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

473. Memorandum of Conversation¹

Sec/MC/21

Rio de Janeiro, November 17, 1965, 15 p.m.

SUBJECT

• Relationship of International Petroleum Company and U.S. Loan Policy

PARTICIPANTS

• U.S.
  • The Secretary
  • Walt W. Rostow, Counselor, Dept. of State, and Chairman Policy Planning Council
  • Jack Hood Vaughn (Coordinator), Assistant Secretary of State for Inter-American Affairs
  • Neil A. Seidenman, OPR/LS, Reporting Officer
  • H. W. Baker, American Embassy Rio de Janeiro
• Peru
  • Jorge Vasquez Salas, Foreign Minister of Peru

The Secretary said that this was a problem that was making our lives very complex, and Presidents Kennedy and Johnson had made special efforts to move resources into Latin America and specifically into Peru in support of the Belaunde Government. However, legislation on foreign investments has been passed by the United States Congress.² Specifically, foreign assistance legislation has provisions limiting appropriation of funds for countries whose governments confiscate investments or property of American enterprises.³ The Secretary said he was not here to negotiate on the IPC problem and reiterated our commitment to support the prosperity and independence of Peru.

The Foreign Minister expressed his appreciation for the Secretary’s concern over this problem. “My government,” he said, “shares this concern.” This was a matter that has been the subject of serious, earnest, concentrated study by the Peruvian Government. He said the Peruvian Government has never expected and does not expect or intend to confiscate or seize any property or infringe on the rights of any individual or company within the territorial bounds of its country. Peru simply desires to be in a position where it can control and manage the natural wealth of the country. In the process of implementing the laws and regulations applicable to this area in Peru, he said, Peruvian authorities have no intention of subjecting any party to discrimination but rather adhere to the principle that non-national interests certainly should not be allowed to enjoy greater benefits than Peruvian nationals; that all should have equal status under the laws of the country. To proceed otherwise would be tantamount to going back to the practices of extraterritoriality. The Foreign Minister said he hoped the United States would realize a country must be in a position to dispose of its own wealth and resources, not with a view to punishing any one, but in a way that parties concerned will be justly compensated. Peru has undertaken a program of land distribution. To carry out this reform it is necessary to expropriate to progress toward an equitable redistribution of the national landed estate. However, Peru lacks adequate financial resources to pay for all of this property and must compensate former owners with long-term bonds which the GOP intends to make fully redeemable within the prescribed period. If it is legal to make compensation for expropriated property in the form of bonds, certainly this should be acceptable to foreign property owners as well. This is not a plan for confiscating property.

The Secretary said that he would like to have some time to review the Minister’s remarks and talk again while they are still here together. The Secretary said that perhaps it would be desirable to have further discussions between the governments, since previously there had only been contacts of the company involved with the Peruvian Government.

The Foreign Minister said he believed the problem was a matter of national jurisdiction, not subject to handling on a government-to-government basis. In the view of the GOP it would be a great mistake to transfer this problem to the realm of diplomacy which would simply mean repeating an historic error committed by Peru at a time when it allowed important property within its territory to remain under the ownership of British interests.

The Secretary stated that this was a decision to be made by the Peruvian Government; the Peruvian Government makes its decisions and the American Government makes its decisions, so these decisions should be balanced. The Secretary said we are only asking that due consideration be given to the factors involved in the hope that both parties can adjust their respective interests. On our side, the Secretary said, it is a matter of our being able to tell the American taxpayers what we are doing with their tax money and that it is worthwhile.

1. Source: National Archives and Records Administration, RG 59, Central Files 1964–66, PET 6 PERU. Confidential. Drafted by Neil A. Seidenman in LS and H. W. Baker, labor attaché at the Embassy in Brazil, on November 19 and approved in S on January 20, 1966. The meeting was held at the Hotel Gloria. The memorandum is part III of III. A draft memorandum of the entire conversation is ibid., ARA/EP/P Files, 1967: Lot 70 D 139, POL 3 OAS—General. Rusk was in Rio de Janeiro November 16–24 for the Second Special Inter-American Conference.
2. The phrase, “which is the source of [the] problem,” concluded the sentence in the draft memorandum, but was subsequently removed in S.
3. The final version of the memorandum also eliminated the following sentence at this point: “The Secretary said he had testified against this legislation but it was passed, and we have it.”