88. Memorandum of a Conversation, Department of State, Washington, May 11, 19561
SUBJECT
- FY 1958 MSP
PARTICIPANTS
- Mr. Holland, Assistant Secretary of State
- Mr. Ohly, ICA
- Mr. Atwood, ICA
- Mr. Trigg, ICA
- Mr. Sandri, Defense
- Comdr. Kittredge, Defense
- Mr. Williams, AR
- Mr. Sayre, AR
Mr. Ohly of ICA described the purpose of the meeting as a preliminary exercise to review the basic assumptions underlying the Mutual Security Program in each region in order to meet the request from the Bureau of the Budget for an indication of the general level of appropriation needed for FY 1958. He then passed around a list of four questions.
1. To what degree and in what ways, if at all, should the Mutual Security Program in Latin America be reoriented or otherwise amended in FY 1958 to counter anticipated Soviet activities in Latin America and elsewhere?
Mr. Holland remarked that the Soviets were angling for diplomatic and trade relations in Latin America but were not likely to engage in any substantial technical assistance programs in this area. Mr. Holland expressed the view that the training program and exchange of persons should be doubled to meet the Soviet challenge. However, he saw no reason to reorient or amend the MSP in Latin America in FY 1958 in other respects.
It was pointed out that I.F.C. would probably be in operation within a few months. This, the existing policies with regard to Export-Import Bank loans and grant aid in cases of emergencies should be sufficient and no changes are necessary in our development assistance criteria in this area.
2. Should the FY 1958 Mutual Defense Assistance Program in Latin America be planned on the same assumptions and criteria with regard to support of Latin American military forces as now apply?
[Page 388]Mr. Holland felt that there was no need to broaden the criteria for grant military assistance.
Commander Kittredge expressed the view that there was a need for more flexible credit terms and a more flexible sales program to meet the Soviet challenge. Mr. Holland agreed that possible offers of Soviet arms within the hemisphere would create problems but he felt that we could meet this problem if we carried out existing programs in an effective manner.
In response to a question by Mr. Ohly, Mr. Holland stated that to implement effectively our policy regarding sale of military equipment on credit we should establish a revolving fund of $100 millions.
He thought that $100 millions was not an unreasonable amount considering that it would be spread out over 20 countries.
3. For purposes of FY 1958 planning, what conclusions or assumptions can be stated with respect to the following elements of the Latin American program?
- (a)
PL 480—Mr. Holland pointed up the problems which the large increase in available funds from this program would present in trying to see that the surplus agricultural disposals served U.S. policy, did not cause inflation or serve to promote an increase in government owned rather than private enterprises and finally did not disrupt normal supply channels.
Mr. Holland opposed any idea that the U.S. should appropriate dollars to facilitate the spending of the accumulated local currencies under PL 480. He did not want to see any new loaning agency set up in Latin America, and he opposed Mr. Atwood’s suggestion that ICA might need to undertake a program of dollar loans for development purposes which might arise out of PL 480 programs.
- (b)
1290–d and/or any versions of a “security fund”—The assumptions and criteria for the 1290–d programs were discussed. It was the general view that adequate provision should be made for the program but there appeared to be no reason to change the assumptions upon which this program is based.
Commander Kittredge referred to the problem of implementing this program under existing legislation. Mr. Holland questioned the advisability of attempting to implement the program for Bolivia under Section 401 of the Mutual Security Act, as amended, because of the adverse affect such action would have on our relations with Argentina. Commander Kittredge suggested that the program might be carried out under the legal authority for the MDA Program if that authority could be broadened to cover internal security. Mr. Holland agreed that some basis should be found to permit the United States to provide military assistance for internal security [Page 389] where the situation demanded that we do so, but as he had stated in commenting on question 2, he did not believe that we should adopt internal security as a general criteria for the MDA grant program. (Mr. Ohly observed after the meeting that the legislative history of Section 105 (b) (4), which is the basis for the grant military program in Latin America, would appear to rule out carrying out internal security programs under that provision of law.)
- (c)
- Atoms for peace—Mr. Holland felt that a generous allowance should be made to implement this program in those countries in Latin America with which we have agreements.
4. Would not the continuation in Bolivia, Guatemala, and possibly Haiti of Development Assistance Programs which in fact implement these countries own long-range economic development plans tend to undermine current policy criteria limiting Development Assistance in Latin America to temporary political or economic emergencies directly affecting U.S. security interests?
Mr. Holland said that they would, if continued indefinitely, but we planned on terminating this kind of aid to Haiti this year and to Guatemala after the next fiscal year. He hoped to eliminate it in the case of Bolivia as soon as it was possible to cut this country loose. Our policy in Latin America in this regard he felt should continue to be the granting of economic aid only in cases of temporary emergencies which the other country could not meet with its own resources.
Mr. Ohly asked about a possible technical cooperation program in the Argentine. Mr. Holland said he foresees one by FY 1958.
- Source: Department of State, Central Files, 720.5–MSP/5–1156. Secret. Drafted by Williams on May 14 and revised by Sayre on May 17.↩