116. Telegram 651 from San Salvador, April 131
Reference: Department telegram 379.
To assist directorate achieve its goals, which we believe in full accord our own policies and objectives in Latin America, it is essential for US and international lending agencies act promptly on principal requests for financial assistance as they are submitted. We are gratified that Department already helping in negotiations for Export-Import Bank loan airport improvement. After that there seems to be no other single project so advanced in planning and so worthy of immediate support as housing development on Ilopango road (G–99). Gonzalez who is moving force in that scheme is presently at IDB meeting Rio but said before leaving he could fly directly to Washington afterwards with engineers in order to present request for long term loan.
Besides direct financial support, we believe regime should be given our strong moral encouragement. Its program so far seems directed both to improving lot of masses of country and to developing nation’s economy. All this is in tune with principles alianza para el progreso. Directorate’s latest measure, exchange control, has incited wrath of some of rich families and also of merchants. Yet some control measure would seem necessary for a developing economy, which needs capital for its growth, Rivera and Portillo told me yesterday in private meeting it seemed only fair that capital formed by “sweat of Salvadoran workers” should be available for domestic [Facsimile Page 2] investment.
Considering that exchange controls, if properly administered, seem reasonable and considering that next few weeks may provide severe test of regime’s power survive against machinations of rich, I believe timely word of support from us may be helpful. Accordingly, I recommend that Department authorize me in course of general interview, which has been sought since my arrival by several newspapers, to express US Government’s gratification that directorate has already given substance to its clear determination improve standard living of people of country. I might also say that decision to institute exchange controls was of course taken by Salvadoran Government independently without consultation with us. I would add, if the Department concurs, that exchange controls if properly administered have often been found during critical periods in many other countries, great and small, to be a useful means of encouraging economic development by making a [Typeset Page 281] nation’s own capital available to promote its prosperity. In such an interview I would also quote again as I have already so often done in El Salvador, sentences from President Kennedy’s inaugural address e.g., “If a free society cannot help the many who are poor, it cannot save the few who are rich”. While this will not make me popular with our rich friends, I believe time may have come when we must use our influence in frank talk so that El Salvador can be saved from fate of Cuba which Department white paper so clearly states was brought on largely by indifference of previous regimes to “needs of the people for education, medical care, housing, social justice and economic opportunity”.
As a separate measure I believe we should privately and discreetly encourage government to seek outside assistance, possibly through Robert Nathan’s mission to bring here soonest a group of fiscal advisers to assist in reform of tax structure.
Meanwhile, we shall endeavor appropriately to make it clear to the rich that efforts to resist sound reform especially through threat to overthrow government will receive no sympathy from Washington.
- Need for direct financial support and moral encouragement for new regime. Secret. 2 pp. DOS, CF, 816.10/4–1361.↩