ARGENTARIA
S.A.de Finanzas

DIREC. TELEG. "ARGENTARIA"

TELEFONO 33 AVENIDA 8213

AVENIDA R. SAENZ PEÑA 567
BUENOS AIRES

January 10, 1958.

Dr. Henry A. Kissinger
Associate Director
International Studies Center
Harvard University
CAMBRIDGE 38, Mass.

Dear Henry:

A note to congratulate you upon the recent publication of the Rockefeller Brothers study. Until now I have only had the opportunity of reading the excerpts published in the New York Times on January 6, but I am eagerly awaiting the complete text which is being sent to me.

Without being disrespectful to the members of the panel, I would say that the summary indicates that one Dr. Kissinger was at least able to convince the majority of the members of the efficacy of his views. From this distance one must, unfortunately, rely to a very great extent upon instinct as to the course of events in official Washington. In recent weeks the definite impression has been left that the Administration is wallowing in a morass of indecision which would not be too catastrophic; were it not for the fact that, in addition, one gets the impression that serious and adequate analysis of our international position has not penetrated to the Halls of the Mighty. Your study is a refreshing change. The word 'freshing' in conjunction with the contents of your report is certainly slightly incongruous, since the substance of the report is hardly cause for rejoicing. The moment he to come, however, when your obviously correct analysis must prevail in our security thinking.

I also want to take this opportunity to congratulate you rather belatedly on your book "NUCLEAR WEAPONS AND UNITED STATES FOREIGN POLICY" which in my judgment is the most important publication in this field in this generation. I have done my best to disseminate both the book and its ideas here in Argentina. Although it is a little difficult to imagine that this will sway world events, it is always helpful, I think, to have people of substance

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in all countries in a position to properly analyse the sit-
tuation of the free world. Looking back on what I have been
doing in the past several years, my greatest regret is that
I fell by the wayside in attempting to help you in a very
small way. I must say that one of the real rays of hope
for someone who has an amateurish interest in international
affairs is the fact that you will continue to work in this
field and I am sure will more and more influence the policy-
makers in Washington. If I could be convinced that they
would follow your advice life would be a good deal more
pleasant.

I have been in Argentina for about five months
directing the operations of the Deltec Corporation in this
country. We are attempting, as we have done in Brazil, to
develop a private capital market by underwriting and distri-
buting to the small investor throughout the country the
securities of local corporations. Everyone here had told us
that this was impossible, but fortunately enough, we have
been able to prove them wrong. This work not only results
in profit for Deltec but, I believe, performs a very real
service to the Nation and to the principle of private enter-
prise. Placing securities of private enterprises in the
hands of the masses of the people will, I believe, tend to
strengthen the concept of free enterprise and will also tend
to strengthen the political Center, which today, I believe,
is extremely important in the over-all international picture.

I hope that some time this spring I will return
to New York and I certainly would very much like the oppor-
tunity of being able to chat with you.

Again congratulations and, for the good of all
of us, please keep up the good work.

JEN/ih

Reconquista 134
Buenos Aires
Argentina

August 8, 1961

Mr. Henry A. Kissinger
Center for International Studies
Harvard University
Cambridge, Mass.

Dear Henry:

It has certainly been a long time since I have had an
opportunity to see you, but I have observed with great pleasure from
a distance the wonderful progress you have been making. Indeed, it
is one of the few consoling factors in the present situation in Washington
to know that you are playing some role in the development of policy.

Your book *The Necessity for Choice* was excellent and I particularly enjoyed the last several chapters.

I am taking the liberty of sending you copies of a series
of letters I have had occasion to write recently, concerning the United
States policy, particularly as it relates to Latin America. I am also
enclosing a monograph which I have written on general political subjects.
I would be very interested to obtain your reaction to this and to ask whe-
ther you think it worth while to try to hammer out a brief article ex-
pressing these ideas. Obviously I am not seeking an expression of agree-
ment from you with reference to the views expressed, but merely an in-
dication as to whether you feel these views might be usefully expressed
in order to stimulate discussion.

I hope to be in New York the end of this month and I am
wondering if there is any possibility that you will be there at that time
and where I could reach you.

My very best regards.

JEN:mr
Enc.

Enc.
JEN:mr.

My very best regards.

and where I could reach you,

wondering if there is any possibility that you will be there at that time
I hope to be in New York the end of this month and I am

in order to estimate discussion
discussion as to whether you feel these views might be usefully expressed
ment from you with reference to the views expressed, but merely an im-
breathing these ideas. Obviously I am not seeking an expression of agree-
ther you think it worth while to try to hammer out a brief article ex-
I would be very interested to obtain your reaction to this and to ask whe-
enclosing a monograph which I have written on general political subjects.
States policy, particularly as it relates to Latin America. I am also
of letters I have had occasion to write recently, concerning the United
I am taking the liberty of sending you copies of a series

Your book The Necessity for Choice was excellent and

to know that you are playing some role in the development of policy.
is one of the few controlling factors in the present situation in Washington
a distance the wonderful progress you have been making. Indeed, it
opportunity to see you, but I have observed with great pleasure from
It has certainly been a long time since I have had an

Dear Henry:

Cambridge, Mass.
Harvard University
Center for International Studies
Mr. Henry V. Klaarner

Argentins
Buenos Aires
Recondo/mats 134

August 3, 1961

August 7, 1961

Hon. Stanley Surrey
Assistant Secretary of the Treasury
Treasury Department
Washington 25, D. C.

Dear Professor Surrey:

You may recall that several months ago I stopped
in to see you at the Department and had an opportunity to discuss with you
the efforts that our group was making to popularize the concept of modern
capitalism in Latin America.

We believe firmly that the only feasible alternative
for achieving a substantial rise in the standard of living of Latin America
within a framework of freedom is to achieve the expansion of the concept
of modern capitalism as developed in the United States. Unlike possibly
other areas of the world, in Latin America we are fortunate to find the
framework of a large productive plant which could be expanded. Unfor-
tunately, in many areas this productive plant is in very few hands. We
face the dilemma that the vehicle available for a quick increase in pro-
duction and distribution, the private capital framework, often represents
a stale and brittle group whose power should not be increased if it is to be
administered as it has been.

In my judgment, one of the great successes of Amer-
ican capitalism has been the democratization it has undergone in our ge-
neration. This has occurred largely by encouraging everyone to be a part
owner of the fruits of the system through stockholdings. It is this evolution
which offers an important possibility to achieve a two-fold aim in Latin A-
merica: to increase production of goods and services, and broaden the base
of the beneficiaries of the private property system.

The United States corporation however when it goes
abroad, seems to leave all of its hard learned lessons behind. It does not
practice abroad those principles which have earned it its right to survive
and prosper at home. This is proving a bad example indeed to the Latin A-
merican capitalist and is earning for American capital the enmity of pro-
gressive groups everywhere. There are very few United States corporations
who have permitted the ownership of their local foreign subsidiaries to be
offered to the general public in the country where it works. This must be an
important first step in any program designed to popularize the concept of
capitalism.

I had indicated to you that many financial groups, in-
cluding our own (The Deltec Corporation) and IBEC, had been working ac-
tively, with the support of many Latin American governments, to convince

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the United States corporations of the necessity for this step. We have been sin-
gularly unsuccessful in this effort. These corporations resist the step primarily
because of supposed inconveniences in having strange minority groups as partners
who might have demands not consistent with overall corporate policy. Often the
argument is used that the local people can buy the parent company stock on the
New York Stock Exchange. The local management is opposed because it would
then have to undergo all the problems of dealing with a truly representative board
of directors composed of local citizens. I do not think it necessary for me to re-
fute these arguments to you, except to say that it is rather incredible to insist
that a foreign government protect the "free enterprise" system when our capital's
interpretation of that system denies the fruits of the system to the local inhabitants.
In 1961 it is not enough that our corporations establish employee social clubs or
medical plans, people want to know they have an ownership stake in what happens
in their countries. What the parent corporation does in Australia or Egypt does
not interest the local inhabitant and furthermore most do not even know what the
New York Stock Exchange is.

From experience, I can state that in every important Latin American
country there exists a substantial interest in investing savings in securities. The
private capital markets here are constantly developing and primarily amongst the
small and medium sized investors. This is a trend that must be encouraged, for as
people become participants in the fruits of the free enterprise system they will
defend it and as they assert their rights of ownership, that system will tend to
evolve in a sane and responsible fashion.

Is it not possible for the United States Government to play a role in
stimulating this development? I do not presume to know all of the possible means
by which this could be accomplished through special tax or credit treatment for
those corporations who offer the securities of their foreign subsidiaries to the lo-
cal public, but I would assume that once the principle is accepted, a way can be
found. The proposed tax bill provides for the elimination of tax deferral for sub-
sidiaries of corporations operating in industrialized countries. This deferral could
be maintained for those corporations who satisfied the Secretary of the Treasury
that at least thirty per cent of its securities had been offered to the general public
in the country where it operated. While Latin America is not presently considered
to fall under this area, I think it clear that most corporations would tend to protect
their future. Obviously, regulations would have to be developed to avoid an arti-
ficial "distribution", but in my judgment this could be done.

Certainly United States loans, through the Export-Import Bank or
otherwise, could be conditioned on the distribution of stock locally. Otherwise,
we are contributing to the destruction of the very system we are trying to defend.
These same conditions could be applied to indigenous corporations as well. If
we are pressing for agrarian reform on one side, we must not forget industrial
reform on which, frankly, I think we are on sounder ground. The United States
representatives on the Board of the International Finance Corporation, the Inter-
American Bank, etc. could certainly press this view.

If we cannot make the local capitalism in Latin America evolve, the
only alternative for increased production and distribution is the state. If we reach

that point our effort will have failed. It seems to me that our government should stress the necessary development of an appropriate environment for the modern capitalist system. The private capital market of our country is the most effective answer yet devised to the communists and we should do all that is possible to obtain its acceptance elsewhere. Missions to study agrarian reform may be necessary, but why not missions to study reform of the framework of the local capital market? Is there any more unique asset that America has than a democratic base for its capitalism?

Please do not think that I am writing these views as an interested party. My real interest is that of an American citizen gravely concerned about the future of my country. At home we have, with imagination and dynamism, developed a sound free enterprise system. All I ask is the application of the same system in our corporate dealings abroad. If American business does not see this necessity, the national interest requires that pressure be brought on it to see the light.

JEN:mr

We are fortunate I think in that in most countries of Latin America we have created the means whereby those of value may rise to authority, for we could not pretend to perpetuate a system of heredity in any sense. Our democratic systems while faulty, do function and with a new burst of vitality will provide the necessary vehicle for the future.

Do not believe for one minute that the basic appeal of communism is "something for nothing". It is the appeal of a doctrine that has proved itself to be "modern" and at the same time is tough, hard and demanding. It is also the appeal of a theory of History and truth which eliminates doubt and which has the flexibility provided by the interpretative function of the Communist Party. We cannot fight this by offering more of the good things of life to the masses. They want those, but they want much more and the issue of our times is whether we can give it to them.

It is interesting to quote here the Basuto proverb from which Mr. Robert Ruark got the title for his popular novel: "If a man does away with his traditional way of living and throws away his good customs, he had better first make certain that he has something of value to replace them".

Best regards,

Sincerely,

JEN:mr

Julie E. Nuflez

June 6, 1961.

Mr. Clarence J. Dauphinot, Jr.
Ritz Hotel
Paris, France

Confidential

Dear Clarence,

Last week I spent several days in Washington and although I did not see either of the Kennedy's, I did see enough people to get a feel of the way the policy makers are thinking about matters of importance to us. Unfortunately, Bob Kennedy was deeply occupied with the crisis in the South and the President on preparations for his European trip, but I did see Mr. Goodwin, without question the principal Presidential advisor on Latin America and Charley Bartlett, an intimate personal friend of the President and one of his closest advisors. I also spoke to the Assistant Secretary of the Treasury, Stanley Surrey, the Deputy Director of USIA, the Assistant Secretary of Labor and several of the directors of the Interamerican Development Bank.

I am afraid that I have returned from my trip considerably more concerned than when I went down there. I go back to Argentina with the firm conviction that if we are to survive in Latin America, it will be because of the joint efforts of those of us who live down there and understand the areas' problems and that we must rely for very little, except money, from the United States.

The purpose of this letter is to give you my personal appraisal of the situation as I saw it. Many of the policy-makers would probably deny that they have the views I attribute to them. Basically what I am doing is analysing the substance of their views and their meaning to our problems. In many cases, it is in just this application of views to problems that a complete lack of understanding results with our government officials. It is in the critical area of the application of the United States liberal concept, personified in Stevenson, Boulé, Schlesinger et al., to current problems in Latin America and elsewhere in the world that the gravest danger results. They develop concepts of ethics and morality which they believe to have universal application and which often disregard the mores of societies other than our own.

[L.C.]

In general, there is an amazing lack of organization in the government today. The lines of authority and of communication are thoroughly confused. All of the Eisenhower "staffs" have been dismantled, but nothing has replaced them, with the result that there is an informality in government which is incredible. Mr. Goodwin, for example, is an intelligent person who is technically an administrative assistant to the President. In fact, he is today the person in the government largely responsible for our Latin American policy. He is twenty-nine years old, speaks no Spanish or Portuguese and has no experience whatsoever in the area. He and Bartlett along with a rather large group of confidants have direct access to the President on matters of policy with the result that no one really knows who is responsible for what. Messrs. Schlesinger, Bundy, Rostov et al. float in and out of most national problems, conflicting with, superseding or by-passing the people legally responsible for policy. You can imagine the result.

The administration is extremely sensitive to criticism, for they feel they have had more than their share, and particularly from Latin Americans, for they feel that what is happening in Latin America is the fault of the Latins and not of U. S. policy. For your guidance, one cannot go to Washington and hope to discuss the necessity for a new approach to our problems in the area, they are too snowed under for that, one must suggest something very specific on a narrow topic, otherwise it is hopeless.

Insofar as policy is concerned, I think we can summarize it by saying that the administration believes it is our basic task to "capture the revolution". They believe that in Latin America there is a relatively small group at the top which has been responsible for oppressing the masses and it is our job to deal directly with the poor and downtrodden and improve their lot. It is basically the New York Times and liberal press approach and I can add that this paper has a tremendous influence on the policy makers through Bartlett and Tad Szulc. They do not believe that we should get excited about Castro, rather we should accept the fact that our mistake in Cuba was in not "capturing" his revolution. Do not expect affirmative action from Cuba, for the administration has a serious gilt complex for having gotten mixed up in the invasion to begin with. The absurd prisoner exchange effort is a reflection of this complex.

I tried to stress that the conservative or traditional groups in Latin America were rapidly awakening and taking affirmative and positive steps to provide for a dynamic evolution of the economies of their countries. It seems to me that the only sensible policy for us is to try to help these people to do the job they have set out to do and to convince those who have not yet seen the light. I am afraid that in Washington there is a basic distrust of the so-called vested interests and of their ability to evolve. Survival in Latin America will come, I fear, at the sacrifice of what you and I believe is essential to a sound society, the free enterprise system as we know it. Mr. Bowles and company desire to deal with a new class, one closer to the "people" and totally disregard the inherent dangers of such a policy.

[LC]

One is discouraged to realize how much would have to be done to make these people see the light. It is like looking through a telescope the wrong way - it all looks so far away.

I gathered they intend to put great pressure on the Latin American countries to effect tax reforms, and agrarian reform. In what way is not clear and no specific policy seems to exist. An amorphous feeling that Latin America is responsible for its ills and has no right to criticize does exist, however. A new ambassador to Brazil will be named, Mr. Lincoln Gordon of the Harvard Business School, and probably a new Assistant Secretary of State for Latin America very soon. I had suggested Ellsworth Bunker for Brazil, but evidently he did not wish to go to Latin America. He is now being considered for the Assistant Secretaryship.

They are insisting on sending Stevenson on his mission to Latin America and the Times gives you an indication of the thinking in Washington. In a lead editorial it states "... Under Secretary Bowles spoke a good deal of sense, as usual, on Sunday when he said: "The biggest thing we should do is stop being obsessed with Mr. Castro and really move on to the big questions that involve us all". He listed these as 'poverty and injustice and the insecurity of people who just feel there is not much to live for'. When Mr. Stevenson came back from his trip to Latin America last year he said: 'If the free way of life does not help the many poor of this world, it will never save the few rich'." I am also enclosing a copy of an editorial in the Washington Post which is interesting.

Obviously, we could make the same statements, but with a much different meaning. These people really pretend to disregard those basically conservative and traditional groups who are aware of their responsibilities and obligations and to deal directly with the so-called mass. Do not misinterpret what I am saying, please. I firmly believe we must better the lot of the majority of the people, but I am just as firmly convinced that the only possible chance we have to accomplish this in freedom is to convince, cajole and lead the established order into a proper evolution. The mass desires to be led and it will be, either by us or by the communists. We cannot pretend to convert the masses, in the context of today's events, into joint administrators of our destinies. They must be led and if we do not do it, our enemies will. Leadership cannot be considered immoral or unethical and must be exercised in a manner consistent with the mores of the society one is leading.

Our total lack of understanding of Latin thought is reflected in our government's reaction to the Castro tractors for prisoners offer. I can state categorically that the top people in our government are convinced that this is the propaganda coup of the year based on editorial comment in the Latin American countries. I frankly do not believe that the papers in Latin America are an accurate reflection of public opinion and that deep down in the hearts of the Latins this is another indication of our weakness and lack of purpose.

For the first time in its history the United States is giving appropriate importance to its relations with Latin America and to the analysis of the social and political trends in that area. It has evidently begun to apply a policy, which is every day becoming more defined. It is a bit early to analyze all of its ramifications, nor indeed to be absolutely sure of its definite outline, but it is extrmely important to discuss it critically at this point for it is a policy which may tend to accelerate the weakening of the established forces of order in the area and hasten the socialization of life in all Latin America.

It is being too narrow to state that this drastic and undesirable result may occur because of an ill conceived policy alone, because the development of such a policy is probably the result of an erroneous concept of the basic nature of the struggle between the Western world and communism. In essence, the United States sees in Latin America a large area where a very small percentage of the population has the vast preponderance of the wealth and has established a firm control of the political institutions which, although they have the trappings of an Anglo Saxon democracy, do not function as such. The United States sees below this small, oppressive oligarchy a large surging mass which is demanding the fruits of a modern economy and which is being offered by communism a quick solution to this desire for material betterment.

The representatives of the present administration in Washington appear to believe that the primary urgency is to show this mass that Western democracy can give material comfort more rapidly and efficiently than communism. They further appear to believe that the present leadership cadre of Latin America which they believe is synonymous in general with the small oligarchy can not be relied upon to provide the vehicle for this development. We hear glowing phrases such as "new men" and "new forces" and the insistence that United States aid must be channeled in such a way as not to make the poor poorer and the rich richer. The forces of order and tradition in Latin America are looked upon with suspicion and on the whole are avoided in preference to dealing with the "state" which magically enough is purported to represent an impartial arbiter of conflicting social economic and political interests.

The critical examination of such a policy cannot be made without analyzing the basic flaws of Western society today. It cannot be questioned that the political and economic leadership of the free world today is in the hands of the United States. Unfortunately the United States has confused this leadership with a false ideological nationalism which will not only tend to make its policy abroad impossible, but which will deny its own society the social and ideological enrichment interaction with other societies should bring to it. The United States has seemed to conclude that the Anglo-Saxon heritage is the only valid expression of the Western Christian tradition and is seeking to gain the acceptance of this heritage in areas where it is not wholly applicable. In addition it has largely ceased the evolution of a dynamic and positive doctrine of its own which would be capable of supplying the inspiration that the next few years will require and has warped the true meaning of its own consensus.

The United States has developed over the past one hundred and fifty years a basically homogeneous society united under a flexible but unbroken tie with its past. The Constitution has provided an ever developing common base upon which a productive and dynamic society has prospered and gained spiritual fort and peace. America's free institutions have had the flexibility that a human society requires if evolutionary continuity is to be maintained. Freedom became the political message of the modern western world as a natural evolution of the classical Christian tradition and its foundation is human dignity and the acknowledgment of the common obligation to unite to protect in every way the collective good. The history of the United States is clearly marked by a remarkable unity of concept as to what the collective good represented, as to what the essential common base of its united society must be.

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This is not the appropriate place to explore in detail what vigor the American consensus contains at the present time, nor to determine the degree to which this consensus is acknowledged by the leadership group in the United States today. In passing it is important to indicate the possibility that the current development of our society has ripped us away from the solid anchor of our ideals which in our past provided the inspiration for our dynamism. Have we not permitted our strength in the struggle against communism to be taken from us by too much doubt and not enough affirmation? The American proposition must not permit itself to become negative. While it permits dissent, its basic task is the continuing development of its traditional institutions and maintaining a positive national unity to achieve this.

In Latin America most countries have two parallel societies, one living in the twentieth century and another in the eighteenth century. The modern society in large measure represents the basically European, educated, traditional society which has guided the political destiny of these nations for almost 150 years. This political destiny in most countries of Latin America today is being lived within the framework of democratic institutions consistent with the developing Western Christian tradition. The eighteenth century society is basically an indigenous society linked rigidly to its own aborigine traditions and living under conditions which in many places may be classified as terrifying. This society plays no real role in the democratic institutions of their nation. They do not understand them, and the necessary educative and evolutive process has not been pressed by the dominant groups in each country over the past century. This large group represents the tool of those who have mastered the techniques of Western democracy.

These masses today realize that their traditional societies, be they family or tribal, can no longer provide them with the basic necessities of the life they now see unfolding around them. These societies are disintegrating as the rural masses flow into the urban centers and come into contact with the material values of the modern world. These groups are therefore pressing to obtain the material benefits of our modern society.

It is here that the United States makes its terrible mistake. We have measured the conflict as one which can be won by proving to this mass that our capitalist society is capable of providing more of the material benefits of life than the communist society. We couple this with an insistence that the present social hierarchy in Latin America is unacceptable and that it is this mass which must somehow promptly assume command of the democratic institutions. We insist upon the leap of two hundred years in one political term of office in the United States.

There can be no question of the urgency of the moment but urgency should not convert itself to panic nor to a break with our own past and with the constantly evolving Western Christian idea. The unsatisfied masses demand not only material betterment, they demand a conscious awareness of being a part of a modern political and social doctrine. The indigenous mass has developed within rigid and demanding traditions, in its family and tribal life. These Indian societies were consistent with the hierarchical nature of all societies and demanded much in terms of tribute and sacrifice to the established authority.

It cannot be questioned that one of the great successes of the communist movement has been its ability to convince the dislocated indigenous masses

of the world that it couples modern material achievement, with a doctrine
that is tough, hard and demanding, and provides society with a flexible char-
ter of conduct in all spheres, but one which permits no doubt when interpre-
ted by the communist party hierarchy. The United States, on the other hand,
has attempted to convince of the merit of its proposition on the basis of a doc-
trine which appears soft and yielding. We speak of live and let live, of the
right to dissent, but we do not clearly spell out what the dissent is from nor
what the organization of our Western society requires. We concern oursel-
ves only with the benefits our society can give, but we do not speak of the
duties of the individual to that society. We do not mention how much we must
give of ourselves if freedom is to have any meaning.

This failure weakens drastically the appeal of our message. The masses
want and need a demanding society, they do not want softness but toughness.
Can we doubt that Western Christian society is the toughest and most daman-
ding yet developed? The disguise must be stripped off and we must enter
the arena openly as the firmest, hardest, most demanding political-economic
doctrine ever devised by man. The spelling out of this doctrine is the urgen-
cy of our times, and we must hope that too many of us have not been lulled to
believe that our doctrine is only a giver and not a taker.

The democratic system we are trying to promote in Latin America is a
rad distortion of our own heritage and one which will not give to the masses
the satisfaction and certainty in life which they require. Our system is not a
more supplier of material benefits, it is a system based upon sacrifice to the
common good and upon the practical development of a strong hierarchical so-
ciety based upon human dignity. These abstract phrases must be given a prac-
tical application if this analysis is to serve a useful purpose.

The societies of the Latin American countries must develop a truly Wes-
tern hierarchy. This must be based upon merit and upon a true respect for
the role of each level of society. Membership in the leadership cadre must
be available to all and it must acknowledge its principal obligations to the bo-
dy politic, recognizing the true value and necessity of the effort of those at
other levels of the hierarchy. This must be true in all endeavors, in the
state and in the modern corporation, which is the principal vehicle for eco-
nomic progress.

The established order in Latin America has undoubtedly failed in its
responsibilities. It has not, in many countries, even commenced the ne-
cessary process of education in the democratic practice so necessary to the
sound development of the system. It has further permitted the continued
existence of a backward society parallel to that of the modern society of
plenty.

One would be blind however not to recognize that in many countries
the established order is evidencing a willingness and a desire to evolve. It
must certainly be the purpose of United States policy to help that process of
evolution by assisting and guiding the established order to new progress.
The forces of production and distribution must be rapidly developed so that
the material benefits which are important to a free society will be quickly
available.

Our Western experience has shown that the state is the least efficient
and dynamic producer of material goods. Within the modern society which
has developed in Latin America there are imaginative, hard working and
effective producers who can drastically increase and improve their activity.
This must be the road of the economic policy of the United States.

It will be essential to develop the masses so that they can play an important role in modern society and so they can provide an ever increasing base to the leadership class of that society. In addition, the present leadership class must evolve and develop the separate society in which it has lived, and into the hierarchy of which the masses must be incorporated. If it is slow in doing this, United States policy must be designed to force it to achieve this.

In the economic sphere unquestionably the modern corporation provides a unique vehicle for the expression of the classical Western tradition. The corporate laws in general must clearly establish the responsibility of the management for the owners of the company, the stockholders. The corporate owners must be forced if necessary, at least certainly in those situations where the corporation owns a substantial percentage of the particular production involved, to sell the ownership of an important part of the corporation to the general public. A just system of appropriate controls must be developed to govern the relationship between corporations. It would be inappropriate here to spell this out in detail but suffice to say that as the modern corporation is the dynamic expression of contemporary economics, the masses must be educated to its workings and must obtain a stake in it.

The leadership class must first accept the representative nature of their position and the fact that their tenure as such may be transitory. Leadership is a quality that must be constantly proven. Christian leadership is humble by nature and is burdened by a clear acceptance of its responsibility. It must then be this class which develops the educative task of conveying to the mass the concept of the dignity of each strata of society. In so doing it must establish a hierarchical flexibility which clearly indicates to the mass its opportunity to occupy a place in the leadership class. A doctrine of rights and duties of each strata of society must be established. Labor has the right to strike, to organise, etc., but it must under most circumstances have the duty to work and to work well. The entrepreneur-stockholder has the right to receive the fruits of his investment but he has the duty to consider the necessities of society as a whole in measuring this return. While this may seem to indicate that the basic social contract is primitive in Latin America it is a fact that generally it has not been sufficiently spelled out either legislatively or in the mores of the society.

Any attempt on the part of the United States to by-pass or avoid the actual leadership cadre in Latin America will plunge the area into chaos and commotion. Our Western classical heritage can only achieve success and development by obtaining the evolution of present institutions. We are indeed fortunate that in almost every country in Latin America the political leadership is in strong and able hands and that in the economic sphere, the established order is awake-ning to its responsibility.

To deal directly with the mass is a practical impossibility and we cannot be duped into accepting the many prophets who are not empowered to speak on its behalf. We cannot turn the clock back, indeed we must move it forward and insist that the established order in each country which is knowledgeable of its own traditions, must provide the elements for a peaceful transition to the establishment of a vital Western Christian order. In the process we in the United States can enrich our own traditions and in restating our message to the world give it new meaning and strength. The heart of the classical tradition is warm but the courage, firmness and determination of our Western message are of stern stuff. It is this toughness which will attract and satisfy the emerging peoples of Latin America.

[LC]

DRAFT OF PROPOSED ORAL OR WRITTEN STATEMENT

AT LOS ANGELES FRANCISCO INTERNATIONAL INDUSTRIAL CONFERENCE

The free enterprise system is facing the greatest challenge in its history and the most urgent question of our times is whether it will have the courage, imagination and dynamism to meet it. The great population masses of the world are totally dissatisfied with their material lot and are pressing inexorably for a drastic improvement of their standard of living. The issue is not whether that standard of living shall be improved, it is whether it shall be improved in freedom or in totalitarian communism or socialism. Will this improvement be channelled and achieved by development and expansion of the present economic base of production and distribution or shall it be deemed necessary to achieve it through state action with all the totalitarian implications of such a step?

We should be under no illusions that the leader of the free world, the United States of America, shall refuse to take a step which would put the entire Western Christian democratic order in peril. There is a general political consensus in the West today that our only salvation will come if the standard of living of the masses can be raised drastically. The alternative of private enterprise for achieving this development is believed to be largely non-existent in the less developed areas, where the issue is pressing, and it is believed that the only possible solution is the state.

We submit that private enterprise has an opportunity and a challenge in one underdeveloped area to prove that this view is erroneous. This conference is composed of men whose lives have proven their ability to seize opportunities and to meet challenges. If we face this situation with the same impulse which started all of us, years ago, on the road to attendance at this conference the outcome is assured. Nothing more is asked, but nothing else is needed.

The only large underdeveloped, heavily populated, politically explosive area in the world which presents an ideal opportunity to prove the continued dynamism of our economic system is Latin America. In this area the framework of the private productive plant is large and its capacity for development enormous. Here, we find large private industrial enterprises and the will to develop and increase their activities. However, these private in-

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dustrial groups are largely ignored by the development planners and are to-
tally disorganized. Indeed, when one speaks of assistance for the area one
assumes a start from nothing.

It would seem an essential first step to make a Latin American
industrial and commercial inventory. The private productive plant of this area
must be catalogued and studied. What production actually exists, what private
corporations could increase production, what is the industrial capacity of the
area, these are the questions that must be answered. At the same time, a de-
tailed report must be made spelling out the reasonable economic aspirations
of the area. This latter has been repeatedly studied by sound international
agencies. Then we, represented here, must examine the productive plant and
its potential and measure it against the production needs. This must be done
with imagination in order to single out those cases where diversification and
expansion are possible. There will be some areas where no specific experience
of productive base for certain products will exist. In these cases, joint private
action from outside the area coupled with the general industrial know-how found
there can provide a solution.

This is an outline of the planning that we can do with the help of
private enterprise in Latin America. A great deal must also be done by pri-
vate enterprise itself in the area. There can be no effective presentation to
the economically advanced Western governments to channel aid to the private
enterprise of Latin America, if this group proves itself unwilling to accept mo-
dern capitalism. Our Western private enterprise system has survived and pros-
pered because the private corporation has assumed and met its responsibilities,
to its owners and to the community where it works.

First and foremost Latin American private enterprise must be
representatively owned. The savings of the community must be channelled to
investment in the private productive plant. Management must accept and rea-
lize its obligations to the stockholders. Governments, helped by private enter-
prise, must provide legal frameworks designed to protect the rights of the mi-
nority stockholders and investors in general in the same fashion that the indus-
trially advanced countries of the West have done. We are indeed fortunate that
in Latin America today, with one glaring exception, there are governments which
would respond to this type of initiative.

It has been the backwardness and short-sightedness of private
enterprise that very often has been responsible for the lack of progress in this
area. The private foreign corporation doing business in Latin America has been
a very poor ambassador for our system, for very few have shown by example

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how private enterprise became the cornerstone of Western progress. How many foreign subsidiaries of European and American corporations distribute their stock to the inhabitants of the country where they work? How many have representative local Boards of Directors? How many make a real effort to develop local industrial leadership? If the local private interests have failed, they have received precious little stimulation from us in Europe and the United States.

How does one get these things done as a practical matter? Would it not be possible to create a committee from those of us gathered here, with an adequate budget, to accomplish the fact finding involved in the inventory process. We mean a committee of men who are doers and not bureaucrats with no sense of urgency. The Latin American business interests represented here should form a working group to which would be added other important and representative local groups possibly not present here. We would urge that free, responsible labor should form a part of both of these groups. They are an essential part of private free enterprise and must be our partners in the task. This is not demagoguery, it is reality and we do an injustice to ourselves and to our system by avoiding it. This group would assist in the inventory work and in the even more difficult and important task of welding a practical investment program from an appraisal of the inventory measured against the reasonable aspirations of the area.

Once the inventory is prepared, compared to the needs and general agreement is reached at a private level as to the specific means of accomplishing the productive objectives, the approach to government must be made. In order to achieve any of this, of course, private enterprise in each country and area must show itself disciplined enough to propose joint action and act on the basis of joint decisions. It has not always proven itself able to do so in the past.

European and United States private enterprise must present this development program to its governments, for obviously public assistance is required. The Latin American governments must present the details of the manner of channelling this aid through private enterprise as part of a general economic development and control program. This type of solution will drastically increase production in the shortest possible time in freedom.

At this stage of requesting government support the effort must be coupled with an overall modification of procedure which business itself must accept. Possibly the quickest way could be to develop a uniform "capital markets and corporations" law which would be incorporated into a regional treaty subscribed by all members of the OAS. Does this sound visionary? If you

have stood by those giants of production that are our modern factories and
seen the ingenuity of our Western free enterprise, you will know what vision
can do and that it is possible to make division a reality,

But let there be no doubt, private enterprise cannot presume
to claim aid funds in any underdeveloped area if it is unwilling to apply the
lessons learned in Europe and the United States. The private corporation
is the most flexible vehicle ever devised for social progress and justice in
freedom. It must be used as such and not merely as a vehicle for maintaining
anonymous wealth which is unproductive. If we do not implement such a pro-
gram the state will step in the breach and freedom is doomed.

The task is enormous, the disappointments will be many, but
the rewards will be unprecedented. We are all here because we have proven
leadership; are we too spent, too self-satisfied to prove it again?

Enc.

JEN/IN

Best regards,

States.

I look forward to seeing you in late January when I am in the
stimulating and I do hope that you will find time to see him.

In spite of his youth, Grondons undoubtedly is the Walter
Lipbman of Argentins and his views have a very important impact on
government policy here. I think you will find him most interesting and
stimulating and I do hope that you will find time to see him.

Department.

a month's trip to the United States under the auspices of the State
Grondons who will be leaving Argentina the day after tomorrow for
I am enclosing a letter of introduction to Dr. Marismo

Dear Henry,

Cambridge, Mass.
6, Divinity Ave.
Center for International Affairs
Harvard University
Mr. Henry Klaasen

December 26, 1961.

CORDOBA
52 DE MAYO 195

BUENOS AIRES
RECONQUISTA 134

MENDOZA
AV. ESPADA 1548

TELEFONO: 33-8513 - DIREC. TELEF. ARGENTARIA - TELEX B.A. 381 ARGENTINO

S. A. DE FINANZAS

argentaria

[13]

July 16, 1962

Hon. John Lindsay
House of Representatives Office Building
Washington, D.C.

Dear John,

One thing is certain and that is that we stand on the brink of a major catastrophe in Latin America and one which will require all of our courage, imagination and intelligence to avoid. Sincerely, I cannot tell you that I am certain it is not too late nor that what I see here is something which should be an indication to all of us of grave danger at home as well.

The main thrust of our policy today is the Alliance for Progress which as yet has barely gotten off the ground. This so-called alliance has as its only reason for being the crusading quest to give more of the good things of life to the downtrodden poor of Latin America. Certainly no one can quarrel with such a laudable goal, but I challenge basically the means we are choosing to achieve it. If we sought to achieve this goal by stimulating the development of sound, responsible leadership in a society where talent and merit are permitted their proper place in its hierarchy, if we fashioned our policy to make it possible in these countries for its citizens to develop the best that is in them within the concept of hierarchy, then our policy would be aimed at establishing a society consistent with our free Western traditions.

The fact is that our policy is being interpreted, and it lends itself to this interpretation, as an attack on the present leadership element coupled with a hand-out to the underprivileged preferably by leftist government entities, while the communists are developing and catering to the new leadership elite coming up. Instead of a program designed to stimulate leadership, ours is a negative barrage against the existing order coupled with an acceptance of the idea that if the United States can be responsible for giving food, closing, etc. to the masses, security will be intact.

This policy can never succeed because we simply do not have the physical means to implement it. You must know that better than I. The existence of poverty on a large scale, where it does exist, has largely been the result of a breakdown of local leadership and upon a distorted application of modern capitalism. If we wish to stamp out poverty we must do it by working through the local leadership. We must stimulate it to action, inspire it to be responsible, prod it into accepting new blood and insist upon the organization of society in such a way that equality of opportunity is not a hollow phrase. We must give the talented outcasts the feeling that our society can accept their leadership. It may be too late for some of this, but we had better look at it closely and quickly.

C4J

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What we cannot permit is the continued impression that we oppose the concept of leadership or at best that we have no inspiring doctrine which can pave the way for new elements of leadership. Our policy holds out food and closing, but not the inspiration and hope that it must to those elements of the leadership groups in Latin America who are willing to evolve with responsibility. What is happening today is that we are strengthening the masses while the communists are developing the new leaders who will rule those healthy, U.S. fed millions. I firmly believe that well fed masses do not per se produce sound leadership, but that sound leadership, within the limits of national circumstances, will tend to produce well fed masses, both spiritually and materially.

We are not even at grips with the real attraction of communism in this area and I would venture to say, other under-developed areas. They tell the youth and the unrecognized talent that in their society they shall be on top and run the society. Our policy does not even establish a dialogue with this problem. We must convince these groups that our society recognizes the right of the able to lead and that, indeed, because of its true social justice, the able tend to achieve the peak of the hierarchy. Is that not our real message? The real guts of our democratic belief is that leadership can best be developed, achieved and maintained on the part of the largest number, by our type of society. Our democracy is a democracy of elite, but an elite open to all on the basis of equal opportunity. Once we establish this convincingly, the communist is only a weakling, unsure of his true value and seeking the aid of force to establish his leadership. Communism must be branded the doctrine of the coward and freedom the doctrine of the brave....

Best regards,