Foreign Relations of the United States, 1964–1968, Volume XXXI, South and Central America; Mexico

44. Memorandum From the President’s Special Assistant (Rostow) to President Johnson¹

Washington, February 10, 1967.

SUBJECT

• Your 6:00 p.m. Appointment with Secretary Rusk on OAS Summit Preparations

Secretary Rusk wishes to discuss what he should say about the Summit meeting at Buenos Aires in view of the wide inter-agency disagreement on what our part of the Summit deal should be.

The Summit Deal

We are asking the Latin Americans to:

• —take the plunge on economic integration;
• —modernize their agricultural and educational systems;
• —forego expensive military equipment.

These steps involve tough political decisions. What we are prepared to do to help is critical to their willingness to take the decisions. The success of the Summit hinges on this interplay.

Linc Gordon and Sol Linowitz have recommended this package as our part of the deal:

1. Express willingness to ask Congress for up to $300 million for Latin American integration adjustment assistance, to be contributed over a period of years and on a matching basis after the Latin American Common Market treaty is negotiated.

2. Approve asking Congress in this session for an authorization and appropriation in FY 1968 of $300 million for replenishment of the Inter-American Development Bank Fund for Special Operations, i.e., $50 million more than you have already approved for authorizing legislation for FY 1968.

3. Indicate an intention to ask Congress to increase our Alliance for Progress assistance for education and agriculture by $100 million in FY 1968 (it is already in the budget) and (an average of $200 million for the following four years, dependent on demonstrated need and adequate self help).

4. Consider modifying tying arrangements for our capital project loans (but not program loans) to permit hemisphere-wide procurement after the Latin Americans negotiate a Common Market Treaty. This would shift the tying from the present individual country basis to a regional basis. The balance of payments effects would not be appreciable.

A table on how the costs of this package would be spread out over the next five years is at Tab A.²

Views of Other Agencies

Treasury—Joe Fowler opposes Recommendations 1 and 4 of the package. I don’t believe he is sympathetic toward economic integration. He feels that if integration adjustment assistance is necessary, the Inter-American Bank should handle it, and by increasing our contribution (as per Recommendation 2) we would meet our responsibilities. On Recommendation 4, he agrees that the balance of payments effect will probably be small, but he fears adverse psychological effects on our balance of payments posture.

AID—Bill Gaud is strongly opposed to Recommendation 3. He fears that an increase of this dimension in the Alliance will most likely result in the Congress granting it at the expense of other areas.

BOB—Charlie Schultze prefers not to mention a specific amount for integration adjustment assistance in Recommendation 1. On paragraph 2, he favors seeking authorization only in this session, leaving the issue of whether to seek a supplemental appropriation this year or next January to be decided later.

My Views and Recommendation

Latin America stands at a crossroads. Over the next few years population increase, growing urban unemployment and agricultural backwardness could, at present rates of modest growth, lead to new social crises and political extremism. If the Latin American Presidents are willing to establish a Common Market and make a major effort to boost agriculture and improve education, the region during the 1970’s could attain a level of “take-off” for self-sustained growth which would promote social and political stability and dependence on US public financing.

The issue boils down to whether you wish to exploit this historic moment to get the Latin Americans to move boldly on integration, and thereby put your stamp on it, or whether you prefer to let nature take its course. The pressure of events can be expected to move the Latins gradually toward integration over the next 15–20 years. And we can take our chances on the present rate of growth under the Alliance keeping the hemisphere a step ahead of social and political troubles.

I favor the Gordon–Linowitz package because:

• —I believe you should take advantage of the historic moment.
• —If we make our part of the deal any less, I doubt whether the Latins will be willing to make the commitments we want.
• —The package is so structured that financial commitments on integration and the untying of aid will not come into play for another 18–24 months after the Latins have negotiated their Common Market Treaty.
• —The FY 1968 budget already provides for the $100 million for agriculture and education for the coming fiscal year. By the time FY 1969 rolls around, the Vietnam situation hopefully will not represent the current drain and permit a further modest increase in the Alliance for Progress assistance.³

Walt

1. Source: Johnson Library, National Security File, International Meetings and Travel File, Inter-American Summit Meeting, Vol. III. Secret. A notation on the memorandum indicates the President saw it.
2. Not attached, but the table is attached to another copy of this memorandum. (Ibid.)
3. According to the President’s Daily Diary the meeting on OAS summit preparations was evidently rescheduled for February 11 (Johnson Library); see Document 45.