434. Telegram From the Department of State to the Embassy in Peru1
243. Ref: Embtel 377.2 Joint State-AID message. During course of two-and-a-half-day visit here September 25-27, Foreign Minister Schwalb accompanied by Ambassador Berckemeyer and Embassy officers, had informal discussions with Moscoso of AID, Linder of Eximbank and Martin of Department and respective staffs, and with heads of IDB, IBRD, IFC and IMF.
In conversations with US officials Schwalb gave general outline Belaunde Government’s reform and development program, budgetary problems and legislative problems. Expressed desire for cordial and fruitful cooperation with US and international assistance agencies. Told Moscoso and Linder that due need for increased revenues to meet present budget deficit and reluctance incur additional opposition by general tax increase, Government relying primarily on foreign lending to finance new development programs.
Moscoso and Linder described loans approved since Belaúnde inauguration and status of those pending, and Schwalb was duly impressed with cooperative attitude he encountered and rapid progress. See Deptel 2273 re Linder’s discussion Eximbank loans.
Moscoso suggested, in interests avoiding providing ammunition to US critics of foreign assistance, that Schwalb attempt in scheduled press conference to correct impression New York Times article highlighting his criticism of Alliance red tape in UN speech.4 (This Schwalb did try to do by pointing out in press conference that his speech as whole was very friendly to Alliance and that criticism was intended as constructive.)
When Schwalb described problems of financing Agrarian Reform, Moscoso suggested GOP look into method adopted in Colombia, where in certain cases land owners pay for improvements provided them by Govt (roads, irrigation, etc., which can be financed by foreign lending institutions) by giving up a part of land holdings to Government for redistribution.
[Page 891]Schwalb discussed with Moscoso and staff at some length prospective investment guaranty agreement. Agreed wholeheartedly in principle on value of such agreement in attracting foreign capital investment but emphasized public relations, congressional and juridical problem for GOP in provisions pertaining to international arbitration and USG assumption of investors’ rights, which he recognized were clauses not likely to come up in practice but nevertheless likely to arouse opposition, especially in view public and congressional sentiment on La Brea y Parinas Arbitral Award. Moscoso and staff explained that 80 countries including 10 LA’s had signed agreements with such clauses. In answer Schwalb inquiry about more limited agreements with Colombia and Venezuela, Moscoso explained that former was simply interim agreement pending final action on complete agreement and that latter was due special circumstances. Schwalb was given suggested text contained AIDTO 137,5 with indication we felt Pastor draft fell short of our requirements largely due omission forementioned controversial clauses. Schwalb promised to study matter further, including possibility resubmission to Consultative Commission on Foreign Relations.
Conversations with Martin and staff followed general lines memorandum of September 27 airpouched to you same date,6 i.e. with Martin raising following topics: (1) Communism in labor and related political problems as well as Communism among students; (2) International Petroleum Company; (3) IT& T; (4) Discriminatory shipping measures; (5) Agrarian Reform and land invasions, but without discussion specific case of Cerro Crop; (6) COAS chairmanship; (7) Puerto Maldonaldo incident; as well as (8) advisability of further consultations re possible MFM. Fisheries problem and Dominican situation did not arise.
Schwalb gave assurances Government did not favor Communism in organized labor, nor did it favor Aprista-dominated CTP, but rather took position that organized labor and student organizations should be non-political; criticized general strike called by CTP; believed Apristas would support Government reform measures in Congress.
Schwalb was optimistic satisfactory solution to IPC problem could be found, although was not up to date on latest developments. Nor did he have latest information on IT&T and shipping problems. Understood US position on all three questions and stated he would look into them upon his return.
Schwalb was also confident that differences over Agrarian Reform Bill would be ironed out in Congress and that, while doubtless would be dissatisfaction among Odriistas and many landowners, he felt Apristas were in general agreement. Stated problem of land invasions created [Page 892] dilemma for Government, which naturally opposed to illegal invasions but wished to avoid violence, which might then be used by opponents of Government’s program to defeat it. Government therefore relying on suasion pending passage Agrarian Reform Law.
Schwalb grateful our desire to back Lavalle6 for COAS chairmanship, but stated question of Lavalle’s retention had not yet been decided by Belaunde. Schwalb had not yet succeeded in getting to Belaunde on this subject, but would do so on his return. He reiterated interest in making information of Puerto Maldonaldo incident available to COAS. He agreed with Martin that question of holding MFM required further informal consultation among OAS members.
- Source: Department of State, Central Files, POL 7 PERU. Confidential; Priority. Drafted by Poole; cleared by Belcher, Allen of ARA/RPA, Moscoso, Lucas of AID/LA, Withereld of AID/LA/WC, and the Export-Import Bank; and approved by Belcher.↩
- Dated September 30. (Ibid.)↩
- Dated September 27. (Ibid., FN 11-1 PERU/XMB)↩
- Reference is to an article of September 25, which described Schwalb’s speech at the United Nations General Assembly the previous day in which he criticized the “excessive red tape” he felt hindered the work of the Alliance for Progress.↩
- Not found.↩
- Juan Bautista de Lavalle, Peruvian Ambassador to the OAS.↩
- Juan Bautista de Lavalle, Peruvian Ambassador to the OAS.↩