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

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

Washington, October 5, 1967.

SUBJECT

• Latin American Purchase of Supersonic Aircraft

The Peruvians have contracted to buy French Mirages despite our repeated warnings of the consequences. The story broke publicly in the New York Times yesterday morning.²

Peru’s action—unless we can turn it around—threatens a supersonic aircraft race among the larger South American countries. It also means serious trouble for us with Congress on MAP and Alliance for Progress appropriations. For Peru it will result in no program assistance at a time when Belaunde is in critical need of help for his stabilization and development programs.

Belaunde finds himself in this bind because of his weak political position. The military looms large in the political structure and they have been pressing hard for modernization of old equipment. The opposition-controlled Congress has played politics by authorizing, on its own initiative, a substantial amount for military purchases. Belaunde was unable to block Congressional action, and he has not felt strong enough to order his military to drop the Mirage deal.

There is a possibility that we can turn this situation around if we do two things:

• —renew our offer to negotiate a $40 million program loan which you authorized last May (Belaunde was then unable to meet our conditions. Now, with increased taxes, spending limitations, IMF standby and devaluation, he is close to doing so, provided he stops the Mirage deal.).
• —tell Belaunde what we told Costa e Silva last July—that we would allow Northrop to sell them F–5’s for delivery in 1969–70.

Covey Oliver and Bill Gaud recommend that you approve negotiation of the program loan based on the substantial economic self-help measures taken by Belaunde since May (Tab A).³ On the basis of previous reviews of the loan package, BOB and Treasury have no problem with the substance of the proposal.

A condition for the loan would continue to be no Mirages. I believe there is a chance of Belaunde making the military backtrack if he can:

• —demonstrate that their action is depriving the nation of vital economic assistance.
• —offer them the alternative of F–5’s by 1969/70.

Before proceeding further in our offer of F–5’s in Latin America, the SIG⁴ believes that we should touch base with Congress. SIG proposes:

• —a frank discussion of our military policy toward Latin America.
• —a detailed explanation of how little of Latin American military expenditures goes into hardware (most goes for salaries and allowances).
• —the serious consequences for the Alliance for Progress if we do not provide a reasonable alternative to limited modernization of military equipment, specifically F–5’s.

SIG (Katzenbach, Nitze, Gaud and myself) has approved the scenario and talking points paper at Tab B for the handling of the F–5 issue.⁵ Secretary McNamara and Secretary Rusk concur. Everyone recognizes that consultation on selling F–5’s may adversely affect foreign aid legislation while the bill is pending in Congress. However, the consequences of doing nothing about the Peruvian purchase, or offering our own supersonics behind Congress’s back are far more severe.

I am convinced that unless we help Belaunde reverse the action taken by his military, we will be in deep trouble in Peru, and our ability to support for Alliance for Progress seriously weakened.

I strongly recommend that you authorize consultations with Congress along the lines of the scenario paper and that subject to the results of these talks, you approve renegotiation of the program loan on the basis of the conditions in the Gaud memo.

Walt

1. Approve consultation with Congress⁶

Disapprove

See me

2. Approve program loan renegotiation, subject to Congressional talks⁶

Disapprove

See me

1. Source: Johnson Library, National Security File, Country File, Peru, Vol. III, 10/67–1/69. Secret.
2. According to the article, written by Neil Sheehan, French aircraft industry sources confirmed that “Peru had signed a contract about two months ago to purchase approximately 12 Mirage V’s from Marcel Dassault General Aerodynamics, the French aircraft manufacturer.”
3. Tab A was a memorandum from Gaud to the President, October 4; attached but not printed.
4. Senior Interdepartment Group, Nick Katzenbach is chairman. [Footnote in the source text.]
5. Both dated October 3; attached but not printed. The SIG discussed U.S. policy toward Latin American security forces, including F–5 aircraft, at its meeting on September 28; see Document 65.
6. The President checked this option.
6. The President checked this option.