January 2, 1964

MEMORANDUM

TO: HAK

FROM: DLB

SUBJECT: The Attached Summary of Latin American Policy Proposals by Ann Black

1. I have read this through in some detail and believe it to be a very fine job. The copy, which is attached to this memo, is one of three up here -- I believe you have one and I have one more.

2. I have indicated in the margins which proposals are new and make some sense. The proposals by de Madriaga and Mikesell are particularly interesting and might be particularly fruitful.

[LC]

TABLE OF CONTENTS

1. Allen, Robert Loring
   Economic Policies Toward Less Developed Countries

2. Berle, Adolf A., Jr.
   The Cold War in Latin America
   Latin America: Diplomacy and Reality
   Tides of Crisis
   Communist Invasion of Latin America
   Economic and Social Progress for Expanding Trade
   in the Americas

3. Gillin, John P.
   Some Signposts for U.S. Policy

4. Haar, Charles
   Latin America's Troubled Cities

5. Lieuwen, Edwin
   Arms and Politics in Latin America

6. de Madriaga, Salvador
   Latin America: Between the Eagle and the Bear

7. Mikesell, Raymond
   Economic Policies Toward the Less Developed Countries
   The Operation of the Alliance for Progress:
   the First Six Months
   Promoting U.S. Private Investment Abroad

8. Patch, Richard
   Bolivia and U.S. Assistance

9. Prieto, Luis
   Education for Latin America

10. Rockefeller, David
    Economic Development: the Lessons and the Challenge

11. Tannenbaum, Frank
   Ten Keys to Latin America

12. Whitaker, Arthur
    Yankeephobia
    Communist Infiltration in Latin America

Communist Intifation in Latin America

Jamaica

13. Walter, Walter

Ten Keys to Latin America

11. Tannenbaum, Frank

10. Rockefeller, David

Education for Latin America

9. Brice, Fred

Boilins and U.S. Assistance

8. Patch, Richard

the First Six Months

7. Mikesell, Raymond

6. de Madsrigg, Salvador

5. Lienzen, Eduard

4. Bear, Charles

Some Struggles for U.S. Policy

3. Griffin, John P.

in the Americas

Types of Countries

The Cold War in Latin America

2. Berle, Adolfo A., Jr.

1. Allen, Robert Puring

TABLE OF CONTENTS

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# "Commercial Policy and the Less Developed Countries" Economic Policies Toward Less-Developed Countries

## Trade Proposals

1. The US and other industrialized countries should regard policies which affect the export markets of the less developed countries as being equally, if not more, important to the economic development and welfare of these countries as the provision of financial and technical assistance.

2. The American public and its representatives must be made aware of the fact that, unless steps are taken to permit a broadening of world markets for the products of less developed countries, much of our foreign aid will be wasted in the sense that these countries will never achieve the objective of self-sustaining growth.

3. The US in cooperation with other advanced countries should take immediate steps to increase the share of the products of the less developed countries in the world markets for primary commodities. This means a gradual reduction of U.S. import restrictions, including revenue tariffs, on primary commodity imports from the less developed countries. The U.S. should also eliminate export policies which may reduce the markets of these countries in order to favor domestic producers such as developing surpluses of wheat.

4. No member of the OECD, including the US, should take actions which affect the world market for primary products without full consultation through regularly constituted international committees on which the less developed countries concerned have adequate representation.

5. Where special restrictive action may be regarded as necessary, the burden of reducing supplies available for the U.S. domestic market should be shared equitably between domestic and foreign producers.

For example, if a reduction in the total supplies of an agricultural commodity or a mineral, the share of the domestic market enjoyed by primary commodity producing countries, and particularly those with low incomes, should not be reduced.

[LC]

6. Any quantitative restrictions on imports of primary commodities from less developed countries should be temporary in nature, and all tariffs on primary commodity imports should be gradually abolished.

7. The abolition of tariffs and other restrictions on primary commodity imports, in which advanced countries compete with less developed countries, will undoubtedly require cooperative action through the OECD and the GATT. This should constitute an important part of a program for general tariff reduction on the part of the OECD countries. However, in order to speed the impact of such reductions on the exports of the less developed countries, it may be desirable to grant special concessions to these countries, which are not made available to the advanced countries which may be exporting in competition with less developed countries.

3. In order to avoid conflicts over discriminatory actions, special concessions to the less developed countries should be negotiated multilaterally through GATT or, if arranged bilaterally, such arrangements should be made a consequence of agreements among the OECD countries. In addition, the industrial countries should not insist upon reciprocal trade concessions from less developed countries.

9. In the longer run, measures to expand world markets of less developed countries for industrial commodities may be equally or even more important than those designed to increase their markets for primary goods. Less developed countries must broaden their export base by exporting semi-processed and finished manufactures.

10. Frequently the commodities which the less developed countries are most capable of producing for world markets are the very ones on which the heaviest burden of import restrictions has been imposed by the more advanced countries. Although it is too much to expect that the more advanced countries would immediately abolish these tariffs and other restrictions, they might very well establish low, or even duty-free, quotas on manufactured goods from less developed countries. They should be the subject of multilateral agreement through GATT or perhaps the OECD.

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11. The U.S. should seek an agreement with the countries of Western Europe whereby tariff preferences arising out of the EEC would be made available to the products of all less developed countries.

12. Customs unions and free trade areas among developing countries should be actively encouraged and assisted by the U.S. and other OECD members. However, an effort should be made to promote agreements among two or more regional trade associations of less developed countries for eliminating discrimination among themselves and broadening the market for their exports.

13. The impact on the U.S. economy of the recommendations for broadening the export markets of the developing countries will be small, but certain industries and firms may suffer. The principles embodied in the escape-clause and peril-point provisions of our Reciprocal Trade Agreements Act should not be applied to these situations. Since broadening the trade opportunities for less developed countries is every bit as important as the provision of billions of dollars of economic assistance for promoting their growth, we cannot shy away from the cost of the impact which may be borne by a small section of our economy. However, the cost of adjustment should be shared by the U.S. economy as a whole through the institution of a liberal trade adjustment program. Such a program might involve low-interest loans to enable firms damaged by import competition to reduce costs or shift to other lines of production. In other cases the government might facilitate a no-loss liquidation and provide for retraining and relocating workers.

## Commodity Stabilization

1. The U.S. and other industrial countries should adopt as a basic policy goal:

a. The prevention of, or compensation for, sharp fluctuations in the export proceeds of less developed countries.

b. Assistance to less developed countries in the expansion of their commodity exports and their orderly adjustment to long-term trends in world demand for primary commodities.

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2. The U.S. and other industrialized countries should avoid unilateral actions affecting the markets for primary commodities. These countries should also reduce tariffs and eliminate quotas on primary commodity exports and avoid domestic primary product programs which involve subsidies or other measures which depress imports of these products.

3. Commodity agreements offer only limited promise for effective price stabilization in the short run, and their long-term effects may be harmful to the primary commodity producing countries. Although commodity agreements may dampen the price and volume fluctuations, the existing and prospective agreements attempt to maintain prices without regard for long-run trends in demand and supply relationships. If means can be found for mitigating the harmful effects of fluctuations through some form of insurance against sharp fluctuations in exchange earnings, then commodity agreements are not necessary as stabilization measures. As measures for influencing long-term trends in prices, commodity agreements are of doubtful value. Nevertheless, the U.S. should not adopt a doctrinaire position on commodity agreements. If some form of exchange compensation arrangement is not put into action, or if there are specific circumstances in which U.S. participation would contribute to an effective commodity stabilization agreement, such participation may be desirable. Each agreement should be considered on its own merits.

4. In cooperation with all other nations the U.S. should seek to expand the availability of short-run credits to less developed countries which experience sharp decreases in export earnings. The IMF should be encouraged to employ its resources for this purpose.

5. Serious consideration should be given to the feasibility of an exchange insurance program which would make contingent loans to countries experiencing an export shortfall. Such loans should cover only a portion of the shortfall, in accordance with a predetermined relationship of the decline in export earnings to an average of total exports, say, in the previous 3 years. When exports recover, the loans would be repaid. Such a compensation scheme would permit less developed countries

[L.C.]

to maintain essential imports even when exports decline, thus facilitating orderly economic development.

6. Study groups, councils, and conferences provide a means of reaching informal agreement on certain types of commodity problems, including the coordination of domestic production programs and export policies. The U.S. should participate actively in all of these efforts, especially those directed toward the improvement of the markets for the exports of less developed countries.

7. The U.S. should consciously employ its agricultural surplus disposal program to promote and support economic development. Less emphasis should be placed on non-commercial exports as a means of reducing surplus stocks and more emphasis on the employment of agricultural abundance for promoting economic development abroad. Since other countries are exporters of the same commodities included in our surplus commodity programs and are, therefore, vitally affected by U.S. non-commercial export programs, U.S. programs should be subject to international coordination and consultation designed to safeguard and promote the interests of both competing exporters and recipients of agricultural commodities.

A. General

1. The U.S. has a double role in Latin America: (1) it must defend against chaos fomented by Communists, it must defent Latin America and itself; and (2) it must promote and assist in organizing the vast forces of economic and social recon-struction. (CW)

2. The foundation piers of American strategy in foreign relations lie:

- in philosophical consistency in the ideas and forces the U.S. undertakes to represent and support throughout the world;

- in changing its economic policy from "aid" to building an appropriate economic community;

- in developing a military organization in conjunction with other nations, capable of defending the community which emerges from the first two forces—including the U.S. (TC)

3. In determining policies for the future, the U.S. and Latin America must both pay attention to the growing tendency towards unification on the part of the Latin countries. (DR)

a. A viable regional political organization will be established conforming to the actual unity of the region. Initially it should take the form of coordination of action among Latin states and with the U.S., similar to that in Europe now. In the long run, coordination may become actual political union in some form of federation or confederation. It seems probable before 25 years. Eventually a growing degree of political integration is almost dictated by necessity where a large number of national states is concerned.

b. Economic integration will be an impelling force toward a unified region. In 25 years Latin America will have a common market.

c. Common intellectual and cultural conceptions will be another impelling force toward regional unity.

[LC]

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4. A 20th century economic renaissance is sweeping the Latin American continent; a variety of economic and social revolations no less profound than the political revolutions of Asia are in full progress. Oversimplified thinking again has led the U.S. to exaggerate the sound conception of non-intervention and scrupulous respect for the sovereignty of the 20 countries to the point of refusing any judgment of them at all--pure Quixotism. So, the U.S. has made the mistake of treating corrupt dictatorships with the same cordial respect as in dealing with honest and forward-looking democracies. In every case we should question whether assistance given tends to make for a better developed and developing people or merely tends to buy the favor of a local tyranny. (TC)

5. Latin America also poses the problem of moving toward economic integration. Canada and Latin America between them already account for half of our foreign commerce. We need this commerce to supply essential materials for our own economy. Little serious attempt has been made to work out a hemispheric system for finance, capital development, orderly marketing, gradual equation of standards of work and the like. (TC)

6. A hemisphere, most of whose economic affairs are now interchanged with the hemisphere itself, cannot indefinitely run smoothly on the basis of 22 non-related systems; eventually the high factor of unity which interdependent economics creates has to be reflected in principles and institutions which meet rather than deny actual needs. And a hemisphere whose chief requirement for protection is common defense against attack from outside has steadily diminishing excuse for building 22 competing military systems while the essential capital construction needs are unmet. (TC)

7. The cold war undeniably compels some diversion of effort from the main purpose of the Alliance for Progress, but it is unavoidable. The need for defense need not seriously prejudice or indeed unduly impede the main positive campaign; the Alliance should itself be a notable part of the defense of the hemisphere. (DR)

8. The real problem is mobilizing Latin American techniques, skill, energy and capital along with U.S. capital to meet Latin America's development needs. (ESP)

[Lc]

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9. At present the U.S. does not have adequate organization to deal rapidly and effectively with the categories of problems which the Alliance must solve. (DR)

10. The U.S. has substantial resources of the trained men that are needed. Many universities now maintain departments or institutes of Latin American affairs. A particularly large reservoir of men exists in Puerto Rico. U.S. business has developed a substantial number of young men trained in particular techniques and capable of understanding Latin American points of view. It should therefore be possible to recruit the personnel needed to work with the Latin personnel of the Alliance for Progress. (DR)

## B. Economic

1. Economic relations may not be a prime cause leading to peace or war, however, they are a powerful contributing consideration determining the alignment of nations. (TC)

2. U.S. economic aid should be judged by two standards: (TC)

    --In terms of straight production of goods and services and their distribution, are the specific objectives of the aid good in themselves? "Good" means do they provide more goods and services and assist in assuring that goods and services shall actually meet and satisfy human needs.

    --Do the measures tend to result in a chain reaction so that the production and distribution stimulated in turn bring about greater will and capacity for more production?

3. The U.S. must provide trained men who will work on problems of economic planning including banking, currency, taxation, budget-making, business financing in private sector operations, grant and public loan financing in social sector operations. Their principle focus in Washington will be the IADB, the AID regional organization for Latin America and the Export-Import Bank. (DR)

[LC]

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4. These men will work with Latin Americans directly. They will influence the financial decisions and operations of the Alliance for Progress, but their greatest contribution must be intellectual. (DR)

5. U.S. aid should be aimed more at building capital resources than at spot conditions. (TC)

6. **Capital Flight** - One of the effects of the Alliance for Progress has been to frighten local capital and local capitalists, who, it suggested, must contribute--perhaps even must sacrifice. One reaction has been a limited movement of capital flight. If, for every million dollars that flows into Latin America through Inter-American Development Bank and AID programs, a million dollars is withdrawn by Latin capitalists, the Alliance offers little chance of success. If the principle of evolutionary reform were abandoned, the chief result of aid through the Alliance would be to make a rich Latin class richer, increasing aggregate productivity somewhat but piling up returns in the hands of a tiny group. That road would end in an explosion. The U.S. has never recommended that the Latin governments take drastic measures to prevent capital flight. This is partly a matter of principle, but perhaps more importantly a realization that exchange controls and control of capital movements are difficult economic operations requiring a high degree of administrative skill and reliability--more than the Latin Americans have. The U.S. can therefore merely present the problem and guide her policy according to the capacity with which the social-political organisms find themselves able to cope with it. (DR)

7. **Trade** - Parallel with the problems of capital accumulation and capital flight, there is a continuing problem of foreign exchange. The imbalance of payments results from inadequate manufacturing in Latin America; consequently, the Latin American nations must import a substantial part of their requirements for consumption and development. To keep a balance of payments the Latin nations must develop a high volume of foreign exchange through exports to pay for these imports. Failure to export to balance needed imports automatically means that the value of the currency of the country in international exchange tends to go down. This means that in internal currency the price of imports rises, hardship increases and eventually imports stop because they cannot be paid for. (DR)

Thus one of the most important necessities for Latin America is access to the markets of the U.S. The U.S. is the largest buyer of sugar, coffee, bananas, minerals such as copper, oil bauxite and iron ore, and these are the mainstay of the Latin export market. (ESP)

The U.S. must liberalize its trade and remove financial restrictions. (TC) (N.B. Berle gives no further details)

The U.S. must help Latin America maintain its balance of payments. (TC) (N.B. No further details.)

3. **Commodity prices and price stabilization.** Another economic problem facing the Latin American countries relates to the price at which Latin products are sold in the U.S. Except for sugar, the problem is almost wholly unsolved. In statistical account, the ratio of price of Latin exports to the U.S. (coffee, sugar, cocoa, fruit, copper, lead and zinc) to the price of imports needed by the Latin countries will have a greater immediate effect on local conditions than any aid program. (DR)

**A policy of price stabilization is essential if the Latin economies are to have a base stable enough to permit development of a coherent policy.** (DR)

**Stabilization will lack effect unless adequate limitation of production can also be achieved.** And it lacks usefulness unless its benefits can be distributed to the workers. (Presently the gains accrue to already wealthy producers.) (DR)

9. **Economic Integration** - Economically the U.S. has pursued a policy of "foreign aid" (the most generous economic operation in history) but it has steadily refused to face the necessity of a degree of economic integration with the actual bloc of countries whose combined economies must be handled together and made to balance and advance if the economies of any of them or of the U.S. are to be sound. (TC)

Our eventual hope should be for a common market. It would be a regional organization at first. (TC) Such a market must lead toward greater political unity. In the long run it should bring a single banking, credit and currency system, which means sacrifice of the right and power of a sovereign government to inflate the currency. No Latin country has really been prepared to make that sacrifice as yet. (DR)

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C. Private Foreign Investment

1. There is a strong feeling in the Latin American nations that ownership and control of industries and chief economic activities of their countries should be in the hands of nationals. (DR)

2. Nationalism in the sense of insistence on building local industries has a sound economic basis--up to a point. The point turns on whether the product of the national plant is designed for internal consumption or for export. Operations in a Latin country whose produce is designed for export, especially to the U.S., need more than the mine or oil field, the factory which can be locally provided. They need access to the U.S. markets. Almost invariably that access is best provided by a U.S. company. This company may own and operate the local production or it may work in close relation or partnership with the Latin enterprise (represented either by its government or, as its social system dictates, by its private businessmen). The local enterprise without the U.S. marketing facility would have rough going.

e.g., United Fruit in Caribbean countries and Ecuador produced bananas and other fruit for export to U.S. It maintained a market that none of the countries could have arranged on its own. (DR)

3. Latin American economists and politicians and diplomats thus approach industrialization of their countries through, or with, the help of U.S. business, with split emotions. Industrialization they want very badly, as they should. They believe that their respective countries have not capital sufficient to do this and that foreign exchange will be needed beyond readily available supply. Therefore, they seek U.S. capital. But they also seek arrangements by which ownership and control of the resulting enterprises will be in the hands of their governments or their own nationals. Untrammeled U.S. investment in Latin America can lead to an unacceptable degree of ownership of Latin American production by U.S. firms. (DR)

4. Despite all the good which comes from U.S. investment and ownership it does not alleviate the unhappy feeling of Latin Americans aware that essential economic functions in their countries are owned or controlled by foreigners. By

[1c]

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and large most U.S. companies owning Latin American enterprises have not seriously sought to work out solutions based on joint ownership--local and U.S. One day, perhaps under international plans like that of the European Coal and Steel Community, markets in the U.S. and production in Latin America will be joined in common organization. (DR)

5. Up to a certain point, depending on the size of the country foreign investment in business is fine; after that point foreign investment should increasingly take the form of loans, without attempt to control management. (DR)

6. Given the political reaction against possible foreign control of the economy and the economic difficulty in providing foreign exchange to service a growing debt, if there is to be a large measure of capital inflow, it must take new forms. They would have to include grants and "soft loans" either on a government-to-government basis or through some central cooperative organism such as the IADB. As a growth takes place the limits of possible action through more classic channels, i.e., foreign investment in industry, enlarge. (DR)

D. Agrarian Reform

1. Changing the relationships between men and land is a complex process. Reform will differ from country to country.

--In some areas, such as northeast Brazil or the west coast of South America, systems of irrigation are the necessary reform. There land means little without water and it must be provided before the land is worth dividing.

--In other areas, marketing facilities must be provided. Not only roads but financially responsible cooperatives or their equivalent are needed. Too often now the small farmer is at the mercy of the money-lending middlemen who demand enormous interest rates for crop loans and demand as security the right to sell the farmers' crops at the lenders' own prices.

2. Reform must also include setting up new relationships
(1) between the farmer, his land and his market; (2) between

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the farmer, his land and the technical capacity to get good use of it (seed, machinery, fertilizer, etc.) and (3) between the farmer, his land and the credit resources permitting him to use the new techniques.

3. It must be kept in mind that when considering changing the patterns of land ownership that land under the management of a large landowner produces more per man and per acre than it does in the hands of many small farmers. Presently most people in Latin America are under-fed and with the rise in population, the food supply must increase. The division of the cultivated large estates means, initially at least, a drop in productivity. If distribution is made of unused land, the situation is eased.

4. However, settlement of peasants on unused land means little unless the new settlers are equipped with a grubstake to enable them to survive the first year of reducing the land to tillable form, and also with the tools to do this. If the settlements are to be more than bare subsistence communities, there must be road connections to cities and markets, schools, and a modicum of public utilities. Filling these needs places a financial burden on the state. These elementary expenditures have already been made by the large landowners in connection with their productive properties.

5. If land reform were ever achieved and the land more productively farmed similar to the U.S., it would require much less agricultural labor leading to a rural exodus, in turn leading to slums, etc. The answer is for greater industrialization.

6. Agrarian reform must take place in the context of a balanced solution. The families offered land must also be offered training, equipment, roads, schools and public utilities. As the productivity thus created will displace a growing proportion of the agricultural labor, urban industrialization must offer jobs. Then, as the whole level rises, the demand for food will rise more than proportionately to population growth.

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E. Education

1. Communist strategy in the field of education has been to train a generation of men devoted to Communist principles and designed to be the principal reservoir of human capacity to take over and administer the affairs of the various Latin countries. This process is fairly well advanced, graduating approximately 100 Communist-educated technicians every year into the life of a small country whose stratum of well-trained men is narrow.

2. The educational poverty of great parts of Latin America makes some of its countries obvious and easy targets. If this is combined with skillful annexation of professors and teachers in local universities and schools the result will be dreadful.

3. Education should be divorced from power politics.

4. One (or two or three) private universities completely removed from state control should be established where conditions will permit. These institutions, presumably free from both political influence and the disputes caused by cold war operations under the banner of "student organizations," could devote themselves to education and scholarships.

5. In Central America, Guatemala, Nicaragua, Honduras, El Salvador all maintain national universities. If consolidated into a single Central American university, possibly distributing the technical schools among the five countries, the ensuing institution would be more powerful, could give better technical education and could exert a powerful unifying influence on a subregion which has always desired unification.

N.B. This idea has support in all five countries.
Possibly Panama could be added as a sixth.

6. Similar institutions could be set up on the Andean plateau and in Brazil.

7. Be demonstrating the enormous educational value of removing education from the battle field of politics, these universities might stimulate separation elsewhere.

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8. **Secondary schools** are needed in large numbers. Many of the best secondary schools in a number of countries are at present operated by the Catholic church or some of its teaching orders. These might be encouraged to organize "branches" or sister schools with local and perhaps international support in their initial phases. Yet in practical possibility the state must be the principal reliance in establishing secondary schools.

A great deal of work is needed at all levels of education; for example: (1) the elimination of nationalism which refuses to recognize the diploma of an accredited school in another country, (2) inter-university understandings allowing cross-credit for work done would be of assistance at the university level, (3) inter-professional agreements could also be worked out, and (4) a system of hemispheric accreditation based on quality of training could be of immense service.

9. To aid in the field of education, the U.S. should provide a substantial body of experts, backed by adequate resources to develop teacher training and to make available teaching materials needed for educational organization and progress in Latin America.

## F. Transportation

The U.S. can assist in building many of the essential road and transport links blown out in World War II. (ESP)

## G. Political

1. As we develop the Alliance for Progress, it can and should be made clear that we can work with our friends but not with our enemies. We can cooperate with economic and political systems different from our own, capitalism--other Latin countries may find and choose other methods. If there is a common ideal and a common agreement on human essentials, cooperation is possible. We cannot cooperate with regimes whose declared or undeclared objective is to join with the USSR in destroying the U.S., for example, Cuba. Nor can we cooperate with regimes who are indifferent to human rights. This is why we cannot cooperate with brute dictators or police states, nor can we cooperate with regimes

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whose politicians seek U.S. aid but in their own countries publicly insult the U.S. The U.S. will go to great lengths to help humanity but should not move an inch because of fear of blackmail. (CW)

2. As always in Latin America, the first line of conflict is among the "intellectuals." The Alliance for Progress should not be primarily a clash between the U.S. and the Communist powers. It should be a clash between the "free world" and its opponents, the imperialist left. (DR)

3. The Latin American political parties of the center, ranging from moderate socialist to moderate conservative, but all agreeing on the absolute necessity of maintaining freedom and opportunity for the individual can and should form a working coalition. Steps toward this have already been taken. The parties in the various countries have been in touch with each other through informal meetings in San Jose and Lima. Slowly there is coming into being an inter-American democratic internationale. Until Punta del Este conference these parties and groups had no defined political objectives. The Alliance provides it. (DR)

4. The U.S. has to think not merely of the government in power but also of the views of the people of the country. The U.S. in dealing with other American governments must go below the surface of diplomatic negotiations and formal assent. It must at all times consider the stability of the government involved and also the extent to which it really represents the people. This is why the U.S. can best deal with governments by representative democracy. (TC)

## H. Information and Propaganda

1. The U.S. must revamp its propaganda campaign. Presently it is working against rather than for American prestige; this is because the U.S. government does not stand for any ascertainable philosophy. The U.S. must maintain a philosophical and moral position. It has confined itself to seeking allies against "communism" meaning against the USSR, ignoring the fact that "anti-Communism" does not equate with freedom. (TC)

2. Not within the Alliance for Progress but strictly with the control of the U.S., there must and should be an

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organization for direct political propaganda. This is not
to replace the U.S. information program. The propaganda
effort may include direct, frank ownership of certain Latin
American newspapers. (Communist newspapers exist and every-
one knows it.) (DR)

N.B. In the Cold War in Latin America, Berle suggests that the USIA be not merely a news agency but should also overtly argue its cause with "good, honest advocacy." (Presently our information effort, as measured by expenditures, is roughly 1/6 of the scale of the Communist effort.)

3. Nominally the U.S. has not seriously engaged in "propaganda" as such. Its activities are stated to be "informational." There is no reason why the U.S. should not engage in advocacy with the same vigor as her opponent. In fact, many Latins insist that the U.S. ought to openly engage in propaganda and other measures to counteract Communist efforts.

4. Action should be taken to prevent local and private U.S. interest from assisting the nation's overseas enemies; e.g., in several countries, anti-U.S. newspapers have large circulation. U.S. companies advertise in them, thus financing anti-U.S. campaigns. (Similar situations prevailed in 1939-40 when NAR worked out blacklisting program.)

5. The principle must be that the U.S. shall not use either political or economic influence in any internal matter which does not directly concern her and which is not stimulated from outside the country involved. Non-interference must be the prevailing policy. But the policy cannot be maintained where the Latin country is unable to prevent extra-continental powers from engaging in internal propaganda or campaigns aimed at the U.S. (DR)

6. The U.S. public should be provided with better news from Latin America. Much of what we read as Latin opinions turns out to be exaggerated reports of the action of tiny groups prepared to use force or demonstrate and often these are paid for by the Communists. (CW)

7. The U.S. could and must find some method of making the literature of the Western world readily available in quantity

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in Spanish or Portuguese to Latin America. Presently books old and new of standard authority in English, French and German are not freely found in libraries and book stores. On the other hand, a full collection of Russian literature, especially Marxian, is available everywhere. At last count the U.S. government was spending a little over $100,000 annually toward making American and Western books available to 185 million Latin Americans. The private effort is also unimpressive.

## I. Defense and Military Aid

1. A policy of strong defense as well as dedication toward the positive human ideal of welfare and freedom must be the determinant of U.S. policy in Latin America. (CW)

2. The defense of Latin America is a necessity or else the Alliance for Progress cannot succeed. (CW)

3. The national interest of the U.S. is entitled to consideration and protection. We have given more benefits to more people than any other system. We have nearly half the population of the Hemisphere. There is also direct treaty agreement that Latin countries as well as ours have national interest in protection of the inter-American system against overseas attacks. Defense is not intervention. In extremities, there is legal sanction for whatever defensive action may be necessary against armed attack. (CW)

4. Presently, in view of the Rio Treaty clauses, there is no legal or moral impediment to taking any action necessary to defend the inter-American system. Strategy and political considerations may, of course, suggest measures other than military action, though this is permitted and, indeed, authorized by the Treaty of Rio. (CW)

N.B. By the Rio Treaty, the American states have already agreed that an act of aggression against one American state is considered an act of aggression against all, requiring a meeting of the foreign ministers to determine how the obligation will be met.

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5. An immediate system of control of traffic in arms for the Caribbean area should be established, preferably by the OAS (CI). Such a system would be designed to interrupt the steady trickle of Soviet weapons from Cuba primarily to the Latin countries bordering on the Caribbean littoral and to Ecuador. (DR)

a. The proposed system should prohibit vessels or planes carrying arms from entering the area without a permit from the arms-control authority. The control should be rigidly enforced. (CI)

b. Joint sea patrols should be established to stop ships and take off contraband in the territorial waters of any of the cooperating countries. Joint air patrols could locate the clandestine fields where the "black" planes by night land secret shipments of arms and munitions. Joint intelligence operations can give information. (DR)

c. The U.S. and any Latin countries that care to join should be prepared to oppose by all necessary means any movements or governments that are manipulated overtly or covertly by forces outside the hemisphere. (CI)

6. In some ways the military sector of U.S. policy is already the most highly developed and most cooperatively organized. Military assistance programs between the U.S. and most Latin countries have been going forward for many years. (DR)

7. Primarily, U.S. military interest is defense. But because there is now no limit to the possible incidence of any war anywhere or to the impact of any aggression, we are committed so far as our resources permit toward peace-keeping and repelling aggression. Yet in evolving military defense measures, it is essential that the U.S. does not find itself arming governments pledged to a hostile philosophy. Nor should we regard as "hostile" countries which, because they cannot be defended by a military combination, consider that their hope lies in being able to maintain neutrality. (TC)

[LC]

- 15 -

8. The Latin American armies must now meet the problem of Political guerilla warfare supported from overseas. They must not only fight guerillas but also must help produce the political atmosphere essential to success in that fight. U.S. military cooperation will have to be increasingly cast in these terms. (DR)

J. Cuba

1. The Cuban affair should be placed in its proper context. Its importance is plain enough, but what happens in Cuba is secondary to what happens in the hemisphere as a whole. Immediately, Cuba is dangerous because her imperial Communist captors intend and propose to prevent the other Latin nations from peacefully determining their own destiny. They intend, using Cuba as an agent and arsenal, to impose solutions designed by and in the interest of Moscow or Peiping. Blocking this attack is primarily important because only then can the Latin countries determine their own solution. That solution transcends the Cuban question. (DR)

2. The zenith of the Communist effort and success in Cuba has been reached and perhaps may have passed. (DR)

[c]

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"Some Signposts for U.S. Policy" <u>Social Change in Latin America</u>

Administration and Planning of Policy

1. The ferment of continuing revolution, the ideological and social changes in Latin America must be closely followed by up-to-the-minute reporting research and analysis. U.S. policy should not be made on old news.

2. A central research institute for Latin America should be established somewhere in the U.S., preferably close to Washington in order to be accessible for consultation by policy-makers. Such an institute should have access to a full range of information, in addition to carrying out investigations under its own auspices. The full information required includes a close analysis of programs and propaganda emanating from the Soviet bloc.

3. U.S. Plans and programs must be drawn up and carried out in full coordination. Each nation is a complex whole. An economic policy must be judged not only in terms of its probable effects on national production and consumption, balance of payments, the banking system and other strictly economic aspects of the situation. Its influence must also be measured with respect to its effects on the various social segments of the nation, on ideological interpretations, political movements and the like. Likewise a policy with respect to any one Latin nation must be examined for its possible repercussions throughout the area.

4. Much could be done to bring U.S. public and private policies in Latin America into a common focus. In some Latin regions the activities, installations and personnel of one or more large U.S. business corporations are more visible than the embassy or official missions. Large business concerns have realized only recently that they are in effect representing the U.S. as well as their own private interests. Coordination of policies should mean a friendly and cooperative relationship between official and private policies.

- 2 -

[LC]

5. The U.S. must be prepared to support projects and movements that are needed for the development of Latin America even though they are not always within the "free enterprise" context as understood in the U.S.

For example, in some countries large economic development programs must be carried out by public bodies set up for the purpose, for want of local capital and private organizational experience. It is essential that their management and control be in the hands of persons committed to the values of the free world and this can be encouraged more readily if U.S. policy is helpful and sympathetic.

## Political

1. It is in the interests of both the U.S. and new Latin leadership that the former should prove to be not only a symbol of democracy and progress but also a reliable partner in the practical achievement of these goals. U.S. support of dictatorships undercuts its support among friends of democracy and provides local critics of the U.S. with free opportunities to create confusion and sow distrust.

2. The U.S. must establish a general image of itself throughout Latin America as a friend of responsible democrats and liberals and an opponent of dictatorships of the right or left. In this connection the U.S. should give closer attention to its military policy in Latin America. In respect to each country, it is important to know whether gifts or loans of arms and munitions actually strengthen U.S. and hemisphere security or merely provide means for consolidating dictatorships.

3. In view of the still persistent personalistic value of Latin culture, it is essential for U.S. representatives to develop sympathetic personal contacts with the leadership elements of the middle groups and learn to appreciate their sometimes hazy aspirations. In the past North Americans have all too often confined their personal relations to the rich, cosmopolitan or Americanized segments of the national society and consequently have had no firsthand comprehension of the changing minds in Latin America.

[LC]

"Latin America's Troubled Cities" Foreign Affairs

April '63

To deal realistically with the economic and social problems of the Latin American countries, we must critically examine the position of their cities -- their relative importance to the country, rate of growth and intensity of problems -- to see if they are being neglected in the formulation of Alliance policy.

More recently economists have begun to argue that economic change does not precede social change, but that both must develop together and in support of one another. This thinking has come to dominate the planning and administration of the Alliance for Progress, in which social reform receives equal place with economic reform and social progress is put on a par with industrial growth. In this kind of thinking the Alliance may be headed toward a new and equally inadequate development policy. For while the non-economic factors of economic growth receive ample recognition, rural reform most often has claimed the high priorities -- especially programs of land distribution and reforms in rural and tenure. Again urban land reform is being forced to wait.

Failure to emphasize the need for urban progress can be perceived not only in the terms of the Alliance charter, but also in the first national development plans so far submitted as prerequisites to Alliance aid. In these three plans, prepared by Bolivia, Colombia and Chile, the problems of urban areas are either ignored or are treated as less urgent and secondary, to be solved in later, perhaps far distant development plans.

## Proposals

1. Establishment of a credit system whereby capital for construction or purchase can be made available at rates and on terms that contractors and individuals can afford.

2. Outside capital must be solicited and, when invested, must be made secure. This might be done through the creation of an international mortgage insurance agency that can sell bonds in the US and other capital-exporting countries and funnel the proceeds into mortgages in the Latin American nations.

-- Puerto Rico's success in the housing field shows the value of financing in the US and the ready market that exists for secure housing investments.

[LC]

L.A. Troubled Cities

3. In addition to securing credit through an international agency, other techniques to finance urban reform in Latin America should be investigated.

-- Stimulation of savings and loan associations -- a policy presently followed by the Alliance administrators -- can be helpful, but it is only one alternative.

-- The use of pension and credit-union funds for housing.

-- Devices can be found for encouraging industrial housing for workers by granting tax relief and other incentives to participating firms.

-- In some countries progress can be made through the creation of cooperative associations, not only for credit purposes, but for the construction of self-help housing as well.

-- In others, laws that forbid banks, insurance companies and other financial institutions to invest their capital in housing must be amended.

4. One of the main deterrents to providing low-cost housing through private capital in Latin America is the unattractiveness of fixed-income investments in countries where money steadily loses its value due to inflation. This is one of the issues so truly central to the entire nature of the economy and its political stability that only the sharpening of experience can indicate the success of the technique. Protection against an unstable monetary system can be gained by tying repayment provisions to price indices or to other more stable currencies, as is done with savings deposits in Chile, or through government insurance against loss through inflation. Both security and liquidity of investment can be aided by revising antiquated forms of security documents and inefficient procedures for collection or foreclosure.

5. More generally, an appropriate system of land tenure must be created in order to make possible the conditions necessary to a modern economy -- where land serves as a commodity that can be securely held, easily transferred and prudently invested in. This will demand:

a. suitable documents of title, mortgage and transfer, and a system whereby the interests in property are clearly defined and easily ascertainable.

[LC]

## L.A. Troubled Cities

b. administrative and judicial systems that will facilitate all arrangements in land and will provide quick solutions to all disputes.

c. archaic legalisms that inhibit the free alienation of land must be weeded out; time-consuming formalities and outmoded procedures must be reformed.

These steps will have to be taken before the needed investment capital can be attracted to provide remedies to pressing urban problems.

6. The replacement of slums and shanty towns by decent structures will mean new sources of property-tax revenue for municipalities; this will enable them to provide some of the desperately needed services.

7. It is time to explore the possibilities of decentralization, of new towns and satellite towns to open up new areas of settlement or to take advantage of natural resources, as has already been done in Brazil and Venezuela. The importance of early control of urban growth must be stressed for once land-use patterns have been set, they can be altered only with enormous difficulty and expense.

8. Similarly, attention must be paid to the potential uses of *tax policy* in meeting the problems caused by urbanization. Adequate taxation of property would counteract the tendency to hoard land. Profits in Latin American countries are often put into land holdings which are not used to best advantage; the result is a rise in land prices. When land prices are high, the problem of providing adequate shelter becomes the more difficult to solve. The property tax should be high enough to force owners to obtain an economic return from their land, or else sell it to individuals who would make the investment necessary to such a return. In addition, undeveloped land can be taxed more heavily than that which is improved; this would encourage sale or development of land now held for speculative purposes and also stimulate construction. Tax penalties can be levied to discourage unsuitable building and tax incentives granted to promote desirable improvements. Finally, reforms in the structure and administration of real-property taxes can bring the added revenues so urgently needed.

[LC]

General

1. The long-range aim of U.S. policy must be a sound, prosperous and stable Latin America, one that will contribute to the strength and solidarity of the Western world and will advance the security of the entire hemisphere.

2. Presently the aims of U.S. military policies conflict with the aims of U.S. economic policies. U.S. policies which emphasize stability in order that Latin governments will be friendly and peaceful and will provide military bases and other facilities where we need them either fail to recognize that a social revolution is in progress in Latin America or assume that it can be delayed while the cold war lasts. A strategy of buttressing all existing governments with military aid can hardly be effective for more than a brief period.

3. For the great majority of Latin Americans, who see no great danger of aggression from outside, the U.S. military program compounds their internal problems, interferes with the process of social change and hinders progress in economic development.

  - The reimbursable aid program, the evils of which are magnified by the new credit policies, gives license to the armed forces to squander money on flashy military "toys."

  - The provision of U.S. arms to military regimes often stymies the popular urge to political freedom.

  - The short-run basis of our policies, which is one of expediency, seems to ignore these considerations. The long-range view of Latin America which they represent is pessimistic as well as static, for it does not count upon the developing popular forces.

4. The critical question is: Is the U.S., in pursuing its supposed hemisphere security goals, interfering with the normal social evolution of the Latin peoples, and if so how long can it continue to do so?

5. Neither our military policies in Latin America nor Latin America's response to these policies fit meaningfully

[LC]

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into the U.S.' world strategy or correspond to its long-term interests.

6. Present military policies ostensibly directed against the Communist menace can do almost nothing to improve Latin America's present narrowly-based cooperation with the U.S.

7. In most of Latin America where illiteracy is high, lack of food widespread, disease and material poverty the rule, the ideological fight against communism is meaningless. The Latin American masses are disturbingly neutral today. Only if the Latins feel that they have something worth fighting for will this isolationism give way to a feeling of identity and equality with the U.S. in the struggle for a free world.

## Military

1. A policy of arms limitation in Latin America, sponsored by the U.S. and by some Latin governments, would provide a simple method by which some of the inconsistencies of our current foreign policy could be removed. Such a policy would be welcomed by the Latin American public, would relieve the U.S. of much of the burden of supporting unpopular governments and would allow the savings on arms to be plowed into economically productive endeavors.

N.B. The level of armament in Latin America today is now many times that of pre-WWII. Yet actual need for armament has decreased because of the effectiveness of the OAS in preventing intra-hemisphere warfare and because no external military threat exists against which Latin America's own arms could be really useful.

2. To make Latin America accept this, the U.S. should:

a. create a favorable climate by de-emphasizing the military aspects of its policy and curtail the present military programs;

b. discourage further arms build-up. To this end the U.S. should gradually reduce its military aid, in general to the minimum amount necessary to keep the Latin governments from seeking aid elsewhere.

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c. handle the grant aid programs by at first expanding neither the MDAP program itself nor the defense "missions" that the signatory countries are pledged to carry out under the pacts;

d. soft-pedal the MDAP requirement that the recipient country do all it can to improve its defense posture, in order to forestall new demands for military aid. The appropriations should be reduced annually with a view to eliminating all grant military aid within a few years;

e. possibly cut down on the Latin military expenditures by controlling credit. The U.S., for example, might restrict the amount of credit extended for military purposes by setting up a revolving fund of perhaps $100 million for the entire area. This would look impressive as a total sum but would not be enough when divided among twenty countries to do much harm;

f. **limit the role of the missions.** The missions should be promptly removed from those countries where they have become symbols of U.S. support for unpopular military regimes. The example of Cuba, where the mission remained beyond that point to our political detriment, is a lesson for the future;

g. encourage the Latin nations to make greater use of their armed forces directly in the process of economic and social development. Many officers possess valuable technical skills;

h. **compensate the Latin countries for reductions in military aid through comparable increases in economic assistance.**

N.B. Kennedy's political program for Latin America ignores militarism and growth of armaments despite the obvious exacerbation of both in many Latin countries; for example, Argentina, Peru and El Salvador.

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[L.C.]

## Economic

1. Basic to mutually beneficial economic ties will be the future expansion of the already high level of trade. To this end the U.S. will have to take into account Latin America's dependence upon exports of foodstuffs and minerals.

2. No U.S. economic aid should be granted to military regimes bent on preserving an outworn order. The U.S. should be wary of granting assistance to any military regime in Latin America for the experience of the past has demonstrated that even when men in uniform have assumed leadership of the social revolution, they have shown little capacity for resolving their nation's problems in an orderly progressive fashion.

## Political

In both its aid policies and its general attitude the U.S. must take into consideration the character of the governments with which it deals, the degree of democracy or dictatorship. This does not mean we should have nothing to do with dictatorships but rather only polite relationship instead of friendship.

## Cuba

1. It was obvious in mid-1961 that an effective political program to deal with the potential threat to hemisphere security posed by the Communist beachhead in Cuba was yet to be developed. It was also clear from the Bay of Pigs that indirect intervention on the part of the U.S. was an ineffective means for bringing Castro down.

2. Under present conditions, direct intervention would, in fact, be laden with dangerous and wholly unnecessary risks.

3. In dealing with Cuba, patience should be the watchword. We should be prepared to use military force to meet military force, such as a Cuban assault on Guanahamo or a Cuban invasion of some Central American or Caribbean republic. However, if there is no such provocation, the U.S. should confine itself to a policy of political containment of Fidelismo and of creating conditions which will check and defeat it throughout the hemisphere. We should continue, without any attempt at coercion, to persuade Brazil, Mexico, Ecuador and others of the wisdom of our policy and move with the important Latin nations, when the time is ripe, in collective action against Cuba.

# Latin America: Between the Eagle and the Bear

## General

1. First and foremost, the all-round North American feeling of superiority towards Latin America should give way to a better realization of the relativity of such relationships, based on a more lively appreciation of the value of variety in human culture. This would entail giving up the conscious or subconscious tendency to equate progress in Latin America with development along lines closer and closer to those of the U.S. What is wanted is a sincere appreciation of the value of Latin American culture as it is and a desire and effort to cooperate in its development as it is.

2. U.S.-Latin relations should be less formal.

3. The U.S. must cut loose from the remaining dictatorships or else Latin America will never trust the U.S.

4. An international enquiry into the financial relation between Latin America and the U.S. should be made. There should be a "central invariable core" set up composed of such men as Raül Prebisch, who should be chairman, together with a prominent U.S. economist, Professor François Perroux of France, Lord Robbins of Great Britain, Prof. Ropke of Switzerland, Prof. Gunnar Myrdal of Sweden and Signor Malagodi of Italy. These men would study the financial and economic relations between the capital providing countries and Latin America from WWII to the present and outline a program for the future. For the study of any one particular nation, they would co-opt an economist of the nationality concerned. (The reason he suggested these men was to give the program an "unrivalled authority".)

## Specific

### Working Toward Regional Groupings and Confederations

1. The OAS should be recast. Presently it is not as it should be a meeting of equal partners on equal terms. Presently the U.S. dominates. The organization should be recast to consist of 2 partners, the U.S. and Latin America,

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or, if this is too ambitious, a middle phase of 5 partners
might be attempted: the U.S., Brazil, Northern Latin America
(Central America and Caribbean countries), South Western
Latin America (from Venezuela to Chile) and South Eastern
Latin America (Argentina, Uruguay, Paraguay and Bolivia).
Other groupings might be considered.

2. These steps toward a confederation would not be easy, but the initial impulse would be less difficult than it seems; for the change would not as yet imply any federation of the Latin states; it would merely aim at the creation of regional branches of the OAS.

3. The existing structure of the OAS leads to and, at times, justifies accusations levelled against the U.S. that it is using the OAS for carrying out policies wished or designed by the State Department.

4. Evidence that regionalism is possible and perhaps desired is shown by the Central American Common Market and LAFTA.

5. A large technical school along the lines of the Zurich Polytechnicum or of MIT should be established to meet the needs of the whole of Latin America. It should be financed by the 20 Latin nations. This institution would bind them to some concrete form of cooperation outside mere politics and would encourage the youth of the nations concerned to devote themselves to technical professions. The U.S. might help with advice, staff and perhaps some measure of initial financial backing.

6. A federation, possibly a fusion, of all Latin American airlines might be attempted. This would avoid much overlapping and unnecessary expense and would create another field for cooperation. This federation might be extended to the sea-lines. A sea and air combine of transport for the whole of South America would result with considerable advantages for the future political federation of the whole continent. It might be extended to include the Post, by creating a Latin American Postal Union.

7. A kind of preconfiguration of a Federal Reserve Bank should be established to deal with loans for creative

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[LC]

purposes and advice on such matters as inflation, develop-
ment and increase of production. This institution would
have to be started with world capital and to rely on selected
experts from the whole free world.

8. A "really Latin American, truly independent press agency" should be established. The present choice is either an American agency such as UPI or AP or the communist-controlled Prensa Latina or one of the big European agencies. The setting up of such a press agency controlled by a federation of Latin newspapers (provided they are not U.S. controlled) and excluding fascist and communist organs, would be highly beneficial for the true interests of the U.S. We could really believe that the news we read reflects Latin opinion.

9. A scientific center of political studies covering the whole of Latin America. It would collect and analyze facts and suggest solutions and stand before public opinion as detached, independent and authoritative observers. This institution would be able to perform inestimable services for the prevention of dictatorship. A close watch on political life at all levels, national, provincial, municipal, might enable it to criticize ways and practices and to suggest alterations with an unrivalled authority. Indirectly, it would contribute to create that higher federal awareness which must precede any successful attempt at political federation.

## Panama Canal

The Panama Canal should be placed under special international
body in which NATO and OAS would be represented. Such a move
by the U.S. would powerfully contribute to popularize the
U.S. in Latin America.

## Cultural Exchange

Establishment by Atlantic Community of an Institute of Cul-
tural Exchange with Latin America. For example, familiarity
with the Scandinavian countries and their way of life might
have a far healthier effect on Latin America than familiarity
with the working-class way of life in the U.S. In short, it
is desirable to widen the alternative and not to allow the
average Latin American to think in terms of either the Soviet
Union or the U.S.

[LC]

A. General Comments

1. The fundamental problem in Latin America is the mobilization of domestic human, material and financial resources for economic and social progress. U.S. money alone will not achieve development and political stability in Latin America or anywhere else in the underdeveloped world. The main job is drawing the hearts, minds and capabilities of the people. (OA)

2. What is needed are positive objectives which will encompass both our interest in the preservation of our traditional freedoms and way of life as well as our interest in helping the rest of mankind achieve economic and social progress. (EP)

3. In considering any revision of American foreign economic policies and goals, it is fair to begin by accepting the fact that nationalism at home and abroad is the world's strongest motivating force. Against this we have to recognize that our goals as a leader nation are international in character. (EP)

4. Today we must move from a position of free world leadership based on an overwhelmingly predominant military and economic posture, to a position of leadership based largely on such qualities as initiative, persuasion, skill in organizing and coordinating programs involving a number of countries, and above all, on confidence and respect for our integrity as a free world leader. If we are to play this role, there must be an awareness on the part of our leaders and on the part of the public generally that very often what we do at home speaks louder than what we say to the world. (FP)

5. U.S. policy planners for Latin America need to think in terms of a balance between shorter-run impact programs which will give the people of Latin America an immediate sense of progress and of increased well-being while, at the same time, using U.S. financial and technical assistance to guide and promote long-term economic growth. (OA)

6. Any effective aid program must be guided by the political and social as well as the economic environment within the host country. Thus, for example, substantial technical and financial assistance for land reform or the creation of credit institutions for strengthening small industries and farms may represent a more effective use of our aid resources than say a hydroelectric dam. Moreover, eliminating government corruption in a particular nation might prove more vital to progress than a rise in total output per capita. (EP)

7. In establishing the goals of the Alliance for Progress we need full cooperation and support of the other members of

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the Atlantic Community. These might very well be adopted as
the major goals of the OECD. (EP)

8. The U.S. must give greater attention to staffing its missions abroad, to coordinating at the country level the various sources of assistance and to mobilizing non-governmental sources of personnel, including people from U.S. and European universities, labor unions, and private business, for promoting the objectives of the Alliance for Progress. (OA)

B. <u>Types of Foreign Economic Aid</u>

1. The most desirable type of development assistance is financial and technical help in the formulation and implementation of specific projects for economic and social development. (EP)

a. Ordinarily such projects should be undertaken within the framework of long-range plans formulated by the developing country in consultation with, and perhaps with the help of, external assistance agencies. (EP)

b. Although funds should be usually allocated only as required for use in specific projects, there can and should be commitments of funds for financing a portion of a country's long-run development program over a period of several years, subject to the preparation of sound projects and the carrying out of agreed self-help measures. This requires a continuous relationship and involvement in the development programs and policies of various national and multilateral agencies operating in the country. (EP)

2. <u>Stabilization Assistance</u>

a. U.S. experience with stabilization or balance-of-payment assistance to less developed countries has not been altogether satisfactory. (EP)

-- in several instances, the Export-Import Bank
has made emergency loans principally to bail out
U.S. and other foreign creditors that have extended
excessive short and medium-term export credits to
these countries. While promises of financial reform
were made, financial mismanagement continued and in
a few years the countries receiving the emergency
credits were in the same, or frequently in a worse,
condition than before.

[LC]

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-- between 1955 and mid-1961 the Export-Import Bank
alone made available in loans (or refinancing of old
ones) over a billion dollars in the form of general
purpose or balance-of-payments assistance, most of
it going to a few Latin countries. Where it was not
accompanied by genuine stabilization programs, it
did not promote sound development but rather enabled
the receiving country to continue to live beyond its
means and to get further into debt. (EP)

b. While recognizing the dangers involved in stabiliza-
tion assistance of this type, it may be necessary in
order to assist a country in building a foundation of
financial stability for sound development planning;
however, this type of assistance should be used sparingly and with adequate safeguards (EP)

3. Government Supplier Credits

a. Government sponsored schemes for supplying and guaranteeing export credits constitute an important factor in competition among industrial countries for world markets. These credits have enabled Latin countries to increase their imports by assuming obligations for repayment in future years. (OA)

b. However, this policy has three disadvantages: (1) it tends to increase the ratio of current obligations to foreign exchange income, as compared with the same amount of credits made available in the form of long-term development loans; (2) the supplier credits may finance consumer goods imports or capital goods that bear little relationship to rational long-term economic planning; and (3) the lack of Latin American governmental control over these supplier credits has frequently been a cause of balance-of-payments crises. (OA)

c. One possible solution is cooperation among the members of the OECD in limiting or controlling government-sponsored credit competition for Latin American markets.

4. Surplus Agricultural Commodities

a. Surplus agricultural commodities should be more closely integrated with our long-range development programs. (EP)

b. In this connection, the practice of "selling" agri-
cultural commodities for local currencies should be
abandoned in favor of commodity grants or sales for
dollars on generous credit terms. (EP)

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## 5. Repayment of Foreign Aid Loans

a. The practice of making loans repayable in local currencies should be completely abandoned in both bilateral and multilateral programs. In most cases, aid should be made available on a loan basis with repayment and other terms geared to the recipient's capacity to service foreign debts. (EP)

b. Capacity to service foreign debts should be determined jointly by all economic assistance agencies operating within a country so that a consistent policy may be followed. This does not mean that the country might not receive loans both from the World Bank under normal hard loan terms and from AID or the soft loan window of the Inter-American Development Bank. However, the coordination among the various lending agencies would assure that the "mix" of hard and soft loans would reflect an agreed position with respect to the country's capacity to service. (EP)

## C. Administration of Economic Aid

1. The several types of external assistance currently made available by various agencies should be integrated and directed toward the achievement of long-range economic, social and political objectives for these countries. There has been far too much piecemeal and discontinuous assistance provided by a multitude of agencies without coordination at the country level and without any clear idea of what the overall impact of their activities may be. (EP)

2. This is a problem which has involved not only the relationship between U.S. agencies, on the one hand, and multilateral and other national and private agencies on the other, but there has been a problem of coordination among the U.S. agencies themselves. There are three levels at which coordination is needed. (EP)

a. policy and operational coordination among the officials in the central offices of the U.S. development assistance agencies;

b. coordination of policies and operations at the country level, both with respect to the functions of the agencies themselves and in their dealing with the officials of the host country; and

c. coordination, such as that carried on by the Development Assistance Group among the governments of the major

[ic]

- 5 -

capital exporting countries, or among government officials
in organizations such as the OAS which includes both
donor and recipient countries. The latter organizations
must be concerned with broad policy problems relating to
long-range goals for groups of countries, with the shar-
ing of the aid burden and with the extent to which assis-
tance should be provided through multilateral or bilateral
agencies.

3. <u>Country-level coordination</u>

a. The most serious problem of coordination is that of
coordinating the financial and technical assistance
activities of all agencies, bilateral and multilateral
at the country level. Specifically, such coordination
must include: (EP)

(1) an agreement on investment priorities in relation to medium and long-term social and economic goals;

(2) a coordination review and common recommenda-
tions to local government officials with respect to
individual plans and programs;

(3) coordination of long-term commitments of exter-
nal funds called for by the country's development
plan;

(4) coordination between the technical assistance agencies helping a country to formulate projects for external financing and the external financial institutions;

(5) agreed positions with respect to the country's
capacity to service foreign indebtedness so as to
determine a proper overall relationship between hard
loans, soft loans, and grants;

(6) agreed positions on recommendations to the
country with respect to its internal monetary and
financial policies.

b. Proposal for country-level coordination

(1) a committee should be established on which all
external agencies operating in the country are re-
presented, with power to make specific joint recom-
mendations directly to the headquarters of each of
the agencies represented as well as to high-level
coordinating groups in Washington or elsewhere. (EP)

[L.C.]

- 6 -

(s) The job of the committee would be to review development programs and requests or recommendations for various types of assistance and to reach agreed positions in connection with all negotiations with officials of the host country. Such negotiations might continue to be carried on by individual agencies or they might be conducted by representatives of the committee which would be chaired by the assistance agency most concerned. (EP)

(3) Since each independent foreign assistance agency is autonomous in its own field, it presumably could not be forced to take an action or refrain from doing so, but the combined decision of a coordinating group operating in the country would normally carry considerable weight. (EP)

(4) Such a country-level coordination would undoubtedly require some reorganization of existing coordinating machinery among the officials of the agencies themselves at the Washington level. However, the whole approach to development assistance in terms of a close and continuous relationship to the development programs of individual countries requires a considerable shift of authority from the headquarters of the aid organizations to the country missions. This presents a problem for virtually all multilateral institutions since most of them do not have resident offices in the developing countries. It is desirable that they have such offices, although one officer might conceivably be a representative for several Latin American countries. In any event, each of the important assistance agencies should have an official who would be in more or less continuous contact with the country committees and with the development activities of one or more countries themselves. (OA)

(5) Coordinating machinery of this type is not likely to succeed in the absence of strong leadership and there will be a tendency for the agency or agencies with the largest programs and those with officials to have the greatest influence and close and continuous relationship to the developing country and its officials to exercise this leadership. Thus both the country coordinating machinery and the leadership would tend to differ from country to country. (EP)

4. Regional and International Institutions

a. Although the U.S. has been channeling more of its aid dollars through multilateral organization in recent years,

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the Administration's new AID program does not indicate a substantial change in the proportion of our total development assistance to be administered by multilateral agencies. (EP)

b. The bulk of U.S. assistance should be made available through regional and international institutions. The main reasons for this are:

-- It is believed that the Inter-American Development Bank or such agencies as the Economic and Social Council of the OAS and United Nations Economic Commission for Latin America are in a better position to bring pressure on Latin American governments to adopt sound financial policies and social reforms than is the U.S. government acting unilaterally. (EP)

-- In view of the fact that the U.S. economic position has grown weaker over the last two decades (U.S. gross national product as a percentage of the combined gross national product of the developed countries of the free world has been declining steadily, as has also its proportion of world markets), U.S. leadership must be based more and more on its ability to mobilize and coordinate the resources of the free world and less upon a position of relative economic power which will continue to decline in the future.

5. U.S. AID Personnel

a. In order to have a successful Latin American policy, the U.S. must provide an adequate personnel staff and coordination at the country level of the activities of the manifold U.S. financial and technical assistance agencies now operating in Latin America. (OA)

b. Presently AID missions are not designed or staffed for carrying out broad development assistance programs. They do not have adequate staffs of trained and experienced economists, engineers, agricultural specialists and other technicians to administer capital financing programs nor are they in a position to provide the level of technical and administrative assistance which the host countries need. (OA)

-- By and large, U.S. aid missions are staffed for carrying on limited technical assistance activities. The capital financing in the past has been handled by the international agencies, such as the World Bank, the International Development Bank, etc., who from time to time send missions to review the

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proposed projects in response to loan requests, but maintain little continuity with the country or with the development process as a whole. (OA)

c. We must build up the capabilities and prestige of our missions in the field. (OA)

D. Assistance for Economic Development

1. Presently the Latin governments are faced with grave financial and economic problems:

a. Inflation, caused by the creation of credit by the central banks to finance ever-growing budgetary deficits, encourages capital flight and inhibits productive investment in industry and agriculture. High interest rates are a direct result of inflation. These rates reduce the incentives to make long-term productive investments and tend to channel investment into more speculative operations. (OA)

b. Balance of Payments difficulties are a direct result of (1) reduction in exchange earnings due to reduced prices of major exports, (2) increased debt service on foreign credit, (3) inflation coupled with overvalued exchange rates which has produced capital flight and increased demand for exports, (4) political disturbances as well as exchange and price instability which have reduced foreign investment. (OA)

2. To curb inflation and decrease budget deficits:

a. Latin governments need to be urged to expand their revenues by broadening their tax base with special emphasis on increasing the degree of progressiveness of their tax systems and improving tax administration so as to capture a larger proportion of the incomes of the wealthy and middle classes. (OA)

b. They should also make more effective use of their revenues by eliminating subsidies and swollen inefficient bureaucracies in favor of expenditures which will expand the productive and social capital of the country. (OA)

3. Balance-of-payments

In the past the U.S. has aided the Latin governments in balance-of-payments financing. If this policy is to be continued, it should be done openly and under the terms ✓

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of an agreement involving financial reforms which will
not require the U.S. to respond continually to such
financing, which would only remove the pressure on
governments for fundamental reforms. (OA)

b. Normally balance-of-payments financing should be tied to recommendations of the International Monetary Fund (IMF). However, IMF recommendations are extremely unpopular in almost all the Latin nations because of the Fund's insistence on the removal of subsidies to consumption, the elimination of fiscal deficits, the establishment of realistic exchange rates and limitations on inflationary bank credit. Though much of the criticism is inevitable, it might be minimized if the IMF would broaden its recommendations to include more fundamental reforms* in the financial area, which look toward an expansion in revenues and a reduction of fiscal inequities and give the widest publicity to its recommendations. (OA)

*Mikesell does not elaborate on what he considers "more fundamental reforms".

c. In the cases where countries have violated IMF agreements, the U.S. should terminate balance-of-payments and budget support financing and limit its assistance to solid, long-term economic and social development projects accompanied by a careful control of the uses to which the funds are put. (OA)

4. Commodity stabilization

a. In some years, reductions in export receipts have been more than all of the external capital, both private and public, that many of these countries have been receiving. The U.S. must give more attention to this problem both as regards shorter-run fluctuations and, perhaps more importantly, the long-run problem of expanding the export markets of the underdeveloped nations.

b. In dealing with the problem of commodity stabilization, the U.S. must not ignore the longer-run problem of achieving a fundamental change in the structures of the Latin American economics which will broaden their export base so as to reduce their dependence upon one or two export crops and will provide growth in export earnings.

5. Agrarian reform

a. True agrarian reform requires the creation of admin-
istrative machinery for the provision of credit and

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technical assistance; the opening up of new lands for
settlement; vast expenditures for transportation; the
provision of distribution facilities which will make
possible the transformation of subsistence agriculture
to commercialized farming or, in some cases, the trans-
formation of farming based on a single crop to diversi-
fied farms which will provide a better balance between
demand and supply in the country and perhaps a broaden-
ing of the export base. (OA)

b. Large numbers of administrators and technicians will have to be trained to implement these programs and considerable time and effort will be required to change the traditional attitude and customs of the people affected by the reform. (OA)

c. Over half the people of Latin America now live in rural areas, and for there to be an increase in output per man, large numbers of people will have to be moved out of farming into industry and services in areas where employment and living facilities do not yet exist. (OA)

d. However, most Latin countries have vast untapped
resources and the opportunities for increasing output
per man in both agriculture and industry through changes
in production methods and economic organization are very
good. (OA)

E. Assistance for Social Development

1. The determination of the administration to provide a larger role for social development in its foreign assistance programs is a consequence of a perhaps belated realization that unless social progress goes hand-in-hand with overall economic growth, the political objectives of our economic programs will not be realized. (EP)

-- If, for example, industrial output continues to expand in the industrial centers of Latin America and agricultural productivity is increased on the large farms and plantations but at the same time the ring of slums surrounding the industrial centers continue to grow and the lot of the Andean or northeastern Brazilian peasant does not improve, or even declines, the political battle will be lost. (EP)

2. While it may be argued that a lack of foreign exchange or external assistance has not been the fundamental barrier to the adoption of social programs, the offer of external assistance for formulating and providing initial assistance

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for such programs as land reform, slum clearance, and the
like, may serve as a prime mover or catalyst for social
progress. Once projects and programs are initiated, they
are very likely to be continued and expanded by the local
governments. (EP)

3. It must be emphasized that social programs need to be accompanied by a substantial amount of technical assistance and supervision -- much more than in the case of economic projects. This technical assistance and supervision must either be provided directly by the agency financing the project or in closest collaboration with other technical assistance agencies. Since collaboration between two agencies is often difficult to achieve, a combination of technical and financial assistance from the same agency may be more effective administratively. (EP)

4. Housing

a. Slum clearance is a problem which must be faced by the planners of the Alliance for Progress. Presently slums around some cities are being created at a faster rate than older ones can be eliminated, due to the continual influx of population from the rural areas. (OA)

b. Slum clearance and housing is complicated not only because of the rapid growth of the large metropolitan centers but also because of property relationships and the financing of the housing construction. For most countries, local material and unemployed labor are available for housing construction, although some elements required for decent housing may be in short supply or involve import costs. (OA)

c. Programs must be organized for mobilizing the available resources and for providing credit at reasonable rates and on sufficiently long terms to enable the low-income classes to purchase the new homes. (OA)

d. Individual home ownership and payments which cover the cost are preferable to government or private ownership because it not only gives the workers a stake in property, but government ownership opens the door to profiteering with undesirable social repercussions. Also private ownership under which workers pay for their homes out of savings increases the volume of savings. (OA)

e. Some seed capital and technical assistance from external sources can be extremely effective in getting these programs started, but massive amounts of external

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capital are neither necessary nor appropriate. (OA)

f. The administration and organization of the programs can best be undertaken by local or regional institutions rather than by a central government bureaucracy. The major task of slum clearance lies with the communities themselves. (OA)

## 5. Education

a. The whole success of the Alliance for Progress depends very heavily on the course of higher education in Latin America. It is these institutions which are producing the new leaders. And the shortage of trained economists and public administrators is perhaps the most critical of any of Latin America's shortages. (OA)

b. U.S. efforts in the field of higher education should be directed mainly at improving the level of teaching and research in the universities rather than in bringing large numbers of under-graduate students to the U.S. (Presently, many Latin students brought here are either not prepared for college level work, or often have little interest in returning home after their years of foreign instruction.) (OA)

c. The U.S. should aim basically at educational institutional building. It can assist the Latin universities in the form of American teachers and research scholars, books, equipment and trainee programs in the U.S. for Latin American faculty members. (OA)

d. Such programs, however, would not exclude the bringing of foreign students and faculty members to the U.S. for specialized training, especially where students have obligations, by special arrangements, to return home and also have positions in specific institutions to return to. (OA)

e. This is an area where the U.S. and other Western countries, through university-to-university contracts, could have enormous influence. (OA)

f. Two other things need to be done: (OA)

-- cooperation with Latin universities in preparing applications for external assistance in a manner which would take full account of the delicate political problems raised by foreign involvement in universities;

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-- prompt applications and enlisting the support of U.S. universities by offering contracts of the kind that would be attractive to U.S. universities.

g. Because of Puerto Rico's amazing success in raising its standards of living and in economic development, it should be used to an even greater extent as a training and educational center for Latin Americans. (OA)

h. An effort should be made to develop the University of Puerto Rico into a truly distinguished university which would attract students from all of Latin America, particularly in the fields of economics, public administration and business. (Presently the school has made a good start but is in need of substantial assistance.) (OA)

## F. Private Investment

### 1. General

a. U.S. private enterprise is making an important contribution to economic development abroad. However, it should play a far greater role in U.S. programs for economic assistance. (PI)

b. While private foreign investment cannot supply the bulk of the capital needed by less developed countries for growth rates sufficient to permit a self-sustaining rise in living standards, it does provide a vital supplement to the scarce and strategic factor of entrepreneurship. (PI)

c. A basic problem for U.S. foreign economic policy is how to provide the dynamic services of U.S. private enterprise and entrepreneurship in our program of development assistance on terms which are acceptable to the foreign countries and to U.S. businessmen. There is no simple formula for releasing a flood of U.S. private capital and enterprise to the less developed areas. Governmental efforts to improve the climate for investment abroad should be continued, but both government and private industry must be guided in large measure by the kinds of private investment foreign countries are seeking and the conditions under which it would be welcomed. (PI)

d. In order for American business to invest successfully in Latin America, it must recognize certain trends toward private foreign investment in the Latin nations: (OA)

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(1) foreign governments are tending more and more to screen investments and to limit foreign investments to certain fields in certain types of operations. Very often official approval of an investment is necessary before a foreign investor is permitted to remit earnings or to repatriate capital at official rates of exchange appropriate for this purpose;

(2) developing countries tend to favor foreign investment in which there is a certain portion of local capital participation, and many Latin countries have laws regulating not only the proportion of foreign ownership, but also the proportion of local labor and supervisory personnel that must be employed;

(3) there is a trend toward greater government participation and/or control in the extractive industries, e.g. petroleum and mining. Where such industries have not been nationalized, they are regarded as quasi-public in nature, and the day is past when a mining or petroleum firm can obtain an enormous concession of land in which it can create an industrial empire without government interference.

e. Therefore, special efforts on the part of the U.S. government to promote the flow of private investment abroad which involve a direct or indirect subsidy, or a substantial risk or administrative cost to the government, should be made on a selective basis as regards both the nature of the investment project and the country in which the investment is to be made. (PI)

(1) Both the investment and the firms would have to be acceptable to the U.S. government and to the foreign government to be eligible for special loan assistance.

(2) Assistance should be made available only to socially responsible investors who may be expected to make a significant contribution to the economy of the foreign country, and directly or indirectly to the national economic or foreign policy objectives of the U.S.

f. Special measures for promoting private investment should be closely integrated with other U.S. or international programs for achieving the same objectives. (PI)

g. Wherever possible, loans to private enterprise, whether American or foreign, should be substituted for

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direct assistance to governments. Such a policy would not only make our financial contribution to the economic growth of the less developed countries more effective, but it could also give a larger proportion of the American business community a vested interest in foreign operations. And it is the creation of a substantial interest and familiarity with foreign operations which offers the best hope for a really large outflow of American capital and enterprise to the less developed areas. (PI)

## 2. Investment Guarantees

a. The Administration's loan and all-risk guaranty programs giving special encouragement to private investors in countries where certain investments are essential to the development program, but where the investor is confronted with unusual risks, constitute a positive approach to the achievement of public-private partnership in realizing our foreign policy objectives. Special encouragement should be given to joint ventures either initially or after the investment is made. (EP)

b. The present U.S. guarantee program, under which the U.S. government and the investor negotiate at the outset a percentage split of any gross loss to be assumed by each of them, and under which compensation to the investor would be paid by the U.S. government regardless of the cause of the loss, is a highly desirable arrangement. (EP)

c. Where government loans contribute a large portion of the capital of the private investment abroad, the U.S. government should liquidate its own capital contribution to the venture by the sale of debentures convertible into local interests in the host country. (EP)

d. In addition, an international investment guarantee program should be established, perhaps as an affiliate of the World Bank. It would help to mobilize private enterprise in all free world capital exporting countries for promoting economic development abroad. (EP)

NB: A proposal for such an institution is currently under study by the staff of the World Bank and has been endorsed in principle by spokesmen for the U.S. government.

e. Eventually such an institution might supersede existing unilateral or bilateral guarantee systems under which individual capital exporting countries provide specific guarantees to their own citizens who invest abroad. (EP)

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### 3. Tax Incentives

a. A major weakness in the Administration's program for promoting direct private investment in the less developed countries is its failure to emphasize tax inducements. (EP)

b. Tax incentives designed to increase the flow of U.S. private investment should be given a fair trial. It is important that in view of the cost of tax inducements to the Treasury they should be made as selective as possible and should not, directly or indirectly, give special encouragement to investment in developed countries or open up tax loopholes to U.S. citizens. (EP)

c. Tax incentives should be limited to the realization of our foreign policy objectives in specific situations and integrated closely with our general foreign aid programs for individual countries. (EP)

d. Proposal (originated by Dr. Jack N. Behrman, and highly endorsed by Mikesell) (EP)

(1) Congress should extend a partial exemption from U.S. taxes to all new foreign direct investments or licensing agreements (and management contracts) in countries whose economic development the U.S. government desires to encourage. The investments would be limited to the types of projects which have the approval of both the foreign and the U.S. governments.

(2) AID would make available to the prospective investors tax exemption certificates which could be used for payment of tax liabilities equal to a certain percentage return on the foreign investment. The exemption certificates could be issued serially so that a given portion would be valid in each of a number of years.

(3) The exemption certificates need not be restricted to use against taxes on income from the particular project in which the investment was made. The project might be unprofitable so that no income would be earned or losses might be incurred. In this case the certificates would be usable against any foreign income or possibly any income of the U.S. parent company. Then even if there were losses overseas, the parent company investors would receive half of the anticipated income as a tax exemption on other income, thus reducing the risk. If the project were more

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profitable than expected, the exemption would still
be given while all income above that exempted from
taxation would be taxed at full rates.

(4) The exemption certificates would be accepted by the Internal Revenue Service which would have the information necessary to assure itself that the investment was actually made under the agreed conditions.

4. U.S. Government Loans to Private Enterprise

a. As a means of encouraging socially responsible private enterprise to make productive investments in the less developed areas, the U.S. government should make loans on liberal terms to U.S. and foreign firms. (PI)

b. These loans would cover up to 75% of value of the capital requirements of the approved investment. (PI)

c. Dollar loans to U.S. private investors could be made out of special funds appropriated for this purpose by Congress for use by AID or out of the funds presently available to the Export-Import Bank. (PI)

(1) Because of the close relationship to ICA opera-
tions, it would seem desirable that special funds be
made available to the ICA for this purpose, although
the actual administration of these loans could be
delegated to the Export-Import Bank once they were
certified by the ICA.

(2) The lending policies should be somewhat more
flexible than those presently employed by the
Export-Import Bank. For one thing, the loans would
represent a larger percentage of the total invest-
ment than is the case with Export-Import Bank loans.
(PI)

d. Where it is necessary for the Government to provide a large proportion of the invested capital, the rate of return on the equity of the private borrower may in the case of a successful investment be quite high. Therefore, the lending agency may want to require participating debentures which would enable the government to recapture some of the profits. An alternative method would be for the government to obtain convertible debentures which could be sold to private investors if the foreign ventures proved to be quite profitable. (PI)

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e. Payment of interest and principal on the loans might be made in local currencies in the event that restrictions on transferability of earnings into dollars are imposed by the foreign government. (PI)

f. At some point in the process of these negotiations the prospective private investor would submit an application to the U.S. government for a loan to finance a portion of the proposed investment. Decisions on such applications would be made on the basis of a variety of factors, including the relationship of the project to the U.S. assistance program and to the requirements of the foreign country, and the reliability and competence of the U.S. firm. The terms and conditions of the loan would be related to the nature of the risks involved, the ability of the firm to obtain capital from non-governmental sources including local currency loans, and to the prospective profitability of the project. (PI)

g. U.S. firms are not the only one who should benefit from this proposal. Frequently European or Canadian firms may be in the best position to participate in an economic assistance program, provided they can obtain the necessary capital on terms commensurate with the risks. The U.S. loan program should be flexible enough to provide financial and other assistance to foreign private investors as well as to U.S. investors. (PI)

h. It would also be desirable for the U.S. to depart from the practice of tying its loans to U.S. exports. (PI)

NB: However, it is recognized that points g & h would involve political difficulties and they are not fundamental to the proposal.

i. Wherever possible, these loans, either foreign or American, should be substituted for direct assistance to governments. (PI)

5. Local Currency and Equity Capital

a. A considerable portion of the capital needed for foreign investment is for local currency expenditures for local labor and materials. When these expenditures are financed with dollars, or other foreign exchange, it provides an increased flow of capital into the country, but when they are financed internally it directs local savings into productive enterprise. (Public lending institutions, such as the Export-Import

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Bank, generally confine their loans to the direct foreign exchange requirements of the projects to be financed.) Foreign investors also seek to borrow or raise through local equity participation a portion of their capital requirements for local expenditures. Since one of the important functions of private foreign enterprise should be to mobilize local capital for productive investment, local currency financing should play a role in the proposed private investment program. (PI)

b. The U.S. government has adopted a policy of reserving a portion of the local currency proceeds from sales of surplus agriculture commodities for loans to development financing institutions in the purchasing countries for relending to private enterprise. Recent surplus commodity sales agreements provide that the local financing institutions shall make local currency loans to local and foreign private enterprises on a non-discriminatory basis. Loans from these funds have already been made by local banking institutions to U.S. private enterprise. Some of the development institutions in foreign countries are empowered to make equity as well as loan investments, and they could supplement the equity investment supplied by foreign investors. (PI)

c. American investors receiving special benefits from the U.S. government should be aware of their responsibility for making the maximum contribution to the economic growth of the foreign country. (PI)

(1) It would seem desirable from the standpoint of furthering U.S. policy objectives in the foreign country for there to be a substantial local equity participation and the inclusion of nationals on the board of directors.

(2) U.S. firms receiving substantial financial assistance from the U.S. government would also be expected to employ local managers and supervisors to the maximum extent consistent with the efficiency of the firm.

(3) U.S. firms would also be expected to give preference to local materials and equipment, and to promote the development and expansion of complementary industries.

d. The question of local equity participation may also be significant for the balance of payments impact of the foreign investment, especially where foreign enterprises producing for a local market grow to a considerable size through the reinvestment of exceptionally high profits. (PI)

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e. While the validity of the distinction between profits paid to foreign as compared with domestic owners is doubtful -- provided there exists a proper relationship between investments which improve a country's external payments position and those which do not -- some recognition of this concern on the part of the foreign countries must be given in the case of U.S. private investments which are heavily financed with U.S. government loans. One approach might be for the U.S. lending institution to require the option of exchanging the debt for equity shares, at least up to 49% of the value of the voting shares, or even larger amounts in non-voting shares. If the investment proves to be quite profitable, the U.S. government could sell the shares at the original dollar value of the debt to the foreign government on condition that the shares be resold at auction to local private investors. In this way, the original private investor could earn exceptional profits on his original investment but not on the funds lent to him by the U.S. government. Such profits would accrue to the foreign government which would sell the equity shares at their capitalized value. (PI)

6. Relationship of Private Investment to Other Forms of U.S. Economic Assistance

a. The U.S. in cooperation with the officials of the foreign governments could also provide technical assistance and capital in the form of loans or grants for projects complementary to the U.S. private investment. (PI)

(1) For example, if the area in which private plants are to be located lacks housing, schools, and other facilities for workers, or if the transportation system is inadequate, the U.S. assistance program could be directed toward meeting these needs.

(2) Technical assistance for worker training, health, and community development could be associated with the private investment.

(3) Frequently, U.S. petroleum and mining concerns with large foreign operations must provide these services themselves, but most firms operating abroad are unable to do so.

(4) The field of mineral resources offers substantial opportunities for participation by private enterprise in foreign aid programs. Government grants could be used for financing geological surveys

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and exploration undertaken by private firms. U.S.
governmental loans and long-term contracts for
stockpile purchases are already being employed to
finance private investment on a number of projects
which would not otherwise have been possible.

b. U.S. government participation with private enterprise in foreign materials development may help overcome the reluctance of foreign countries to permit private development of their resources. (PI)

7. <u>Interesting American Investors</u>

a. Since one of the objectives of the proposed program is to interest and familiarize a larger segment of U.S. business with foreign operations, governmental efforts to induce foreign investments should not be confined to firms already operating abroad. A special effort ought to be made to interest medium-sized firms, or even small firms of proven ability, to undertake foreign operations. (PI)

b. While the government must avoid any appearance of discrimination in inviting private participation in its foreign assistance programs, it must do more than circulate investment opportunities in government publications if the program is to succeed.

c. In addition to publicizing the fact that the government is interested in promoting private investment in a foreign country in a particular field, it should contact selected firms with a view to soliciting their interest. Through U.S. foreign aid agencies abroad, the government could facilitate investigation by representatives of U.S. firms and their negotiations with private and governmental agencies abroad. (PI)

8. <u>Selling the Program to Foreign Countries</u>

a. The success of the proposal depends not simply upon obtaining the participation of U.S. firms in our foreign aid program, but in educating foreign countries in the mutual advantages of private foreign investment. (PI)

b. There is reason to believe that as more U.S. firms become acquainted with foreign operations, a larger amount of private investment will take place without direct governmental participation. But foreign governments must also be sold on the advantages of private enterprise over government-to-government loans, at least in those areas where private firms can be most effective in stimulating economic growth. (PI)

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Bolivia and US Assistance (1961)

(Patch has written a very good paper on the social change in Bolivia, its history and US assistance. He makes some sound proposals for US policy in Bolivia, many of which could be applied to the rest of the Latin nations. He also shows a good knowledge of Latin America as a whole.

General

1. US and Bolivian leaders have made two grave errors in thinking in planning aid.

a. They have underestimated the profound nature of the social changes that follow the emergence of the peasants from their previous status as serfs, changes which will make social and economic institutions unstable for a long time;

b. They overestimated what an aid program, even one of the broadest in the world, can accomplish in imposing stability on an inherently revolutionary process of change. The majority of the population is caught up in this process. The peasants and the urban workers are demanding more out of life than they received in the past. On the other hand, both the Bolivian government and the US aid program have had to be concerned with the internal and external stability of the economy and with strengthening that sector which is oriented to the world market. In the process they have frustrated some of the immediate expectations of the revolutionary groups. The attempt to meet the new demands without seriously impairing economic stability can succeed only if the formerly underprivileged and exploited majority learns rapidly enough to identify its interests with the world-oriented, exporting - importing sector of the economy. Only then can the government forestall a clash between the economically conservative and the socially revolutionary sectors.

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2. While it is true that Latin America's problems will not be solved until it can put its economy on a healthy footing, it is also true that a healthy economy will not automatically bring about the social and economic development that are necessary. Foreign aid contributes to growth by providing more resources than the country can pay for, but it is an instrument of limited scope and flexibility.

3. In Bolivia the root of the dilemma has been that a US aid program of the customary type cannot bring about political and economic stability in a country that is undergoing a social revolution except by slowing down or halting that revolution. And in Bolivia that revolution is running at flood tide.

## Criticism of US Policy.

1. US aid has been too broadly spread and has attempted to reach into too many parts of Bolivian life, or at least the life of Spanish-speaking Bolivians. Its programs range widely from training in public administration to cattle raising to gifts to make up the national deficit. A program that attempts so much inevitably spread thin; at times it lacks coherence and creates an expectation that US assistance can be counted on to meet any need or overcome every difficulty.

2. Closely related to this is the tendency of part of the aid program to become linked with institutions that continue to depend upon US support. Some projects have been going for 17 years. Begun as limited and temporary undertakings often advisory in character, they have grown over the years and have required physical assets that have required more and more money to maintain and operate. Sometimes they are too large and too expensive for the Latin Governments to take over and run. By this time investment in them is so great that it is difficult to abandon them in order to assign funds to more pressing needs. E.G. the Health center at Cochabamba or the vocation school of Muyurina.

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3. For reasons of convenience US aid programs of agricultural educational and health services have been directed largely at the Spanish-speaking minority of Bolivia. Similarly by locating these services in fixed centers, the majority of the peasants have been isolated. All three services could facilitate the changes which are taking place among the peasants only if they had more mobility.

4. One unforeseen effect of the service programs has been to encourage the already serious exodus of trained personnel from Bolivia. With the best intentions the agricultural health and educational services have sent Bolivians abroad for training. On their return they have not found jobs in which they could use their new training; or the jobs which are available only pay a small fraction of what they can earn elsewhere, even in Peru, Argentina and Chile. Only by planning new training programs in keeping with employment possibilities can this loss of ambitious and skilled people be avoided.

5. The US aid program has taken little advantage of the opportunity to promote settlement in the rich and almost unoccupied lowlands of eastern Bolivia. At various times the Point 4 program began colonization projects in Bolivia, near La Paz, only to see them abandoned sooner or later. The lag in opening up new agricultural lands has been especially serious because in its planning the US aid program relied heavily on the Bolivian government's confidence in its ability to develop the Santa Cruz area rapidly enough to relieve the strains caused by the decline in mining and agriculture.

6. In general, the US aid experts and the Bolivian government have been equally mistaken in their attempts to interpret the needs of the peasant masses. Long-range development programs have too often been stressed rather than small scale short-term schemes which would raise living standards for the majority of underprivileged peasants.

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7. Teams composed of both Latins and North Americans could be made mobile instead of being tied, like most aid projects, to a few favored localities. Their main function would be to provide materials and directions that are not available in the local community and to utilize fully the local resources of leadership, material and labor not only for obvious economic reasons but even more importantly for the intangible reasons of strengthening local identification with the project and encouraging local responsibility. Persons respected in the village should be brought into the planning of each project at the earliest possible time, and they should feel that their views are known and respected.

8. Although this is not the most efficient way to build a school, road, etc. there are many advantages not apparent at first:

- One is a kind of "social multiplier" effect. The spectacle of work going forward in one community may stimulate another community to try a similar project (this happened in Peru).

- Another advantage is the weakening of paternalism --the lethargy of waiting for the "government" to "give" the town a road. Only thus can the tradition of dependence be weakened and eventually destroyed.

- The sharp definition of goals has propaganda value and the North American personnel in the field are much more real symbols of US good will than any number of cases of dried milk with US labels.

- The ultimate and crucial advantage of the project approach is that it can be expanded and contracted with the vacillation of the degree of US interest in the country's development in a way that will do the least harm to that country and to relations between it and the U.S.

[L.C.]

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- To the peasants' desire for seed, land and water, the agricultural service has too often responded by offering insecticides, sprayers, fertilizers and a school for training tractor mechanics. These innovations, while potentially valuable, are not adapted to the level of agricultural techniques practiced in most of Bolivia. The agricultural extension service has suffered from being too close a copy of the US Extension service.

7. Many of the aid programs never reach the peasants because their staffs have little contact with or knowledge of the villages.

## Specific Proposals

1. Production in manufacturing and agriculture must be expanded; however, this must be accompanied by even larger advances in energy production and transport, two areas which are essential to economic development.

## U.S. Administration - Policy

2. The US must reorganize and improve its administrative procedures and provide better supervision of aid-supported activities.

3. US policies must become flexible enough to reconcile the requirements of economic stability and moderate government in a revolutionary situation. This will require finding means of easing austerity programs without plunging into inflation.

4. The US must dramatize its friendly purpose to the peasants, who, having emerged from 400 years of serfdom, now hold Bolivia's future in their hands.

5. The US faces a dual interest in fostering a stable and moderate government and in strengthening a sound economy. Concern for the long and short run foreign policy economics, has created for the US policy the paradox of publicly supporting the moderates while making its aid conditional on economic measures that may prove their undoing.

## Emphasize Community Projects

6. More stress should be placed on the needs of specific communities or areas by making each project a focus of local activity.

[L]

Education for Latin America

General

1. If education is to be a social process, its struc-
ture and orientation must be determined by the aspirations
and the ideals of the people. White it conserves values
contributed by tradition, education is also an effective
instrument for promoting progress. Latin American education
must be progressive in the sense of an education for economic
and social development, capable of procuring ample produc-
tion not for the profit of a few but for greater social
benefit. The competent producer and the discriminating
consumer are essential objectives of education for people
in the process of development.

2. Education in Latin America must become a means to attain security and freedom, and to foster habits of cooperation in a free world. It must be compulsory and free, designed to give man an understanding of his environment and to train him for productive work. It should awaken community spirit, through which the pupil learns by cooperation with others that he is a member of a larger nucleus from which he receives benefits and to which he has obligations. It must also foster respect for the principles of coexistence, which is the law of the community.

3. To see the urban and the rural school as two different forms of education is false. The ends are the same: to form capable and productive citizens having a democratic spirit, respectful of the rights of others and defending their own rights.

4. Agrarian reform is the point of departure in an integral process of transformation, of economic and social growth. The land in the hands of the peasant who works it becomes a means of increasing income per capita, so that a redistribution of national income is possible. It is of no avail to place instruments of production in the hands of men who cannot use them effectively. With workers who are incompetent to produce, land reform can even mean that the national income may drop. Hence, agrarian reform must be supported by education for the peasant.

[lc]

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## Primary Education

A complete primary education would enable man to make even more headway in this changing world. Rural schools must become agencies for social change.

## Secondary Education

1. In almost all Latin American countries, secondary education embraces the traditional course preparatory to university studies, and studies leading to professions. The professional type, also called vocational, can be a final stage of study for adolescents; it enables them to enter a profession or trade in which they begin to work productively. This educational level, however, is decidedly backward in Latin America.

2. The traditional secondary school has suffered from an excessive intellectualism inherited from French and English schools, a survival which is dangerous to our economic and social development. Reform at this level of study is urgent, but extremely difficult, because for secondary teachers reform would necessitate a new learning process.

3. What is needed is a new understanding of education, within a new environment and with new tasks. It is a matter of applying what is called "democratic humanism," the tasks of which are defined below:

a. to educate man to the full extent of his physical and moral potentialities as a positive factor in the communities;

b. to equip him for the defense of a democratic system within which the essential civil and political rights of individuals are enforced and guaranteed; and

c. to equip him for productive work through techniques required for technical development in this period.

4. The extension of secondary-school opportunities to the majority of adolescents is not a luxury. The ideal would be to continue primary education in a unified school for five or six years, at the end of which the adolescent could enter productive life or higher technical education. This

[L.C.]

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implies a school with a minimum of eleven years of study,
entirely free, as in Venezuela and some other countries of
this continent. The educational structure would thus
eliminate discrimination and would put an end to the struggle
between primary and secondary schools. It would not merely
call for the reform of a cycle of studies, but would recog-
nize the whole educative process in a single school of eleven
years, where secondary education would appear as a natural
sequence in the process of moving from childhood to adoles-
escence.

5. Secondary education even more than primary must envisage the training and conditioning of the producer and consumer which increasing industrialization demands. With them comes an increasing democratization.

## Education of Adults

Statistics indicate adult illiteracy in Latin America of 40%, not including those who once learned to read and write and then forgot it, or those who can only scribble their name. In Venezuela, the Shoup Mission carried out an extensive investigation which revealed the poor production and low wages of the illiterate, intimating that education guarantees better means of subsistence.

Economic Development: The Lessons and Challenge

1. A more imaginative and effective strategy of economic aid must be developed. The basic problem is to use foreign assistance in a manner that will excite and enlist increasing local efforts. This assistance should be regarded as seed capital. As such, it should be directed into channels where it will support and encourage local investment and technical advance. Proper direction and use of economic aid are far more important than its sheer quantity -- a fact which we in the U.S. have been slow to learn.

2. More attention should be devoted to forward planning. A developing nation needs broad objectives and an omnibus plan for achieving them. It needs national policies which, within the framework of the free pricing system, will direct its scarce resources toward the attainment of those objectives. Out of a give-and-take process between business and government can come a development program that will produce sustained progress without sacrificing the freedom of individual choice.

3. Greater emphasis should be placed on private investment. There is much to be said for asking the developing countries to recognize the desirability of foreign private investment through their endorsement of some form of multilateral convention. Such a convention would state specifically that foreign investors were to be given the same rights as their domestic counterparts. A related suggestion, which has great merit, involves setting up a multilateral institution financed by both industrial and developing nations to provide guarantees for private foreign investment. These steps would represent a degree of maturity in the attitude of the developing countries which must be realized sooner or later if their own best interests are to be served.

[LC]

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# Prof. Frank Tannenbaum - Ten Keys to Latin America

## General

1. Without profound social and political reform, the egalitarian democracy we stand for is impossible. It is also unlikely that the Latin governments can carry forward the necessary changes. Therefore, **the U.S. ought to promote industrialization as best it can and let the changes occur as they may.** They will be intermittently peaceful and violent, but **our role will remain that of supporting the development of industrial growth, housing, education etc.,** without a **commitment to a particular political program and without asking for specific changes in government policy.** This would enable us to define our responsibility for social change as limited to helping governments meet their problems, even if they come to power by violence.

2. Presently we have committed ourselves to promoting social changes which would in effect destroy the present basis of government in Latin America. We are not deliberately bent on overthrowing the age-old ruling class in Latin America, but that is what agrarian reform and the other items of our policy really come to.

The gap between the rich and the poor in Latin America is so wide that it cannot be bridged in a hurry, except by violence and perhaps not then. To speak of this as a 10-year program is to speak of 10 years of convulsion or of a magic universe where miracles can be performed. Ultimately the gap can be closed by changes stimulated by industrial development. This would be mainly a peaceful process but also sporadically violent. It would ease the backward parts of Latin America into the present in gradual stages, as developing resources permitted. To attempt to hasten this process by our pushing reform as a condition of help toward development will either bring military dictatorship as a way to avoid social convulsions or produce violent outbreaks without necessarily accelerating the desired social change.

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3. The real question faced by the U.S. and other industrial nations is how to allow for the seemingly necessary revolutions among pre-industrial countries without unduly interrupting their development--that is without interrupting the flow of foreign investments needed for industrialization. Every revolution, among other things confiscates foreign property. This is due partly to nationalist self-identification and partly to Marxist belief in the essentially evil nature of "capitalism and imperialism".

4. The issue is grave enough to require some corrective measures in the interest of the pre-industrial areas themselves for confiscation not only slows down further investment and stimulates a flight of capital from areas where it is most needed but also disrupts and sometimes destroys the industrial plants already in existence and postpones the possibilities for increasing the standard of living of the people in whose name the revolution is made.

5. The fact that confiscation either postpones or retards the economic expansion a growing population requires is lost in the revolutionary excitement. Political measures need to be developed to sustain the objectives of social reform and protect the foreign investor at the same time.

U.S. insistence on prompt and adequate compensation for expropriated U.S. property* from the governments involved which it is neither able nor willing to pay, places the U.S. on record not only against confiscation of U.S. property but against the changes the government is proposing to bring about. We end up accused of being opposed to social change. We come out of the controversy poorer and with less prestige. Somehow confiscation must be stopped and we must not seem to stand in the path of the needed reform.

**SPECIFIC PROPOSAL:** To be adopted as a unilateral and later through treaty arrangement, as a multilateral policy.

1. The enunciation and immediate implementation of a policy

*Hickenlooper amendment to 1962 Foreign Aid Authorizations Act.

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[LC]

of placing a temporary repayment tax on all imports from the country or countries involved in confiscation. The funds thus derived would be used to pay for the confiscated property.

--In the case of Cuba, this would have included a tax on sugar, tobacco, citrus fruits, etc.

2. This tax would be imposed only until the confiscation had been paid for.

3. A joint commission with an impartial chairman would be charged with assessing the value of the properties seized.

4. This policy ought to be universally applicable, almost automatic in its operation. It would act as a kind of insurance for foreign investors. It would make possible the transfer of foreign-owned property to national hands without bitterness. The government undertaking the confiscation would have to accept the responsibility of living with a lower income from exports than its predecessors until confiscated property had been paid for.

It would facilitate confiscation but it would reduce its likelihood. Confiscation would lose its attractiveness and might well cease to appeal to revolutionary governments.

5. This new policy should be coupled with the announcement that the U.S. will support the governments in their efforts to improve social and economic conditions. Even while the compensation tax is imposed, the U.S. should encourage both private and public financial institutions to extend aid to the new government in its constructive programs. This support of the reform effort would include encouragement of private investment and other forms of aid if the new government should desire foreign capital and technical assistance.

6. With such a program the U.S. would place itself in a position of living with the convulsive nationalism and the social upheavals which characterize our time, without being charged with protecting the status quo or opposing changes it cannot control. We would no longer have to insist upon immediate payment as a condition of friendly relations nor would we have to adopt punitive measures.

"Yankeephobia: the U.S. and Latin America" Current History (January 1962)

## General

1. Latin American policy has been characterized by an ambiguity strikingly illustrated by its attitude towards Castro's Cuba. This ambiguity has its main source in the incompleteness of the American policy revolution of 1947 which has left us an unresolved antithesis between the new "globalism" and the older American regionalism.

2. The effect of the Alliance for Progress has been blunted in Latin America and doubts about the true intent of the Kennedy administration have been raised everywhere by the U.S. involvement in the Bay of Pigs invasion.

## Specific

### Economic

1. Although the success of the Alliance for Progress is doubtful because it rests on assumptions of very questionable validity, including assumptions that such aid will make friends for us and that it will stimulate a healthy economic development, it nevertheless should continue because the U.S. is certain to fail if it isn't.

### Military

2. While a reduction of Latin American armed forces and their budgets is desirable, the U.S. ought not to encourage total disarmament there; it must not become the policeman of the Western Hemisphere. (no further explanation)

3. The U.S. will probably have to provide some military aid. This should be granted or withheld and otherwise tailored to fit the situation in each of the highly diversified countries of Latin America. N.B. Whitaker does not give any further details on how this would be done.

[L.C.]

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## Unilateral Action against Castro

4. Such action would be a blunder. It is not justified either by the present threat from Cuba or by the present prospects of the Castro regime, which, I am confident, will either shed its Communist affiliations or disappear. There is no reason to assume that we must either blast Castro out now or else tamely submit to the permanent presence of a Communist power on our doorstep.

5. Armed intervention by the U.S. in Cuba under present circumstances would wreck the OAS, poison our relations with the rest of Latin America and destroy the credibility of our chosen roles in world affairs as a champion of law, order and the sanctity of treaties.

## "Communist Infiltration of Latin America" The Annals
(July 1960)

### Proposals

1. Possible use of Anti-Communist Declarations of Caracas (1954) which would lead the way to multilateral enforcement measures ranging from diplomatic sanctions through economic sanctions to the use of armed force as provided by the Rio Treaty. However this solution is not feasible now, since it requires a 2/3 vote of the American states which the U.S. could not secure in the present state of Latin American opinion.

2. For the long run, the best way to combat Communist infiltration is for the U.S. to help those Latin elements that are working for political democracy along with economic development and social reform. Such a course is good not only for its positive merits but also it is the kind of course that we ought to follow even if there were no Communists for us to combat.

[2c]

BIBLIOGRAPHY

1. Alexander, Robert (on suggested list)

Struggle for Democracy in Latin America (1961) - written
for the layman

"New Directions: U.S. and Latin America" Current History
(February 1962) - no proposals

"Trade Policies in Latin America" Current History
(August 1962) - no proposals

Communism in Latin America (1957) - good but outdated

2. Allen, Robert Loring

Economic Policies Toward Less Developed Countries (1961) -
included in study

3. Berle, Adolf A., Jr. (on suggested list)

The Cold War in Latin America (1961) - included in study

Latin America: Diplomacy and Reality (1962) - included
in study

Tides of Crisis (1957) - included in study

"Communist Invasion of Latin America" Reporter (July 1960)
included in study

"Cuban Crisis" Foreign Affairs (October 1960) - out of
date and no proposals

"Our Role in Latin America" Reporter (November 23, 1961)

"Alliance for Progress: Address" Department of State
Bulletin (March 6, 1961) - no proposals

"Alliance for Progress vs. Communism" Department of
State Bulletin (May 22, 1961) - no proposals

"Economics and Social Progress for Expanding Trade in
the Americas" Department of State Bulletin
(May 29, 1961) - included in study

"Inter-American System and the Program for Economic and
Social Progress" Department of State Bulletin
(May 1, 1961) - no proposals

[LC]

4. Black, Eugene

*Tales of Two Continents* (1961) - no proposals

5. Draper, Theodore (on suggested list)

*Castro's Revolution* (1962) - This is the only book Draper has written on the subject and it is not good for the purposes of the study. It is a recount of the Cuban revolution with no proposals for future U.S. policy.

6. Gillin, John P.

*"Some Signposts for U.S. Policy"* *Social Change in Latin America Today* (1961) - included in the study

7. Haar, Charles

*"Latin America's Troubled Cities"* *Foreign Affairs* (April 1963) - included in the study

8. Hirschman, Albert

*The Strategy of Economic Development* (1960) - too technical

*Latin American Issues* (1961) - no proposals

*Journeys Toward Progress* (1963) - no proposals

9. Lieuwen, Edwin

*Arms and Politics in Latin America* (1960) - included in study

10. de Madriaga, Salvador

*Latin America: Between the Eagle and the Bear* (1962) - included in the study

11. Mikesell, Raymond

*Economic Policies Toward Less Developed Countries* (1961) - included in the study

*The Operation of the Alliance for Progress: the First Six Months* (1962) - included in the study

*Promoting U.S. Private Investment Abroad* (1957) - included in the study

Mikesell, Raymond (cont'd)

*Liberation of Inter-American Trade* (1957) - main proposals are for establishing free trade areas, which are presently under way

*"The Movement Toward Regional Trading Groups in Latin America"* *Latin American Issues* (1961). A history of the movement - no proposals

12. Patch, Richard (on suggested list)

*"Bolivia and U.S. Assistance"* *Social Change in Latin America Today* (1961) - As far as I know this is his only published work.

13. Perkins, Dexter

*The U.S. and Latin America* (1961) - The book is an historical account of Latin America and the Monroe Doctrine.

14. Prieto, Luis

*Education for Latin America* (1963) - included in study

15. Rockefeller, David

*Economic Development: The Lesson and the Challenge* (1963) included in the study

16. Tannenbaum, Frank (on suggested list)

*Ten Keys to Latin America* (1962) - included in study

(his other books are all dated)

*"U.S. and Latin America"* *Political Science Quarterly* (June 1961) - incorporated as chapter in above book

*"Our Political Stability"* *PSQ* (June 1961) - incorporated as chapter in above book

*"Castro and Social Change"* *PSQ* (June 1961) - incorporated as chapter in above book

*"Political Dilemma in Latin America"* *Foreign Affairs* (April 1960) - incorporated as chapter in above book

17. Teichert, Pedro

*Economic Policy Revolution and Industrialization in Latin America* (1959) - too technical

18. Whitaker, Arthur (on suggested list)

*Nationalism in Latin America* (1962) - essentially the same as the paper he wrote for us.

*The U.S. and South America, the northern republics* (1940) out-dated

*The Western Hemisphere Idea: its rise and decline* (1954) out-dated

*Development of American Regionalism: the OAS* (1951) out-dated

*"Yankeephobia: the U.S. and Latin America"* *Current History* (January 1962) - included in study

*"Communist Infiltration of Latin America"* *The Annals* (July 1960) - included in study