteen years. The U. S. could offer some special concessions, e.g., for protection of infant industries to countries lagging far behind in industrial progress.

A complement to the establishment of a common market would be the establishment of an Inter-American Payments Union, which would provide full convertibility of the currencies of all participants.

In order to increase regional solidarity and confidence, the U. S. should support regional projects, such as an East Andes Development Authority, which would provide for the development of agriculture and power over a broad area.

3. As an intermediary step towards the common market, the U.S. should take the lead in reducing trade barriers between countries of the Western Hemisphere. To this end, it should:

a. Remove quotas on lead, zinc, and petroleum. (If it is desired to maintain some protection for domestic producers, then direct subsidies should be granted, but on a schedule aiming at complete elimination of such restrictions.) The U. S. should then invite discussions between the affected countries for mutual tariff and quota reductions.

b. Encourage and support OAS activity in the field of regional economic integration in Latin America. The OAS and ECLA (the Economic Commission for Latin America) should be urged to cooperate in hammering out regional programs that will maximize economic growth and create as little diversion of trade as is consistent with the regional goals. As a prerequisite to support of any regional arrangement, the U. S. should specifically require a clear statement of intention by the countries associating to reduce gradually outside tariff walls as the internal regional market achieves cohesion.

c. Through GATT, negotiate scheduled reductions in tariff walls on a world-wide basis, thus promoting trade between all countries.

4. The U. S. should support cooperative efforts to solve the problem of instability of commodity prices on an individual commodity basis. Studies of commodities should be undertaken to find a workable formula for reducing price instability while permitting long-run supply and demand conditions to set the general level of commodity prices.

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5. The U. S. should continue to encourage foreign investments in Latin America by:

a. Further improvements in economic intelligence from our overseas commercial officers.

b. Taking a stronger initiative in negotiating tax sparing treaties and providing technical and legal assistance to the negotiating countries where this is requested.

(At present, U. S. taxes corporations 52%. If a foreign government tax rate is 50%, then U. S. adds an additional 2%. Tax sparing treaties would permit those tax concessions offered by Latin American countries to be passed on to the foreign investor without being offset by the imposition of U. S. income taxes up to 52%.)

6. The National Advisory Committee on Inter-American Affairs (NACIAA) should be given operational and liaison functions to be carried out under the direction of the Assistant Secretary of State for Inter-American Affairs (though the Secretary of State should remain chairman). The U. S. ambassador to the OAS should be made a member of the Committee.

7. In U. S. foreign aid to Latin America steps should be taken to secure better coordination among U. S. agencies as well as between U. S. and international agencies. The NACIAA should have an important voice in determining priorities, distribution and types of foreign aid to Latin America. In addition, the U. S. should:

a. Base assistance on long-range studies of each country, undertaken jointly by U. S. and Latin American technicians.

b. Adopt the proposal of the Draper Committee to create a single economic assistance agency.

c. Provide greater continuity in U. S. aid programs by pressing for the needed legislative authorizations and an appropriate personnel policy.

If (b) and (c) apply to all foreign aid.

8. The U. S. should launch, jointly with the General Secretariat of the OAS, a major program of technical and financial assistance to eliminate illiteracy and raise the level of technical and hygienic knowledge in Latin America. In addition to its intrinsic worth, such a program will make it possible for human resources to contribute more effectively to economic growth.

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9. To promote mutual understanding between the U. S. and Latin America, the U. S. should:

a. Make the USIA more effective by (1) changing its method of projecting the story of democracy; and instead of emphasizing democracy in the U. S., USIA should seek out instances of democratic relationships as they exist in Latin America. (These instances can be found in family life, in certain courts or legislatures, etc.) Through a "Democracy in the Americas" program, using all media of communication, USIA could make vivid these instances and project our way of life more forcefully; (2) setting up more cultural centers in major Latin American cities.

b. Expand the cultural and educational exchange programs.

c. Encourage greater coverage of Latin American affairs in magazines and newspapers by sponsoring tours by U. S. editors to Latin America.

10. In order to remove or mitigate conditions creating friction with Latin American governments, when this can be done without endangering U. S. national interests, the U. S. should:

a. Be prepared to join with other Latin American governments, through the OAS, in exploring ways in which arms expenditures in Latin America can be reduced.

b. Reassess the importance of military aid to Latin American countries from our defense point of view, and replace military with economic and technical aid to the extent feasible and with the consent of the governments concerned.

c. Continue to adhere to broadly non-interventionist policy. Maintain the "abrazo-handshake" approach to dictatorships, and avoid giving special economic or military assistance to governments generally regarded in Latin America as undemocratic.

d. With respect to Cuba, the U. S. should continue to be patient and not undertake any positive action unless it is clear beyond any doubt that Castro's regime is serving interests outside of the American hemisphere. Any action we might take then, if at all possible, should be taken through the OAS.

### C. DISCUSSION

While the U. S. and Latin America have long had common interests, only in very recent years has it become evident that we tend too much to take these for granted. This fact was borne home sharply in 1958

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by the fierce attacks on Vice-President Nixon during his tour of Latin America. Only then did it become generally recognized that many Latin Americans are deeply dissatisfied with the extent of our economic aid, angry at our presumed sympathy for Latin American dictators, irritated by our seeming neglect of them in favor of other areas closer to the Communist sphere, scornful of our distaste for international commodity agreements.

In the aftermath of the Nixon experience, U. S. policy toward Latin America was reassessed resulting in several important policy shifts: more circumspect treatment of dictators, approval of the Inter-American Development Bank, more money for educational exchange, a setting up of the National Advisory Committee on Inter-American Affairs, the Eisenhower visit.

Those measures indicate a new approach to Latin American affairs, one that shows more clearly our great concern for the aspirations of the people of our neighbor republics. What is required now, is to carry this approach further, to highlight the unique and special importance of Western Hemisphere ties, and to step up our economic aid to fill some of the gaps most urgently felt by Latin American governments. Beyond this the U. S. should eliminate needless sources of friction, take the lead in reducing trade barriers and continue to encourage foreign investments.

Whitaker's paper (C-1) ends with the idea that the U. S. should show that it cares what happens in Latin America. The NPA study prepared for the Senate Foreign Relations Committee begins with that idea. However, Plank (Paper C-2), seems to suggest that a realistic assessment of Latin American importance gives it a low priority in terms of foreign policy concessions. But in view of Latin American needs, the relatively vast military and economic might of the U. S. from the Latin American point of view, and the historical basis for hemispheric cooperation, it would seem indispensable to a set of policies designed to enhance U. S.-Latin American relations that the U. S. give special importance to that area. If this can be done in a way that will more closely identify the U. S. and Latin American interests, then it will be well worth the effort.

1. Through a meeting of the foreign ministers of the Western Hemisphere, we might elicit cooperative thinking and suggestions for action on some of the serious political problems which threaten Hemisphere unity. The meeting of foreign ministers should be called under the OAS charter, which provides for such meetings on request to consider cases of an urgent nature and common interest. For example, at the Inter-American Foreign Ministers' Conference in Santiago, Chile, last August, the Inter-American Peace Commission, a five-nation working group of the OAS was revived and given new responsibilities; under its new mandate it was assigned the task of investigating violations of human rights in the Dominican Republic.

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Among the matters which a meeting of foreign ministers might consider are measures to deal with the Cuban situation should it seriously threaten hemisphere solidarity, the Dominican Republic violation of human rights and the OAS report on this matter, and tensions in Panama due to the U. S. presence in the Canal zone. The meeting should also study long-range positive goals for the Hemisphere.

2. A Pan American Union could make an important contribution to world economic growth and to better balanced development progress for its members while helping to moderate a self-defeating and complex structure of international trade barriers. It could also serve as a useful laboratory for cooperation between nations; its functioning would require a joint commitment to disciplines which many nations of the world find difficult to impose upon themselves when acting independently.

For the U. S., Canada and Latin America inter-hemisphere economic ties are predominant in their respective foreign trade interests. About half of U. S. trade flow is within the hemisphere; over 65% of Canada's trade is with the U. S. and almost 50% of Latin America's. Hemisphere investment also radiates north and south from the U. S.; we supply about 16% of gross capital invested in Canada and about 10% in Latin America. For us these investments total approximately two-thirds of our direct investments abroad.

Trade among the Latin American nations at present amounts to less than 10% of their total trade. Trade within the area has been hampered by lack of transportation and by tariffs, quotas and inconvertible currencies. The base for a common market would therefore be fragile. However, the Latin American economy has now reached a stage where greater freedom of trade within the area would contribute to general growth. Industrialization in many countries is outrunning local markets, yet the barriers to trade are such that few Latin American industries are able to cross them.

A procedure set up to arrive at the long-term goal of a common market over a period of ten to fifteen years, as is being done by the European Common Market, would permit time for adjustment to the conditions of freer trade and exchange. The U. S. might well consider adopting a much swifter timetable for freeing our restrictions.

The common market proposal will raise fears about impeding the industrialization of the Latin American countries, but the experience of Puerto Rico, which is part of a common market with the U. S., would seem to indicate that in most cases tariff barriers are not required to stimulate industrialization, and in fact may impede it.

The establishment of an Inter-American Payments Union would be a necessary complement of the common market, since currency restrictions can be as crippling to international trade as tariffs and quotas.

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Here the U. S. could assume constructive leadership. To make a payments union work, the participants must gain some direct advantage from it. The advantage the payments union would offer would be to make available to members drawing rights along the lines of the European Payments Union. The U. S. would supply the major part of the capital for the payments union and would be a part of it. Thus the payments union could provide credit to cushion the adjustments entailed in each member country by shifts in the international economy. Such credits would enable nations to maintain the imports they need for economic development while going through the adjustments required to restore a high level of export earnings. Multiple exchange rates would be abolished and adjustments to maintain over-all equilibrium in each nation's balance of payments would be made primarily through the adjustment of exchange rates. The managing body of the payments union would encourage member governments to adopt realistic monetary and fiscal policies.

The payments union would be an essential first step in broadening markets within the area and would provide impetus to economic development by making it possible for industries to serve the entire area.

3. (a) While the U. S. quotas on lead, zinc and petroleum, imposed in 1958 and 1959 have not produced great hardship on the Latin American producers, who have been more the victims of generally weak world markets in these commodities, they have permitted the idea to grow that the U. S., while proclaiming the virtues of free economies, protects its own weak industries without regard for the impact on other nations.

(b) The U. S. should attempt to promote increasingly free external trading relations on the part of regional groupings and should guide them in such a way as to prevent them from creating permanently inefficient industries within high protective tariff walls.

The U. S. should consider the proposal of a Pan American Economic Union as an intermediate goal between the currently developing sub-regional markets, and world-wide free multilateral trade. As the regional markets progress, and the various areas gain in economic strength there should be an increasing willingness to share the larger hemisphere market containing the U. S. and Canada. (See Position Paper K-2.)

4. A study on means to reduce instability of commodity prices might suggest a program that would cost a little money in the short run. However, the basic condition that supply and demand determine long-run price levels precludes either a very great or very lasting financial burden. There are those in Latin America who claim that the U. S. is not interested in the problems created in their countries by commodity price changes. Our undertaking such a study, and possibly

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implementing a program would provide a constructive answer in both
economic and psychological terms to this criticism.

5. U. S. private investments in Latin America will continue to be the major source of foreign capital for many countries of that area, and the U. S. government, in cooperation with Latin American governments, should take steps to maintain and even expand the flow of such capital. One device that should be employed more is tax sparing treaties with Latin American governments. In some countries, Haiti for example, there is inadequate legal talent free to forge and negotiate such a treaty. In such cases the U. S. might offer technical advice and services in drawing up the treaty to meet the specific needs of the country concerned.

6. The NPA study suggests the desirability of setting up an agency similar to the Old Council on Inter-American Affairs that was so successful in promoting the Good Neighbor policy during World War II. Milton Eisenhower's modification of this idea was actually implemented by the President in November last year when the National Advisory Committee on Inter-American affairs was set up, chaired by the Secretary of State, with the Assistant Secretary as vice-chairman.

Although the Committee may not be able to meet as often as
might be desired due to widely dispersed residences (Denver, Chicago,
Caracas, as well as New York and Washington), it would be desirable
to make the Committee the focal point of all major decisions concern-
ing Latin America, including foreign aid priorities. In the absence
of a coordination of the whole foreign aid program, the NACIAA should
be responsible for country programs, which would be the basis for our
total financial and technical assistance program in Latin America.
For this purpose, the staff of the Office of Inter-American Affairs
would have to be reorganized and strengthened. It might also need
closer liaison with other agencies in the Departments of Commerce
and Agriculture dealing with Latin America in order to avoid unneces-
sary duplication. Thus the NACIAA, as a committee should pass on
recommendations prepared by the staff of the Assistant Secretary, and
lend its own weight to them, as it sees fit.

7. The U. S. should streamline its foreign aid program to Latin America by adopting a country program approach, as recommended in the NPA study, instead of giving aid for individual projects, we should adopt the basic recommendations of the Draper Committee for unification of the foreign aid program under a single agency (excluding the Export-Import Bank) and for obtaining greater continuity through appropriate legislative authorizations.

In adopting the country program approach, it may be useful to
take a leaf from the Joint Brazil-U.S. Technical Commissions set up
in 1948. The studies prepared by the Joint Commission, which was
staffed by U. S. and Brazilian specialists were extremely useful both
in providing a framework in which U. S. assistance and World Bank
credits could be judged, and in bringing the Brazilians into a joint

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activity that heightened the spirit of international cooperation. It would seem desirable to copy parts of this program by initiating over-all country studies prepared by joint investigating teams. While the possibility exists that U. S. efforts of this kind could be construed as commitments for much greater foreign aid programs, the NPA study rightly points out that the Latin American governments are generally clear about the limitations of U. S. aid. Anyway, misunderstandings of this kind would be unnecessary if the joint studies were initiated properly.

One of the values of this kind of program would be in setting up rough priorities, not only for U. S. aid, but for the development programs of the governments themselves. Moreover, such joint commissions might undertake, as part of their job, the uncovering of opportunities for private investment, both foreign and domestic, thus increasing the amount and effectiveness of private capital in the development of the countries concerned.

These studies could also be used to help determine the ratio of U. S. multilateral to U. S. bilateral financial assistance, as the projects coming under study by the commission would recommend themselves to one form or another.

Finally, joint surveys of this nature are an important form of technical assistance in themselves, providing valuable experience to the national technicians in preparing project proposals that meet high standards of economic and technical competence.

8. It seems probable that the gain in terms of increased productivity from additional investments in the human resources of Latin America could be far higher than many investments now being made in grandiose schemes of heavy industrialization. Education expenditures per pupil in Latin America are extremely low, and teacher's schools are far from adequate. Yet for a relatively modest amount of money spent over ten to fifteen years the U. S., in cooperation with local agencies, could greatly expand normal school facilities, provide elementary school buildings and facilities, and rapidly cut down illiteracy. At the same time, the program would raise the level of technical and hygenic knowledge appropriate to the various areas in which the programs were undertaken.

Such an educational aid program, which might cost in the neighborhood of $100 million a year, should be coordinated through the General Secretariat of the OAS, which has been conducting a wide range of studies on the educational needs and problems in the 20 republics. This would have the multiple advantages of using available talent in the planning of such a program, and enhancing the prestige of the OAS.

This program should be in addition to our regular aid programs. The cost is substantial, but I believe its impact on U. S.-Latin American relations would be inestimably great and long-lasting.

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9. It is generally agreed that the U. S. cultural exchange and the USIA programs have been successful, and that they might be profitably stepped up even more than they were last year.

In microcosm, democratic relationships can be found all over Latin America, in family life, in certain unions, in certain courts, in certain legislatures, in certain municipalities. If these instances, isolated as they may be, could be sought out, then made vivid through motion pictures, photographs, lectures, even cartoon books, and if they could then be shown and explained to Latin American audiences, we might project the way of life we think important much more forcefully, then by emphasizing primarily life in the U. S.

10. (a) and (b) During President Eisenhower's visit to Latin America, President Allesandri of Chile took the initiative in proposing that the American Republics undertake to reduce arms expenditures. His proposal has been supported or approved by most of the Latin American governments, as well as by President Eisenhower.

Average annual expenditures for Latin American armed services average as high as 20 to 25% of the respective national budgets and in a few cases even higher. It would appear that as much as $1.5 billion is being spent to maintain the armed forces of the Latin American countries.

There is a widespread feeling that this expenditure may be disproportionate in terms of the amounts needed for economic development and social services. The U. S. should be prepared to assist the other governments in studying the issue, both because of the importance of disarmament measures in themselves and because of the possible impairment of economic development by unnecessary arms expenditures. The exploration of this issue might well be undertaken under the OAS.

c. In the past, gestures by high U. S. officials indicating friendship and respect for Latin American leaders generally regarded as dictators has caused great resentment. The "abrazo-handshake" policy first enunciated by Vice President Nixon has since been adopted, and is adequate for its purpose. Whitaker (Paper C-1) suggests that this policy is transparently hypocritical, since we do not change our military or aid commitments to dictators. However, this misses the point. The policy is merely a way of avoiding embarassing gestures; without this rule, there was, on occasion, an absence of common sense, which the rule merely seeks to restore.

d. With respect to Cuba, specifically, the U. S. should continue its present course of strict non-intervention, leave the President some leeway on the sugar quota to exercise at his discretion, and keep in close touch with Latin American sentiment through U. S. Embassies and in the OAS.

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We should not take any punitive action until it is clear beyond any doubt that the Castro regime is serving interests outside the hemisphere. If the regime is involved in tyrannical actions which are resisted by the Cuban people, joint action could be invoked by the OAS.

## D. RELATED ISSUES

- Economic Development

- Regionalism

- Trade Policy

- Commodity Problems

- National Defense

## E. NAR PREVIOUS POSITION

NAR has proposed a Pan American Economic Union. The Panel III report suggests giving Latin America special consideration; supports a solution to commodity problem; supports further aid to education in underdeveloped countries; and giving additional incentives to private investments abroad. It also indicates need for greater expenditures for foreign assistance.

## F. OTHER POSITIONS

The Administration has given special recognition to Latin America by setting up NACIAA, by a presidential visit to South America, and by increasing cultural interchange. However, policy has been to try to get more mileage with less gas. The Export-Import Bank has been making fewer loans, and technical assistance has not been increased. More interest is being shown regarding commodity problems but no offer to seek specific solutions such as reducing price variations. Panama Canal issue not regarded as open for discussion at this time. The setting up of the office for private investments within the ICA last year indicates continued and growing interest in fostering U. S. private investments. No indication that unification of foreign aid programs is contemplated.

Democrats represent a wide spectrum of opinion about U. S. relations with Latin America. Northern liberal wing which would include Stevenson and Kennedy generally favors greater economic assistance, more multilateral aid, and discussion of commodity problems. Southern wing generally favors improving conditions where possible, but would be reluctant to increase foreign aid expenditures.

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Study Papers on Latin America

November 23, 1960

Douglas L. Bailey

Table of Contents

Page

I. Analysis of Economic Development Aid in Latin

<table><tr><td>America</td><td>1</td></tr><tr><td>(Summary of a study by the National Planning Association, prepared for the Senate Foreign Relations Committee, on "United States and Latin American Policies affecting their Economic Relations," January 31, 1960.)</td><td></td></tr></table>

II. Analysis of the Operations of the Organization

<table><tr><td>of American States.</td><td>7</td></tr><tr><td>(Summary of a study by Northwestern University, prepared for the Senate Foreign Relations Committee, on the OAS, December 24, 1959.)</td><td></td></tr></table>

III. Brief Analyses of the Relevant Institutions 14

A. The Organization of the American States 14

B. The Economic Commission for Latin America (U.N.) 19

C. Central American Free Trade and Economic Integration. 22

D. The Latin American Free Trade Association (Montevideo Treaty Group). 25

E. The Inter-American Development Bank 28

F. The Export-Import Bank. 32

G. The Development Loan Fund 35

H. The International Bank for Reconstruction and Development. 38

i

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<table><thead><tr><th></th><th>Page</th></tr></thead><tbody><tr><td>I. The International Finance Corporation</td><td>41</td></tr><tr><td>J. The International Development Association</td><td>43</td></tr><tr><td>K. The United Nations Special Fund</td><td>47</td></tr><tr><td>L. The United Nations Expanded Program of Technical Assistance</td><td>50</td></tr><tr><td>IV. The Statistics of Economic Aid to Latin America</td><td>54</td></tr><tr><td>A. 1957 Economic Aid to Latin America.</td><td>54</td></tr><tr><td>B. 1958 Economic Aid to Latin America.</td><td>55</td></tr><tr><td>C. 1959 Economic Aid to Latin America.</td><td>56</td></tr><tr><td>D. 1960 Economic Aid to Latin America.</td><td>57</td></tr><tr><td>E. Breakdown of ICA Aid.</td><td>58</td></tr><tr><td>F. Breakdown of DLF Aid.</td><td>59</td></tr><tr><td>G. U. S. Agricultural Surplus Program.</td><td>60</td></tr><tr><td>H. Other U. S. Aid Programs.</td><td>61</td></tr><tr><td>I. Breakdown of IBRD Aid</td><td>62</td></tr><tr><td>J. Breakdown of IFC Aid.</td><td>63</td></tr><tr><td>K. Breakdown of U. N. Special Fund Aid</td><td>64</td></tr><tr><td>L. Breakdown of U. N. Expanded Program Technical Assistance Aid.</td><td>65</td></tr></tbody></table>

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November 21, 1960

# I. Analysis of Economic Development Aid in Latin America

(Summary of a study by the National Planning Association, prepared for the Senate Foreign Relations Committee, on "United States and Latin American Policies Affecting their Economic Relations," January 31, 1960.)

## A. Latin American commercial and financial policies.

1. The Latin American nations can be divided into three groups on the basis of the severity of their import and foreign exchange controls.

a. Where currencies are readily convertible into dollars at fixed rates of exchange, where only minor trade restrictions are imposed in addition to protective tariffs. (Cuba, Dominican Republic, El Salvador, Guatemala, Haiti, Honduras, Mexico, Panama, Venezuela)

b. Where currencies are not readily convertible, but only moderate foreign-exchange controls are applied because a good balance-of-payments position obtains. (Costa Rica, Ecuador, Nicaragua, Peru)

c. Where highly complex and discriminatory exchange controls are applied because a severe balance-of-payments problem exists. (Argentina, Bolivia, Brazil, Chile, Colombia, Paraguay, Uruguay.)

2. The countries in the third group have been making serious efforts to overcome their difficulties, and the U. S. has been concentrating attention on these areas to help them meet the problem.

a. The group represents 2/3 of the Latin American GNP.

b. They are major suppliers of raw materials to the U. S. and are major markets for U. S. exports.

c. They have been large recipients of Export-Import Bank loans and of U. S. Technical Assistance.

d. U. S. policy has generally recognized the soundness of aid to encourage the proper atmosphere for economic growth in these countries, thereby encouraging solution of the balance-of-payments imbalance.

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2.

B. United States Import Policies

1. Most important Latin American exports are on the U. S. free list (coffee, cocoa, bananas, iron ore).

2. There are some problems over restricted goods such as lead, zinc, petroleum, and copper.

3. The sugar quota system has been unsatisfactory to Latin America because it was their feeling that Cuba's quota was disproportionately large.

4. Major problems exist in the area of trade in agricultural goods (see C, 1, below).

C. U. S. Economic Aid Policies

1. The surplus agriculture sales program under Public Law 480 has created some very large problems. (It should be remembered that this program exists primarily for domestic policy reasons.)

a. It is intended that these sales be conducted in a way that does not affect the normal trade in these commodities.

b. Some Latin American agricultural production has shrunk due to the U. S. program of sales and donations of goods, which these countries also produce.

c. On the other hand, Latin American countries have benefitted through the program by increased food consumption and larger supplies of agricultural raw materials for industrial purposes.

d. These goods are sold for local currencies, which could in the long run have serious inflationary consequences unless handled carefully and timed correctly for they "represent purchasing power that is not matched by a corresponding import of potential supplies into these economies."

2. U. S. governmental aid Institutions

a. Export-Import Bank loans have been extended for many financing purposes (power projects, industrial plants, highways, railroad improvements, private foreign trade activities, etc.).

3.

b. ICA (and predecessors) technical aid has been broken down as follows: 27% in agricultural and natural resource development; 18% in transportation; 15% in health and sanitation; 10% in education; the remainder in industry, public administration, housing, etc.

c. DLF loans have been useful but its new program may cease after the Inter-American Bank gets underway.

3. U. S. policies effecting private investment.

a. On the whole Latin American countries have encouraged or at least permitted U. S. private investment for many different beneficial purposes.

b. The U. S. has tried to encourage the flow of this private investment.

c. U. S. anti-trust policy is an area where more careful cooperation between the State and Justice Departments might be able to eliminate some of the hindrances to private investment.

d. Latin American countries, where the risks aren't quite as great, have been more successful in drawing U. S. private capital than other less-developed regions.

D. The Over-All Aid Problems

1. Latin American countries need development capital in three main areas:

a. for self liquidating projects "which provide part of the basic infra-structure necessary for economic growth." (hydro-electric plants, railroad and port facilities, telecommunications systems, etc.) Funds for these purposes have been provided by the IBRD, the Export-Import Bank and private U. S. sources.

b. for areas of opportunity for private investment "for which Latin Americans lack the required financial resources, managerial experience, technological processes, or technical skills." U. S. private capital has, for the most part, been available for these projects.

4.

c. for projects that meet neither of the above criteria; that is they are not sufficiently desirable or necessary for over-all economic growth to justify IBRD or other large development loans, nor are they desirable projects in the view of the private investor. They largely consist of social projects: roads, bridges, schools, water and sewage installations, etc.

2. It is in this third area where development problems are really acute:

a. The IDA was intended to operate on this level but it appears that IDA resources are too small, and the IBRD has apparently adopted the policy that IDA will supplement it in the first described area of need.

b. It remains to be seen how the Inter-American Development Bank will function in this area.

c. The DLF will apparently cease most of its Latin American operations when the Inter-American Development Bank begins to operate.

d. The needs in this area are not clearly known. It would be advisable for a study, similar to the objective IBRD studies, to be undertaken to determine the long-range needs of the Latin American countries in this area. After such a study development institutions could adjust their programs or be created to meet the demands.

3. The U. S. Government emphasis on loans rather than grants has helped produce an atmosphere in which each project is studied by itself and little coordination or country programming is undertaken. This type of coordination and long-range "country-programming" was very beneficial in the operation of the Marshall Fund and could be of enormous benefit for Latin American development.

E. International and Regional Organizations operating in the Area.

1. The United Nation's Economic Commission for Latin America (ECLA) has worked in reasonably close cooperation with the Economic and Social Councils of the U. N. (ECOSOC) and of the OAS (IA - ECOSOC), but ECLA has had the dominant role as the leading international organ working to meet the economic problems of Latin America.

[10]

5.

a. In ECLA and the other organs where functional problems (such as agriculture, health, education) are discussed, the U. S. has been constructive.

b. The real problems have arisen in areas already discussed (U. S. import policies, agriculture surplus program, etc.)

c. The Latin American countries take ECLA very seriously and appoint sound men to it, which has meant some success for it, but the U. S. considers it just one of many international organs and, consequently, relatively not too important. The latter fact has disturbed some Latins, particularly so when the U.S. must subordinate its ECLA policies to policies in other areas which may not appear as vital as the immediate hemispheric questions.

2. U. S. support of Central American economic integration movements has been qualified:

a. The U. S. has been careful to urge that certain standards must be adhered to re internal liberalization of trade and establishment of common discrimination in the group's trade with non-members. The U. S. has sought to retain its trade patterns with these countries.

b. The U. S. negotiators while defending principles have perhaps taken too rigid stands in defense of those principles.

F. The General Policy Changes Proposed:

1. While U. S. policies in this area are, on the whole, valid, they seem to demand more adequate interest, understanding and energy in their implementation. There must be a much more sympathetic concern for Latin American aspirations and problems.

2. Certain U. S. governmental changes would be valuable to permit coordination of Latin American policies and assure the Latin American nations of a constant and understanding ear in Washington. Their experience during the war and under the CIAA is a pleasant one. They wish they received as much attention and understanding today.

LC

7.

## II. Analysis of the Operations of the Organization of American States

### A. The Effectiveness of OAS:

1. In the area of political-military activities the OAS has not been very successful. It has been particularly plagued by the problems of national sovereignty.

a. It has had some success in the development of "legal norms" directed toward the prevention of inter-American strife.

b. The problem of extra-hemispheric subversion has certainly not been adequately faced.

c. OAS defense is a paper affair, which leaves the burden solely on the U. S.

d. "Perhaps the widespread regard for the success of the OAS as a maintainer of peace has been gained only because the record of other international agencies over the past centuries has been so abysmal."

2. Many elements inherent in the Western Hemisphere tend toward fragmentation and thus make OAS cooperation difficult:

a. Elements which emphasize nationalism and hence fragmentation include the great variance in size, resource endowment, ethnic composition of their populations, social structure, political forms, and degree of economic development.

b. Historically in the Western Hemisphere countries, born out of colonial domination, there has been a "tremendous momentum for autonomy" which remains today.

c. The factors of a cohesive nature are few and relatively vague:

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8.

(1) There are some economic factors now slowly leading toward some economic integration.

(2) Common opposition to external force tends toward unity.

(3) There is a cohesive force in "an almost mythological and widely held belief that citizens of the New World share a common destiny in the pursuit of freedom."

3. Neither has the OAS provided substantial leadership in the hemisphere, nor has substantial leadership been provided within the OAS.

a. OAS posts are not considered as important as the major ambassadorial posts by most Latin Americans; therefore, the best talent goes elsewhere.

b. Latin American ambassadors are over burdened because they generally represent their countries both at the OAS and at the White House.

c. Few ambassadors are left at the OAS long enough for them even to become acquainted with the problems of multilateral diplomacy.

d. For the U. S. to take very active leadership would create resentment, but if it doesn't lead the Latin Americans seem reluctant to push forward.

e. There is a great fear of creating some supra-national organization.

f. Authority is greatly dispersed among the many councils and committees of the OAS.

4. Competition and Cooperation between the OAS and the U. N. specialized agencies:

a. Despite formal working agreements the rivalry between ECLA and IA-ECOSOC is keen, with ECLA clearly dominant in the Latin American view.

b. The cooperative arrangements between FAO, UNESCO, and their OAS counterparts have been reasonably successful.

successful.

p. The cooperative arrangements between FAO, UNEPCo, and their OAS counterparts have been reasonably successful.

a. Despite formal working agreements the rivalry between OAS and ICAO is keen, with ECIA clearly dominant in the Latin American view.

U. N. specialized agencies:

4. Competition and Cooperation between the OAS and the and committees of the OAS.

f. Authority is greatly debilitated among the many councils.

e. There is a great fear of creating some sub-national organization.

Americas seem reluctant to push forward.

c. For the U. S. to take very active leadership would create resentment, but if it doesn't lead the Latin Americans seem reluctant to push forward.

b. Latin American ambassadors are overburdened because they generally represent their countries both at the UN and at the White House.

c. Few ambassadors are felt at the OAS long enough for them even to become acquainted with the problems of multilateral diplomacy.

a. OAS boats are not considered as important as the major force, the best talent goes elsewhere.

c. Neither has the OAS provided substantial leadership in the hemisphere, nor has substantial leadership been provided within the OAS.

pursuit of freedom."

the New World share a common destiny in the logical and widely held belief that citizens of the New World are a common entity in the

(3) There is a cohesive force in "an almost mythic unity."

8.

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9.

c. "The most successful articulation of OAS and U. N. is found in the arrangement whereby the old Pan American Sanitary Bureau actually operates as the regional arm of WHO."

B. How OAS Organs actually function:

1. The Inter-American Conference and the formal Organ of Consultation by the Foreign Ministers have in practice left most consultation and day-to-day operations to the Council.

a. The Council has been able to act quickly before any conflict "enlarges itself in a cycle of retaliation and counter-retaliation."

b. The Council has developed its own quick and reliable fact-finding procedures.

c. "The Council's activity as provisional organ of consultation allows 'cooling off' time, during which the more conservative forces of self-restraint within each of the nations can work internally for cessation of provocation."

2. The Inter-American Peace Committee, established in 1940 but only activated in 1948, has been an "unsung hero" of the OAS.

a. It is a five man standing committee, allegedly under the control of the formal Organ of Consultation, but with members chosen by the Council. It actually works under Council direction.

b. As a quiet mediatory board, working with the consent of the powers concerned, it has been almost as active as the Council in helping to solve disputes.

3. The Inter-American Defense Board also has been quite active.

a. All countries are represented by delegations of military leaders.

b. The constant personal contacts would make collaboration in joint defense matters easier, should emergencies arise.

[L]

10.

c. The IADB has been helpful in encouraging military leaders to act more in line with professional military career standards, and to refrain from interfering in political affairs.

4. The Pan American Union working as the Secretariat, is over-worked and under-staffed:

a. Only recently has the PAU contracted with the specialized agencies and experts to undertake some of its more specialized studies. Its procedure used to be one of trying to do everything itself which meant that many studies were either ignored or given haphazard treatment.

b. There are so many groups and organs within OAS that the Secretariat receives enormous numbers of studies, generally without any kind of priority rating. This has meant that the PAU, itself, has had to make judgments as to feasibility and thereby be selective in its work.

c. "Perhaps the most important function of the Secretariat is achieving continuity in the operation of the various organs of the OAS."

5. The record of the IA-ECOSOC has been disappointing:

a. Political considerations, rooted in the desire for autonomy, have made economic cooperation hard to reach.

b. One of the largest stumbling blocks in the way of progress has been the "incongruity of the economic-social-cultural philosophy of the North and South."

c. In comparison, ECLA has not been constantly bothered by a governing board in permanent assembly, concerned with political considerations.

d. With low prestige, IA-ECOSOC does not attract qualified personnel for its civil servants or delegates, and the latter group is too often likely to be concerned with political ramifications.

e. The financial and manpower resources available to IA-ECOSOC have been spread so thin, that real accomplishment is difficult.

[10]

11.

f. In 1956 the IA-ECOSOC was bypassed in favor of the _ad hoc_ Inter-American Committee of Presidential Representatives, who were to recommend action. Thus the prestige of IA-ECOSOC sank even lower.

C. Proposals made to strengthen the OAS and increase its effectiveness for the implementation of U. S. foreign policy:

1. "Consolidate the military advisory functions within the OAS as follows:

a. Provide that the I-A Defense Board furnish the Advisory Defense Committee for the meeting of consultation of the ministers of foreign affairs.

b. Utilize the I-A Defense Board staff to provide military attaché services, when such are needed, for the investigatory committees established by the Council when acting as the provisional organ of consultation and for the I-A Peace Committee.

2. "Establish a miniature inter-American auxiliary force, especially trained for guerilla warfare and anti-subversion activities, which might be used by governments with the approval of the OAS Council, to supplement national forces - 'whenever the inviolability or the integrity of the territory or the sovereignty or political independence of any American state shall be affected.' (OAS Charter, Art. 24.)

3. "Establish an inter-American staff college and mission unit to be operated by the I-A Defense Board.

a. The inter-American staff college should provide a curriculum of study for higher level officers. The content would include training in (1) the relation of military matters to hemispheric and world political problems, (2) procedures for handling subversion and riots without jeopardizing civil and political rights, and (3) organizational techniques for guerilla combat.

b. The inter-American staff college mission unit would be an extension field service of the staff college, operating in countries under bilateral agreements with the OAS, as requested.

with the OAB, as requested.

f. The inter-American staff college mission unit would be an extension field service of the staff college.

a. The inter-American staff college should provide a curriculum of study for higher level officers. The content would include training in (1) the relation of military matters to hemispheres and world politics, and (2) procedures for handling superannuation and issues without jeopardizing civil and political rights, and (3) organizational techniques for security and police control.

b. The unit to be operated by the I-A Defense Board.

c. "Establish an inter-American staff college and mission (OAB Charter, Art. 24.) independence of any American state and will be affected, integrity of the territory or the sovereignty or political national forces - whenever the sovereignty or the with the approval of the OAB Council, to supplement operation activities, which might be used by governments especially trained for guerrilla warfare and anti-aparatus.

d. and for the I-A Peace Committee. When acting as the provisional organ of consultation with the I-A Council, the I-A Peace Committee is established by the Council. Inquiries and services, when such are needed, for the I-A staff to provide will be provided by the I-A Defense Board.

e. Provide that the I-A Defense Board furnish the Advisory Defense Committee for the meeting of consultative affairs.

OAB as follows:

f. "Confirm the military advisory functions within the effectiveness of the implementation of U. S. foreign policy.

g. Proposals made to strengthen the OAB and increase its effectiveness for the implementation of U. S. foreign policy.

h. In 1990 the I-A-ECO2000 was passed in favor of the representation of the I-A-ECO2000 staff even lower. It was recommended, who were to recommend action. The I-A Inter-American Committee of Presidential Studies, who passed the I-A-ECO2000 resolution.

if.

[L.C.]

12.

4. "Provide an ample peace maintenance fund in the Secretary-General's office to meet the operating costs of the Inter-American Peace Committee and the ad hoc information and investigatory committees established from time to time by OAS Council.

5. "Reestablish the old Emergency Advisory Committee for Political Defense as a permanent inter-American observation group to assist the ad hoc investigatory committees and the I-A Peace Committee of the OAS Council, as requested by them, and to report independently its observations to the OAS Council at regular intervals.

6. "Establish an inter-American court of international justice, articulated closely with the International Court of Justice of the United Nations, which would be its superior court.

7. "Decrease response time on the part of the governmental apparatus of the United States vis-a-vis its participation in the IA-ECOSOC and related activities in the OAS.

8. "Change the regulations of the IA-ECOSOC so that the Council meets but once or twice a year, with representation by deputy ministers of economy or finance; supervise the interim activities of the Council through a small executive committee meeting ad hoc.

9. "Establish an emergency economic defense board within the IA-ECOSOC, with its own revolving emergency fund.

10. "Encourage interim meetings of the Western Hemisphere contingent of the Inter-Parliamentary Union, as well as encourage wider Pan-American participation in world meetings through establishment of American parliamentary fellowships within the OAS fellowship program.

11. "Establish an Inter-American Leadership Foundation, independent of the OAS, which would match funds with foundations and men of wealth within the whole hemisphere on projects designed to encourage the development of lay leaders through democratic participation in inter-American organizations, official and non-governmental.

13.

12. "Allow citizens in the hemisphere to receive tax deduction benefits of generous proportions, applying to persons in lower income brackets, for contributions to private but nonprofit organizations concerned with inter-American affairs.

13. "Organize within each member nation an official National Advisory Commission on Inter-American Affairs.

14. "Relocate OAS headquarters in an inter-American district.

15. "Establish and generously endow an inter-American free and autonomous university devoted to basic studies in all disciplines with -

a. A Special Institute for the Objective Study of Inter-American Affairs; and

b. A set of extension professional chairs of inter-American law and politics in the national university of each member country.

16. "Begin steps toward the multilateralization of the Panama Canal under the aegis of the Organization of American States."

III Organizations

A. The Organization of American States (OAS)

Membership:
Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, United States, Uruguay, Venezuela.

Treaty Date: April 30, 1948 (Charter of Bogota) -- also 1947
Treaty of Rio de Janeiro

Goals:

1. To maintain the peace

a. by preventing possible causes of difficulties and ensuring peaceful settlements of disputes that might arise among them;

b. by providing for joint action in case of aggression or any act that threatens the peace of any of the member states, for the purpose of the common defense and security of all.

2. To promote human welfare

a. by seeking jointly to solve problems, political, legal, social and economic, which affect the welfare of the people of the Americas;

b. by working cooperatively to improve economic, social and cultural development.

Provisions:

1. Clearly a regional agency within the United Nations, and is in accord with regional arrangements envisaged in Articles 51 to 54 of the U. N. Charter.

2. Any OAS provision may in effect be altered by a 2/3 vote of the members.

3. No state has the right to interfere directly or indirectly in the internal affairs of another.

4. Each member is equal (1 vote) to every other.

5. An act of aggression against one American State

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OAS (Cont.)

17.

d. Has the authority to consider all matters referred to it by the Inter-American Conference and/or the Meetings of Consultation of Ministers of Foreign Affairs.

e. In cases of extreme emergency or an act of aggression committed against any of the American states, the Council acts as the provisional Organ of Consultation, until the foreign ministers, whom the Council calls, can meet.

f. The Council is responsible for the proper functioning of the Pan American Union (the Secretariat)

(1) It appoints the PAU Secretary General and Assistant Secretary General.

(2) It approves the work program and the budget of the PAU.

(3) The Council apportions the quotas each member pays toward the budget of the PAU.

g. The Council is the central coordinating agency for the activities and programs of the six inter-American specialized organizations. These organs work in conjunction with many U. N. organs and other international agencies.

(1) Pan-American Institute of Geography and History.

(2) Inter-American Commission of Women.

(3) American International Institute for the Protection of Childhood.

(4) Inter-American Institute of Agricultural Sciences.

(5) Pan-American Sanitary Organization.

(6) Inter-American Indian Institute.

19.

B. Economic Commission for Latin America (ECLA)

**Membership:**
Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Cuba, the Dominican Republic, Ecuador, El Salvador, France, Guatemala, Haiti, Honduras, Mexico, the Netherlands, Nicaragua, Panama, Paraguay, Peru, UK, USA, Uruguay, Venezuela.
(Membership is open to Canada; provisions exist for associate membership for non-member of ECLA)

**Treaty Date:**
February 25, 1948; UN Economic and Social Council adopted a resolution establishing ECLA.

**Goals:**
1. To assist in raising the level of economic activity in Latin America and to maintain and strengthen the economic relations of the countries in Latin America both among themselves and with others.

2. To assist ECOSOC in carrying out technical assistance programs in Latin America.

**Provisions:**
1. In carrying out its tasks ECLA is to undertake investigations and studies of economic and technological problems, and the collection, analysis and dissemination of economic, technological and statistical information.

2. ECLA is to ensure that its work is appropriately coordinated with that of other UN organs and with the specialized agencies.

3. ECLA is to report annually to ECOSOC.

4. It is to consider the effect on the world economy of the regional measures with which it is concerned.

5. No action in a particular country can be taken without the agreement of its government.

6. The Commission has only recommendatory powers.

7. ECLA was allowed to adopt its own rules of procedure.

[LC]

ECLA (Cont.)

20.

Organs:

1. The Commission

a. Meets every two years (Committee of the whole meets every alternate year)

b. Headquarters of the Commission are in Santiago, Chile.

c. It has established two permanent bodies to meet specific needs as its work progressed:

(1) The Central American Economic Cooperation Committee

(2) The Trade Committee

2. The Secretariat

a. Offices in Santiago, Mexico City and Washington.

b. Undertakes studies requested by the Commission.

c. Considered part of the UN Secretariat.

3. There is a coordination committee between ECLA and the Inter-American Economic and Social Council of the OAS, in order to avoid overlapping and duplication.

Accomplishments:

1. Annual publication of the comprehensive, statistical studies, *Economic Survey of Latin America* and the *Economic Bulletin for Latin America*.

2. Continual studies of economic development both by region and individual country have been valuable in the continued development in the area.

3. Stress has also been placed on the social aspects of economic development.

4. Specific studies and discussions have been undertaken in the areas of industrial development, energy resources, agricultural production (particularly coffee), internal and extra-regional trade and technical assistance.

ECLA (Cont.)

21.

5. Under the joint sponsorship of ECLA and UN Technical Assistance programs for training of personnel have been undertaken at ECLA headquarters in Santiago. There also has been cooperation on the consideration of existing and future UN technical assistance programs.

6. ECLA has been instrumental in providing the studies, guidance and discussions leading to the establishment of the Latin American Free Trade Area by the Montevideo Treaty of February 1960.

7. ECLA has also been the leading organization in discussions and studies leading to the recent establishment of the Central American Free Trade and Economic Integration Area.

Source: United Nations, Cooperation for Economic Progress, (1959) (pp. 37-49)

[Lc]

22.

Members: Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua

Date of Treaty: June 1958: "Agreement on the Regime for Central American Integrated Industries."

June 1958: "Multilateral Treaty on Central American Free Trade and Economic Integration."

1960: "Tripartite Treaty of Economic Association" (El Salvador, Guatemala, and Honduras)

1960: Agreement to create a Central American Bank for Economic Integration (Guatemala, El Salvador, Honduras, Nicaragua)

Motives:
1. Not primarily for intra-regional trade purposes because only approximately 4¼% of regions' foreign trade is with itself (compared to 25% for European Common Market)

2. Create framework for future development of region's production and trade. Belief that a sweeping reorientation of Latin American economy necessary for an adequate growth rate.

3. Need for new plan for growth emphasized by decreased foreign exchange holdings which have been boon to growth rate.

4. Attempt to give wider market to infant industries (in non-primary goods) without subjecting them to competition from highly industrialized countries.

5. Need intermediate steps for economic gains by these small countries so that they can later join wider Latin American Common Market.

Goals:
1. Eliminate barriers to trade among themselves.

2. Establish a common tariff vis-a-vis third countries.

3. Measures to coordinate their industrial development.

Free Trade (Cont.)

23.

Procedures:

1. New Industries requiring access to full market of 5 countries are "integrated industries," the products of which will be granted immediate free entry to the markets of all 5 countries. Any plant in the same industry will not receive initial free duty if established outside the integration program. A second integrated industry will not be established until all five countries have one. This plan will go into effect when all the countries ratify the appropriate 1958 agreement (all but Costa Rica had, as of September 1960).

2. Trade treaty provides for immediate elimination of inter-regional tariffs and other charges on 200 commodity groups. Calls for elimination of all other mutual tariffs within 10 years, and for an eventual common external tariff. (In effect among all but Costa Rica who had not ratified as of September, 1960).

3. September 1959 treaty set a 5 year deadline on the establishment of the common external tariff (El Salvador and Guatemala only had ratified this by September 1960)

4. September 1959 protocol called for 20% reduction in tariffs on all goods produced in region. (By September 1960, none ratified)

5. 1960 -- El Salvador, Guatemala, Honduras ratified Treaty which provided for immediate freeing of all intra-area trade except for about 50 items, tariffs on which to be removed in 5 years. Common external tariff in 5 years. Creation of a Development and Assistance Fund to finance development projects and to facilitate readjustments necessary due to opening of the common market. In June 1960 each of 3 decided to put in $5.5 million. The Economic Commission for Latin America has been asked to draft a treaty which would bring Costa Rica and Nicaragua into Tripartite plan.

25.

D. Montevideo Treaty Group (Latin American Free Trade Association)

Members: Argentina, Brazil, Chile, Mexico, Paraguay, Peru, Uruguay. (Bolivia held out although she had taken part in negotiations.)

Date of Treaty: February 1960. (Comes into effect when ratified by 3 signatories, as of September 1960 none had ratified.)

Motives:
1. Desire to preserve their existing trade with each other. New framework of trade necessary to replace bilateral preference after Organization made its currency convertible in January, 1959.

2. Desire to develop new trade (e.g., Mexico's adherence)

Goals:
1. To achieve complementary and integrated national economies.

2. The 7 countries' huge and diverse natural resources provide ample scope for a beneficial division of labor.

Provisions:
1. Treaty provides only for limited goal of free trade area.

2. 12 year limit on removal of charges and restrictions on all intra-area trade for almost all their reciprocal trade.

3. No provision for common external tariff, but re-export out of the area and then back in is prohibited except by special agreement, on when the goods have undergone processing in the importing country.

4. Actual tariff and quota reductions to be made through annual negotiations, in which each country must demonstrate successive annual reductions of 8 percent of the weighted overall average of its tariffs on goods that it imported from the other treaty countries in the preceding 3 years. At the end of 3 years the common list must include goods amounting to 25% of the intra-area trade; 50% by six years; 75% by nine years.

Montevideo Treaty Group (Cont.)

26.

5. Limits to commitments:

a. Only need to reduce tariffs on goods actually traded within the region.

b. The rate at which tariffs are to be reduced on individual products is to be left to each country.

c. Escape clauses permit the temporary withdrawal from the list of goods from industries, which are seriously endangered by imports, and which are "specified productive activities of significant importance". Escape clause use is also permissible in face of over-all balance of payments difficulties.

Organs:
1. Annual Conference of the Contracting Parties, will be association's supreme authority, empowered by 2/3 vote to take all action requiring joint decisions. In the first two years, however, each country will have a veto power.

2. A Permanent Executive Committee, composed of one representative from each country, will exercise continuous supervision over the implementation of the treaty with the aid of a permanent secretariat.

Problems:
1. Leaves much to future negotiations.

2. Flexibility in tariff reduction program may enable domestic political and economic pressures to be of maximum effect. (Putting off most difficult tariff reductions until the last years)

3. Those goods not traded interregionally may be so because of perfectly tariff-protected industries, which certainly may hamper perfect cooperation.

4. Paraguay is significantly less developed than the rest.

[LC]

28.

Membership:
Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, United States, Uruguay, Venezuela. (1959 proposed membership)

Note:
This entire discussion of the Bank is based on
reports of the Agreement before it was ratified
but after it had been signed.

Date: Signed April 8, 1959: ratified subsequently (Cuba has signed but not ratified)

Goals:

1. To enlist the full cooperation of the Latin American countries in a joint and mutual enterprise in which all will share in the financial costs of the operation and in responsibility for its success.

2. To concentrate exclusively on the economic problems of the members of the OAS so that it will be in a position to adopt its policies to provide maximum assistance to the needs of the area.

3. To mobilize and channel foreign private investment funds for use in financing economic development.

4. To stimulate the investment of Latin America's own resources in the economic development of the area.

5. To supplement private capital and existing public lending institutions in providing financing to meet the large capital needs of the area.

6. To provide technical assistance for the preparation of sound and broad programs of economic growth.

[6]

Development Bank (Cont.)

29.

Provisions:

1. The total resources of the Bank will total one billion dollars.

a. Authorized capital stock -- $850,000,000

1) divided into 85,000 -- $10,000 shares.

2) the U. S. holdings of 35,000 shares (350 million dollars) would amount to 41% of the total subscriptions (which are outlined in the Articles of Agreement)

3) of the $850 million, $400 million will be paid in and $450 million will be on call. (U. S. will pay in $150 million, and retain $200 million on call.)

4) installment arrangements, for the amounts to be paid in, indicate that all funds to be paid in will be paid in by September 30, 1962.

5) 50% of any installment must be in the country's national currency, and 50% in gold and/or dollars.

6) the terms under which the Bank may call up portion of the callable funds are clearly defined.

b. A Fund for Special Operations -- $150,000,000

1) all quotas are to be paid in;

2) the U. S. quota is $100 million (67%);

3) there is a flexible installment arrangement by which all payments are due at least by September 30, 1962.

c. Provisions exist for the expansion of the total resources of the Bank by an additional 500 million dollars.

Development Bank (Cont.)

30.

2. The Bank may loan to member governments or private enterprise, but in neither case if the pertinent member government objects.

3. The Bank may insist upon a guarantee by the pertinent government before it makes a loan to a private enterprise.

4. The Bank may loan for any purpose which will further Latin American development (including loans to groups of member States, or national development institutions).

5. The Bank may guarantee loans.

6. Loans of the Fund for Special Operations will be made on terms and conditions appropriate for dealing with special circumstances.

7. The Bank is authorized to provide technical assistance to its members. (Specialized training for projects; preparation and execution of development programs.)

Organs:

1. The Board of Governors (the final authority)

a. Governor (and alternate) appointed by each member state for five years.

b. Each member state has 135 votes plus one vote for each share of stock held. (Thus U. S. has 35,135 votes or 40% of the total.)

c. Certain powers reserved to the Governors.

1) election of President of the Bank

2) admission or suspension of members

3) changes in the capital stock, etc.

d. Meets annually.

e. Majority decision (of voting shares) will be determinant in all cases unless otherwise provided.

[c]

Development Bank (Cont.)

31.

## 2. The Board of Executive Directors

a. Subject to review by the Board of Governors.

b. Continuous session in Washington.

c. 7 members: 1 appointed by U. S., 6 chosen by the Board of Governors to represent big and small countries alike.

d. Three year terms.

e. Voting will be in accordance with the number of votes of the countries each director represents.

f. Apparently this body approves loans by a majority of voting power.

g. In the Special Fund cases a 2/3 vote (of voting power) is required including the U.S. vote.

## 3. President of the Bank

a. Elected by the Board of Governors (absolute majority of members and voting shares)

b. five year term.

c. Vague position, but apparently in charge of the staff.

## Accomplishments:

1. The U. S. has allocated a total of 600 million dollars in 1960 for Inter-American Aid for Social Development which apparently is to be jointly administered by the Bank, the Economic and Social Council of OAS, and ICA.

2. Although the Bank is in operation everything seems very vague at the moment.

3. Congress approved Bank Bill in 1959, authorizing 450 million dollar contribution and appropriating $280 million of that contribution.

## Source:

National Advisory Council on International Monetary and Financial Problems, *Special Report to the President and Congress on the proposed Inter-American Development Bank*, May, 1959.

32.

F. The Export-Import Bank (A wholly U.S. government owned instrument)

Date: 1934

Goals:
1. To induce private portfolio funds to participate in the financing of foreign development.
2. Through loans to foreign governments, loans to private entrepreneurs in foreign countries, loans to U. S. firms for foreign investment, and guarantees of U.S. private investment to help in the process of foreign development.
3. To act as an instrument of the U.S. Government.

Accomplishments and Policies:
1. The Bank is a portfolio investor only.
2. The Bank makes loans only.

3. The Bank loans to foreign governments supposedly only when it is an area in which private enterprise could not profitably operate and therefore it is within the proper sphere of governmental economic activity.

a. Public Works (irrigation and reclamation projects, etc.)

b. Transportation (The Bank has not attempted to transpose U.S. philosophies of private railroad and airline industries to foreign governments.)

c. Power Projects (The Bank has loaned to foreign governments for government controlled utilities but frequently under heavy criticism.)

d. Where governments have reserved themselves natural resource preserves, the Bank has provided loans for mining operations.

e. The Bank has refused to loan to governments in support of governmentally owned manufacturing operations.

[LJ]

Export-Import Bank (Cont.)

33.

4. On occasion the Bank has thought it proper to loan to foreign enterprise despite its acceptance of the general theory that private enterprise should remain private. These cases involved operations in the less developed countries:

a. Activity must be productive to the economy of the country involved.

b. The Bank has lent to the relatively few private foreign companies in transportation power and mining.

c. Loans to manufacturing concerns are generally so small that the Bank is not interested, but where there is a problem of dollar supply which only such a loan could meet, the Bank has made the loan.

d. The Bank shortly after World War II made loans for hotel construction on the basis that this was necessary to stimulate commercial activity. After this sole trip into the commercial trade area the Bank quickly withdrew but has recently re-adopted the policy.

5. Before it makes a loan the Bank will inquire as to whether private capital is not available for the purpose.

6. The Bank will only guarantee a private loan if it would be willing to make the loan itself.

7. Originally the Bank believed that it should not loan to U.S. companies in order to make foreign investments because private enterprise should remain private. But since World War II it has been making such loans on the assumption that U.S. private investors should not be denied the right to do that which the Bank is doing.

35.

G. The Development Loan Fund (DLF) (A U.S. unilaterally administered Fund)

Date: 1957 (Paragraph 6, Mutual Security Act of 1957)

Goals:
1. "to assist, on a basis of self-help and mutual cooperation, the efforts of free peoples to develop their economic resources and to increase their productive capabilities."
2. to promote the development of competitive free enterprise systems in friendly foreign countries.
3. to obtain the participation of private capital in developing the economies of those countries.
4. to serve as an instrument of United States foreign policy.

Provisions:

1. DLF is empowered to make loans, credits, guarantees or other transactions (not including grants or direct purchases of equity securities, with such nations, organizations, persons or other entities and on such terms as it may determine taking into account:

"a. whether financing could be obtained in whole or in part from other free world sources on reasonable terms

"b. the economical and technical soundness of the activity to be financed.

"c. whether the activity gives reasonable promise of contributing to the development of economic resources or to the increase of production capacities in furtherance of the purposes of the DLF.

"d. possible adverse effects upon the economy of the United States, with special reference to areas of substantial labor surplus, of the activity and the financing operation or transaction involved."

Development Loan Fund (Cont.)

36.

2. In addition to this enormous grant of powers there is a wide spectrum of specific powers some of which are spelled out here:

a. With a promise of repayment and reasonable expectation thereof DLF can make loans to any private person or entity, U.S. or foreign.

b. DLF does have the authority to compromise obligation owing to it, but it does not have the authority to make grants.

c. DLF may make guarantees of loans, etc., limited only in that it may not guarantee equity investments against normal type business risks. But against any other reason of default (including war, currency inconvertibility, expropriation, etc.) DLF may guarantee the transaction: (This means even guarantees of the investments of foreign investors)

d. DLF has the authority to secure its loans through mortgages, liens, pledges, other collateral or security -- and may take the guarantee of governmental or private entities.

e. In its financial operations DLF has very few limits on its conversion rights, which could make it far more flexible than the IFC.

Organs:

1. DLF is a government corporation, subject to Presidential supervision, with the right to sue and be sued in its own name.

2. It is subject to the Government Corporation Control Act of 1945.

3. Board of Directors governs its operation.

a. Secretary of State, Chairman

b. Director of the International Cooperation Administration.

[J]

Development Loan Fund (Cont.)

37.

c. Chairman of the Board of Directors of the Export-Import Bank.

d. U. S. Executive Director on the IBRD.

e. Managing Director of the DLF (chief executive officer of DLF.)

Accomplishments:

1. As of October 1960, DLF had been authorized 1.4 billion dollars by Congress, but had loaned only 0.3 billion of that amount. It had, however, commitments to lend considerably more, and has received many more applications than it can possibly fill.

2. About 70% of DLF loaned funds have gone into development of roads, ports, railroads, communications and power plants -- programs beneficial to private enterprise -- but inappropriate for its investment.

3. About 1/3 has been lent directly to private enterprise itself.

4. DLF has undertaken and encouraged joint public/private development investing.

Problem:

1. In the long run the success of DLF will be found in the degree to which U.S. business will be willing to respond to its proposals, for essentially the purpose of DLF is to stimulate private development investment.

Source:

Golby, Ralph W., "The Development Loan Fund and Private Investment," *The Federal Bar Journal*, Volume 19 (1959) pp. 316-326.

38.

H. International Bank for Reconstruction and Development (IBRD -- World Bank)

Membership: 68 members as of January 1959 (including major powers except U.S.S.R.)

Treaty date: December 27, 1945 (first operational meeting in March 1946)

Goals:
1. "To assist in the reconstruction and development of its member states by facilitating the investment of capital for productive purposes, thereby promoting the long-range growth of international trade and the improvement of living standards."

2. "To promote private foreign investment by guarantees of and participations in loans and other investments made by private investors."

3. "When private capital is not available on reasonable terms, to make loans for productive purposes out of its own resources or from funds borrowed by it."

Provisions:
1. Quota system, similar to IMF, with voting dependent on quota, but the power to borrow is not limited by the size of the quota (difference from IMF)

a. Member pays in 20% of quota, the other 80% is subject to call at any time. (10% of any amount paid in will be in gold)

b. The total bank activities should not exceed the total in the bank plus the 80% reserves.

2. The Bank may borrow from the capital markets of members.

3. Loans must be repaid in the currency of the loan. A borrower must repurchase its surplus currency with a foreign exchange of which the Bank is short.

4. The Bank may guarantee private loans.

IBRD -- World Bank (Cont.)

40.

3. President

a. Elected by the directors.

b. Ex officio Chairman of Directors, and
Chief Executive Officer of the Bank.

c. Subject to the general direction of the
Directors on questions of policy, he is
responsible for the conduct of the business
of the bank.

Accomplishments:

1. Early loans were made primarily for water power, railroads, ports, etc.

2. Early experience was not reassuring particularly because the reconstruction needs were met outside the Bank.

3. Private firms were not happy to borrow from the bank when their government had to guarantee that they would pay back.

4. Creation of IFC and IDA did much to alleviate these difficulties.

5. IBRD came around to the view that many loans, although uneconomical in terms of profit, would be sound development loans.

6. Role of bank and President (especially Mr. Black) has greatly expanded into advisory and arbitral position.

Problems:

1. Most of the bank's problems have been met through the IFC, IDA and the forceful poli-ticking of Mr. Black.

Sources:

1. DLB personal notes.

2. Everyman's United Nations, (New York: United Nation's Publication, 1959) pp. 494-498.

41.

I. International Finance Corporation (IFC)

Membership: 57 countries as of January 1959 (all the major powers except Nationalist China and USSR -- open to all members of the IBRD).

Treaty Date: July 24, 1956

Goals:

1. "To further economic development by encouraging the growth of productive private enterprise in the developing areas of its member countries. It works toward this end by:

"a. investing in productive private enterprise, in association with private investors and without governmental guarantee of repayment, in cases where sufficient private capital is not available on reasonable terms;

"b. serving as a clearing house to bring together investment opportunities, private capital (both foreign and domestic) and experienced management; and

"c. helping to stimulate the productive investment of private capital, both domestic and foreign."

2. To overcome the IBRD difficulties of making loans to private corporations requiring national government guarantees onerous to private enterprise.

Provisions:

1. Funds available to IFC have been invested in United States Government obligations with maturities up to 5 years. (For the year ending June 30, 1958, earnings from these investments totalled $3,414,410; earnings from IFC operational investments totalled $93,311.)

2. IFC makes investments, not loans, and operates as a business venture would with careful analysis and research.

3. To be eligible an enterprise must be essentially privately owned.

IFC (Cont.)

42.

4. IFC may not accept a governmental guarantee.

5. IFC may sell its investments as soon as they become attractive to private organizations.

6. IFC is to be active in bringing private capital and investment opportunities together.

7. It is understood that IFC should be primarily interested in the less developed areas.

Organs:

1. The IFC, although closely affiliated with the IBRD it is a separate legal entity and its funds are, entirely separate from the IBRD.

2. All powers are vested in Board of Governors.

a. Governor and alternate from each member.

b. Each member country has 250 votes plus one additional vote for each share of stock held.

c. Annual meetings held in conjunction with those of the IBRD and IMF.

3. The Board of Directors is composed *ex officio* of the Executive Directors of the IBRD whose countries are also in the IMF.

a. Supervises the conduct of the general operations of the Corporation.

b. Meetings when business requires.

4. President of IBRD serves as *ex officio* Chairman of the Board of Directors of IFC.

5. The President of IFC is appointed by the Board of Directors of IFC.

Accomplishments:

1. By end of 1958 IFC had invested $11,817,000 in 13 private industrial enterprises. Private sources of capital have supplied roughly $50,000,000 in the same projects.

Sources:

1. DLB personal notes.

2. Everyman's United Nations. (New York: United Nations Publication, 1959). pp. 498-502.

43.

J. The International Development Association (IDA)

Membership: Membership shall be open to all IBRD members on
terms established by IDA. Originally 68 members.

Date: 1960

Goals:
1. "To promote economic development, increase productivity and thus raise standards of living in the less-developed areas of the world." (Included within IDA's membership.)

2. To provide finance "to meet their important developmental requirements on terms which are more flexible and bear less heavily on the balance of payments than those of conventional loans, thereby, furthering the developmental objectives" of the IBRD and supplementing its activities.

3. To provide an international source of development aid which would permit repayment of loans in local currencies which is not really possible under IBRD operations.

Provisions: 1. Initial Subscription

a. Each member country has been assigned a quota (U.S. -- $320,290,000; total -- $1,000,000,000)

b. Listed (17) capital exporting countries must contribute all their funds within 5 years, on a predetermined schedule, in gold or freely convertible currency.

c. Capital importing countries must contribute according to the same time schedule but only 10% of their quota need be in gold or freely convertible currencies; the other 90% would be in their local currency.

d. Members may withhold 90% of their actual quotas as long as it is payable on demand (for the capital importing countries the 10% they must pay in must be in gold or freely convertible currency).

[c]

IDA (Cont.)

44.

e. IDA may increase the subscriptions after reviews made every five years.

2. IDA will not loan when funds are available from private sources or when it is the type of loan undertaken by the IBRD.

3. IDA may loan to public international or regional organizations, a member government or political subdivision thereof, a public or private entity.

4. When a loan is to other than a member government, IDA _may_ require a governmental guarantee.

5. IDA may, under special circumstances guarantee other loans from other sources not inconsistent with IDA goals.

6. No political strings attached to any loan.

Organs:

1. The Board of Governors (in which all IDA powers are vested.)

a. IBRD Governors (and, their alternates) of IDA members are _ex officio_ Governors (and alternates) of the IDA.

b. Chairman of the IBRD Board of Governors shall be _ex officio_ chairman of the IDA Board of Governors. (As long as his country is an IDA member.)

c. This body may delegate any power to the Executive Directors except that:

1) to admit new members;

2) to authorize additional subscriptions;

3) to suspend a member;

4) to approve proposed amendments to the Articles;

5) to determine general policy, etc.

IDA (Cont.)

45.

d. Meets annually (in conjunction with IBRD Board of Governors)

e. Each member will have 500 votes plus one for each $5,000 of its original subscription. (Thus of the 234,000 votes, the U.S. would have 64,558 or approximately 28%.)

f. Except as otherwise indicated, all matters will be decided by a majority of the votes cast.

2. The Executive Directors

a. Responsible for the general operations of IDA and will exercise the powers given them by the Board of Governors.

b. Composition: (ex officio)

1) Any Executive Director of IBRD appointed by an IBRD member who is also an IDA member.

2) Any Executive Director of IBRD elected in an election in which the votes of at least one member of the IBRD, which is also an IDA member, shall have counted toward his election.

c. Voting:

1) Each Director, who is an appointed director of IBRD, shall cast all the IDA votes of that member.

2) Each Director, who is an elected director of IBRD, shall cast all the IDA votes of those IDA members who voted in his election.

3) All Directors will cast their votes in a single unit.

d. The Executive Directors will meet as often as necessary.

47.

K. United Nations Special Fund

Membership: Available to any government

Date: January 1, 1959

Goals:

1. To raise production and productivity.

2. To assist in the performance of essential
"pre-investment" work.

3. To thereby attract other capital for investment in development programs.

4. To serve all institutions that have funds to invest in the low-income countries.

Provisions:

1. It may make grants to less-developed countries on a re-imbursable basis but has not yet done so.

2. It may and does support the pre-investment activities of the United Nations and certain of its specialized agencies -- on a sub-contract basis.

3. It assists projects in 3 specific fields:

a. Surveys and feasibility studies: to reveal wealth-producing potentialities (land bettered through irrigation; rivers to produce electricity; mineral deposits; marine resources)

b. Applied research to find new uses for local materials and products.

c. Manpower training and technical education -- to develop vocational and technical skills for a fuller utilization of the human resources of underdeveloped countries, and thereby the fuller development of natural resources.

5. It attempts to avoid duplication of the work of any other organization.

[LJ]

UN Special Fund (Cont.)

48.

Organs:

1. The Governing Council

a. Composed of 9 representatives from industrial countries and 9 from less industrialized countries.

b. Normally meets twice a year.

c. Three major tasks

1) to set basic guide lines for Special Fund policy;

2) to supervise administration of Special Fund activities;

3) to approve the allocation of resources for projects and operations.

d. Reports to ECOSOC.

2. The managing director

a. Responsible for overall administration of the Fund under direction of the Governing Council.

b. Receives all request for project aid.

c. Reports to the Governing Council on the requests and recommends action.

3. The Consultative Council

a. Composition: Managing Director, Secretary General of U.N.; President of IBRD; Executive Chairman of the Technical Assistance Board.

b. Helps in forming recommendations of the Managing Director to the Governing Council.

4. The field representatives of the U.N. Expanded Program of Technical Assistance help the requesting countries in formulating their requests.

UN Special Fund (Cont.)

49.

Accomplishments:

1. By the end of 1959, 63 million dollars had been pledged by 74 U.N. member governments.

2. By June 1960, formal requests had been received for 219 projects, involving 195 million dollar Fund expenditure.

a. The Governing Council had approved the allocation of 55 million dollars in Fund resources for 74 projects in 49 countries and territories. (The gross cost of the 74 projects will be 135 million dollars of which 80 million dollars will be paid by the recipient countries in counterpart funds.)

b. Requests for 54 projects were under consideration for recommendation to the Governing Council in December 1960.

c. Eight requests had been withdrawn by the requesting governments.

d. 83 requests were of a nature which did not pass the standards for recommendation by the Managing Director.

3. The Special Fund has adopted an operating rule to concentrate on relatively large projects requiring at least $250,000 of its funds.

Source: The United Nations Special Fund, 1960 (New York: United Nations publication, 1960.)

50.

L. United Nations Technical Assistance Program

Membership: United Nations membership

Treaty Date: Since U.N. origins; expanded program accepted by General Assembly on November 16, 1949.

Goals:
1. To aid underdeveloped countries, at their request, to develop their economies, through provision by the U.N. of technical assistance to help meet the need for the technical knowledge and skills required to plan and execute economic development programs and projects.

2. To provide technical assistance similarly in the areas of social welfare and public administration.

Provisions:
Although there were many scattered programs for technical assistance through the U.N., this summary deals only with the thoroughly organized program initiated by General Assembly unanimous approval of ECOSOC plan on November 16, 1949.

1. Financed from voluntary contributions by U.N. members to be paid into a Special Account by the Secretary-General.

2. Arrangements would be made by the requesting governments with the participating U.N. agencies

3. The requesting countries should perform as much of the work as possible in order to define the nature and the scope of the problem involved.

4. Three major forms of technical assistance are provided.

a. technically qualified experts to advise governments and train local staff in a wide variety of economic development fields;

b. fellowships or scholarships to enable nationals of underdeveloped countries to study modern methods in similar fields abroad;

[L]

UN Technical Assistance (Cont.)

51.

c. organization of training centers and seminars on a regional basis to enable experts of several countries to exchange ideas and experience in particular technical fields.

5. Participating organizations include IAEA, ILO, FAO, UNESCO, ICAO, WHO, ITU, WMO.

a. They also conduct their separate technical assistance programs.

b. ECOSOC is the coordinating body with the prime function of preventing duplication.

6. Obligations of recipient governments:

a. to contribute toward the local living costs of the experts;

b. to provide counterpart services for projects;

c. to set up their own coordination machinery;

d. to provide all the relevant information re the project proposed;

e. to give full and prompt consideration to the technical advice given;

f. to publish information or provide material for study and analysis of the results achieved;

g. to give publicity to the program within their own territories.

7. Creation of a Working Capital and Reserve Fund (of approximately 12 million dollars) which will serve as an operating reserve from which the Executive Chairman of TAB (see below) may draw to meet urgent needs which may arise in the implementation of the program. (This adds considerable flexibility to the program.)

[c]

52.

Organs:

1. The Technical Assistance Board

a. The executive heads of the participating organizations or their representatives, under an Executive Chairman.

b. Function: to coordinate and supervise operations under the expanded program; to submit reports on activities already undertaken and on funds received; to consolidate yearly requests from each recipient country into an over-all program for submission to the TAC.

c. Maintains field representatives to help countries draw up their requests, and to help the technical assistance teams in the field.

2. The Technical Assistance Committee of ECOSOC.

a. Eighteen members of ECOSOC plus six additional members elected from among the members of the U.N. and related agencies.

b. On the basis of regular TAB reports it reviews the progress of the program at least twice a year.

c. It interprets resolutions and takes decisions on questions submitted to it by TAB.

d. It must approve annual country and regional programs before they can be carried out.

e. TAC reports to ECOSOC which, in turn, reports to the General Assembly.

3. Bureau of Technical Assistance Operations

a. In the Secretariat, its job is to provide for and coordinate technical assistance programs operations.

53.

b. Under direction of a Commissioner for Technical Assistance, who coordinates certain aspects of technical assistance programs.

Accomplishments:

1. As of 1959 member governments were pledging about 30 million dollars a year. (Under the expanded program) Programs have spent just about the amount.

2. The major fields in which aid has been given: basic surveys of resources and building up of administrative services; power, transport and communications; industrial production and mining; agricultural production; auxiliary services to industry and agriculture; health services; education; community development; and other social services.

Source: Everyman's United Nations, (New York: United Nations publication, 1959) pp. 188-196.

61.

H. Other U. S. Government Economic Aid Programs for Latin America:

1. The Export-Import Bank has loaned over $1,150,000,000 in Latin America in the last four fiscal years. Its loans, generally of a small amount compared with other institutions mentioned here, are made primarily to private enterprise for many varied reasons.

2. The U. S. share of the construction and maintenance of the Inter-American Highway has been substantial.

3. Few Latin American countries have contracted with the United States in its Atoms for Peace Plan.

4. Congress has authorized a 450 million dollar contribution to the Inter-American Development Bank, and has appropriated 280 million dollars of that contribution.

5. At the same time Congress appropriated 500 million dollars for "inter-American Aid for Social Development," in a Fund which apparently will be jointly and flexibly handled by ICA, OAS and the Inter-American Bank.

6. If the Central American Bank for Economic Integration comes into existence, the United States will be obligated to make 10 million dollars available.

[c]

<u>LATIN AMERICA -- GENERAL</u>
(Summary)

(Jan. 20 - Sept. 20, 1961)

Report No. 1
Ann Black

Sept. 22, 1961

I. <u>JFK Actions</u>

A. <u>Appointments</u>

Attempting to evolve a new policy toward Latin America, JFK appointed a task force under the direction of A. A. Berle, Jr. Arthur Schlesinger, Jr. and Adlai Stevenson were sent as special envoys to tour Latin America. JFK also appointed Robert Woodward as Assistant Secretary of State for Inter-American affairs and deLesseps Morrison as OAS ambassador.

B. <u>Alliance for Progress</u>

1. On March 14, 1961 JFK made a major statement on Latin American policy, which he termed <u>Alliance for Progress</u>. It is a ten-year development program for the American republics.

2. To implement the new program, JFK asked Congress for $600 million in aid (Bogota plan), told agencies connected with the Alliance to <u>accelerate their already funded projects</u> and signed the agreement for the <u>Inter-American Social Progress Trust Fund</u>.

3. At the meeting of the Inter-American Economic and Social Council in Uruguay, the U.S. and all the Latin nations, except Cuba, signed the <u>Declaration of Punta del Este</u>, which is to be the basic charter for the Alliance.

C. <u>Alliance for Progress -- Specific Aid Appropriations</u>

Funds totaling approximately <u>$635,545,000</u> in the form of grants and loans, have been given to <u>14 Latin American countries</u> through agencies connected with the Alliance.

D. <u>Military Aid</u>

1. JFK asked Congress to remove the present ceiling of $55 million on military aid to Latin governments and to abolish the restriction on assistance for internal security purposes. In turn he proposed <u>$68 million in military aid, of which $21 million</u> would be earmarked for <u>"anti-subversion" equipment</u>.

Amendment equipment.

writing aid, of which $31 million would be earmarked for
security purposes. In turn he proposed $28 million in
spoil the restriction on seaplane for internal
$28 million on military aid to Latin American countries and to
TKK asked Congress to remove the present capping of

D. Military Aid

through agencies connected with the Alliance.
and forms, have been given to Latin American countries
for totaling approximately $832,842,000 in the form of grants

C. Alliance for Progress -- Specific Aid Appropriations

except Cuba, signed the Declaration ofarmy ofBata deBate,
Council in Uruguay, the U.2, and all the Latin nations.

Social Progress Trust Fund.

Projects and signed the agreement for the Inter-American
with the Alliance to accelerate their already funded
$800 million in aid (bonds plan), told agencies connected
3. To implement the new program, TKK asked Congress for
rebuilds.

It is a ten-year development program for the American
American policy, which he termed Alliance for Progress.

1. On March 14, 1961 TKK made a major statement on Latin

B. Alliance for Progress

American affairs and defenses Morrison as OAS ambassador.

Robert Woodward as Assistant Secretary of State for Inter-
africanenvoy to four Latin America. TKK also appointed
Arthur Schreiber, Jr., and Adulf Stevenson were sent as

substituted a task force under the direction of A. A. Bensle, Jr.
Attempting to evolve a new policy toward Latin Americas, TKK

A. Appropriations

(Jun. 30 - 2 Apr. 30, 1961)

(Summary)

LATIN AMERICA -- GENERAL

Sept. 25, 1961

Ann Black

Report No. 1

- 2 -

2. $16 million was authorized by JFK for <u>anti-subversion</u>
<u>equipment for Bolivian forces.</u>

E. <u>Information campaign in Latin America</u>

To improve U.S. information techniques, JFK established a
<u>task force</u> and asked Congress for <u>$121 million for additional</u>
<u>broadcasts</u> to Latin America.

F. <u>Cuba</u>

1. The Administration issued a <u>White Paper</u> calling upon the Castro regime to sever its relations with International Communism, granted <u>aid to the Cuban refugees</u>, and made agreements to stop <u>the use of Cuban molasses</u>.

2. JFK endorsed the <u>Tractors for Freedom Committee</u>.

G. <u>Brazil: Resignation of President Quadros</u>

1. The Administration <u>remained silent</u> on the issue and formally denied charges of having taken part in the action.

II. <u>Congressional Activity</u>

A. <u>Alliance for Progress</u>

1. Congress agreed to JFK's request for the <u>Bogota plan</u>;
however, there was some bi-partisan skepticism of the
success of the program.

2. The <u>Senate and House</u> foreign aid bills authorized <u>investment guarantees for pilot housing projects in Latin America and allotted funds for OAS.</u> The two bills (not yet reported on by the conference committee) differed only on the ceiling of the guarantees and in their policy toward Cuba.

B. <u>Military Aid</u>

1. Neither the <u>House</u> nor <u>Senate</u> granted JFK's request to abolish the <u>restriction on internal security assistance</u>.

2. The <u>House</u> raised the military aid ceiling by $5 million.
The <u>Senate</u> kept it at $55 million.

- 3 -

C. <u>Cuba</u>

1. The <u>House</u> called for <u>collective sanctions</u> by the OAS against the Castro Government.

2. The program of <u>Tractors for Freedom</u> incited considerable controversy in the Senate.

III. <u>Editorial Comment</u>

<u>Latin American reaction</u> to the Alliance proposal was generally favorable; however, there was some criticism from an Argentine financial newspaper.

B. <u>Punta del Este</u>

The <u>New York Times</u>, <u>Herald Tribune</u> and <u>Washington Post</u> praised the declaration and the Uruguay conference. The <u>Wall Street Journal</u> does not believe that the stated goals will ever be attained.

C. <u>Military Aid</u>

The Wall Street Journal supported the abolition of the present Congressional <u>restrictions on military aid</u> to Latin America.

D. <u>Cuba</u>

1. <u>Latin America</u> was highly critical of Castro's proposal to <u>trade tractors</u> for prisoners.

-- In twelve Latin countries citizens' committees were formed to help raise the money.

2. <u>Editorial comment</u> in the five U.S. National Studies papers favored the tractor exchange.

E. <u>Brazil: Resignation of President Quadros</u>

The <u>U.S. gained</u> friends in Brazil, and <u>Cuba lost</u> some, as a result of their different attitudes assumed toward the crisis brought about by Quadros' resignation.

Report No. 1

Ann Black

Sept. 22, 1961

LATIN AMERICA -- GENERAL
(Jan. 20 - Sept. 20, 1961)

I. <u>JFK Actions</u>

A. <u>Appointments</u>

1. Task force under A.A. Berle, Jr., who toured Latin America. (NYT 1/31/61). Mr. Berle retired as chairman at the beginning of July because the task force's work had been completed. (This signified the Administration's desire to simplify and streamline the lines of command and decision on Latin affairs -- See #8 below) (NYT 7/8/61)

2. Arthur Schlesinger, Jr., special envoy who toured several Latin American countries.

3. Arturo Morales Carrion of Puerto Rico as temporary US representative on the Council of the OAS. (NYT 5/15/61)

4. Teodoro Moscoso, a Puerto Rican, as US Ambassador to Venezuela. This appointment and that of Morales were very well received by the Puerto Rican population and by the editorials in the New York Times (NYT, 5/16/61)

5. Sent Governmental financial team to Bolivia to examine appeal for immediate special aid program of $20 million (NYT 3/4/61)

6. Adlai Stevenson as special envoy to tour South American countries on behalf of JFK. He discussed plans for the coming Ministerial meeting of the Inter-American Economic and Social Council with the heads of each state. (5/19/61)

7. deLesseps S. Morrison, Mayor of New Orleans, as OAS Ambassador. (NYT 6/19/61)

8. Robert F. Woodward, Ambassador to Chile, to be Assistant Secretary of State for Inter-American affairs. Prior to this selection, JFK had asked Ellsworth Bunker then Carl B. Spaeth to accept the position; however, both refused. JFK was subject to much criticism for not immediately appointing someone to be in charge of Latin American affairs. He was faced with complaints that responsibility had been diffused among too many White House and State Department aides. (NYT, 6/17/61)

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9. **Lincoln Gordon** as Ambassador to Brazil. (NYT 8/25/61)
The Washington Post editorial lauded this selection; however, it criticized its tardiness on the ground that it had been known for a long time that Gordon would replace Cabot and it only put the latter in a difficult and awkward position. (8/28/61, NYT).

10. **Charles W. Cole**, vice president of the Rockefeller Foundation, as Ambassador to Chile. (NYT 9/6/61)

B. Alliance for Progress -- General

1. On March 14, 1961, JFK made a major statement on Latin American policy, which he termed "Alliance for Progress."
He proposed:

a. A 10-year cooperative development program for the American republics;

b. A ministerial meeting of the Inter-American Economic and Social Council to begin the massive planning effort required.

- The Council can assemble the leading economists and experts to help each country devise its own plan;

c. Immediate aid of $500 million to fulfill U. S. commitment under the Act of Bogota;

d. Support to all economic integration which is a genuine step towards larger markets and greater competition, e.g. projects such as:

1) Central American Common Market

2) South American free trade areas

e. U. S. Cooperation in a case-by-case review of commodity market problems to bring an end to the disruption of the one-product economies of several Latin countries brought about by violent price fluctuations;

f. Expansion of the Food-for-Peace program

1) establish food reserves in areas of drought

2) provide school lunches

3) provide school lunchers

f) establish food reserve in areas of drought

E. Expansion of the Food-for-Famine program.

Drought affects by violent price fluctuations;

e. U. S. Cooperation in a case-by-case review of commodity market problems to bring an end to the distribution of

e.g. projects such as:

a. stepwise larger markets and greater competition,

b. support to all economic integration which is a genuine commitment under the Act of Bogota;

c. immediate aid of $200 million to fulfill U. S. and expertise to help each country devise its own plan;

d. The Council can assemble the leading economists and experts to help each country devise its own plan;

required.

p. A industrial meeting of the Inter-American Economic and Social Council to begin the massive planning effort

American republics;

He proposed:

f. On March 14, 1964, UK made a major statement on Latin American policy.

Foundation, as Ambassador to Chile, (WAT 8/8/64)
10. Charles M. Cole, Vice President of the Rockefeller

and awkward position. (8/28/64, WAT).
replace Cabel and it only but the latter in a difficult
time had been known for a long time that Gordon would
however, it criticized its tardiness on the ground that
The Washington Post editorial landed this selection;

g. Lincoln Gordon as Ambassador to Brazil. (WAT 8/28/64)

- 2 -

- 3 -

3) offer food grains and other surplus foods as inducements to countries initiating land reform

e.g. Feed grains would be sold at bargain prices to various governments. The food would be given to new farmers to feed livestock until farmers could supply their own food.

g. Sharing of science and research projects.

1) Latin American scientists invited to work with U.S. in new projects in fields such as medicine and agriculture;

2) Expansion of U. S. science teacher-training programs to include Latin instructors;

3) assistance in establishing similar programs in Latin America.

h. Expansion of technical training to man the economies of developing countries, and cooperation in higher education. The U. S. is prepared to help fill the gap in trained manpower.

i. Reaffirmation of the U. S. pledge to defend any American nation whose independence is endangered.

j. An invitation to Latin countries to contribute to the culture of the U. S. by sending teachers here and accepting U. S. students in the universities there.

2. On March 15, 1961 JFK asked Congress for $600 million in Latin American aid for fiscal 1960-61, which had been authorized but not appropriated under the Eisenhower Administration.

a. $394 million for grants and low-interest loans to be administered by the Inter-American Development Bank;

b. $100 million for earthquake relief in Chile;

c. $6 million for OAS to use in planning Latin development programs;

d. $100 million to be administered by ICA for education, health and training programs.

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- JFK signed the bill on May 27, 1961. It was cleared by Congress with one amendment added (See below Congressional Activity A.1)

3. On May 9 memoranda were sent to all the agencies connected with the Alliance stating that the National Security Council had decided that the program should be expedited and strengthened. Each memoranda then went on to instruct the various agencies and groups as to what their duties were. They were as follows: (NYT, 5/10/61)

a. ICA

1) move rapidly to implement the selected social development projects under the Inter-American Program for Social Progress (Bogota program).

2) negotiate forthwith a number of projects in the fields of education, training and public health, which have been assigned under the Bogota program.

a) select cases where the recipient governments are making the greatest efforts at self-help and institutional reforms.

b) Projects selected should include a number of countries and different types of educational projects.

3) set aside $25 million as a minimum target for the obligation of funds by June 30, 1961, with an optimum target of $35 to $50 million.

b. Export-Import Bank

1) accelerate the implementation of assistance already extended to Latin America and of projects already funded.

2) give careful consideration to overcoming internal policy and other operations which may delay the carrying out of credits already extended to Latin America.

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b. The major fields of activity will be land settlement and improved land use, housing, water supply and sanitation and technical assistance in the mobilization of the Latin American countries' financial resources.

N.B. The original steps toward the establishment of the fund were taken in the Eisenhower Administration and in Congress last year.

5. On August 17, 1961 the Declaration of Punta del Este was signed by the U. S. and all of the Latin American nations, except Cuba. It is to be the basic charter of the Alliance for Progress. The U.S., for its part, pledged its efforts to supply financial and technical cooperation in order to achieve the goals stated in the Declaration. (For the aims toward which the signatories have agreed to work, see addendum) More specifically the US has promised: (NYT, 8/18/61)

a. to provide more than half of the $20 billion assistance, principally in public funds over the next ten years;

b. to give more than $1 billion from public funds during the twelve months which began on March 13, 1961;

c. to furnish development loans on a long-term basis and at very low interest rates;

d. to join a new world coffee agreement;

e. to study an international system of compensatory financing to cushion Latin America against price fluctuations in raw materials.

### C. Alliance for Progress -- Specific Aid Appropriations

1. Funds totaling approximately $653,545,000 in the form of grants and loans, have been given to the following Latin American countries through the agencies connected with the Alliance for Progress: (For more detailed information see Addendum II)

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- He proposed to increase Spanish and Portuguese language broadcasts to a total of 154 hours per week as compared with the present 42 hours, none of which is in Portuguese.

N.B. The Soviets, Red Chinese, and satellites already broadcast into Latin America more than 134 hours a week in Spanish and Portuguese. Communist China alone does more public information broadcasting in our hemisphere than we do.

2. On a recommendation by Adolf Berle, Jr., a new task force is being established to study a "new concept" for advocating the democratic system in the Americas. (NYT 7/12/61)

N.B. The Communist governments, exclusive of Cuba, spend about $100 million annually on propaganda in Latin America. For its activities the U. S. has available $15 million annually.

## F. Cuba

### 1. Aid to Cuban Refugees

a. Ribicoff, acting on orders of JFK, made a three-day survey of the problems connected to the refugees in the Miami area.

b. On February 3, 1961 JFK issued a series of orders to be followed in order to alleviate the refugee problem, He allotted $4 million for this program.

c. On July 20, 1961 JFK asked Congress to give special statutory authority to U.S. participation in the Cuban Refugee Program. The program has been financed out of the President's contingency fund under the Mutual Security Program and, as of June 30, had cost about $5 million. The legislation which has been requested would remove the refugee program from foreign aid and would authorize the expenditure of sufficient funds, as well as loans, food grants and use of local currencies, needed to carry out the respective programs.
(CQ 8/11/61)

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2. State Department White Paper. On April 3, 1961 the JFK Administration issued a document calling on the Castro Regime to sever its link with international Communism and restore the dignity of the original Cuban Revolution.

-- The booklet was written largely by Arthur Schlesinger, Jr., Richard Goodwin and A. A. Berle, Jr., but it was closely checked by JFK himself.

3. In order to hold down dollar earnings of the Castro government, JFK ordered two Federal agencies to do what they could to stop purchases and use of Cuban molasses by Publicer Chemical Corporation. (WSJ, 6/22/61)

a. The U. S. Government proposed to sell surplus corn to Publicer as a substitute for the molasses it uses to make industrial alcohol and liquor.

b. The White House put pressure on Publicer by announcing that imports of Cuban molasses were not in the public interest because they provided money to a dictatorship.

c. An agreement between the Government and Publicer was reached at the end of June 1961.

4. On May 24, 1961, JFK endorsed the formation and actions of the Tractors for Freedom Committee; however, the Federal Government remained apart from it and granted no direct aid. (NYT, 5/25/61)

G. <u>Brazil</u>

1. The Administration adopted a policy of official silence and nonintervention on the subject of President Janio Quadros' resignation. The State Department formally denied accusations made in Moscow and Havana of the U.S. engineering the action.

2. The U. S. congratulated Joao Goulart on his assumption of power.

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## II. <u>Congressional Activity</u>

### A. <u>Alliance for Progress</u>

#### 1. <u>Bogota Program</u>

a. Congress cleared the bill appropriating $500 million for the Inter-American Social and Economic Cooperation Program and $100 million for Chilean Relief in fiscal 1961 on May 25. (C.Q., 6/2/61)

(1) The bill was passed with a compromise House amendment which modified a Senate amendment adopted May 9.

(2) The compromise amendment provided that funds could not be loaned or reloaned under the Inter-American Program at rates considered to be excessive by the Inter-American Development Bank or higher than the legal interest rate of the recipient nation.

(3) The original Senate amendment, sponsored by Williams (R., Del.), set an 8% interest ceiling.

b. <u>Republican views</u> on the $600 million appropriation

(1) <u>Javits</u> (N.Y.) felt the program to be "laudable" but "inadequate."

(2) <u>Capehart</u> (Ind.) opposed the measure on the ground that it provided no "controls over how the money would be spent and contained no assurances that the recipient government would remain friendly to the U. S." (NYT, 5/10/61)

(3) <u>Dworshak</u> (Idaho) was opposed to starting without adequate preparation. (C.Q., 5/12/61)

c. <u>Democratic views</u> on the $600 million appropriation

(1) <u>Gore</u> (Tenn.) is somewhat sceptical of the program. He served notice on the Administration that the Foreign Relations Committee intended to "keep a close eye on the program." He feels that: (C.Q., 5/12/61)

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- No projects should be undertaken in countries ruled without essential democratic tenets or in nations where land and tax reforms are not undertaken, or excessive interest rates and inadequate credit machinery exist.

- No funds should be committed until the recipi-
ent governments have shown "their determina-
tion and ability to carry through essential
institutional and legislative changes."

(2) **Fulbright** is in favor of the bill which he feels is designed for the "common man." (NYT, 5/11/61)

2. Foreign Aid Bill

a. The bill as passed by the Senate on August 18 1961 made the following specific provisions for Latin America: (C.Q., 8/25/61)

(1) Authorized the President to guarantee up to 75% of an investment in pilot housing projects in Latin America, up to $10 million against unspecified risks, with an overall ceiling of $15 million on such guarantees;

(2) Allotted $1,500,000 for voluntary contributions to the OAS;

(3) Required that economic assistance to Latin America be administered pursuant to the Act of Bogota.

b. The _House_ bill, passed on August 18, 1961, differed from the Senate's only in that it:

(1) set a ceiling of $100 million, instead of $15 million on guarantees on investments in pilot housing projects;

(2) prohibited aid to the current government of Cuba and authorized the President to establish a complete U. S.-Cuba trade embargo. It also prohibited aid to any nation assisting Cuba unless the President determined such aid was in the national interest. The Senate bill did not bar aid to Cuba by name.

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B. <u>Military Aid</u>

1. The _Senate_ Foreign Aid bill retained the $55 million on military equipment aid for Latin American nations and stipulated that it was not to be used to preserve internal security unless the U. S. President so determined. (C.Q. 8/25/61)

--- An amendment was offered by _Morse_ (D., Ore.) requiring the President to report promptly to the Foreign Relations Committee and the Speaker of the House of Representatives his reasons for deciding to permit use of U. S. military aid for internal security purposes in Latin America. This amendment was accepted.

2. The _House_ bill limited military aid to Latin America to $60 million in fiscal 1962, $5 million more than the Senate provided. (C.Q., 8/25/61)

C. <u>Cuba</u>

1. On May 17 the House adopted by 404-2 vote, a resolution expressing Congressional support of _collective sanctions_ by the _OAS_ against the Castro Government and requesting that Cuban representatives be barred from meetings of the Inter-American Defense Board. The resolution has not been acted upon by the Senate as yet. (C.Q. 5/19/61)

2. Although the program of _Tractors for Freedom_ was favorably received in Latin America and by the U. S. Press, it incited controversy in the Senate. The main objections to the plan are epitomized in the following statements:

a. Sen. _Capehart_ (R., Ind.) said that he was "100% opposed" to the exchange. "We are setting a precedent for every big and little dictator around the world to blackmail us whenever he feels like it." _Goldwater_ shared this opinion. (C.Q., 5/26/61)

b. Sen. _Keating_ (R., N.Y.) questioned the wisdom of the President's support "since there is danger that it will be misunderstood as Government acquiescence to such an unthinkable deal." (C.Q., 5/26/61)

c. _Nixon_ declared the transaction to be "morally wrong" and "unwise" on the grounds that it would "increase the power of the tyrant of the country" and that the

[c]

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U. S. policy of refusing economic assistance to Cuba would be abrogated by private citizens with Presidential approval. (NYT, 5/28/61)

N.B. Although the major opposition was voiced by Republican Congressmen, the *controversy was not split along party lines*. (e.g. Javits supported the President's position - NYT, 5/25/61)

3. On June 28, Sen. *Keating* (R., N.Y.) proposed that the Tractors for Freedom Committee appeal to the donors to send their contributions back so that the *500 tractors* can be purchased and donated *to other Latin American countries*. (D. Mitchell)

a. He said that a gesture of this type, completely voluntary, would be a far more dramatic sign of our concern to aid and encourage free nations than any kind of barter deal with Castro.

b. Sen. *Cooper* (R., Ky.) endorsed the proposal.

4. On August 25, Sen. *Keating* (R., N.Y.) called for *compensation for U. S. property seized and nationalized and the ending of Cuba's importation of Soviet bloc arms*. He also said that Cuba should be required to hold free elections as one condition for any reconciliation with the U. S. (NYT, 8/25/61)

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[LC]

### III. **Editorial Comment**

#### A. **Alliance for Progress**

1. Latin American reaction to JFK's Alliance for Progress was generally favorable.

a. Quadros of Brazil and Frondizi of Argentina made a joint declaration approving the program. (NYT, 4/22/61)

b. Leaders of 18 Latin American democratic parties, representing 11 separate countries and Puerto Rico, have given their solid support to the plan in what is called the Declaration of San Jose. (NYT, 3/30/61)

c. Chile declared that the Alliance for Progress opened new prospects for inter-American cooperation. (NYT, 7/5/61)

d. The President of Peru said that the program 'may well mark the beginning of a change to better conditions in the Western Hemisphere.' (NYT, 5/5/61)

2. However, there have been a few words of criticism amidst the praise; e.g. "El Economista," the Argentine financial newspaper, echoed the impatience of many when it said that: (NYT, 5/15/61)

a. The need was for rapid direct aid and not for more economic conferences. 'Inter-American conferences should be avoided although it appears that President Kennedy seems disposed to favor them.'

b. The U. S. policy toward Latin America involves a tendency to seek formulas applicable to all countries south of the Rio Grande, whereas conditions vary widely in these countries.

#### B. **Punta del Este Declaration**

1. The *Herald Tribune*, *New York Times* and *Washington Post* praised the success of the Uruguay conference. They considered the Declaration to be a "hemispheric milestone" which has opened the door for the Latin nations to help themselves. The three papers stress, however, that the Latin American countries must cooperate with the U.S. by drawing up concrete plans for the execution of the reforms. (NYT 8/18/61; HT, 8/13/61; WP, 8/9/61)

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D. <u>Cuba</u> - <u>Tractors for Freedom</u>

1. Whereas Castro was confident that Latin America would respond with admiration to his "gesture of generosity", editorial comment from Mexico to Argentina began describing him as a "second Eichmann."

In 12 Latin American countries, citizens' committees were formed to raise the funds for the tractors. (NYT, 5/28/61)

2. Editorial comment in the five National Studies papers favored the tractor exchange. (NYT, 5/25/61; HT, 6/22/61; CSM, 6/1/61; WP, 5/24/61; WSJ, 5/25/61)

E. <u>Brazil</u>: <u>Resignation of President Quadros</u>

1. The U.S. has gained friends in Brazil, and Cuba has lost some as a result of the different attitudes assumed by Washington and Havana toward the crisis brought about by the resignation of President Quadros. There was a widespread feeling that the Kennedy Administration showed prudence and restraint by not interfering in the internal political affairs of Brazil. (NYT, 9/11/61)

2. In contrast, the statements by Castro and the comments broadcast by the Moscow radio declaring that the resignation was a result of economic and political pressure by "American Imperialism" and military reactionaries irritated many Brazilians. (NYT, 9/11/61)

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[c]

IV. **Other Proposals**

A. A report was submitted to the OAS by ten Latin American and US experts which draws attention to a gap in the network of hemispheric institutions. While there are inter-American instruments to deal with economic and political questions, no group exists to handle the special problem of higher education. The report proposed the creation of a "special inter-American fund for universities." An initial contribution of $75 million is suggested for the fund, the money to be used for loans to the hard-pressed colleges and universities of Latin America. (WP, 8/3/61)

-- One advantage of such a fund would be that it could accept contributions from private foundations as well as governments. No comparable channel now exists through which money can be invested in an educational program aimed at benefitting all the American republics.

B. A corollary suggestion is that a University of the Americas be established in the U.S. Plans for such an institution are already in gestation. In some respects, the school might be an answer to the Friendship University in Moscow, at which thousands of Latin Americans are now being indoctrinated.
(WP, 8/3/61)

[c]

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Addendum to Latin America

I. The Declaration of Punta del Este contains the following goals toward which the signatories have agreed to work:

A. To improve and strengthen democratic institutions through the principle of self-determination;

B. To accelerate economic and social development to effect a substantial and steady increase in the average income;

C. To carry out housing programs both in the city and the country;

D. To encourage, in accordance with the characteristics of each country, programs of integral agrarian reform;

-- with a view to replacing latifundia and dwarf holdings by an equitable system of property so that, supplemented by adequate credit, technical assistance and improved marketing arrangements, the land will become for the man who works it the basis of his economic stability.

E. To wipe out illiteracy;

-- extend the benefits of primary education to all Latin Americans

-- provide broader facilities for secondary and technical training and for higher education.

F. To press forward with programs of health and sanitation;

G. To assure workers fair wages and satisfactory working conditions;

-- establish effective systems of labor-management relations and procedures for consultation and cooperation among government authorities, employers' associations, and trade unions.

H. To reform tax laws;

I. To maintain monetary and fiscal policies which will protect the purchasing power, guarantee price stability and form an adequate basis for economic development;

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J. To stimulate private enterprise;

K. To eliminate unemployment;

L. To find a solution to the problem of price fluctuations in the basic exports of Latin American countries;

M. To accelerate the integration of Latin America so as to stimulate the economic and social development of the continent.

-- This process has already begun through the Treaty of Economic Integration of Central America and, in other countries, through the Latin-American Free Trade Association.

-- The conference directed Jose A. Mora, Secretary-General of the OAS, to bring together within six months task forces of experts to assist in the formulation of national programs in these areas of social reform. (NYT, 8/17/61)

Grave in these areas of social reform. (NAT. 8/17/31)

of experts to assist in the formulation of national pro-
tect the OAS, to bring together within six months task forces

Economic Integration of Central Americas and, in other
-- This process has already begun through the Treaty of

K. To eliminate unemployment;

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II Alliance For Progress -- Specific Aid Appropriations

1. **Aid to Bolivia:** The U. S. offered $13,000,000 in immediate economic and social aid. It was accepted by the Bolivian government. This figure was developed after a 3-man mission sent to Bolivia in March reported to the Administration. The offer would supply: (NYT, 5/15/61).

a. a loan of $3,500,000 for machinery and equipment for tin mining under an arrangement in which West Germany and the Inter-American Development Bank will contribute an additional $6,500,000.

b. $6,000,000 in ICA loans to the Bolivian Government's oil company for repair and replacement of equipment.

N.B. This is the first loan under the Administration's new policy of lifting the long-standing ban on aid to Governmental oil concerns.

c. a grant of surplus agricultural products for school-lunch and family-relief programs, in the amount of $1,350,000 to be distributed by voluntary aid organizations, plus $500,000 to cover transportation and distribution costs.

d. a loan of $2,000,000 for road building equipment.

2. <u>Aid to Brazil</u>

a. The U. S. is making new loans totaling $338,000,000 to help Brazil in her balance-of-payments crisis. This is part of an international financial program involving U. S., six Western European nations, Japan and the International Monetary Fund. The new U. S. loans will break down as follows: (NYT, 5/18/61)

1) $168,000,000 from the Export-Import Bank;

2) $70,000,000 from the Treasury's Exchange Stabilization Fund;

3) $100,000,000 from the foreign aid program (still subject to Congressional approval).

to Congressional approval).

3. $100,000,000 from the foreign aid program (still subject to approval).

Fund:

2. $70,000,000 from the Treasury's Exchange Substitution Fund.

1. $398,000,000 from the Export-Import Bank;

follows: (NYT, 2/18/61)
Monetary Fund. The new U. S. loans will break down as Western European nations, Japan and the International an International financial program involving U. S., six Grasil in her balance-of-payments account. Tura is part of a. The U. S. is making new loans totaling $338,000,000 to help

2. Aid to Brazil

d. a loan of $5,000,000 for road building equipment.

e. a grant of supplies agricultural products for school-funch, to cover transportation and distribution costs.
be distributed by voluntary aid organizations, plus $200,000 and family-relief programs, in the amount of $1,320,000 to

c. a grant of supplies agricultural products for school-funch, to cover transportation and distribution costs.
be distributed by voluntary aid organizations, plus $200,000 and family-relief programs, in the amount of $1,320,000 to

d. a loan of $2,000,000 for machinery and equipment for tin and the Inter-American Development Bank will contribute an additional $6,000,000.
e. a loan of $3,200,000 for machinery and equipment for tin and the Inter-American Development Bank will contribute an additional $6,000,000.

f. would supply: (NYT, p/2/61).
to Bolivia in March reported to the Administration. The offer to Bolivia in March reported to the Administration. The offer to Bolivia was developed after a 3-man mission sent economic and social aid. It was accepted by the Bolivian. f. Aid to Bolivia: The U. S. offered $13,000,000 in immediate

II Alliance for Business -- Specific Aid Appropriations

50

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b. The Export-Import Bank has completed arrangements to lend the Brazilian railroads $4,000,000 for new equipment purchases. (The credit was given under a loan agreement authorized several years ago.) (NYT, 7/7/61).

c. JFK said that the U. S. is prepared to cooperate with Brazil's Northeast Development Agency in its $900,000,000 five-year development program. It is not clear as yet how much U. S. aid will be given. (NYT, 7/15/61).

3. **Aid to Panama, Guatemala and Argentina:** The U. S. announced the approval of projects to provide social welfare funds totaling $3,780,000. These will be the first outlays from the $100,000,000 fund administered by the ICA under the $600 million Bogota program. The funds will be used for: (NYT, 7/3/61)

a. **Panama:** initiating a program to help build and equip about 200 school rooms in rural areas;
expanding the existing activities for the training of people to operate and maintain heavy road-building equipment.

b. **Guatemala:** continuing and strengthening the Government's program for agricultural diversification:
providing some industrial improvement and raising the literacy standards;

c. **Argentina:** increasing the training of economists, especially through a program of improved economics teaching at the University of Cuyo.

4. **Aid to Argentina:**

a. The Export-Import Bank granted Argentina a $40 million loan for the improvement of her road network through the supply of equipment and services (5/24/61). This action was presumably in response to the JFK memorandum of May 9. (EXIM Release 7/27/61)

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[c]

b. The Inter-American Development Bank approved a loan equivalent to $15 million to a consortium of Argentine provincial banks to finance small and medium projects of private enterprise in agriculture, industry and mining. (Inter-Am D.B. Release 7/18/61)

c. The U. S. and the International Bank for Reconstruction and Development have agreed to grant $204,500,000 in loans for industrial development. The loans to be given by the US are:

1) $60,000,000 for the second phase of the development of Argentina's steel industry;

2) $50,000,000 for railroads;

3) $32,000,000 for the building and modernization of airports;

4) $12,500,000 for power plants.

The World Bank is to contribute $50,000,000 for the railroad modernization program. (NYT, 7/22/61)

d. The U.S. also agreed to send a trade mission to Argentina to help her expand her exports to the US and to arrange for consultations every six months to determine whether the disposal of US commodities jeopardized Argentina's trade in any given market. (This latter problem has grown more serious as the US has accelerated deliveries of wheat to countries with balance-of-payment deficiencies or food shortages) (NYT, 7/22/61)

5. **Aid to Panama:** The Inter-American Development Bank approved a $7,600,000 loan from the Social Progress Trust Fund to help finance a program of low-cost housing for low income families. This loan and ones to Venezuela and El Salvador were made purposely on the opening day of the conference at Punta del Este, Uruguay (NYT, 8/6/61)

6. **Aid to Venezuela:** The Inter-American Development Bank granted a loan of $12,000,000 from the Social Progress Trust Fund to help finance a program of rural housing in Venezuela (NYT, 8/6/61)

finance a program of rural housing in Venezuela (NYT, 3/2/81)

loan of $15,000,000 from the Social Progress Trust Fund to help

3. Aid to Venezuela: The Inter-American Development Bank granted a

Ecuador, Uruguay (NYT, 3/2/81)

basically on the opening day of the conference at Punti del

This loan and one to Venezuela and El Salvador were made
finance a program of low-cost housing for low income families.

$7,000,000 loan from the Social Progress Trust Fund to help
Aid to Panama: The Inter-American Development Bank approved a

(NYT, 7/22/81)

with balance-of-payment deficiencies or food shortages)
as the US has accelerated deliveries of wheat to countries
given market. (This latter problem has grown more serious
disposal of US commodities jeopardized Argentina's trade in any
consultations every six months to determine whether the
to help her expand her exports to the US and to arrange for

modernization program. (NYT, 7/22/81)

The World Bank is to contribute $20,000,000 for the railroad

(4) $15,200,000 for power plants.

airports;

3) $35,000,000 for the building and modernization of

(2) $20,000,000 for railroads;

Argentina's steel industry;

f) $20,000,000 for the second phase of the development of

7/18/81)

agriculture, industry and mining. (Inter-Am. D.B. Releases
to finance small and medium projects of private enterprises in
to $12 million to a consortium of Argentine provincial banks
p. The Inter-American Development Bank approved a loan equivalent

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[c]

7. <u>Aid to El Salvador:</u>

a. The U.S. and El Salvador signed a $6 million agreement designed to assist the latter country to maintain its present unified exchange rate and to restore equilibrium in her balance of payments. (Treas. Dept. Release, 7/14/61)

b. The Export-Import Bank authorized a credit of $10 million to the Banco Central de Reserva de El Salvador to maintain essential imports from the US. (Treas. Dept. Release 7/14/61)

c. The U.S. announced that assistance financed through the ICA would be given to El Salvador for education, health improvement and country economic planning. A specific sum was not stated, however, the money will be part of the $9,500,000 assistance set aside for Latin countries as Alliance for Progress projects. (State Dept. Release, 8/2/61)

d. The Inter-American Development Bank approved a loan of $2 million to the Central Reserve Bank of El Salvador to help finance credits to small-scale farmers (NYT, 8/6/61)

8. <u>Aid to Chile</u>: On June 1, 1961 the U.S. announced approval of a $5 million loan, the first of its kind, to help establish a network of private savings and loan associations in Chile in order to spur home building. (NYT, 6/2/61)

9. <u>Aid to Honduras</u>

a. The Inter-American Development Bank announced approval of a $2,500,000 loan to Honduras for carrying out a highway program. (NYT, 5/15/61)

b. As part of the Alliance for Progress, the ICA will grant a portion of $9,500,000 to Honduras for expansion of school construction and for development of teacher training. (State Dept. Release, 8/2/61)

10. <u>Aid to Costa Rica:</u>

a. The Export-Import Bank authorized a credit of $4.5 million to assist in the expansion and improvement of the water supply system. The loan was made in conjunction with the Development Loan Fund, which has authorized a companion credit of $3.5 million. (EXIM Release, 7/27/61)

of $2.7 million. (EIM Release 7/27/81)

Development Loan Fund, which has authorized a companion credit
amendment system. The loan was made in conjunction with the
to assist in the expansion and improvement of the water
system.

a. The Export-Import Bank authorized a credit of $4.3 million

10. Aid to Costs of Rice:

(State Dept. Release, 8/2/81)

construction and for development of teacher training.
portion of $2,500,000 to Honduras for expansion of school
p. As part of the Alliance for Progress, the ICV will grant a
program. (WAT, 2/12/81)

a. The Inter-American Development Bank announced approval of
a $2,500,000 loan to Honduras for carrying out a highway
program. (WAT, 2/12/81)

3. Aid to Honduras

order to start home building. (WAT, 2/3/81)
network of private savings and loan associations in Chile in
$3 million loan, the first of its kind, to help satisfy a
$3 million loan, the first of its kind, to help satisfy a
$3 million loan, the first of its kind, to help satisfy a

3. Aid to Chile: On June 1, 1981 the U.2. announced approval of a

finance credits to small-scale farmers (WAT, 8/9/81)

million to the Central Reserve Bank of El Salvador to help
4. The Inter-American Development Bank approved a loan of $2.5
million to the Central Reserve Bank of El Salvador to help
 Progress projects. (State Dept. Release, 8/2/81)

assistance set aside for Latin countries as Alliance for
assisted, however, the money will be part of the $2,500,000:
ment and country economic planning. A specific sum was not
would be given to El Salvador for education, health improve-
c. The U.2. announced that assistance financed through the ICV
essential imports from the U.2. (Tress. Dept. Release 7/14/81)
the Banco Central de Reserves de El Salvador to maintain
p. The Export-Import Bank authorized a credit of $10 million to
balance of payments. (Tress. Dept. Release, 7/14/81)

s. The U.2. and El Salvador signed a $6 million agreement
designed to assist the latter country to maintain its present
unfilled exchange rate and to restore equilibrium in per
balance of payments. (Tress. Dept. Release, 7/14/81)

7. Aid to El Salvador:

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14. Aid to Peru:

a. The U.S. Air Force gave assistance to the Peruvian Government in opening vast inland areas of that nation for agriculture with an airlift. The US provided the planes and pilots and the Peruvian Government paid the operational costs. (Defense Dept. Release 8/2/61).

b. The Development Loan Fund granted a loan of $10,800,000 to Peru to be used for agrarian-reform projects and the completion of a road. The loan is part of a $53,200,000 aid program for Peru, that was announced by Eisenhower in July 1959. (NYT, 9/9/61)