NOTES ON STEVENSON-BENTON TRIP

• Document Type: FOIA
• Collection: FOIA Collection
• Document Number (FOIA) /ESDN (CREST): 06182040
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 542
• Document Creation Date: March 9, 2023
• Document Release Date: June 21, 2021
• Case Number: F-2017-00334
• Publication Date: June 20, 1960

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COUNTRY
SUBJECT
DATE OF
INFO.
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DATE ACQ.
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REFERENCES
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SOURCE:
NOFORN
II A
report prepared
America with .Adiai
tevvinson
copy of
trip thro
20 Running to several hundred doublea-spaced pas, the report
notes and transcriptions of material dictated to a recording
during the trip � There are memoranda of conversations� accounts
briefings in US Embassies and elsewhere, assessments of importeint in
dividlials met, and observations and ingtressions by a traveler litho is
obviously a far eibovemoaveraige observer.
The countries
Ecuador
Dissemin
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ted were Argentina Brazil Chile, Colombia Costa Rica
� Mexico Panama Peru, Uruguay and Venezuela
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ARGENTINA
Cat. #1672 A
Memo #40 A
3/3/60
NOTES ON LATIN AMERICAN UNIVERSITIES, FROM COMMENTS BY GROUP RETURN
ING FROM SANTIAGO UNIVERSITY CONFERENCE
With us today in Micchu Picchu have been Mr. James Perkins
^ice president of the Carnegie Corporation, President Murphy of the
University of Kansas, and Dr, Burkhart (?), President of the Council
of Learned Society. They are on the way back from a conference of
South American university rectors, together with ten American counter-
parts, in Santiago, Chile. Dr. Burkhart says that the students prob-
lems are complicated, which would be most natural. In some countries
and some universities, these rights for the students have been most
important and most constructively used by the students. In some
cases, the students have become almost the sole liberal voices in
the countries. Further, the faculties of these universities are part-
time people, many of whom are incompetent, many of whom are politi-
cally appointed, many of whom don't even attend their classes, many
of whom hire assistants to teach their courses -- and the students in
some cases have been a factor in attempting to raise standards, rather
than to lower them. Mr. Perkins told us that the average faculty
member at a South American university who serves part-time, gets paid
$1,200 a year. (Later, we were told $40 a month with the professors
primarily interested in the appointments because they helped give
them prestige in private jobs and legal practice.) In some universi-
ties there has been a strong trend toward full-time professors -- and
these are paid as little as $150 and $200 a month but in exceptional
cases as much as $4,000 a year. For instance at the University of
the Argentine, I think it was, the number of full-time professors as
gone up from 5 or 6 to more than 100 in recent year (1 later
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Memo #40 A
2-
confirmed this with Rector Frondizi.) The medical staff at the
university in Sao Paulo in Brazil is a full-time medical faculty,
according to Mr. Perkins, and this interested me because I have
understood that the University of Chicago medical faculty Is the
only full-time medical faculty in the world. (I'd like to have this
point checked by John Howe, on Sao Paulo.)
This Carnegie Corporation conference had an agenda of a full
week. All the tough problems were discussed, says Perkins: the
part-time faculty, the usurpation of dictatorial rights by students,
the low standards of instruction, etc. Dr. Burkhart said that the
big result of the conference was "getting acquainted", He and Mr.
Perkins spoke with enthusiasm of many of the Latin American intellec-
tual leaders. President Murphy thinks this meeting will open up a
new era of interest in Latin American universities by our big founda-
tions. He prophesies that major financial assistance will be forth-
coming.
Seemingly Ken Holland's organization should be complimented
on a signal success. They are preparing all the records and reports.
Will M. Howe please get a full set? I think there is very valuable
material here for my article.
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ARGENTINA
CALL UPON MINISTER OF THE INTERIOR
ALFRED VrAt AT HIS OFFICE
GOVERNOR STEVENSON AND SENATOR BENTON
..mormemiPirrimmkimillintrinewswirmr
Cat. #1692
Memo #58
3/16/60
The Minister of the Interior is responsible for the State Po-
lice. The Governor asked about the bombings. The Minister mere or
less shrugged these off. He said they would cease after election on
March 27. He said they are the effort of the communists to cause
trouble, but that the public is not reacting. He attributes them to
a tiny group. He says this is the end of a period the transition
to a new one - "the great majority want peace and nothing will pacify
the country as much as prosperity". I asked him where the bombs were
coming from. He said some were imported and others were homemade.
He spoke of little books telling people how to make bombs"!
The Governor asked whether the Peron leaders were under arrest.
The Minister said they were not but that the government knows "per-
featly" who they are. The Governor asked about the role of the army
(some news stories have reported that the army has taken over control
of the Internal police in its campaign to eliminate terrorism
The Minister said the army was "cooperating" with the police
Minister Vltalo explained that the Peronist leaders do not
expect Peron to come backs that Peron does not want to come back; that
he has become a symbol "as in Germany and Italy".
In response to a question from Governor Stevenson he said
that the economy Is not expanding fast enough to satisfy the Argent n
Ian people. He spoke of the fact that the government had had to
yield to the workers when threatened with a railroad etrike But he
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reminded us that the elections were in a week and after the ele
tions, the government can be more firm. He said that the problem was
well understood by the political leaders but that "most people don't
understand it".
The most interesting part of the meeting followed Governor
Stevenson's question about problems of United States policy in deal-
ing with Latin America. The Minister told us that in his judgment
the United StE..tes problem "is to regain the confidence of Latin Amen-.
ca". He told us that the "climate" was more important than the fi-
nanctal aid. He emphasized that human development is of highest
importance. He said that trips and visits such as Governor Steven
son's "are vital". He told the Governor that his visit to Latin
America will have "tremendous repercussions". He emphasized that
Governor Stevenson's and my trip "seems disinterested". It drama-
tizes the human element". Again he said, 'This is more important
than the aid". The Governor commented that he felt this was a most
Important observation
The Minister remarked on the fact that Europe "psychologically
ignores Latin America" and this leads to advocacy in some quarters of
a so called"third position". Those who advocate this position want
Latin America to sit on the sidelines as observers, without actively
participating in world affairs.
The Minister told us that no foreign minister has visited
Latin America who could be called "disinterested". Until recently
he added the same thing could be said about the United States
This
does not accord to Latin America the consideration it is after. Latin
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America wants to be an integral part, a member of the family". The
Minister told us that the United States often acted 'too much alone
and not enough as one of the group'.' of American republics. He took
the position that if the United States wants to speak for Latin Ameri-�
ca, it should consult the other American republics. He said that the
Rio Pact to the average Latin American "was organized by the United
States to help the United States". He said the United States should
seek ways to demonstrate that the "OAS is for all". The Governor
asked him how he'd feel about locating the OAS in Panama. The reply,
"Bluenou,
The Minister went on to speak of the Antarctic Conference, a
recent conference of 12 states which approved the Argentine proposal
that atomic tests should be banned in the Antarctic. He said the
United States did not support the position of the Argentine, but the
Argentine won out anyway. He said he could give many small illustra-
tions. All of them point up the fact that Argentina wants the United
States to be more a friend she wants to feel sure that the United
States will indeed defend the interests of Latin America throughout
the world. She doesn't like the feeling that the United States ex.w.
pects to utilize the OAS to foster U.S. policy, She objects to being
made to feel that the Argentine is merely an adjunct to the United
Statese
(Later Imet the Ambassador who represented the Airgen.�-
tine at the Antarctic Conference. He said the Minister is
mistaken. He said he understood the position of the U.S.
with its complex world wide negotiations and commitments
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and that final agreement would have been impossible without
tie cooperation of the U.S.)
The Minister stated that the 'balance now favors the East"
in the present world competition. He says that only Latin America
and Africa can swing this balance towards the West 6 He spoke of the
fact that the population of Latin America is equal to that of Canada
and the United States put together. He asked 'May not the world
drama be played out - here in Latin America 25 years hence?" In
response to this rhetorical question, Governor Stevenson said, "That's
why I'm here!"
The Minister reminded us that President Roosevelt "in a spurt"
won the psychological and spiritual confidence of the Latin American
people. He said, When he came here, he was hailed as a world leader".
He urged us 'to study the economic issues from a psychological and
sociological point of view". He suggested there was too much emphasis
on the dealings between governments - government to government - and
commented that now is the time for much closer relationships among
North and South American universities, labor unions, "impressarios".
told him we were visiting the University of Buenos Aires that very
afternoon and quoted Mr. Pinedo s comments to him on the disintegra
tion of the universities during the Peron regime.
"The universities suffered as did the rest of the country; they are
now being rebuilt."
mil
He answered briefly,
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Cat. #1694
Memo #60
3/22/60
MEMORANDUM ON A VISIT WITH DR. FREDERIC0 PENEDO
MINISTER OF FINANCE IN THE ARGENTINE IN 1933 -
FOR AN UNKNOWN PERIOD - AND AGAIN IN THE EARLY YEARS
OF THE WAR, (HE SPOKE VERY WARMLY OF NORMAN ARMOUR,
WHO WAS THEN OUR AMBASSADOR
Premier Beltran of Peru urged us to visit with Dr. Penedo.
He told us how Dr. Penedo had floated the kind of short term govern-
ment bonds for the Argentine, during his period as Finance Minister -
as a matter of course - the kind Premier Beltran now contemplates
for Peru. Dr. Penedo today spoke of the government bonds he put on
the market in 1933, which I gather were long term bonds, at 4% in-
terest - "in contrast to interest rates today of 4% per month".
Mr. PrebAssch also urged us to visit with Dr. Penedo.
Dr. Penedo bewailed the present state of Government finances.
He deeply regrets the controls which have dominated the economy. He
says that even today the controls are much greater than one would
gather in a visit such as ours yesterday with Mr. Alsogaray. Over
our tea, we took tea cups as an example. If he and I want to go in
the tea CUD business, we can go ahead and build a: factory and there
is nothing to stop us - but we may have to pay 40% interest on our
money In contrast to somebody who has an inside track at the bank
who may pay only 8%. More importantly, we shall have to pay 3op%
import duty on our machinery. If we had successfully gone to the
Government Bureau, and received their okay on building a tea cup
factory, we might import our machinery for nothing. But the Govern-
ment Bureau might refuse to give us such permission stating that
there were already two tea cup factories or four tea cup factories
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and asking us why we didn't instead go into the book business, about
which we might know nothing. With vivid gestures and much laughter,
Dr. Penedo spun out his story of the evils of a controlled economy.
But he feels progress i being made and he is hopeful. He
thinks Alsogaray is on the right track. He feels his friend, Prebisch,
is not. He applauds Prebisch's efforts to pull a common market to-
gether, bringing down tariffs among the various countries, but he
bewails the fact that Prebisch wants to raise an even higher wall
around his common market - to give greater protection to Its industry
and its economy. He thinks the tariff walls shou d come down both
within and without. Further, he greatly fears Prebisch's tendency
to plan everything for 20 years ahead. He says that Prebisch over-
plays the role of the state. Prebisch's plans will tell you in ad
vance how many tea cup factories and how many tea cups are wanted
for 1988! (Ambassador Beaulac makes exactly the same point about
Prebisch he says that Prebisch is for "statism"; he says that
Prebisch wrote a plan for the Argentine government and that every-
thing that is now happening in the ArgentIne is exactly the opposite
and very much for the better" he mistrusts Prebisch and gives as his
illustration the fact that Prebisch, in his plan, said that the oil
industry must be conducted as an Argentine Government monopoly, and
when Beaulac asked him why, Prebisch replied that he thought this
was good politics and that no other recommendation would be accept.
able; Beaulac distrusts him as an economist because he doesn't think
economists should make such compromises.)
Dr. Penedo thinks that Prebisch's figures are 'biased". He
won't go as far as did President Alessandri of Chile to claim that
they are communist inspired
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Memo #60
He speaks with loathing and distaste of the Peron period,
and no wonder. He ificas in jail three times, once for 100 days. One
time when he got out he ran into the Foreign Minister who asked him
what could be done to Improve Argentina's relations with the United
States. Dr. Penedo replied, "Just the opposite of everything you
are doing now!" His property was confiscated. He had valuable land
in the lake district which was purchased at a fraction of its value.
There is no recourse now. This seems to be universal hero in the
Argentine. People can't sue the government for recompense for ex-
propriated or ruined properties.
Dr. Penedo thinks that Argentina's greatest need Is money
for credit for internal development. Interest rates 'must be brought
back to normal. The banks must loan money on the same basis to
equally qualified companies, rather than making decisions according
to special privilege.
He thinks that Castro Is a mad man, paranoic, and wholly out
of the customary pattern of Latin American Dictators - "He Is unique".
He disagrees sharply with the statement made to us In Wash-
ington that the great fieed of Latin America iso land reform. Ie says
c,
that this will come about automatically when it's more economical to
break up the b g estates. He points out that the size of farms has
grown In the United States lnothe last 20 years and that the number
of tenant farmers has increased. He says that when it is more eco-
nomical to conduct farming in smaller units this will come about
without any forced measures on the part or the government. He states
that in the early days of the United States, the land was owned in
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Me o 11/-0
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big chunks, but these broke up automatically because they were uneco-
nomical. He seemed to 'agree that it would be legitimate to provide
money and credit so that farmers could buy the land for themselVes.
(1 am not sure that I-am doing justice to his views here but I wanted
to report my understanding of them if only to indicate that there
are greatly varying responsible views on the subject of land reform.
He speaks well of Alsogar4y, "an able. man" - and thinks he is pro-
ceeding in the right direction. He wants Governor Stevenson and me
to visit with Mr.�Klein Finance Minister, and Mr. Mendez Delfino,
President of the Central Bank (of which Prebisch used to be General
Manager).
Dr. Penedo emphasizes, as does Ambassador Beaulac, the enor-
mous differences among the Latin American countries and the folly of
talking about Latin America or South America. He asked, "What have
we got in common with Nicaragua?" He thinks in terms of three, great
0
0
units - one, the Indian country; two, Brazil, which is a great unit
In Itself; and three, Argentina and the rest of us - (white).
Like the Ambassador, he emphasizes the great responsibility
for policy and development on the shoulders of the countries them
selves. He recognizes the lAmitations of United States policy.
. A professor, who is no longer teaching, he bewails the state
of the universities. He says the professors change all the time;
that the classs arc enormous; that the only role or the professors
is to give examinations to the students; that the students don't
attend classes; that the standards are 'low and abominable and out-
rageous"; thus the students run the university and completely
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Memo �0
demoralize it; that a student can fail one month arid go right back
and start again the next month; andomuch, much more to the same
effect. I asked him how his university was 30 years ago and he seems
proud of it then. He quoted the Russian Ambassador. Because so many
of the students organizations are communist dominated, someone
asked the Russian Ambassador whether in the U.S.S.R. the students
were permitted to run the universities. The Ambassador snapped back,
1.�
'Absolutely not:" We talked of the high standards of Soviet train-
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ARGENT INA
Misce
C
Cat. #1695
Memo #61
3/16/60
LUNCHEON- WITH MR KLEIN, SECRETARY OF THE TREASURY
Governor Stevenson and Senator Benton
0
aneous Notes
0
�Mr. Klein said- that there wasn't any policy on the part of the
government to reduce prices. The hope is to stabilize them. He says
the government doesn't want to try to legislate price control; that
police action has proved to be ineffective.
* * * * * *
When I ioined the luncheon the Governor was talking about the
problem of changing the dietary habits in the Argentine�. Publicity
has been given to the eating of fish. Liver and other parts of the
steers have been thrown away. Argentinians shpuld eat more vegetables,
but the Minister complains that the Italians who control the distribu
tion of fruits and vegetables In Buenos Aires, all of whom are small
operators, conspire in various ways to keep the prices up. I laugh-
ingly referred to the. Mafia as a possible soUrce of the conspiracy
and the Minister agreed.
001 course the objective is to cut down on the enormous per
capita consumption of meat - in order to provide meat for export.
The Minister explained that during the thirtieso the entire
Internal and external debt of the Argentine had been refinanced.
Interest rates had been brought down from six to eight percent-
four to five percent. The Argentine now has no external debt.
No bonds have beep sold since 1945. An effort to float cinter
nal bonds will be made this year. The Minister speaks generally of
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selling them at an eight percent interest: rate perhaps at 9O. This
will give the hope of capital gains. The capital gains tax rate is
only five percent. There are no taxes at all on the interest of
government bonds.. With a top tax bracket of 60 percent for individu--
als at two million pesos pr 4bout $25,000, this should provide in
centive for the purchase of suoh bonds. (The corporation tax rate
is 33 percent, 30 percent plus an emergency three percent.)
The Ministers says that the Treasury Department had an excellent
0
tax collecting department in the thirties. Peron brought in porrup--
0
tion everywhere. This demoralized the employees in the tax depart
merit. Peron and his lieutenants used the tax department to bring-
pressures of various kinds. A new head of the tax departmentocharged
with responsibility for re--organizing it, is to be appointed on Mona.
day. His biggest problem is the low. morale of the staff, broken by
0
the experiencesc of the last 12 years plus the problems caused by
inflation.
* * * *
The Governor asked about interest rates at banks. They are
now prohibited by law from paying interest on demand deposits. Some
of the banks want this changed. They charge about 15 percent for
shortterm money and theyopay ten percent or thereabouts for time
deposits.
0
There is of course a very great shortage of money. Private
individuals loan money at 30 percent or more.
asked abogut the
favoredetreatment" given to some companies by the banks reported
to me by Mr. Pined�. Secretary Klein thinks
hat the bank administ a
tors are now using their best judgmen
with favors at a minimum
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3�1.
The Minister objects to "cheap official credit for companies
h as Icaiser. Further, he says that Kaiser was permitted to bring
cars from the United States duty free, selling them at such a tabulus profitoin this protected market that they raised the money to
0
finance their factory. �I remarked that perhaps it wasn't a bad idea
to have the Air Force as a partner with 18 percent of the stocks The
Minister likes the idea of joint ownership between Argentinians and
foreign owners.
0 0
told the Minister that Mr. Pinedo objected to,Mr. Prebison
Idea of a high tariff wall around the Common Market, thOugh he ap-
proved enthusiastically the idea of the Common Market itself. The
Minister does not think Mr. Prebisch has clearly committed hiniself
on this point.
Governor Stevenson commented on the paradox here in the Argen
tine: a Prestde.t who believes
IZ :tyr
Tes ^ ga el, 4-4 ^ rit
L"
4214"'ClimAit
4.0"160GII.
of-the Economy who wants free enterprise and who favors liberal trade
policies. Secretary Klein suggested that President Frond izi did
0
indeed advocate "heavy protection", at a prevolous period of his ca-
fl
reer and also avoredoa planned economy. Rear
0
that he is now
el. let
tap ca. L
Klein thinks
more liberal. - Indeed he states this unequivdcally.
The Minister said that he did�notnthink the big landed e tates
were an important problem. 0 Often they� are more efficient
He told
us of big sugar plantations which had to support their ine A.cient
small neighbors. He said that the big estates were essential for
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ent cattle breeding. He mentioned several area Of the Country
where tile land is well divided. But he put his principal emphasis on
an Argentinian law of 1870. This compels the distributton of all
0 0
property upon death - In equal parts to each child. Only 20 percent
of the property is at the free disposal of the parent. Unless a
family corporation is formed, to keep the estates together, they are
automatically broken lip with death. �,The Mitister commented on the
fact that settlement was new in Patagonia, and the great sheep ranches
didn't date back to before the turn of the century - and death had
not operated over a long enough period to break them up!
* * *
The Minister seems to have spent much of his life in public
service. His English is very good. He's a gray-haired bespectacled
man in his fifties with a most pleasant ingratiating manner. He
speaks precisely and exactly, particularly on matters pertaining to
money or interest rates.
0
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ARGENTINA
Ca � #1696
Memo #62
3718/60
MEETING IN BUENOS AIRES WITH MR, ISOLGO LARRAtDE,
LEADER OF THE PEOPLE'S RADICAL PARTY
Governor Stevenson and Senator Benton
The meeting was arranged so that we would hear theviewseof
an important opposition leader. I understood Mr.c)Larralde to say
that his party is the biggest single party in the Argentine and that
a
he is a former candidate for vice-president.
a
Mr. Larralde isn't worried about Peronism. He says the Peron-
ista party will last only as long as Peron is alive. He does npt
fear his return. But he says that Vargas of Brazil, and Ibanez*of
Chile after they had been deposed as Dictators - and when subse-
quently they then legally returned to power - were pretty good demo-
cratic leaders! He assure 4 us that he doesn't think Peron ever will
come back, and that he itipresents no danger, but he suggests that if
he did - and were legally elected 7 he might not be so bad,
a
But he is desperately concerned about Commeunism. He says that
a
Communism is as hard to fight in the Argentine as anywhere in the
09
world. Every time there is "a deception by American business", the
people here feel they've been let down and are willing to ligten to
the Communist propaganda. We pressed for specific exatilpleWbut none
were forthcoming. Mr. Larralde opposs the giving of �easy credit to
Americans Who come here with good credit because they have cash in
the United States - but who do not bring their cash witla them to the
Argentine.
,A0
He is deeply suspicious of Iirondizi in part because he came to
power with Communist support. He says popular opinion in the army,
after his election, made him toss the Communists out of his
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c�-�
administration - but "many are still around," and �have access to
Frondizi". They may be out of the key jobs but "he still has obli-
gations".
Communism is helped here, he says, by the lack of entOrprise
of A gentinian local investors. They have no tradition of invest-
ment. They want the biggest posaible prof3,:td.. :They lack social
consciousness. He says we can't count on economic cooperation be-
tween the Argentine and the United States - to build suitable rela-
tions between the two countries - because the type of Argentinian
doing business is not responsible. Relations by U.S. business with
such people aren't going "to remedy matters". He feels that the
soundest relations can only be developed through diplomatic cchannels.
The Governor pressed Mr. Larralde for specific recommendations
apfaied to Communism. The Governor said he wanted to know what the
United States could do about it. Mr. Larralde has spent a lot of
time in the United States and he came through with some very con-
crete ideas:
�
�
0
0
A) He wants lots of translators of U.S., material on how to
fight Communism. He read much excellent material when he
0
was in the United States., This should be transmitted
.widely:throughout South America.
9
He thinks there is much too much talk about economic des.:
�
velopmeQt. He urges Governor Stevenaon and other leaders.
to speak and talk much more about fight of ideas".
�
(He liked the Governor'ss statement to the press that he
didn't believe that Castro was a Communist, and felt that
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he agreed but he heartily condemned Castro for his kill-
ings, and,hts expropriation of property without compensa-
tion.)
He wants much more lonformation-about the great cultural
ea)
tradition of the United States - its literature, Its be-
lief in law, is political and juridical history and
tradition, et cetera. This will counteract the "view of
the United States which is negative, and wholly materi-
alistic".
He wants much closer relations between United States and
Latin American labor leaders and labor unions. He spoke
of mr.. Romualdi as being "very good", He wants more ex-
changess.more.RornUaldis, many more labor publications
translated into Spanish.
He wants to multiply exchanges of people and information
on a very large scale. He says that the Cultural Attache
here in our Embassy Is very good, and so too is the Labor
Attache, but their efforts are on much too tiny a scale.
�
�
He pleads for sending anti-communist material to the
� 0
newspapers. He said, "Even in papers like La Nacion,
there Is no serious discussion of what's wrong with com-
munism; very few people here in the Argentine have any *
�
idea what's .going on behind' the Iron Curtain; they read
mostly about Soviet ach.ievements and little else." (When
he complained that La Pyensa and La NaCion have no cor-
respondent behind the Iron Curtain, the Governor commented
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r)
�
Memd #62
that few few papers do! The Governor asked about the ser-
vices of the AP and the UP, but Mr. Larralde did not
comment directly. Perhaps it Is significant that he
didn't criticize them,
* *
C,73,
Al]. in all Mr. Larralde gave a whale of an argument for a
greatly improved and stepped up program by the USIA. Mr. Larralde
emphasized that his party stands for political stability. He feels
this is essential for economic development. He thinks the elec-
tions in ten datys are going to prove bad for the government. Gover-
nor Stevenson asked whether the stability of the government would
be affected. He replied, "This depends on the size of the, blank
vote; this vote is a vote of contempt; it Is a sore in our national
life; we need an antibiotic with which to combat it". The Governor
asked whether it wouldn't be better to legalize the Communist and
CD
Peronistic parties so they would have candidates to vote for. Yes,
said Mr. Larralde, this would be better - yes, heofavors legalizing
"even Communism". If the Communists wdrk-in the open "we shall
know who they are, how many there are, what they publish, et cetera:"
Mr. Larralde spoke of Governor Stevenson in the very warmest
terms; his admiration for him Is .deep and genuine as Is that of all
political leaders of all parties In all thee countries. The uni-
versality of this admiration is not particularly surprising - but
2
Its intensity is
Dictated in Buenoc, AIres
arh
r,
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A R GENT INE BUENOS AIRES
To: Mr. John Howe
From: William Benton
C.)
Cat. #1699
Memo #155
March 22, 1960
My very disorganized memos on prior discs about myovisit with
Mr. Patterson were written in his presence during our two hour
,
visit - a paragraph now and then - and I know that they will seem
most disorganized and perhaps in,parts even contradictory. I'm now
writing you after he left. He's a fascinating guyoand you will be
visiting with him shortly in New York yourself - so I hope. Most
interesting are his ideas-On-the urgent need for strengthening and
developing the Latin American universities. He says that Point Four
programs have gone to seed. They're beating the same old gums on
the same old project. Losing steam, they need rejuvenation. Be-
cause the problems were different here in the Argentine, he has had
to invent new things
cct)
He feels that the United States should now take the lead all over
South America in selling the top Ministers on the essential need of
the development of science and technology - essential to industrial
development, to agricultural development, etc. This involves real
budgets at the federal level for the universities. There isn't any
post graduate work here In Latin America. He speaks of the universi-
ties as the last remnants of Europe". He points out that they have
no resemblance to universities in the United States. Often there
are no entrance examinations; no attendance records; the profedsors
aren't professors - they teach for prestige which will help them
make money privatel
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(40)
Memo
He speaks of the "taxi professor who use "warmed up notes from
courses they once took in Europe". The professors don't keep up
with developments in their own fields. He speaks of the students
as "kibitzer students" - without laboratories and without libraries.
He says that the students, with nothing to dos, fall into the hands
of agitators. They "take to the streets, sometimes led by a dean".
Mr. Patterson wants to make the South American universities a major
project under Point Four. He feels that this will cost the UnIted
States more money for the next ten years - but far less money in
the following 100! In the letter attached, note the six keyo fields
listed under Point One on the first page.
This proposal, known as the Argentine Proposal, originated with
Mr. Patterson. This has been submitted to the Committee of 211
(OAS). He feels these six fields 0are the key ones. I commented
that
we know a good deal about teaching engineering and if a boy goes
bought there were important differences among them. Thus
to MIT or Cal Tech he can be turned out as a good engineer.- Simi-
larly we know how to teach agricultural technology. I said �1 did
not feel we could be equally confident that we knew how to teach
"business administration" He thinks we can at the middle level
not at the topllevel
Mr. Patterson wants todevelop major universities, specializing
n Brazil and the Argentine.
in these six fields
Then he favors
developing one or two of the departments at other universities in
other countries
He says it will be easy to send the students from
Paraguay Bolivia, etc. to the three key universi les Tens of
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0
brilliant students should be sent to t
Memo #6�5
.3..
thousands of Latin American students must be tra,ined. TheJJnited-
States can't possibly handle them all. He says only the most
United States.
As a marvelous example of how to build up a Latin American univer.i
aity, he cited the present project at the Catholic University
(private) in Santiago,, Chile. This is the project of the Economic
Department at the University of Chicago under Professor Schultz.
He refers to it as the most concentrated project at any Latin
American university. He says that one grave, problem in Chile is
the Marxist, left wing-oriented economists who have come from the
tr)
university departments and Infiltrated into the Chilean government
and economy. (We had exactly the same report on the Economics
Department at the Unioversity of Mexico and its impact on the Mexican
government and economy.)
Four men from the University of Chicago are now active on the
(7)
faculty of the Catholic University, helpi
-g
to rebuild the Economics
Department. Nine of the brightest boys are in Chicago taking their
4
C`)
PhDs. Professor Schultz said that the brightest student of the 150
graduate. students in Economics at Chicago - is a Chilean. Profes-
sor Schultz commented, 'Chile will never be the same again when
these boys return". The boys have agreed to teach. ifl ohile for
several years when they return. Mr. Yatterson thinks that the entire
Economic Department of the University can be rebuilt tn five
years
I suggested
to Santiago,
hat boys as bright as these won't want to come back
or to spend their lives teaching at the university
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Memo #65
He doesn't agree. He says this depends on how they were selected.
He helps select about 150 students annually to go from Chile to
the United States and "97 percent come back".
He makes the interesting point that Chilean and Argentinian students
�o�
who go to the United States, if properly picked and 'if' they sign
an agreement - will indeed come back and integrate themselves into
their own universities and economies. But he says students from
Paraguay will not. They come from a subsistence economy, run by a
dictator, and the emotional shock of the change experienced in the
United States - either demoralizes them - or persuades them that
they do not want to return to Paraguay - ,or, if they docreturn, they
become embittered and of little value. He feel p that the Paraguayan
students should go for their education to the Argentine, let us say,
where the emotional adjustment is much easier - and where it's afar
easier transition for them when they return home.
I'm persuaded I want to give a b g section in the forthcoming
article to the universities. There's plenty of good material in
this splendid memorandum of 1958 written by Professor Silvert given
me by Mr. Patterson. Other material- can be readily pulled together
as my previous menios indicate. Note in particular in Mr. Silvert
memorandum the reference to the reformer enunciated In the Univer
Alb
sity of Cordoba in 1918.."(page 2). Here we see the origin of many
of the problems which now plague the universities
Patterson
said that the communists and communist student leaders were very
quick to see the importance of the Argentine Proposal to OAS and
of course they're fighting
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00
Memo #65
I suggest that Mr
Howe take this memorandum along when he vi its
th Mr. Patterson. .Show it to him and get his comments, correc--
tions and amplifications
and his further suggebtions as to how
�
we should proceed to collect ttre material which we need,
�
rn 1
Co)
a
41,
�
41,
(t,
�
�
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0
ARGENT IN 6
Cat. #1700
Memo #66
3/15/60
BRIEFING SESSION WITH THE AMERICAN AMBASSADOR
AMBASSADOR BEAULAC, AND HIS STAFF ON OUR FIRST MORNING
IN BUENOS AIRES GOVERNOR STEVENSON AND PARTY
Ambassador Beaulac dioened with a theme which I later discov-
ered Is a� favorite one with him and he brings real authority to it.
He has �been an ambassador for sixteen years, longer than any other
0 present ambassador. jie has served in Paraguay and Chile as ambassador
~ among other countries sow and indeed has spent his entire career of
thirty years in the Foreign Service in Latin America except for
0
one term of service in Spain. He says that the United States does not
have "relations with Latin America". Our relations are with twenty
separate countries. He objects to talking about relations with Latin
America. Such talk leads to "vague generalities". Similarly, "the
U.S. can't think in terms of doing things for Latin America". He
stresses that the U.S. is traveling a two.�.way street with twenty other
countries. Thud we can only talk usefully about one country at a
time, specifically and concretely about the one country. This is the
way toeavoid the "vague generalities".
The Ambassador explained that people in the Argentine want
bettep livfng standards "which means economic development". He said
that many Latin American governments put handicaps in the way of the
0
use of their 4esources, xtidch means handicaps to economic development.
The Arteneine is,a good example ofethis Thirty ,years ago, Argentina
�
�
was an advanced country. Peron was unable to destroy the country only
�
because it was strong and had vitality.
0 � �
�
�
�
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a
a.
a
Memo
The tendency in a situation such as we find in the Argentine
today too often 180 "we can solve our problems if you help us". The
Ambassador is skeptical of such an approach,.
The Ambassador explained that Peron spent the country's patri
mony; he was "punishing agriculture to help inefficient industry".
If we had "poured money into the Argentine, he would have wasted it;
he would have used it as a credit base for foreign loans which he
also would have wasted".
In the Ambassador's judgment, Peron threw away the
000,000,000 which he used to purchase the railroads. The British
were supporting these railroads and now their deficit is a big factor
in the present government's deficit. Similarly, Peron wasted the
money with which he purchased the American Telephone Company. This
company is now running at a deficit and further the service is very
bad!
When President Frondizt came into power, he took the controls
off. Meat prices promptly trebled; gasoline prices also trebled; the
total price level doubled. Frondizi showed great courage "in revers
ing former policies". These policies are being carried forward by
his Minister of the Economy, Mr. Alsogaray, an engineer and former
military man whose biography should be attached to the memorandum on
our interview with him (It's In the little book prepared by the
USIS.) 0
es
The big present hope,ofor improving the economy is Frond
oil program
9
He entered Into contracta�w h several American oil
0 �
9
s
companies and also with Shelloand an Italian company. The oil fields
�
�
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�
�
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Memo #66
qz*
41111111
71r,"
had already been discovered, so the companies did not face the risks
of exploration. Indeed, their risks seem negligible. My understanding
is that they are investing something like a billion dollars. The re-
markable story of the pipeline is told in part in Mr. Train's letter,
which I have forwarded. The hope Is thiat by 1961 Argentina will be
producing its domestic needs in�petroleum. They are now importing
$250,0000000 to $300,000,000 worth of oil annually. This approximate-
ly equals the present deficit of imports over exports. The Argentine
people have been as emotional about petroleum as a national resource
as the Brazilians are today. But their government monopoly was most
inefficient. Yet any Argentinian who proposed the foreign exploita-
tion of the oil fields would have been_ regarded as a traitor. Mr.
Alsogaray was the first important Argentinian leader who had the
nerve to stand up against this tradition and to demand a new policy.
Under this policy, the government retains the ownership of the land
and the wells - while the companies put up their own money and produce
oil for the government's oil monopoly. They are paid by the monopoly
for the oil at world prices. They will make as much money as if they
owned the land. This new policy promises oil for Argentina in the
shortest possible time.
Of course after Argentina achieves a balance in its foreign
imports andexports, it will still peed money to service the debt
0
0
which has been accumulated and this money must be provided by ex-
ports which only agriculture can provide. Here Is the second great
�
=
area of present hope in the Argentinian economy. The U.S. has not
0
, been in a position to be helpful, under past policies, but we now are.
a
6)
�
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characteristics:
1. It has the support
program "agility".
2. It is directed to a basic objective- basic explicit and
�
�
Memo #66
Our Point Four Program here Is called "Operation Beef". It has three
f the President. This gives the
ca%
tr,
fundamental - and the country will itself finance the
program.
3. It requires minimum American personnel (but these must be
othe best ayailable.)
The Ambassador then turned to Mr. Albion Patterson, a most
remarkable officer who has been in Latin America since he started with
Nelson Rockefeller in 1942. He graduated from Princeton, trained in
the liberal arts, and started to specialize in agriculture when he
was sent to Paraguay in '42. He has developed a substantial library
on agriculture and is regarded '-as an expert. He is head of the Point
4 program.
* * * * * *
Mr. Patterson explained that Nelson Rockefeller got going with
his "Point Four Program" in 1_942. (He was the pioneer with such ideas
a
and Mr. Patterson feels he did a phenomenal job during the war years,
a
with the help of the most unusual staff which he assembled.) In these
,early days, Argentina stayed aloof from any tie-up with the Americans.
The Argentinian Cabinet was divided on war polic in 42 with
many of its members pro-German. .Mr. Penecro, then Minister of Finance
a
in the cabinet who was himself pro United States, latbr told me that
Ambassador Norman Armour was in to see him every day.) Ambassador
Beaulac and Mr. Patterson both emphasized how much the climate has
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�
0
memo #66
005-�
changed here in the Argentine, in its attitude towards the United
States sincd 1942 - and in the extent and kind of nationalistic feel-
Inge. In the early forties, the country's brand of nationalism was
very different. If the Argentine had c9operated in-1942, it would
have been easy to promote "the Rockefeller services". Today, the
strong leftist tendencies among the electorate can easily be fomented
into aggressive nationalism. This makes such cooperation very diffi-
cult. Mr. Patterson explained that he has been seeking new mechanisms.
He hopes that some of these may turn out to be helpful to other coun-
tries.
Mr. Patterson told us that President Frondizi believes that
"after oil comes beef". He explained how Peron had taken the money
from "the camp". .(rile word "camp" is a colloquial expression for the
ranches and haciendas on which cattle are raised.) Mr. Patterson
explained how the stock had been killed off because of controls and
the lack of incentives to produce more. The size of the cattle herds
dropped by six million.
Today beef production is two million tons. But home consump-
tion is so heavy that only 200,000 of these tons. are available for
export (There's a big campaign on to persuade the Argentinians to
eat less beef so that more swill be available for export.!) The goal
is to step up this 200,000 tons to 600,000 by 1965. Exports go large-
ly to England and to a growing market in Latin America.
a
Dr. Adler of the World Bark recently prepared a study of the
world market for meat. He decided that the market was unlimited! As
�
,its income rises,up to $15,00O a year, he average family eats more
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4;
Memo #66
and more red meat. Beyond this level the wealthy ask for choicer
and choicer cuts!
Mr. Patterson thinks that $300,000,000 in increased exports
for meat ,can be developed by 1965. The big packing companies seem
to agree because they are investing considerable sums right now in
their plants and opportunities in the Argentine.
A most important development is that the Argentinian govern-
ment has now admitted that their cattle really have 'Hoof and mouth"
disease. They have denied it for years. This reversal means that
they may be prepared to do something about it. We can help with
leadership and with
step up production.
production.
Mr. Patterson thinks that our law excluding fresh Argentinian
0
vaccines. Killing this disease would enormously
�
Indeed this disease Is the biggest handicap to
Az;
beef is wholly justified. The disease doesn't affect those who eat
the beef, but it is transmitted through the fresh beef. Butchers
throw it into their backyards or feed it to hogs and the disease
breaks out. There have been 100 such outbreaks in Britain due to
South American beef, The British have learned how to throw a cordon
around the outbreak to butcher all cattle within the circle and
to eliminate the threat. Footwear worn in the area must be discarded
01121
before stepping beyond the cordon. 6
In cans Mr. Patterson says, the beef is okay and the disease
�
does not spread. The heating has killed it
Theopresent argument with the Argentine over hoof and mouth
disease centers around our importation bf raw beef which has been
salted. Laboratory tests in the United States showed that this
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Memo #66
wilting does not kill the virus of hoof and mouth. ,But for 30 or 400
years we've been importing such beef - for sausages and hot dogs -
without any outbreak of the disease. The Argentinlans_ask why_we
suddenly shut off thi,s*$30,000,000 or $40,0001000 worth of annual
purchases. Governor Stevenson thought perhaps the cattle industry
might have something to do with it - and I mentioned the Texas dele-
gation. (The Foreign Minister later mentioned this point in his
opening remarks to us, asking for a commission to study the question
and to come up with A true finding.)
Mr. Patterson explained that our beef production in the U.S.
runs in a 13 year cycle. Last year was a low point and we imported
J.E.1
six percent of our beef consumption. When we're at the peak of the
cycle, we export six percent.
After the program for beef, Mr. Patterson said, came the prob-
lem of attracting foreign capital. Argentina suffers from a great
lack of manufacturing. The country needs tractors, trucks, etc. -
and these In fmAirn Alimvcoop auxIlary enterprises, The government is
now
seeking to attract capital by special guarantees. This is arous-
ing great interest in the United States. One or two American firms
are here every week -
to fill the present g
provide employment
* trying to ease off
employees - but is
their attrition 4)
�
investigat ng. The foreign capital is needed
eat gap of lack of capital and is needed to
to the government employees whom Mr, Alsogaray is
�
the government payroll. (Hegisn't firing these
�
trying to develop�polfcies which will make for
�
�
�
An example of the kInd of special privilege given to foreign
�
capital is the fat that permits will be issued for the importation
�
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Memo #66
of capital equipment, perhaps duty free. Further, the investor may
get a permit which will' allow bim to -subsequently export his capital.
(And indeed there Is no restriction on the export of capital today.)
Wa8 especially interested in-Mr. Patterson's discussion of
the specialists and techniciabs imported from the United States for
guidance and counsel. He stated flatly; "Only the best are good
enough for the Argentine". He says that even after 18 years expe-
rience in Latin America, Ale's learned a lot in the past year In the
Argentine. He says that the,Best United States technicians are not
D
ava 'able for the standard two year tour except in three fields:
C,
civil aviation, geology and public health. In agriculture, where
he desperately needs top people, the best qualified men will not
leave fore two years. Their academic life in the United States de-
pends on their record In scholarship and research. They must con
stantly investigate and publish - or their academic progress is In-
terrupted. They cannot be away from the competitive academic life
for as much as two years.
president Frondizi spoke to President Eisenhower of the high
Importance of top technical assistance - and of his desire to get the
highest quality from the United States. This has helped some - 'but
bureaucracy is a great force in the United States as well as in the
Argentine. The bureaucrats of the Statd ,pepartment in Washington do
not know how to persuade the best scientists those of greatest inter-
�
est to.Mr. Patterson., to come to the Argentine, for 90.dcxvs. Thus
o
Mr. Patterson and his Argentine counterpart recently visited Iowa
State University
ge.
He worked out a planyb get their best msn for
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Me o*#66
stretches
a�N
tzt
x weeks-- not through the ICA mechanism, "which won't
function" - but by some special plan under which he converts pesos
into dollars on a special arrangement with Iowa State. A man who
comes down for six weeks doesn't bring his family. He works long
hours and all day Saturday and all day Sunday. Unless the man Is
(72
coming for more than a year, a couple of months is almost as good as
12. Mr. Patterson says he uses a financial device, used in Washington
during the war, called "When Actually Employed" - WAE. ICA under
WAE hires men as in wartime, by the month, beginning their term of
employment when they step on the plane. He states that this kind of
operation, in his field of agriculture, is the way industry is oper
ating here. Thus Kaiser Industries brings men down for as little as
two weeks. And like the Kaiser men, e scholars from Iowa State
(7,
will come back next year. Iowa State is taking 20 smart Argentinian
boys for their PhD's - and the professors come here to the Argentine
to work with these boys on their theses.
Mr. Patterson commented that he had no trouble getting top
men through Washington when he first came down with Nelson Rockefeller
in the forties: 'I could get good men by telephoning to Washington".
Now he says he can't get them because of the bureaucracy. His new
�
a
non bureaucratic procedure he likes to describe by the wcIrd "agility"!
�
�
Governor Stevenson, as we were about to break up said that
he felt we should be tdld about the polittca1 situation. Ambassador
Beaulac again took over. He explained that the Peronist leaders
have their own plans and ideas - and do not want Peron back in the
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Memo #66
country. He told us that no party can get a majority at the polls.
He explained that President Frondizi had attracted the Peronist vote,
but how he had done so is an open question.
11,4
nonents accuse him
of signing an agreement with Peron, who then instructed his leaders
to tell their people to vote for Frondizi. But how could this have
been done? If it was done, Peron must have felt he was dealing with
a man who truly represented Frondizi.
After his election, President Frondizi tried to integrate the
Peron vote into his own following. He did this first and primarily
of course because he wanted to corral the vote for his own standard
and party. Secondly, he sought social peace and the surest way to
get it was to incorporate the Peron vote. His opponents of course
charged him with being "soft to Peron", with "carrying out his agree-
ment with Peron", with "trying to get control of labor through the
Peronist leaders", etc. Many of the charges boiled down to an accu-
sation of perfidy.
Frondizi failed. The Peronistas will not vote for him again.
His predecessors outlawed the Peron party so they cannot now nominate
candidates. The voting is compulsory, as I've explained elsewhere
and the Peronist leaders urge their followers to turn in blank ballots.
We see this slogan everywhere on the walls - 'Vote En Elanco".
0
The Ambassador regards this Peronist vote as a menace. Even
� 0
though Peron was thrown out before the economy,taok a tailspin: and
�
�
before the evil effects of his ten years of pillage and corruption
were felt by the workers and the electorate even though he was
0
thro
n out while people were still living we he won't come back,
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f_9?
CC2)
a
Peron was perhaps kicked out too
evil effects of his policy would
6-learly to his regime and to his
observer who felt that Peron was
coming, and did not really fight
rather to make his exit when the
Memo #66
soon. A few months later, all the
have been felt and would be tied up
downfall. (Later I talked to an
so smart that he saw the debacle
to maintain his position, choosing
timing was better for him.)
But what should be done with this group? Who will success-
fully grab this bloc? The communists are now after it. The church
is moving in through a Monsignor Plaza "a politically-minded priest"
who is trying to bring the Peronista into the Church.
Governor Stevenson asked, "Who is using whom?" The answer,
in the judgment of the Ambassador, is that the communists are using
the Peronista. The communists work underground and do not reveal
0
themselves. (The Ambassador remarked parenthetically, "Here in the
Argentine it is not we who are the imperialists; it is the British!")
The Governor asked the Ambassador to describe the communist
objective. Is it to embarrass the United States? Is it to take over
the Argentine government?. Is it to influence the Argentine diplo-
matically against the West? The Ambassador replied, "It is all these
things". Their objective also includes taking over the labor movement
or at least the objective of interfering with it to prevent its
healthy development, 0
�
�
In response to another question, the Ambassador said that
�
President Frondizi has stated that he will give favorable considera
tion to Chilean proposals for the settlement of the border dispute.
0 The Ambassador thinks that Frondizi would like to reduce expenditures
0
�
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�
(70;
-12-
memo #66
on.armaments. But he is on a tightrope. The military has controlled
the situation here for 30 years, and dictated its budget - and it is
not going to get over the habit in a hurry. Mindful of this historic
role of the military, the Ambassador thinks that their present de-
mands are modest. Their military equipment is obsolete. They have
purchased no modern jet planes as in Peru. He mentioned one bad spot
in the record: the Argentine navy does not seem excessive in size -
but he regrets the fact that two years ago they (and Brazil) bought
aircraft carriers from Britain (we refused to sell).
The Ambassador thinks it would be a mistake right now to
press too energetically for a reduction of the military forces. The
problem is delicate. It is subtle. The proper balance isn't easy.
The Governor asked whether the military is popular with the people.
The Ambassador replied with a double negative, "It is not unpopular",
The Governor asked whether he should see General Aramburu.
(The Ambassador had said that Aramburu is being groomed by the Con-
servatives as a candidate for President.) The Ambassador replied
that Aramburu was not truly In opposition to the present administra-
tion, though he feels free to criticize it. He told us that Aramburu
wp.s a key guest of honor on President Eisenhower's recent visit. It
was agreed that it would be a good thing for the Governor to make
this call. (I had intended to go along with him, but after the
Governor visited privately with President Frondizi, I felt perhaps
� it would be wiser if he also visited privately with General Aramburu,
0
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and even though the Governor asked me to accompany him, I declined.
Vie Governor later reported that Aramburu told him that
the administration represents only as,minority of the people; .
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that he thinks the policy is too rigid and being pursued
too aggressively - that three or four years should be given
to programs which are being jammed through in half the time
or less. I further gathered that General Aramburu feels It
would be wiser if the Peronists were given much more rope,
through being legalized in the confident expectation that
they will split into factions and thus weaken their present
ominous and solid threat through the blank ballots.
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Cat: #1700
3/29/60
P.S. - To the briefing session at Buenos Aires Where
Mr. Patterson talked about the hoof and mouth
disease.
P.S. - This is a postscript from Sao Paulo. We have just spent a
day with Tom Taylor, president of International Packers - a several
hundred million dollar company which is the successor to the foreign
a
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businesses of Swift and Armour
1.A
s deeply interested in the hool
and mouth disease and its deleterious effects o- productivi
quoted Mr. Patterson to him. He says that if the hoof and mouth
disease could be eradicated in the Argentine, this in itself would
step up production between 25 and 33%. He now has scientists in Ger-
many Investigating vaccines. He says he has talked to President Fron-
dizi about the problem and also to Mr. Alsogaray. He says that Pata-
gonia is free of hoof and mouth disease. He thinks that the problem
should perhaps be approached by attempts to push up the "free line"
from Patagonia - further and further north - as the "tick line" was
pushed back and still further backwards into Mexico. He says there
are four or five different types of hoof and mouth diseas
aald
ingly several different vaccines are required to control it.
Here seems to be one of the great problems facing the econo
mies of the Argentine and Uruguay - and, I gather also, of Brazil.
*
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ARGENTINA Cat. #1701
0 Memo #67
3/15/60
CALL UPON THE FOREIGN MINISTER OF ARGENTINA,,
MR. DIOGENES TAB AA
BY GOVERNOR STEVENSON AND RN.TOR BENTON
The Minister agreed with the Governor that most people think
that the United States Is more interested in Asia and in Europe than
in Latin America - but the Minister said that without the Marshall
plan, Europe would have been lost to communism. The Governor com-
mented that he wished more people in Latin America knew this. He
asked what the United States could say or do - to improve its rela-
tionship with South America. The Governor jestingly added talk
a lot about this and m not sure anyone is listening!"
The Minister replied, We need greater knowledge about the
United States and its attitudes. And you on your part need greater
knowledge about our problems - particularly, right now, on the ques-
tion of salted meat and we need a commission to study this whole
problem of meat, the meat problem between the United States and the
Argentine!" (We had heard a good bit about this at our briefing
session at the Embassy, and of course I was interested and amused
that the Foreign Minister brought up the subject almost immediately.
He is referring primarily to the $30,000,000 or $40,000,000 of raw
salted Argentinian meat which has only recently been excluded by the
United States. See my memo of our briefing at the Embassy.)
The Governor asked whether there was any continuing resentment
about the:, U.Ss ttltude towards Peron wh
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Minister said there was none. He smilingly compared our attitudes
towards Peron with the prement Argentinian attitude and policy towainds
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Paraguay. (The Minister was a relaxed and witty man throughout
The Minister said that the Argentine and the United States now
concurred in their joint judgment -of Cuba. The Governor asked about
Castro's new Ambassadors. The Minister said that the new Cuban
Ambassador was a young man "who has just arrived and I don't know
him!" He added that The Gueverra (?) is an Argentine Communist.
The Governor said that many In the United States had the
pression that Cuba is becoming communist and is about to use the
Cuban Embassies as communist outposts. The Minister said that he
and the Argentine Foreign Office had been warned about this and he
thought there was no danger that the Cuban Embassy would be effective
in Buenos Aires. The Governor said that he felt the real danger was
within Cuba itself. The Minister replied that the Mtkoyan visit
"was no accident and there must have been something in the back-
ground. He said that Mikoyan may visit the Argentine In May - but
he reassured us that the Argentine people were "pretty conservative
and were not hungry and that there is no danger".
The Governor asked about the Soviet broadcasting. The Minister
said that the short wave reception in the Argentine is poor. He
referred to other forms of propaganda. He said the "clandestine
propaganda" is far more dangerous.
(fel
The Governor then asked about the posibtlity of arms control
in South America a subject he brings up in most interviews and on
reports have touched many times before, The Minister
rep lecl, "Your views on this subject are well known". The Minister
continued, 'Our arms today are so old and antiquated that they serve
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Memo #67
3...
no useful purpose." T e-Governor asked whether the Minister hoped
for disarmament. The Minister agreed that this was possible in
South America. The Governor kept pressing him: what steps can be
taken? The Minister replied that Chile was taking the initiative,
that nine countries were discussing the matter. (See other memos)
The Governor asked whether the -arms expenses in the Argentine
could be reduced. The Mn&ter -Aid not Arrawchr this quest
BUt hack
trimliirwi-gamrAmei
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dr%as us .1.2. �
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tha* the Chile boundary d4 ute could e
arbitrated and will be arbitrated. He said flatly that Argentina
wanted arbitration. He assured us that the Argentine was about to
come to agreement with Chile. He added, "Whatever we cannot now
agree on, we want and desire to arbitrate". (This of course is a
very different report rrom the one we received from the two Ministers
with whom we visited in Santiago).
The Governor asked about his hope for agreement on the boundary
dispute between Ecuador and Peru. The Minister said this had to be
put off until after the Ecuadorian election. He said he had spoken
to Secretary Herter about this. He said he had suggested to Herter
that after the election, the four guarantors get together on this
boundary dispute. Can't they then see to it that it is settled? He
regretted that this dispute had become a "political football". The
Governor pressed for a more specific answer. The Governor asked,
"After the Ecuadorian election, then what?"
There was talk about the four guarantors demanding that "the
treaty" be lived up to. The Governor suggested that conditions had
�
changed, and that this seemed�to Invalidate the treaty. The Minister
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SOWS
stated that if the Latin American countries themselves cannot solve
such a problem - then the United States can help decide the answer.
He stated that war should be Impossible and he added, "The day the
United States refuses to sell a rifle or cartridge to South America -
on that day there will be even less a danger of war - and war between
Peru and Ecuador is unthinkable." (This remark, which was not (its-
cussed or
examined,
caused the Governor to say that he "had the feel
lig that we should get Britain and France to agree to terminate all
sales of arms to Latin America." And this in turn caused the Minister
to reply that it was "not as easy as all that" Giving the conversa-
tion a new twist, the Minister complained that Argentina's arms were
"old" - that Argentina needed new and up-to-date equipment
The Governor volunteered that there would be no trouble agree-
Ing on adequate equipment for the police. He said that the problem
is "offensive equipment". He spoke of the rumors we had run into
in Peru that President Prado had bought French jets on hIs curerit
visit to Europe.
Skepticism was expressed of Ithrushiahev-s proposed "disarmament
in four years". The Minister said that this made him skeptical of
the likelihood of refusal by the United States to sell arms
The Governor suggested that if s--11, West refused to sell arms
to South America, the "finger of suspicion would point against any
country which then bought arms from the Soviet bloc." The Governor
said that he favored a broad ngrgag%.
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pur-hase
ment rather than a unilateral policy by the United States The
Minister replied simply, and somewhat contradictorily in line with
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Memo #67 'Q
-5-
prior discussion, 'Every effort at disarmament is backed by the
Argentine." He said he considered the United States the great bul-
wark of Western hemisphere defense.
IVO
re-emphasized the fact that
the United States "had saved Europe and had blocked Communism".
But the Minister added that he hoped that the United States
would listen more " - would listen to advice from South America,
whether its good or whether it's bad, or whether the U.S. follows
it or doesn't. The Governor answered this last sally with the com-
ment, "Most emphatically I agree, and we've been at fault." The
Governor then thanked the Minister for what he himself had done in
changing the Argentine attitude towards the United States.
The Governor added that he's hopeful that the democratic ele-
ments will win out in Latin America's current political elections -
and that, if they do, there is no danger of a reversal of United
States policy towards South America. The Minister told the Governor
that the Democratic party in the United States 'most closely resem-
bles your Radical party!" He went on to assure us that relations
between the Argentine and the United States have hd.Ls never
better.
This caused the Governor to tell him that the Argentine can help the
United States in its relations with other Latin American countries
where confidence in the United States is less. The Minister replied
by stating that if the Argentine succeeds with its stabilization pro-
gram this will have a very b g effect on other Latin American coun-
t"fra
sot sh. ���
CaP
cmpime.01-_rA
f the courage of President Frondizi in signing con
tracts with the oil companies - and he stated that the results were
�
being watched carefully and that he hoped the results would show
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that a Latin American country can do business with the big United
States corporations "without being swallowed". He added further
that the 'present Argentinian policy will show that smaller countries
must help themselves - and that if they do not help themselves the
United States is throwing its money away in trying to help them.
The Governor asked about the Common Market. The Minister said
that the results in the first year or two would be 'little if any".
He explained that a lot of the countries 'don't know what the idea
means". He said that the night before the Common Market agreement
was signed, it almost blew up 'because some countries didn't under-
stand what it was all about". He said that the Argentine government
was very tough in pressing for agreement on the Common Market. He
believes that it will be three or four years from now before the
idea begins to pay off. The countries do not yet understand that
this is a "regional agreement" which does not prevent other economic
agreements to their own advantage.
The Minister warned us that he doesn't himself agre
w441-4.
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everything that Alessandri says on disarmament - but that in general
he is wholly behind him
fop *
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ARGENTINA Cat. # 702 ,
Memo #68
March 14, 1960
MISCELLANEOUS AND VERY RAMBLING COMMENTS ON IMPRESSIONS, EVENTS
AND ANECDOTES OF THE THREE OR FOUR DAYS DURING WHICH I HAVE NOT
HAD A DICTATING MACHINE - HAVE TAKEN FEW IF ANY NOTES AND HAVE
HAD NO INTERVIEW TO REPORT
At the cocktail party given in Cordoba by two former Governors
of the Province - in an attractive country house surrounded by vine-
yards -�I met Dr. Amelio Descotte. He has just founded the new
University of Mendoza. This is a private university founded under
the new agreement with President Frondizi which permits the estab-
lishment of private institutions. (Three universities have been
founded by the Church, I think by the JesulFs.) The University of
Mendoza is the only new university which is non-religious. He claims
for it many of the features of the UniversIty of the Andes in Bogota.
For instance the students are not on the General Council and don't
have any control over the university!
(In Buenos Aires, at lunch with Ambassador Beaulac, he told
me that an important project under Point 4, which he wants
kept confidential Is the reorganization of the University
of Buenos Ai es so that it will have full time professors
full time students tougher entrance examinations for stu-
dents - and, by impl cation a curriculum of higher standards.
Ambassador Beaulac says that when he was Ambassador to Chile,
he and his associate, Mr. Patterson o has been working
on La�e
n American problems since the
gram or 18 year
*
project at the Catholic Unixersity in Santiago - costing a
LW
1ffl..n.411Anyv
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established the University of Chicago
good bit of money and involving part time and full time
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Memo #68
residence of Chicago professors and the Ambassador says
that this project at the Catholic University has created
the best Economics Department in all Latin America.)
The University of Mendoza is just getting off the ground. The
next morning Dr. Descotte sent me a big batch of material which I've
turned over to Carleton Smith. (If he does not send It will Miss
Cronin please get it - with his interpretations, if possible.)
told Dr. Descotte of the meeting at Santiago under the auspices of
the Carnegie Corporation and advised
to develop pioneering proj-
ects which would warrant his application for funds to American
Foundations. He has established a faculty of law, and my understand-
ing Is that the faculty of medicine comes next. We were told that
there is an excellent medical faculty at the University of Cugo, the
State University in Cordoba which we visited.
At the University of Cugo, we were greeted by the rector and
escorted into a big wood-paneled room which is used for ceremonials
such as the awarding of diplomas - and the Governor answered the
customary questions from the faculty. He tossed one question at me,
"What role have universities played in the development of the United
States?"
I told the story of their importance since the founding of
Johns Hopkins in 1875 - followed by the University of Chicago - which
11turn stimulated .the development of the colleges, such as Yale,
Harvard and Princeton into great universities.
The Governor ancrI were given small pennants and gold medals.
found the pennant rather pathetic. I am enclosing mine. My under-
standing is that the original name of the university was Monserrat.
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Memo #68
The rector took us to the library, an imppessive looking vaulted
room. As with other visits to universities, the Governor made a
fine impression and I'm sure the visit was productive from the stand-
point of general relations of the United States with the intellectu-
als of Latin America - but we benefited but little from it.
We've been trying to p n down the salaries of professors and
we get varying reports. Seemingly a part time professor, and this
covers most on the faculty, gets about 00 a month. At some universi-
ties, no more than 20% of the professors, If that, are full time.
The reports on their salaries vary. My impression is that they earn
somewhere between $175 and $200 a month - with rare exceptions earn-
ing as much as $275 or $300. (This is one of the grave problems;
Ken Holland's organization will know about it.)
There are six National universities, all with free tuition.
See page 88, in the attached little pamphlet which shows the total
of nine universities and which seems to confirm my impression that
there are three private ones and all very new. This page shows the
total enrollment of all universities at 142,000 with 60,000 of the
total at the National University at Buenos Aires.
In Bariloche we visited.a fascinating Institute of physics.
I did not take ally notes but I picked up several pamphlets which are
in the hands of Dr. Smith for comment and translation. I make this
note to remind my office to follow through with Dr. Smith and to make
sure we get these pamphlets. This institute is training students in
physics approximately for the level of the Masters Degree. We met
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Memo #68
two American professors and one English professor assigned to it
Drs. Melvin and Connors, the latter of the University of Chicago
(Argon Institute) and a Professor Davies from Britain. We were
shown through laboratories and saw much technical equipment, some
of it from the United States but much of it from various countries
of Europe. Dr. Melvin explained to me how the Argentinian professors
work in this institute and at the Argentinian Universities - at very
great personal sacrifice. In contrast to their $200 a month or
thereabouts, they could, earn many times this In private industry.
They receive many tempting offers from outside the Argentine. I
gather that something like 50% of the Argentine's best trained sci-
entists and scholars in the natural sciences have left the Argentine
for jobs in other countries.
We heard a lot about the notorious Dr. Richter, an alleged
atomic physicist, whom Peron backed with $5,000,000 or thereabouts,
and for whom he built an expensive plant on an island nearby, now
abandoned. Dr. Richter Is now raising chickens. He seems to have
been a kind of modern Merlin, half-quack, but perhaps self-deceived,
who cast a spell over Peron and extracted large sums from him. Among
his exploits were the employment of beautiful German secretaries who
lived with him and his associates on his island.
We visited this Institute at the end of the summer session, a
0
special session wholly apart from the regular academic year. It I
housed in modern buildings which resemble quarters for officers at an
Army camp. We saw a Trice neat rooM with twin beds and
UA.� Lb .. ..... ow 4
ture for students, which resembled a room at an American secondary lo
sthool.
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Memo #68
Perhaps the Governor understood the equipment - but I didn't!
The professors were very proud of-their institute and of their equip-
ment and insisted on escorting us from room to room. The project is
manifestly a remarkable one, conceived nobly, dedicated to high ideals.
At Senora Ocampols cocktail party in her big 19th Century
family house near Buenos Aires, we met distinguished Intellectuals,
including Mr. Major, famous novelist, and Mr. Jorge Luis Borges,
famous short story writer. (New Directions is about to publish' his
first translation in English and he was greatly interested In New
Directions.)
Dr. Smith, I think it was, called Mr. Borges Chile's leading
writer. He is a professor of English and American literature and
his course is divided Into fifteen sections or units. I asked him
how they were divided between English and American literature. The
division is nine to six. I felt this very flattering to American
literature! He is greatly interested in Mark Twain and we talked
a bit about Huckleberry Finn. Some time back there was a review
in the New York Times' Magazine Section - I'd say three to six
months ago but no longer - a very lengthy review - which told the
background of the original publication of Huckleberry Finn, and
the critical assaults upon it. I hope this article can be located,
and I believe I tore it out myself and sett it to Mrs. Wilkins JDe-
cause I thought I woula ube it in a commencement speech together
th thch R=e141
ahrir
mate al about Huckleberry Finn. Will you please
send all.s article to Mr; Borges? His address is Maipii 994, Buenos
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rvietno #68
���
Aires, Argentina, I also told him I would send him a set of the
Britannica in return for some of his books. Please send off the set.
Mr. Major is a former Argentinian Ambassador to UNESCO. I did
not realize that the Latin countries send ambassadors to UNESCO. He
agrees that UNESCO has not remotely lived up to its potentialities.
told him this would be impossible until UNESCO went regularly on
the agenda for discussion at meetings of the foreign ministers.
The protocol hangs so heavy that I can cut it and I occasion-
ally get fed up with It and so told Ambassador Gaviolat the protocol
officer from the Foreign Office who met us at the border and has been
with us ever since. I told him I wouldn't attend another dinner
where I sat between two men neither of whom could speak a word of
English. He prom.l.sed me that at the next dinner I would have one
next to me who could speak English. I told him I demanded two.
At dinner in Mendoza, given by the Governor, I sat between the
attractive and charming Vice-Governor, Sr, Pedro L. Luja, a full time
politician who was charged with being a Communist by the representa-
tive who was accompanying us from the American Embassy, (a 43-year
old Pennsylvanian named, Ellwood Rabenold) and Dr. Rodolfo Calvo,
President of the Chamber of Deputies. Neither knew any English.
Dr. Calvo Is a quiet spoken young physician. Through the inte-rpretor
sitting behind us, I asked him how it happened that as a physician
he had gone into politics. I asked him why he hadn't left politics
up to the lawyers as the doctors do in the United States. He replied,
"The lawyers all sold out to the generals and this brought the physl-
clans Into po itics!"
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Memo #68
And the next day in Cordoba, I again bat between two who
couldn't speak a word of English - the Brigadier General in charge
of the air base In Cordoba, and the Governor of the Province whom we
were told iS a potential candidate for President. The latter is a
big tough strong minded man who walks with a limp, handsome and
earthy. He devoted most of his time to talking to Governor Steven-
son. I talked to the General about the interest of the Air Corps
4 lom 4-1m dem.^^,m^m.vr ^4". ImeN ArelPs=.1"4-4,mAm
%et %at lo .11 16.00 II j %AO 4. %.0 41 %or Z-1 1. it) �044o 1. 94.4, 4441. 14 4 N4.0�
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responsible for vehicles, as the army was for steel. As a conse-
quence, the Army owns the steel mill here which was financed by a
$6o,000,000 loan from the Export-Import Bank.
(1 chatted with the Ambassador about how the Export-
Import Bank loan to Chile for a steel m113 - at
$80,000,000 as I remember it - had been worked out
es
that private ChIlean c...tizens own the mill -
whereas in the Argentine the mill is owned by the
Army. The Ambassador said that the loan was under
the regime of either Assistant Secretary Miller or
Assistant Secre� ry Holland - while Nufer was here
as Ambassador - and that it has been criticised
first because It was to the�Peron government and
secondly because it has built up "statism" in the
form of ownership by the Army.. Ambassador Beatilac
�
says there isn't any private capital in sight any-
where to take the mill over and that it would be
qmpossible to turn it over to foreign interests -
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but he is hopeful that the mill will ultimately find
its way into private hands.)
Because of the Air Corps' power In the field of vehicles I dis-
covered in our tour through the Kaiser plant that it owned 18% plus
of the stock interest In this important company. Mr. McCloud, manager
of the plant, told me that the Air Corps itself manufactures air-
planes, motorcycles, and much else. The enormous Importance of the
government here In the economy is brought out in some of the charts
which will accompany my report on our Interview with the Minister of
the Economy, Alvaro Carlos Alsogaray.
I tried to talk to many of the people I've met about Peron and
the experiences of the recent past - and of course it's not easy.
Everyone seems to agree that Peron is all washed up; that even his
followers do not want him back; but the enormous impact of his follow-
ing is everywhere to be seen. The walls on all sides are labeled with
the admonition, "Vote Enblanco." Because the Peronist party is ille
gal, it has no candidates. The method of protesting is therefore to
drop in a blank ballot.
One of the most interesting points I've picked up is that voting
in the Argentine is compulsory. People are fined if they fail to
vote. There Is believed to be about a 10% normal 'blank vote" - peo
pie who don't know, or don't give a damn, and who merely go to the
4:
polrs and drop in a ballot in ore:der to avoid the fine. The belief is �
� that the surplus over and above tqls 10% is the Peronista or Communist.
6 ft
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Memo #68
vote. My understanding is that the total blank vote in the last
election was some 21 or 22% and there are those who think it will go
up to 30% in the coming election at the end of the month.
Everybody in the Argentine has
'I'-,
carry an identification card.
This Is known as a "Voleta." This card is stamped to show that the
vote has been cast. I gather it is stamped to show a marriage certif-
icate and for many other things. Mr. McCloud is going to send me a
copy
"
CI 4- eN /* At% .0�N fk% T thought we ought
told GovertioL-
to pass a law in the United States compelling everyone to vote - that
it would be of great help to the Democrats!
At Cordoba we were met at the airport by Mr. McCloud who runs
I.K.A., known familiarly by these initials, the Kaiser plant which
was begun In 1955 and which began to turn out vehicles one year later.
Thus far it has produced 70,000 vehicles of fifteen types - Jeeps,
tractors, station wagons, et cetera - with 30,000 produced last year
and 40,000 scheduled for this year. This is the biggest industry in
the Argentine with a current volume of about $100 million. Ford,
General Motors and Chrysler are now opening plants here. The average
age of the vehicles on the highways Is between 15 and 20 years. There
are 600,000 such in this country with a population of 21,000,000.
When the country had 10,000,000 population, there were 500,000. Mr.
McCloud argues that as the economy becomes stabilized, and its roads
are built, there is an enormous unfilled demand. He thinks the pres-
ent slack in the market is for at least 1,000,000 vehicles. Some 85%
0
of all cars sold last year in the Argentine were from his plant -
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the Import duties are very stiff indeed - and of course he anticipates
a much smaller percentage of the market as the new plants open - but
he anticipates a rising production. He says that today only 10% of
his materials are being imported, with 90% supplied domestically,
don't think that's quite right. I think he said that 10% of his
sales price consists of monies paid for imported materials - thus 90%
of the sales price remains in the Argentine. He has of course helped
many suppliers to develop.
I am attaching his application to the Export Import Bank for a
loan. This will tell much more about this remarkable enterprise.
Mr. Kaiser failed with his Kaiser-Frazer car in the U. S. and
was left with lots of obsolete dies and equipment. An important
industrialist In New Orleans whose name I think was Morrison - but
I cannot remember it - a man who deals heavily with Latin America -
suggested to Kaiser that he take his old dies and equipment from
Willow Run (the plant was later sold to General Motors) and 00 into
business in the Argentine. Mr. Kaiser, or his son, Edgar, I did not
clearly understand which, came to the Argentine with McCloud who was
then only 36. McCloud was left here and in his five years this as-
tonishing plant has developed. The ownership is 32% in the hands of
Kaiser Industries, the top holding company of the Kaiser industrial
complex - 5% in the hands of a Cleveland company, an industrial engi-
neering company which built the forge plant associated with the
Kaiser plant in Cordoba, and which furnished all machinery for the
forges- 1 n the hands of the Air Corps - with various other inter-
ests which I forge but the importaqt point Is that 51% of the total
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Memo
-11
outstanding stock is owned by Argentinian investors. McCloud claims
that the Air Corps put in money for its 18% on the same basis as
other investors. The Air Corps was the co-ordinator of vehicles
under Peron.)
The plant is 1,600,000 feet, and Kaiser Industries, including
its Buenos Aires office for sales and finance, employ 6,000 people.
There is a waiting list of 30,000. The union is strong. The men are
paid by the week. They are paid for 48 hours and work 44 hours. The
average man on the line earns about $22 a week while men in the forge,
doing more skilled and more dangerous work, earn about $25 or $26.
This latter group has been trained by men sent down from Cleveland
during the last five or six months. We saw them handling the hot
metal with their forceps, and the great enormous 'hammers", seemingly
with great skill. Mr. Smith, a director of Kaiser Industries, who
represents the Cleveland interest, told us that these men learned at
least as fast as American workman. He said that within another year
he thought their productivity would exceed that of American workmen.
He said they tried harder and were more interested.
In Mendoza we had received complaints that the Argentinians
were not doing their work in the vineyards, - that they would work
for three or four days and when they had enough money for their food
and their wine, they would quit. These complaints don't seem to apply
to the workmen for an American firm like Kaiser. Here is an interest-
ing angle. It is in the American firms where the unions try to be
most active. Yet the American firms seem to provide leadership and
,direction and incentives which make theften want to work. I had
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Memo #68
another report confirming this from Mr. Train, growing out of the
recent experience of American firms In building the natural gas pipe-
lines.
Mr. McCloud showed us two new models. We had driven to the
plant In a heavy Kaiser car with natural leather upholstery In red.
He's about to bring out a smaller model, with a European body, weigh-
ing one thousand pounds less. And a still smaller model, made from
Italian dies and with Italian body, weighing two thousand pounds less.
The background on these new models is in the application to the
Export-Import Bank. I asked him why he was bringing out the Italian
model and he explained that he was able to go to Italy and buy the
dies, which originally cost $4-1/2-5 million, for $750,000. The
Italian company was about to bring out a new model. But the old
model Is plenty good enough for the Argentine!
The Board of Directors only has three Americans. Edgar Kaiser
Is Chairman, and McCloud is President. Mr. Smith must be the third.
Mr. Henry Kaiser was scoffed at by American business before the
war who objected to his close ties with the government; he was so
frowned upon by business during the war that it was unthinkable for
Paul Hoffman and me to put him on the Board of the CED, though we
lunched with him once with this in mind; and of course he has received
widespread publicity for his failure in the automobile business; but
here he is setting the Dace in the Argentine - with the three big
automobile companies now belatedly following and copying. Mr. McCloud
says that the value of the stock has gone up 50% in real terms,
after discounting the inflation). McCloud is a stocky, confident,
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13-
tough engineer. He looks like a good man to tie to. He has head-
quarters in Buenos Aires and visits Cordoba a day or two a week. He
started with 150 American associates and this is now down to 35. He
expects to reduce it still further. This seems a good example of
American enterprise and industry in cooperation with foreign capital
and talent. This is the kind of enterprise that Mr. Alsogaray, Minis-
ter of Economics, is trying to encourage.
(1 was later told by Hickman Price In
-0.rla,7i1 that in capitaliz-
ing on his dies and equipment, which gave him the 32rib, Interest in
Kaiser Industries of the Argentine - Mr, Kaiser "wrote up their real
value 17 times." Mr. Price was formerly overseas manager for Kaiser's
Toledo Company, Willy's Overland.)
At the luncheon in Cordoba I met Father Amadeo, Vice-Rector of
the New Catholic University of Cordoba. Father Amadeo, a Jesuit, is
the brother of the Argentinian representative to the United Nations.
We chatted briefly and he explained the efforts of his University to
raise the standards of the curriculum. The University has been
founded under the new agreement with President Frondizi, permittIng
the Catholic Church to start universities. He speaks good English,
wears a loose fitting black and dreary Jesuit robe, and is well ac-
quainted with the Jesuit universities in the United States. He ex-
plained that only the Church, outside the State, was in a position to
al�OF .11.4�0,
vow.
Sitting at my left in Buenos Aires at the small and intimate
*
formal luncheon given for the Governor by the President was Mr. Mariano
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-14-
Wainfeld who tells me that he has been the political adviser to the
President for 15 years. He sounds like one of those men with a
passion for anonymity. He's confident on the outcome of the coming
election. Of course only half of the seats are up. The Argentinian
Constitution of 1853 is closely modeled on that of the United States.
It was suspended by Peron but it has been reinstated. The government
now controls about 2/3 of the seats. Mr. Wainfeld says they will lose
seats in 111.mnArNr7n and elsewhere - but will still have a margin. Of
course the President is being bitterly criticized for his austerity
program and for his alleged "treachery". He ran with the support
of Peronistas and Communists, and is now following a policy which
they deem to be directly opposite to his promises. This policy will
be more clearly brought out in the memorandum I'm dictating on our
talk with Mr. Alsogaray, the Minister of the Economy.
At the dinner last night given by Ambassador and Mrs. Espil -
I sat next to Senora De Sanchez Ella. She's the sister of the famous
publisher and editor of La Prensa who unfortunately left town a day
or two back and thus we won meet him
She says that La Prensa is owned by her brother and her mother.
She compares her mother to "a national monument'. Age 85 her mother
drove up in front of La Prensa at the peak of the Peron regime, when
Peron expropriated La Prensa, got out of her car and delivered a stump
This was reported in TIME. She says her other brother, a
younger one, is handsome and attractive, and doesn't like to work.
She lives with her mother and takes care oP her. She a most attrac-
tive woman of 60 and she reminded me.ofvClare Luce - slender and svelt
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Memo #68
with a beautiful figure and lovely gray hair, very few lines in her
face, excellent English and a delicate feminine air.
She surprised me by telling me that none of the people At this
very fashionable dinner party knew Peron. She said her mother met
him once, before he was the Dictator, when he was a Minister and was
working in the cause of some charity on which her mother was working.
She is persuaded that the present stories are correct that
Peron wants to get to Switzerland to put his hands on large sums of
money left in the Swiss banks by Eva Peron. The Ardoentlnian multi-
millionaire, Mr. Benberg, whose great breweries here have just been
restored to him, and who she says is the only Argentinian with a true
international fortune - told her that under Swiss law, unless money
was left in a "numbered account", the inheritor had to be fully dis-
closed. No, Peron can't get the documents from the Argentine govern-
ment to authorize the release of the numbered accounts to him.
Frondizi is on the spot on this one. J. H. has the news story on
this. Peron doesn't want to be disclosed. She told a long story
about two great chests of gold sent by Eva Peron on an Italian ship
from Buenos Aires to the French Riviera, with armed guards in attend-
ance, which was destined for the Swiss banks.
Stories about Peron are everywhere. Senora de Sanches Ella says
that one reason Eva Peron 's jewels brought such disappointing prices
In Buenos Aires was that the people here did not want to be associated
with their purchase. I commented that I thought the results would
have been quite different if the jewels had been auctioned in New York
or London or Paric. I asked her whether the jewels were themselves
attractive and she agreed that they were.
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Memo #68
Of course stories about experiences under Peron are on all
sides. Senora de Sanchez Ella could not get out of the country on
her own passport She went out using the passport of a sister. But
when she returned, nobody did anything to her. Peron used torture,
she told me, and there were a few charges that some people died after
the torture. But he did not kill many people.
T am sure if this memorandum weren't far too long and if
weren't persuaded that most
initely - and make it three
the chance that some of the
some of the flavor of these
article.
Dictated in Buenos Aires
Attachments
arh
of it is useless, I could keep on indef
times the length! I'm dictating it on
material will be helpful to me in giving
days in the Argentine for the Yearbook
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ARGEti
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la A
'LAMM
V IS IT WITH PROFESSOR GERMAN I
BY SENATOR BENTON
(Should be read in conjunction with Senator
Benton's memo on Ills meeting at the University
of Buenos Aires with Professors Caviolo, Mor
Lngo and Chapman.)
_ -
�
Cat, #
Memo
Professor Silvert made very few suggestions on people with
whom we should visit. One he urged upon us was Professor Gino Ger-
mani, head of the Department of Sociology at the University of Buenos
Aires. I received a very different pveion of the ITnivgmers itv and
Its students from Professor Germant than from others with whom I've
been chatt ng. In the first place, Professor German, manifestly a
most intelligent and thoughtful man, says that not only is he a full-
time professor but so too are most if not all of his department. I
think he has some 40 members of the department, though I cannot now
exactly remember. But most of them occupy two jobs - one in teaching
for which they are paid, and the other in research for which they are
not paid. Most are quite young, under 30 in most cases. His depart-
ment is a new department. The university has had a so-called Chair
of Sociology for decades, perhaps for 50 years or more, but the Chair
has recently been broken down into several silh-Aiv tones
Proressor Germani defends the students in his department. He
says that the visiting professors from abroad say that his students
stack up well with students in other countries.
He is hopeful for American support for research projects.
The Rockefeller Foundation has just provided $35,000 for a study of
the impact of immigration into the Argentine. He says that from 1900,
to 1925 seven out of ten people living In Buenos Aires were foreign
borni
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Memo #69
From some other source, he has funds with which he is launch-
ing a survey into immigration into Buenos Aires from the rural areas
of the Argentine.
Those who came from Europe, he says, were mostly leftists,
socialists, Marxists, etc. He says that this hard-core group from
Europe prevented the development of a good, legitimate left wing or
radical party of Native Argentinians. When the native rural elements
moved to Buenos Aires they did not find such a native. party to join
A million and a half such rural immigrants have moved to Buenos Aires
since 1930 - and have not found a healthy democratic left wing Argen-
tintan party waiting for them. He thinks this must be understood for
a comprehension of what's happened In Argentinian politics, including
Peronismo He warns me that Argentinian politics are Machiavellian"
(Speaking of the Rockefeller gift he said that present laws
discourage gifts from internal sources including rich individuals,
he is referring to the inheritance laws and other laws.)
The "internal commotion" now going on he described by the
word "contintes". He says that strong military action against the
small bombings and other disorders may Increase the number of blank
ballots on March 27. Otherwise unless these blank ballots are pro
yoked in some such manner, he thinks they will not exceed 30 percent
Like General Aramburu in his statement to Governor Stevenson Frau.
Lessor Germani favors proportional representation. Also like him
he favors the legalization of the Communist and Peronist parties.
This latter would put an end to the blank ballots and would bring
es everything into the open. Professor Germani sa7s that by far the
most imper ant issue today in the Argentine is to maintain democrat
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Memo #69
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Institutions. He qualifies this with the phrase, 'At least the
semblance or fiction of them".
Professor Germani tells me that he thinks that Ito percent of
the Argentinians ShOUl
4.4
thow%Acxj
114/14121 Cara
sib led as "middle class" � But
he immediately adds qmp This group was at least 25 percent in 1900".
However, he adds further, the middle class group today in Chile is
only 20 percent.
Professor Germa i teil5 me that- the salaries of university
professors are larger than those previously reported They are paid
13 months for 12 months tenure. Adding everything together, the
salaries for the full-time professors run about $300 a month. When
asked him about the report at the Bariloche Physics Institute,
that the salaries run only to $200 a month, he explained that this
was an Institute and not a University. When I asked him whether a
professor could live on $300 a month, he said this depended on wheth-
er he had a satisfactory house which he had secured early enough and
at a reasonable price. He says that if the professor has a house, he
can get along on the $300 which is at least comparable to twice
that amount in the United Statese
Professor Germani speaks of Frondizi's problem because he
ran on one platform and with one policy, and Is now supporting anothm,
er. He suggests that Frondizi is just using Alsogaray for his own
temporary purposes, (Machiavellian) I was not clear whether he was
in sympathy with present government economic policies but I was
very clear that he was not wholly in sympathy. His fingers are badly
a crossed though he Is acutely aware of the grave dilemma and the
acute problem caused by the inflati9n.
0
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41
AROENT INA
VISIT WITH PROFESSOR GERMANI
BY SENATOR BENTON
(Should be read in conjunction with Senator
Benton's memo on his meeting at the University
of Buanos Aires with professors Caviolos Mor
i2E2.222A.211Pmarl.:
#1703
emo
Professor Silvert made very few suggestions on people with
whom we should visit. One he urged upon us was Professor Gino Ger-
mani head of the Department of Sociology at the Unive slaty of Buenos
Aires. I received a very different impression of the University and
its students from Professor Germani - than from others with whomI've
been chatting. In the first places Professor Germania., manifestly a
most intelligent and thoughtful man, says that not only is he a full
time professor but so too are most if not all of his department.
think he has some Ito members of the department, though I cannot now
exactly remember. But most of 'them occupy two jobs - one in teaching
for which they are paid, and the other in research for which they are
not paid. Most are quite young, under 30 in most cases. His depart-
ment is a new department. The university has had a so-called Chair
of Sociology for decades perhaps for 50 years or more, but the Chair
has recently been broken down into several sub-divisions,
Professor German' defends the students in his department. He
says that the visiting professors from abroad say that his students
stack up well with students in other countries.
� He is hopefu.s. for American support for research projects.
The Rockefeller Foundation has just proiided $35,000 for a study of
the impact of immigration into the Argentine. He says that from 1900
to 1925 seven out of ten people living in Buenos Aires were foreign
born.
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Memo #69 2
From some other source he has funds with which he Is launch-
ing a survey into immigration into Buenos Aires from the rural areas
of the Argentine.
Those who came from Europe he says, were mostly left sts
socialists, Marxists, etc. He says that this hard-core group from
Europe prevented the development of a good, legitimate left wing or
radical party of Native Argentinians. When the n.ftimAv4c1) rural elements
moved to Buenos Aires, they did not find such a native party to join.
A million and a half such rural immigrants have moved to Buenos Aires
since 1930 im and have not found a healthy democratic left wing Argen-
tinian party waiting for them. He thinks this must be understood for
a comprehension of what's happened in Argentinian politics, including
Peronism. He warns me that Argentinian politics are "Machiavellian"!
(speaking of the Rockefeller gift he said that present laws
discourage sifts from internal sources including rich individuals;
he is referring to the inheritance laws and other laws.)
The "internal commotion" now going on he described by the
word "contintes" He says that strong military action against the
small bombings and other disorders may increase the number of blank
ballots on March 27. Otherwise, unless these blank ballots are pro-
voked in some such manner, he thinks they will not exceed 30 percent.
Like General Aramburu In his statement to Governor Stevenson, Pro-
fessor Germant favors proportional representation. Also like him,
he favors the legalization of the Communist and Peronist parties.
This latter would put an end to the blank ballots and would bring
everything into the open. Professor Gemara says that by far he
�
most Important issue toda in the Argentine is to maintain democratic
�
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0
Memo #69
Institutions. He qualifies this with the phrase, 'At least the
semblance or fiction of them".
Professor Germani tells me that he thinks that 40 percent of
the Argentinians should today be classified as "middle class". But
he immediately adds "This group was at least 25 percent in 1900".
However, he adds further, the middle class group today in Chile is
only 20 percent.
Professor Germani tells me that the salaries of university
professors are larger than those previously reported. They are paid
11 months for 12 months tenure. Adding everything together, the
salaries for the full-time professors run about $300 a month. When
asked him about the report at the Bariloche Physics Institu
that the salaries run only to $200 a month, he explained that this
was an Institute and not a University. When I asked him whether a
professor could live on $300 a month, he said this depended on wheth-
er he had a satisfactory house which he had secured early enough and
at a reasonable price. He says that if the professor has a house he
can get along on the $300 which is at least comparable to twice
that amount in the United States,
Professor Germani speaks of Frondizi's problem because he
ran on one platform and with one policy, and is now supporting anoth-
er. He suggests that Frondizi is just using Alsogaray for his own
temporary purposes (Machiavellian!) I was not clear whether he was
In sympathy with present government economic policies - but I was
very clear that he wa6 not wholly in sympathy. His fingers are badly
crossed! - though he is acutely aware of the grave dtlemma and the
acute problem caused by the Inflation.
l
�
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ARGENTINA
Cat. #1703
Memo #69
March 17, 1960
INTERVIEWS DEALING WITH THE UNIVERSITY OF BUENOS AIRES AND ITS
STUDENTS - BY SENATOR BENTON
(Meeting at the University of Buenos Aires with three
professors: Professor Gavioli, physicist, brother of
Ambassador Gaviolt who represents the Argentinian
government in escorting us; with Professor Morinigo,
philologist, who is about to go to Urbana for a spell
as a visiting Professor at Illinois; and Dean Chapman
of the School of Business Administration and Depart-
ment of Economics.)
I visited with three professors of the University while*
Governor Stevenson conducted the kind of affair in a large adjoin-
ing room - to which we've grown accustomed in our visits to the uni-
versities. (Several score of professors and students ring the room
and ask questions of the Governor.) Because we have learned so little
from such meetings, we have found them in general such a waste of
time, I asked Ambassador Gavloli to arrange a private visit for me
with three or four outstanding professors who could speak English*
wanted to talk to them, among other things, about the damning re-
ports which I've had in the last 36 hours from Mr. Penedo and Mr.
Patterson about the University of Buenos Aires and its students.
Professor Gavioll spoke with passion about the general worth-
lessness of the student body. He says there are 68,000 students "and
only two or three workers." He spoke of his own training in Germany
and at Johns Hopkins as a young man. He said, Many of the students
were so poor they could only afford to get their hair cut every three
months, yet they attended classes and they worked." He says that the
Buenos Aires students, within six months after entering, feel that
they have a right to a good living - that their objective is not to
�
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ARGENTINA
Cat, #1703
Memo #69
March 17, 1960
INTERVIEWS DEALING WITH THE UNIVERSITY OF BUENOS AIRES AND ITS
STUDENTS - BY SENATOR BENTON
(Meeting at the University of Buenos Aires with three
professors: Professor Gavioli, physicist, brother of
Ambassador Gavioli who represents the Argentinian
government in escorting us; with Professor Morinigo,
philologist, who is about to go to Urbana for a spell
as a visiting Professor at Illinois; and Dean Chapman
of the School of Business Administration and Depart-
ment of Economics.)
I visited with three professors of the University while
Governor Stevenson conducted the kind of affair in a large adjoin-
ing room - to which we've grown accustomed in our visits to the uni-
versities. (Several score of professors and students ring the room
and ask questions of the Governor.) Because we have learned so little
from such meetings, we have found them in general such a waste of
time, I asked Ambassador Gavioli to arrange a private visit for me
with three or four outstanding professors who could speak English.
I wanted to talk to them, among other things, about the damning re-
ports which I've had in the last 36 hours from Mr. Penedo and Mr.
Patterson about the University of Buenos Aires and its students.
Professor Gavioli spoke with passion about the general wo h
lessness of the student body. He says there are 68,000 students "and
only two or three workers." He spoke of his own training in Germany
and at Johns Hopkins as a young man. He said, "Many of the students
were so poor they could only afford to get their hair cut every three
months; yet they attended classes and they worked." He says that the
Buenos Aires students, within six months after entering, feel that
s they have a right to a good living - that their objective Is not to
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o#69
learn, but to get money for themselves - that all of them are well
dressed.
He said with a sweeping gesture "These children are being
trained to become social parasites and to take over the government
He reports that one-third of them right now are getting money in
various forms of grants and scholarships from the University. Another
one-third have government jobs; about one-tenth have private jobs.
The students have almost universally become "smart boys. They feel
that society owes them a living. In Uruguay, says Professor Gavioli�
the situation is even worse; in Brazil It is better.
(1 am reminded of Yale in my undergraduate days when most of
the students felt that the smartest trick was to do as little work
as possible - 'to get by" with minimum effort - when the general goal
was to avoid the professors and the taint of intellectual endeavor.
However, attendance at class was compulsory and indeed so was attend-
ance at Chapel!)
Professor Gavioli complained bi,.terly because it is impossible
to get rid of students who are no good. He's just failed one student
for the sixth time and expects him to enroll again for a seventh try.
He complains of the fact that there is no compulsory attendance.
Professor Morinigo smiled tolerantly and indicated that he was
at least In partial disagreement. He spoke of 2,000 students who are
teaching the primary grades and he said, "This takes work." Contra-
dicting himself, Professor Gavioli agreed and commented, 'These are
the best students."
0
-8Professor Gavioli says thb.t the job in higher education that
must be 'done In the long range interest of the Latin American
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countries cannot be done through the State universities He himself
is trying to start a private college and is seeking 65 million pesos.
He spoke with enthusiasm of a new 'Technical Institute of Buenos
Aires" which is privately controlled and which is being founded this
year. When he gets his private college roiling, he will later add
special graduate departments in agriculture, metallurgy, and hope-
fully, in economics.
Professor Gavioli condemned the new Church universities or
colleges. Three have been started under a new law in which the
government has agreed to "recognize their degrees." The recognition
of the degree is essential for a career as a teacher or lawyer. As
long as the government refused such recognition there were no Church
universities; the students wouldn't attend. Professor Gavioli said
the Church wants to train its own lawyers to defend its viewpoint;
that the teaching at these universities is Thomas Aquinas - (Mr.
Hutchins please note) - together with much outdated material - with
no chance NP any training for engineers, or in science and technology.
(Professor Gavioli plans no law or medicine at his new college!)
Dean Chapman Joined us to tel.'. us that Dean Courtney Brown of
Columbia was here in Buenos Aires visiting the University last week.
Dean Chapman is working out a project with Columbia along exactly the
lines I described in my report of my interview with Mr. Patterson,
the kind of project which Mr. Patterson developed In Santiago for
the Department of Economics at Catholic University. This project is
to cover the development of faculties in business administration and
government administration, or at least one of them. These are two of
di
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Memo #69
the six six fields Mr. Patterson wants developed as major departments or
schools. Sixty million pesos have been allocated for the U.S. for a
program in five fields and Dean Chapman expects at least one-fifth
of this sum - and perhaps two-fifths if he is prepared to move ahead
while others aren't. This money will come through Law 48o, growing
out of the sale of surplus farm commodities, as I understand it.
Dean Chapman approves enthusiastically of the Santiago plan.
He already has four of his students or professors at Columbia in
Business Administration. They've agreed to return to teach for a
minimum of two years. I told him that I had told Mr. Patterson that
felt that engineering could be well taught - and that anybody who
went to Cal Tech and took his degree in engineering certainly should
have the educational equipment to develop as a good engineer. (Pro-
fessor Moringo's son is 24 years old and an Instructor in physics at
Cal Tech and won't come back to the Argentine.) But I had told
Mr. Patterson that I questioned whether Business Administration could
be taught with equal skill - and equal hope of results. Dean Chapman
said that one of his four men took this attitude when he left for
Columbia, to the point where the Dean wondered why he'd given him the
Peilowship. But he came back with his head hanging, apologetically,
saying that he'd learned a lot. I told him of my recent conversation
with Ted Yntema, who tells me the reasons the best schools of business
in the United States are now doing a good job is that they are teach-
ing the liberal arts to students who failed to learn them at their
undergraduate colleges
in other words they are teaching mathematics
and English composition and science and economics. Dean Chapman
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Memo #69
seemed to agree. Professor Gavioli later told me that most of the
students in economics are at night school,
(Mr. Frondizi told the Governor and me that the University
of Buenos Aires only had five full time professors when
he took office but now has more than one hundred, includ-
ing a large number of full time professors and associates
in the Medical School; He's aiming at a full time faculty
in the Natural Sciences; but he said that he was an ex
porter of professors, most unhappily; Cuba and Venezuela
pay much better salaries and have taken many of his
a
professors, wholly apart from the erosion elsewhere.
I told the three professors that if I were trying to remedy
the financial plight of the Argentinian universities, and hoped to
get money from private individuals, one of the first things to which
I would apply myself would be a change in the Argentinian law which
compels everybody to leave four-fifths of his total estate to his
children, whether he wants to leave money to his children or not.
The idea of repealing this law struck the three as novel, Mr. Chapman
took to it at once. At breakfast the next morning with Professor
Clan Caglini regarded by many as the leading scholar in the field of
electronics I laughingly told him of this part of the conversation
and it amused him greatly until he started to think about it when he
said that he thought there was a lot to it. I told him that the big
U.S. foundations were more likely to help universities that were try-
ing to help themselves and that if I were the Ford or Rockefeller
Foundations thinking of giving money to the University of Bu nos
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Aires, I would at least take a good look at this law! Its repeal
would hardly fail to stimulate bequests.
The foregoing material must of course be interpreted together
with my two previous memos here In Buenos Aires dealing with the
University and its students - and also together with Mr. Silvert's
memorandum which I've mailed - and with other material which I am
assembling from Mr. Patterson and elsewhere. Professor Gavioll is
sending some material. Other interviews are to follow which deal
with the University.
Dr. Ciancaglini, the brilliant young physicist whom we met
at the Atomic Institute at Bariloche, came in for breakfast and
described his life to me. He works all day at the Atomic Energy
Institute, from early morning until 5:30. He then goes to the uni-
versity and works until 10:00 o'clock. He has two children whom he
never sees. He tries to keep up with his field of study on Saturdays
and Sundays. He's been able to take no vacation this year. He re-
cently described the financial problem of the scholars, (which I
covered briefly - growing out of my talk with Professor Melvin at the
Bariloche Institute) to President Frondizt of the Argentine. He
thinks President Frondizi understands it. He told Frondizt that
there was no hope for real progress or recovery in the Argentine
unless the scientists and universities were supported. The President
says that this must wait along with most everything else. Professor
Ciancaglini is hopeful The government is beg nning to give a bit
more help to the association of scientists.
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Memo #69
Dr. Clancaglint says that electronic development .1.8 starting
here in small ways - "because the manufacturers save money.
Most importantly, Professor Ciancaglini does not agree with
Professor Gavioli In his wholesale and blanket indictment of the
students. Professor Ciancaglint says that "perhaps my students in
electronics are better, but certainly lots of them are workers."
He admits freamly th=i- 4-1-141 entrance
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points out that the students have received very bad preparation in
the secondary schools. (This was the argument used by the Public
Relations man at the University of Mexico.) He admits that there
should be techniques by which they could be dropped and winnowed out.
He concedes that the standard of the curriculum needs a major face-
lifting. And of course he Is unhappy about the large numbers of
students who are "the smart boys" as Professor Gavioli described
them, and who are in for the free ride.
Nor does he share Professor Gavioll's views that the only
constructive course is to start a new private university. He thinks
the University of Buenos Aires can be built up and should be built
up. However, he agrees that the starting of private universities,
which can help set standards, would be greatly beneficial to the
country.
I have three pieces of literature in Spanish which have ar-
rived from Professor Gavto 1 and I'll see if I can get an understand
ing-of them from Dr. Smith
If I-can't, and I deem it to be unlikely
that I can I shall send them along for perusal in New York. m
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persuaded that I want to devote a major section In my article to the
role of the Latin American universities and their potential impor-
tance. Many of these quotations from the professors will be helpful.
* *
Last night at the dinner given by Minister of the Interior,
Mr. Alfredo Vitolo, I sat next to Rector Frondizi of the university.
He, of course, thinks that Mr. Pined�, Professor Gavioli and Mr.
Patterson are much too tough on the students. Indeed he takes the
position that he likes to have the studmts elected to his governing
Council. He says this gives him a chance to persuade the students
on the policies of the university. They in turn persuade the stu-
dent body. He says, "I would much rather have them inside, working
with me, than outs de working against me." I told hi. that I thought
this probably depended on the skill of the Rector - that I could see
that he had to have great political talent! I report this to show
that the problem here is two-sided. A great student body of 68,000,
the size of the student body at the University of Buenos Aires, has
political influence.
's a threat to the politicians as the gov-
ernor of one of the provinces in Colombia pointed out when he ad-
vocated unabashedly the legal and political role of the students at
the Colombia's universities. Further, the student body is frequently
very healthy politically- it will stand up against dictators and will
fight in the streets on occasion, against a leader like Peron - when
other groups may be supine. Rector Frondizi's point shows that the
argument about the legal power of the students is a two-sided one.
I of course, favor the structure at the University of the Andes,
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Memo #69
in Bogota described in the memorandum of our visit there. But if a
Rector is politically talented and can handle the students, I can
Imagine times and places where it might indeed be better to have them
on the council than to have them outside fighting.
I talked to the Rector at some length about our EBF chemistry
and physics series. He is deeply interested and wants to know more.
I told him that It might be that the Ford Foundation might help him
secure prints of the series, particularly if he would lay out some
kind of experimental teaching program. He wanted to know if they
were suitable for freshmen in college and I told him I thought they
were made for students of 16, 17 and 18 years of age. I suggest that
Mr. Ladas or Mr. Mitchell write him at once and that our representa-
tive be in touch with him at the right time. I told him that I
didn't think the cost would be too great to put them into Spanish.
Ambassador Beaulac was sitting on the other side of the Rector.
The three of us talked about the future development of television
here. R ght now it is so new that most anything can be done with it.
told the Rector that if I were he, I would explore the possibility
of taking on a TV station for the university and operating it on a
subscription basis. This seemed to appeal to him greatly. I gather
he's going to look into it told him that available teaching films
would probably provide programs of a couple of hours a day, at least
In the early period, if he could get the money for the Spanish sound
tracks
�
ondl/i is a philosopher. He translated two books into
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Spanish from Whitehead. He was a visiting professor at Yale for two
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Memo #69
-107
years during his exile so he must have solid academic standing. He
was also at Harvard. His English is good. He's a brother of Presi-
dent Frondizi. He looks like an enterprising and imaginative leader.
I wish we could get some significant experiment started, under top
auspices, here in Latin America, on the use of our films. I'm posi-
tive that the only conceivable chance for money for films, in many
countries, is through American foundations or through Point Four,
Public Law 480, or some other form of American underwriting. I urge
John Howe to talk to Mr. Patterson about this when he sees him. Note
the fact that Patterson is allocating 60,000 000 pesos to the uni-
versity. . Seemingly Patterson has money under Public Law 480 and
-perhaps lots of It I don't see why it couldn't be allocated to a
list of our physics films as well as to 'Business Administration."
There are many angles of this kind that need careful exploration In
Latin America.
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Memo #79
3/15/60
VISIT WITH MR ALSOGARAY, MINISTER OF THE ECONOMY
IN ARGENTINA. GOVERNOR FrEVENSONAND SENATOR BENTON
Minister Alsogaray personifies the new economic policy of
President Frondizi's administration. He is an engineer, a former
army officer, perhaps 45 to 50, energetic and determined. He made
a fortune in aviation after leaving the army; he is very sure of
himself and his self confidence is contagious. He opened our visit
by saying he would give us a brief report on the political implica-
tions of moment in the Argentine today. He said that to understand
these clearly it was necessary to go back to September 55. He ex-
plained that the Peron dictatorship was not a normal South American
dictatorship but "a collectivist dictatorship like a communist dicta-
torship" - that every sector was under the control of the state - and
that this meant not only state enterprises but full state interven-
tion everywhere including control of the labor unions. Yes, said
Minister Alsogaray, "Peron controlled everywhere - TV - the press,
the unions - and during the twelve years of his administration the
Argentinian people succumbed." The slogan of Peron - his philosophy
was called "national socialism."
When the revolution took place in 55, lead by the armed
forces and the people, it was due to moral revulsion - a moral pro-
test by the armed forces and the church which were tired of corruption.
But the Minister explained that "clever people of socialist
ideas" kept the revolution of 55 from changing the economic and
sociaa ideas pf Argentina between 55 and '58. Indeed he said,
a
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there
there was very little change. Everything stayed much the same as
under Peron. In 1956, Mr. Alsogaray was the Minister of Industry
and he fought the ideas of the Peron system but he failed. Then he
organized a small free enterprise party and secured a few votes. He
founded a magazine which became important. At this time, President
Prondizi was in the opposite camp. But after President Frondizi was
elected, he changed - after his inauguration on May 1st, 1958. The
President since then has settled the oil dispute by making a deal
with private oil companies to develop the Argentinian fields. He has
settled the dispute with the American Foreign Power Company. He has
suffered criticism of course and pressures - from the Peron groups
who continue to favor inflation. September in '58 was "D Day" for
the Argentine when President Frondizi changed the whole Argentinian
system to one of free enterprise. On December 29, 1958, he eliminated
currency and other controls. He has now established free enterprise
in the economy except for rent control. (Some of this is lefts.)
Now there is a complete free market on currency.
Although President Frondizi came to office with the support
of the Peronists the communists and other collectivist groups - he
has now rejected them all By mid-1959 this reversal produced great
confus on. Thus a crisis developed in June of 59. At this point
he changed top Ministers and Alsogaray became the two key Ministers -
the Minister of Economy and the Minister of Labor. Under Alsogaray
are also the Secretaries of Agriculture Treasury Finance - and the
Central Bank. There are about twenty Ministries in all but only
eight top Ministers report to the PresIdent.
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Memo #79
The Minister wants us to understand that the big effort has
not been in the eighteen months since President Frondizi was elected
but in the last eight months since Alsomaray himself was appo nted
Minister since June of 59. At this point he showed us the set of
charts attached. I think my notations will make these clear. They
are a remarkable lot of charts even though the Minister said that
the statistical base for them is sometimes inadequate. He presents
such material in a weekly television program. He feels his next big
job is to persuade the people of the Argentine to a full and all-out
support of his policies. Central to his objective is a campaign to
bring down prices. (The following morning he took the Governor with
ram to visit f ve or six department stores and major markets, a part
of his publicity drive to bring down prices.) The Minister wants to
emphasize the values of competition. He is proud of the fact that
the pipeline is opening for oil and gas. (Described in a letter from
Mr. Train.)
The Minister concedes that the economy has suffered from
strikes and other difficulties but he says that today everything is
going well "except for small acts of terrorism". He feels that the
Argentine is now at the end of a difficult period. He says the peo-m
pie are beginning to realize that his way is 'the only way". The
Argentine has no unemployment.
Unhappily, the Minister has no GNP figures because the statis
tics are all cockeyed due to the inflationary spiral Indeed, he
laughingly told us that Peron regarded "statistics as a top state
secret'
He says that his brother went to jail for giving out Peron
statistics and stayed in jail for four years
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Memo #79
The Minister does not feel that the country needs new loans
or finances from the United States. The important need is to re-
finance short term loans into long term. He says that the Export-
Import Bank has given the Argentine $10 million and another $15
million is assured. My impression is that this last credit is for
small Argentinian enterprises which he wants to encourage in line
with his general program on behalf of free enterprise. I am dictat-
ing this memorandum some time after the interview and if I make this
point in my article about the Export-Import loan, it should be re-
checked.
Dictated in Rio de Janeiro, Brazil
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ARGENTINA Cat. #1732
Memo #91
3/26/60
CALL UPON MINISTRY OF EDUCATION IN RIO DE JANEIRO -
DR. ANISIO S. TEIXEIRA, DEPUTY ADMINISTRATOR AND
DR FREDERIC� RANGEL, HEAD OF DEPARTMENT OF
ENGINEERING AND TECHNICAL EDUCATION
�
Dr. Teixeira explained that in 1930 there were 1,800,000
students in Brazil's elementary schools; that in 1960 there were
5,500,000; but that there should be 7,500,000 in 1960 - if all
youngsters from 7 to 11 were to be in school.
He said that most of the elementary schools have no books to
be read. They desperately need libraries, "a much higher priority
on books." And he added that reference books were the most important
books needed. Thus he said that he wa.5 most enthusiastic about our
projected Brazilian Encyclopaedia. He said he would like a set in
every school
(l later
it-
d Alf edo de Sa that I thought it would be
good business for us. to waive royalties for such sets, and for him to
waive all profits in other words - to turn over our plates to the
Brazilian government for a mass printing of sets to be installed in
these schools which have no books; such sets would teach the students
to use encyclopaedias and would make them want them as adults, and
make their parents want them now.)
After the books says Dr. Teixeira, comes the teacher train-
ing. Only 2,800,000 of the 5,500,000 students have teachers trained
at the secondary level; 2,700,000 have teachers with only primary
training. The great expansion of students has resulted in "deterio-
rated standards for teachers."
Dr. Teixeira says that the new annica in Portuguese is
none of the most important things for the intellectual development of
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the country" - that can be imagined. And he says that the need for
the purchase of the set for each and every school is more important
even for the teachers than for the students. Of the 180,000 el
mentary schools he would be happy if the set can be bought for
90,000 - the bigger ones.
Dr. Teixeira described to me his new Center in Santiago and
am attaching a pamphlet and his own notations upon it in pencil.
This folder and his notations must be studied and translated.
marked the wing on the cover at the left which he told me was his new
Institute of Audio-Visual Studies". He says that this is financed
by Point 4, and I think he refers here to the whole building and not
merely to the A-1r section. The building is 200 meters long and is
just getting under way. It is designed to train teachers with ad-
vanced courses
Dr. Teixeira explained that motion pictures were only suitable
to the advanced schools because of the lack of electric power in the
rural elementary schools. Most of the 3,000 to 3,500 secondary schools
are J.n cities and have electricity.
Dr. Rangel broke in to explain that he was In ge of the
engineering colleges These are only growing at the rate of 7% a
year which is roughly the rate of growth of the CNP in Brazil. They
could take more students but they cannot find more qualified students.
They are thus limited "by the ava&labllity of good students."
Dr. Rang el gave me what he said was an old slogan, ineer ng is
physics plus good sense." The Brazilian students don't get the phys.
ics Arid this of course leads me into a discus'slon of oUr Dr. White
Physics Series
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Memo #91
The reason the secondary school students don't get adequate
t�ra ning, says Dr. Rangel, is that most all of them are on two shifts
and indeed a high percentage are on three shifts - from 7 to 12 and
from 12 to 5, and at night. They don't have room in their curriculum
for the new subjects - or even to do justice to physics. They have
no time 'for laboratories or for enrichment." Dr. Teixeira broke in
to say that the Brazilian education system Is now roughly where the
U. S. system was in 1890. But he showed me a table (attached) which
brings out the fact that in Sao Paulo - all the Sao Paulo figures are
about double the averages for the country as a whole - there are about
twice as many secondary school students and indeed there are three
times the number, percentagewlse, of university students.
The United States provided $20,000 for equipment for the new
AV Center in Sao Paulo. With this equipment Dr. Teixeira hopes to
produce films and filmstrips. The Brazilian government spent about
5 million cruzeiros to match the U.S. contribution. Dr. Teixeira
thinks that he will have to make his own films in History and Geog-
ra,pliy but he says that he should possibly buy the films in Science -
and I am not sure that he used the word "possibly". It was at this
point that I suggested that the cheapest way for him to get the Science
films would be to bring our negatives into Brazil, to add Portuguese
translations and to print them here.
To dramatize the desperate state of Brazilian educational
budgets, Dr. Teixeira said that the Brazilian budget per pupil per
year at the primary level is only $9. At the secondary level it is
*356
At higher Allmmation it iS about $300. Each adult in Brazil musi-
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Memo #91
educate four children in contrast to France where each adult must
carry the load for only one.
Dr. Teixeira expounded on the fact that Brazil must have edu-
cation if it was to remain a democracy. If It is to maintain its
defense, he says it must have educat on. Indeed, he said that educa-
tion in South America "should have the highest priority of all." He
said the great need is "to develop a climate of opinion towards this
end." He explained to me that this "should be a high political aim."
Dr. Rangel, which Alfredo de Sa tells me is a Portuguese name,
wrote out in pen and ink the following statement while we were talking:
It
1) Brazilian High Schools are too standardized too crowded
and without time and space to pay attention to films or
anything new.
2) There exists in Brazil, however, a dissatisfaction with
science teaching on the part of parents b--7s engi-
neers, industrialists and so on. A market can b
developed if the right promotion is done. I would re-
commend a broad promotion, to hit education by reper-
cussion. Perhaps it would be fruitful to start through
schools of engineering and the federation of industry."
This whole meeting was a very moving one for me. When I later
praised Dr. Teixeira to Alfredo de Sa he told me that he had asked
him to be the editor of our new encyclopaedia and I deem this to be
high praise by Alfredo Dr. Teixeira has many jobs in the government
and is very highly respected here in this coMmuntty. He turned Al-
fredo' down
Dictated in Rio de Janeiro Brazil
Transcribed in New York City
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Cat. #1733
Memo #92
March 5 1960
VISIT W ITH RAULPREBISCH
Publicized by some as the "Jean Morliet of South America", Prebisch
is head of the U.N. agency ECLA located in Santiago; he is a well
known Argentinian economist and former head of the Central Bank
In the Argentine.)
told Mr. Prebisch that he was as famous as the Andes.
Five or ten friends of mine had told me that my most important
single mission in Latin America was to visit with him. He is a
singularly handsome and attractive man of around 60. His English
is very good. His eyes are better. And his wife is beautiful.
Governor Stevenson and I called on him at his office but I also
had dinner with him twice at his home. I shall first report his
presentation at his office. This of course was the official point
of view of ECLA, subsidiary and offshoot of the U.N. Prebisch
became head of ECLA a year or two after it was established. Its
genesis was the strong feeling of Latin America that a special
organization was required to study Latin America's special economic
problems There are references to this in several other memorandums
thatI've written. In one meeting, dealing with Operation Pan Amer-
ica in Brazil, Governor Stevenson commented, "I've heard all this
before," - and he was referring to the genesis of ECLA in U.N.
discussions.
At the meeting in ECLAoffice, Mr. Prebisch talked elo-
quently for an hour and a half or thereabouts. He explained ECLA 's
great concern about the slow rate of economic growth in Latin Amer-
ica. This is onlx running a trifle more than the rate of population
growth. It isn't even averaging one percent per capita per year.
45
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Memo #92
Back in 1945 to 55 it averaged 2.7 percent. This hazher ratgai says
Dr. Prebisch was due to "extraordinary factors" which have dis
appeared.
Mr. Prebisch 's story centers on the fact that _Latin America
now needs a vigorous program of economic development.
He says that private Initiative is not enough. It cannot
in itself respond to the Soviet challenge. (Mr. Prebisch states
flatly that communism has been transformed into "a very effective
method of economic development",)
Mr. Prebisch seeks ways* to transform private initiative into
a powerful medium of development. He thinks this can be done if
private initiative is complemented by "a system of planning" - a
system that doesn't in any way interfere with private initiative -
but indeed will give it stimulus. He contends that it's ultimately
possible for Latin America to rival Europe or the United States
through unleashing the forces of private initiative,
Mr. Prebisch points out that the needed ',economic planning
is not always easily accepted"! (At one of his press conferences
Governor Stevenson said that he was one North American who was not
afraid of the word "planning".) Mr. Preblsch stressed that in many
Latin American countries "another way of thinking prevails" - the
feeling which has been ingrained that the free play of economic
forces" will do the job. In such countries "economic planning is
not always easily accepted". He explained, and he understands, the
"natural reaction in some quarters against too much government".
Further, he understands the political forces which "want to keen
things as they are".
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Memo #92
Mr. Prebisch says that too many people "state intervention
means agrarian reform, taxes, and structural changes in the economy
which will unleash great new social forces". And of course many
don't want changes of this kind. Thus such people line up aggres-
sively against the need for planning and the need for state leader-
ship. In opposition to these people, Mr. Prebisch takes the view
that the need for such is more and more evident. He speaks of the
growing pressure of the masses. He speaks also of "the feeling of
frustration" in the younger generation - those who are inevitably
destined to be the leaders. He speaks of "the dynamic elements"
which are frustrated by the lack of opportunity due to the present
lack of economic growth.
Mr. Prebisch points out that a greater rate of economic
growth will provide greater opportunities to such dynamic or younger
groups He says that the students and their discontent are "not an
isolated case" - they are indeed a deep-seated phenomenon" - and he
suggests that they are to be offset by a more rapid rate of economic
owth.
Mr. Prebisch reminded us that not long ago the students
"fought dictatorships for freedom". Now, he says, they are fighting
for "what to do"? The students ask, 'What is offered to us in con-
trast to communism and its system of ideas'"?
Mr. Prebisch feels that we of the free world must build our
own "system of ideas" - with driving power which will help "channel
the emotions of the younger generation".
Mr. Prebisch asked Governor Stevenson and me, "Is .this pos
ible?"
He answered his rhetorical question by saying,
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Memo #92
that it Is". Communism may seem very appealing on the economic side,
he contends, but it is very weak on the political side.
In his discussion of communist propaganda he said, "If we
analyze communist propaganda everything which they promise is what
we of Latin America should be doing: 1) Industrialization; 2) land
reform; 3) social reform through taxation of the rich; 4) laws to
curb monopoly. All of these you have achieved in your country!"
Mr. Prebisch suggested that all of these "flags" we have
lost, at least temporarily, to the communist propagandists - and
these "flags" are exceedingly attractive to Latin American intellec-
tuals.
Mr. Prebisch says that the communist propaganda helps per-0
suade the men in the streets of Latin America that the United States
is against their industrialization. He says that the men in the
Chilean streets do not know that the Export-Import Bank is responsible
for the steel industry of Chile. He told us that our U.S. policy was
"dual". He feels that we have agreed on the need for the industri-
alization of Latin America very late - but he says that fortunately
we have indeed supported his idea of the common market (which the
communists opposed).
Mr. Prebisch criticized Jack Viner and other University of
Chicago economists who visited Brazil and other Latin American coun-
tries arguing against their industrialization on the old theory of
international trade" to wit, that every country should produce
what It's best qualified to produce and exchange it with other coun-
tries. (Mr. Prebisch complained about the International Bank which
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has never given a penny to the iron and steel industry of Latin
America - because the cost of production is higher than In the United
States - and because the Bank does not believe in heavy industry in
Latin America.)
Mr. Prebisch asked the rhetorical question: why is the rate
of growth weak in Latin America? He answered by saying, "1) the
rate of savings are low; 2) the land tenure system is a terrible
3) the continent suffers from inefficient use of manpower
trained manpower; and 4) everywhere there is misuse of
handicap;
and lack o
capital". He added, the Latin American countries are '20 small
watertight compartments".
Mr. Prebisch then proceeded to discuss the rate of savings,
his point number one on the low rate of economic growth. He says
the Latin American countries could save much more. He asked us to
look at the way the high income groups live". They have "all the
advantages of the past and the present". Mr. Prebisch thinks that
taxes should be enacted and enforced to take income from the rich
groups and use the revenue for government-designated aims. (Of
course I emphatically agree. Any man in a high tax bracket who
visits Latin America, from the United States, can hardly fail to
feel resentful of the way the rich seem to avoid taxes and yet want
grants�
and loans from the United States where people of comparable
wealth yield most of their income to the government.)
Mr. Prebisch emphasized that Latin America needs a graduated
Income tax that Is collected. He doesn't ask for taxes on lower
Incomes,
or on money productively invested. He seeks taxes that
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Memo #92
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are much more effectivly geared to encourage savings - and for
social aims - and for incentives.
Frebis h said of course that foreign capital is indis-
pensable, and indeed It's necessary to accelerate the rate of sav-
ings, He explained that Latin America must take advantage of every
possible method to step up savings - and that this In turn will help
attract foreign capital. He stated that an increased rate of savings
Is the "cornerstone" to Latin America's economic development. He
emphasized, however, that foreign capital can't possibly
be muffi.
cient In itself. He said, "If we set a goal of three percent a year
for our economic growth - this will help us estimate the amount of
foreign capital we need". He hastened to add, "Of course we cannot
assume that any program is automatic".
asked him about the psychological factors - the psychologi-
impact on foreign investors - such for example as Brazil with
1
Its rapid inflation where only one percent of the people were made
to pay income taxes. Mr. Prebisch replied that the problem as posed
He said, "Not one single country in Latin
AmerA.ca has passed income tax laws comparable to those of the United
States",
Mr. Prebisch took the position that many problems related
to foreign capital were indeed psychological: they were "an atti-
tude". Thus he suggested that the International Bank puts up many
obstacles
needed.
a long
It does not foster the spirit of reform which Is urgently
It has no "spirit of promotion".
e. Thus says
Prebisc
It delays and "waits such
Skov
five years since Peron
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fell in the Argentine and there has not been a penny for the Argen-
tine from the International Bank. (1 told Mr. Prebisch that I
thought he was complaining of the fact that the bank Is run by
bankers. - and indeed I do think that this is precisely his com-
plaint.)
Mr. Prebisch said that In 1951 the bank told
to take unpopular measures to fight inflation. Then
"Let us wait and see the success of these measures".
the government
the Bank said,.
Mr. Prebisch
thinks this formula is wrong. He feels the bank cannot expect the
job to be done without simultaneous and major investments. One
reason the bank's policy has failed is Its lack of investment. (I'm
dictating this memorandum some time after the interview, based on my
notes and I do not recall exactly where Mr. Prebisch claimed the
policy failed.)
Mr. Preb sch Is emphatic that the bank should change its
attitude and should seek to help creatively develop projects for
investment, Instead of merely sitting back and waiting for them to
be presented. Mr. Prebisch thinks we need two types of institutions.
One may be a bank. But another must be a promotion-minded institu--
tion. (1 suggested that Paul Hoffman might be a symbol of what Is
needed.)
� Prebisch said, "My first point is the amount
lending; my second is the attitude; my third is the need
en Latin American entrepreneurship and the need for more
capital here".
Mr. Prebisch thinks that
of the
to strength-
foreign
f more credit is available in Latin
America, the consequences w 11 be an enormous boost in entrepreneurship.
0
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He points out as has Governor Stevenson, that there are some things
that only foreign capital can do.
chance for Latin American
to develop power plants? Here the
Why doesn't the United States seek
in Latin America on power plants?
example.)
Mr* Prebisch told us that a development corporation to en-
courage entrepreneurship in Turkey had worked very well. It was
small. Money was put up by the International Bank and by the Turkish
government, Governor Stevenson interrupted to ask, "Aren't you
And here of course is a great
entrepreneurs. Why can
proposing government credit
t they get credit
technology is very well known.
to strengthen private initiative
(I happen to think this is a bad
private
Are ..tre,"
cmilerergmaf-Ano-
this in small chunks as well as big chunks? And what interest rate
do you propose?"
Mr. Prebisch re-emphasized, in line with the recent signa-
tartes setting up his projected common market, that there is an
important role for private capital. He said the public capital is
needed to help develop priw
n 414,pbwre
otherwise there would
be "an imbalance' which in turn would have political repercussions.
Mr. Prebisch suggested, 'Here is a type of flag to be waved by the
United States". He wants the new Development Bank oriented towards
such a purpose. He also suggests this goal for the Export-import
Bank and the International Bank:
Latin America
Ptlas
4-ed S4-ate
.I1
V
Owl
Po
the economies of
Prebisch thinks he is outlining the right em-
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Governor Stevenson asked whether he felt that U.S. policy
had placed "too much emphasis on making Latin America safe for
American business instead of safe for Latin American business".
Mr. Prebisch said that it was indeed true the United States had
inherited the British 19th century attitudes.
Mr. Prebisch added that he can't possibly exaggerate the
importance of United States policy in the development of the eco-
nomies of Latin America. - He said that United States economic
policy can play the greatest political role".
Mr. Prebisch asked the Governor and me, "Why don't pro-
gressive elements here in Latin America believe in the United States?
Why doesn't the United States attract them?" He reminded us that
these elements had believed In FDR, but that unhappily their faith
had been lost. He hastily added that "many progressive people do
indeed want to believe in the United States - they don't want to go
to communism - but they don't know what to do",
Mr. Prebisch told us that such groups largely want to do
those things which we have done in the United States - they want to
control their own monopolies - they would like to have strong labor
unions - they are eager to foster land reform - they would like our
system of taxation.
Mr. Prebisch asked why, instead of preaching these things
which we do indeed stand for in the United States, why we preach the
importance of 'foreign private initiative". Manifestly he thinks
such preachments are not enough.
Mr. Prebisch told us that his oreoan ation, ECLA, isn't
0
always urperstood in its view that planning is needed. President
e
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Lleras Camargo of Colombia sees the issue but he may fall in pro-
moting it because he may not have his people behind him. One handi-
ap to the achievements of Mr Prebischis goals is that the United
States "does not believe in planning and is not contributing real
experts to help"
�
He wants a pool of U.S. experts. He needs our
experts on land reform and other key issues. He emphasized to
Governor Stevenson and me that our leadership in such planning will
appeal to the youth of South America.
* * *
At our meeting was Mr.Santa Cruz who represents the U.N.
in Chile. He reminded us that the most critical Latin American
problem is agriculture. He says that the population is growing much
faster than the production of food. Per capita, food
Chile is now lower than before the war. He says that
calls for 'bold action and technical assistance". He
needs a program of education and social reform in its
production in
the problem
says Chile
rural areas.
(Mr. prebisch broke in to explain that in the Argentine they would
tell us that land reform would be achieved in 100 years through
inheritance) Mr. Santa Cruz says that the attitude is changing in
Chile and even the Conservatives see the need for land reform He
thinks that taxation on unused land would help make it revert to the
government
Mr
Santa Cruz thinks that the new agricultural law, just
passed, provides a good beginning in Chile. This law went
rough
only a week ago. It provides according to Santa Cruz and the law
was later described quite differently by President Alessandri) the
co
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law provides that the public land can be divided among peasants and
workers who want it; 2) that there shall be a tax on unused and
badly exploited land which will open it up for distribution to those
who will use It. 3) that the president shall have the power to ex-
propriate - if the land is "badly needed"; 4) that a board shall be
set up to select the people who will get the land.
The problem, Mr. Santa Cruz points out, will in part center
on the shortage of capital for the people who want to take the land
and develop it. But he thinks this law is a big step forward - and
it shows, he says, a change of attitude.
* * * * * *
The Governor asked what kind of money will be required to
stimulate private entrepreneurship in Chile. He was told this wou
take about $300 million a year. The Governor asked how much would
the public have to put in? He was told $1 billion a year, (I'm
giving a literal interpretation here of my notes but because the
interviews are so far behind me I cannot now interpret these figures
or the Governor's questions.)
I am clear that Mr. Prebisch and Mr. Santa Cruz feel that
the objective for growth in the over-all economy of Latin America
Is three percent. They estimate that such a growth requires an
Investment rate of an extra four billion dollars a year - of which
they think private investment of two billion four hundred million
would be forthcoming ii publIc Investment of one bllliOfl, six hundred
million were provided.
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Somewhere in in the course of this meeting, talking about words
and semantics, the Governor made an amusing comment, "We are destroy
ing English and it is destroying
Lis
(This reminded me of my speech
in Paris in '48 dealing with the fact that the Russians were steal-
ing the great words of our language. And It reminded me of Anne
O'Hare McCormickmarvelous phrase, 'Upside down language".)
* * * *
The Governor asked the figures of loans from the Export-
Import Bank and the International Bank. Mr. Swenson, Mr. Prebisch's
deputy, estimated these at a hundred million dollars last year. (All
these figures have to be checked before I use them in the Britannica
article.)
Over and above the official Interview reported in the fore-
going, with Mr. Prebisch and his staff, I had two dinners with him
at his home, one of them with Governor Stevenson.
At these dinners, Mr. Prebisch again emphasized that he was
deeply worried about the trends. He again reiterated that in the
ten years after the war - the rate of growth was 2.7 percent - but
in the last several years it has only been one percent per capita.
He continued to stress that without a bold attack, the rate of growth
will not increase. He fears there are many factors which inevitably
will keep It very low
1) the communist penetration.
2) the problem of youth; the young people fear they
without an outlet. They develop frustration. If
they cannot exercise their growing sense of power
in their frustration they're likely to turn to
communism
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13-
Me o #92
a frontier is needed. Where is It? Where is it?
Where is the frontier to absorb the revolutionary
elements? A "frontier of dynamic opportunity" for
the young is needed. The boldest of the Chileans
emigrate. Thus Chile loses its most promising
citizens. There are 300 Chilean nurses in the
United States - as an example. There are many
Chileans in many other parts of the world. This
is partly due to the fact that the Chilean economy
itself is "too undynamic" to keep these people at
home in Chile.
Of course Mr. Prebisch thinks that the Common Market is one
important antidote but he concedes that the problem is far more
serious than this. Although he urges the possibilities of the sys
tern of private initiative, and its great potentialit es - he does
not think that private groups can possibly respond successfully, in
themselves, to the Soviet threat. He suggested that the State
Department thinks that they can-- or at least that this was the
policy of the State Department when the present Republican adminis-
tration came into power. He doesn't agree. (Mr. Swenson broke in
to say that Henry Holland, as Assistant Secretary of State, had
tremendous power". Mr. Holland was not viewed with approval.)
Mr. Swenson has been Prebisch's Deputy for ten years. He's
a Minnesota Swede from St Olaf College. And a very
guy. He said he is very worried.
trends".
Mr. Prebisch himself only took the directorship in the
second year of ECLA gather that ECLA was originally created for
sft4 e14-11Vd
LCA.%�00..a..
only three years
He too is greatly concerned about
but that it has become a permanent institution.
Mr. Prebisch told me that in a choice between "made in
Moscow or "made in Washington"most Latin Americans would take
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Memo #92
the former. He wants ECLA to help provide a better answer to this
choice. Further he wants to promote "made in Latin America"!
Prebisch spoke of the Mexican economists, which
are Marxist-oriented. He said that in his youth,
Marxism was indeed a real theory. But now nobody
speaks of 'the theory of value".)
* * * *
At the second evening meeting, with Governor Stevenson on
hand, Mr. Prebisch stated that to accelerate the rate of growth, a
target was needed. Shall we shoot at one percent, two percent,
three percent? If two and a half percent, as an example, certain
definite measures need to be established.
He suggested we set two and a half percent as a target
And he
hat are the obstacles? They are social and
political more than economic.
First there are the traditional groups with power.
Prebisch said that "even if they see" "they don't feel".
Secondly, there's t.he problem of education - and the better
use of the land One of
SC
"IOW 11�11�
se is illiteracy. This
could have been solved. But the ruling classes only pay lip service
to its solving. They don't listen to the voices of the masses",
(Chile is a good example of a ruling class trying to stop inflation
to bring order out does it indeed have good sense? Doesn't it
lack imagination and faith in the new opportunities? Isn't it indeed
living In the world of the twenties? Mr. Prebisch agrees that Chile
should have "sound money" as a basis for economic development.
S
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Memo
He agrees that one of the biggest obstacles to economic growth in
Chile is the lack of incentive which has been stimulated by infla-
tion.)
most acu
the left
does not
who feel
The leftist groups and the communists feel these problems
ely. Mr. Prebisch says that the United States has lost
- "in a Latin American sense". (And he emphasizes that he
mean the communists.) and we have lost the left, 'those
the need for social and political change", those who sup-
ported FDR.
Mr. Prebisch says that Roosevelt was the first President in
whom the left and progressive groups in Latin America had real con-
fidence. He reminded us that Woodrow Wilson sent the Marines to
Mexico. He reminded us that FDR did nothing when Cardenas expropri-
ated the oil of Mexico. Prebisch said that Cardenas Cabinet told
him we might invade when he expropriated the oil. Cardenas vg%plic:!(1)
"If FDR does that I shall resign and another man-may make peace.
When Prebisch was head of the Central Bank of the Argentine,
he visited in Washington in 1940, seeking loans. He wanted to buy
th=
I.
r
rams and their pipelines He was
taken to meet President Roosevelt
The Argentine Ambassador said
that he could have five minutes with FDR. He spent 45 minutes
President Roosevelt flavored the transferral of ownership of the
British railroads
President Roosevelt told him, If the British
are in a dangerous spot they will sell". The British received
million.
Prebisch thinks that the big problem
now to re-educate
the orogressive elements in Latin America towards the U.S. How does
�
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16
the United United States attract them to its viewpoint? How do we in the
United States States learn that Allende Is not a communist but a progressive?
Mr. Prebisch thinks that we of the U.S. need an ideology with
which to combat communism.
Mr. Swenson suggested that there was an acute problem In the
Latin American re-distribution of income - that the upper classes
with high incomes do not pay taxes - nor do they save money to re-
invest in the economy.
I asked what the rich people do with their money. I gather
that they have four or five houSes, complete staffs of servants In
Paris and elsewhere - etc., etc. A thousand fam lies or so are very
rich. And they do not indeed provide savings.
They concentrate on
what Thorstein Veb en called "conspicuous consumption".
Mr. Prebisch suggests that the problem in Latin America is
to build up each country, country by country, as we attempted In the
Marshall Plan - through the kind of inter-regional plans which he
supports.
He does of course say that the beginning of such a program
is "to separate the urgent from the less urgent",
He thinks that ECIA can make an inventory of basic needs, of
unsatisfied needs, country by country - and of capital needs - coun
try by country - including housing, schools "training of manpower",
etc This of course is planning on a very vast and great scale.
This is the challenge for E LA as he sees it. (Only a few people we
� 4T�tt) VtecOgp ze that there is an
ger tb taIe over lac tin a bignmen )
talked to, among
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Thus in in the Argentine probably the best investment by ECLA
or by any other research organization would be In agricultural re-
search - and I suspect it's doubtful that this Is generally under-
stood by ECLA or by the U.S. government.
Governor Stevenson made the comment that "ECLA is no plan-
ner". But of course this wholly depends on the definition of the
word "plan". Mr. Prebisch says that the big Latin American problem
Is 'the imbalance of foreign payments". If this is true, this would
seem to indicate some need for planning.
By plans, Mr. Prebisch suggests, sudden imbalances can be
minimized. This involves complex questions of exports which must be
controlled - and of imports and substitutions.
Mr. Swenson said something which seemed to me wise and prac-
tical, "We're not planners, but we train planners"! This caused
Governor Stevenson to ask, 'If ECLA had authority, 'what would it
do?'" .Mr. Prebisch replied, "We would divide the immediate problems
from those of longer range". He said that the immediate problems
Included those growing out of inflation and the balance of payments
in count lee suffering from inflation. The immediate problem says
Prebisch, is the so-called 'Operation Bootstrap",
Mr. Prebisch said that "1 was responsible in my youth for
the Central Bank in the Argentine before Peron". He made this com-
ment because we had agreed that inflation was In large degree "a lack
of responsible policies".
The longer phase is related to the rate of savings - and its
relationship to the rate of growth. Mr. Prebisch contends that for
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-18-
a satisfactory rate of growth, "outside cooperation" is needed.
Here's where he brings the United States into the problems of long-
term policy. Here again he emphasizes the opportunity and the need
for a three percent growth rate - which of course requires big out-
side credits.
* *
Prebisch feels that the local industries of Latin Amer-
ica must be given a chance to develop - and that they will require
tariff protection.
He explained that the International Monetary Fund preaches
Lard., tough practices and he said he would agree with these but
that in addition he would point out that there is a very difficult
area of unemployment - that while he agrees on a ,Arm monetary pol-
icy - while he agrees that savings must be stepped up - he also feels
that a long-term program should be agreed upon. (Most certainly he
is not very clear in his answers to some of Governor Stevenson's
questions.)
�
ent on was made
*���� aim
he fact tha
MmbawineN
j� 4 76. 7...�
going ahead
three percent in population per year us three percent per capita
in its industrial development.
Mr. Santa Cruz, a Chilean who represents the United Nations
In Santiago, said that in his judgment he would give priority in the
Whe.. I
educat
lye first priori
dc t vu on".
k d what were the most Important investment needs was
told that thew were in education. M
Prebisch said, 'The' vdt-Dy
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19
impressive illiteracy in Latin America is something for which we are
ourselves exclusively respon ible".
Governor Stevenson suggested that we had the New Deal in the
30s and that perhaps Latin America now needed its own New Deal.
indeed there are those who say that Latin America needs the Mexican
Revolution of 1910.
asked about Roosevelt
Good Neighbor polIcy. I am not
clear that Roosevelt ever spent much money on it. Nelson Rockefel-
ler s program and other programs had great psychological impact, but
I don't believe they cost much.
Governor Stevenson suggested that our problem with Latin
America didn't seem to him to be money. He asked whether South
America couldn't solve its problems without United States money. -
*
After our visits w th Mr. Prebisch we received a remarkable
memorandum from him headed 'Some Reflections On The Need For An
Devel
Policy in Latin America." I read this memoran
dum carefully and I think that it was specially written for Governor
Stevenson. It can act as a correction and amplification to the fore
going memorandum. His own written word is more authoritative.
I am attaching this memorandum and a second one headed
"Important Problems of Agriculture in Latin America" which was given
I am also attaching an ECLA memo of May 1959
prepared for the meeting in Panama of that date, titled 'Advice and
us by Mr. Santa Cruz.
Assistance to Governments in Programming Economic Development
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BRAZIL ca
LUNCHEON WITH THE DIRECTORS OF THE AMERICAN CHAMBER OF
COMMERCE OF SAO PAULO, PRESIDED OVER BY CONSUL GENERAL
MR. WILLIAM P. COCHRAN, JR. AND ATTENDED BY
GOVERNOR STEVENSON AND SENATOR BENTON
� #1708
emo #74
3/21/60
This group consisted of 20 or 25 American businessmen. Over
cocktails we had a chance to chat with many of them at some length.
After lunch Mr. Cochran asked them to tell us their principal prob
lems. This is the best looking group of American businessmen I've
met in any foreign city except London. One of them told me that it
is the most important American group in any city except London. I
don't think the men averaged more than 42 or 43 years. They seemed
aggressive, alert, and perhaps more important - they seemed happy
to be here. The oldest one of the group was Mr. Samuel F. Chalfin,
perhaps n man In his 60th year, vice president of the American
Machine and Foundry Company. Over a gin and tonic he told Governor
Stevenson and me that the group was unusual He said, We are all
of us here voluntarily; we're here because we are happier here than
we would be in the United States, we feel we can achieve greater
fulfillment
This is the
to me by an
Mr. Chalfin
tors of the
a boom city
and without contradiction. Sao Paulo is indeed
men are carrying significant responsibilities.
They are making important decisions. They like the dynamic quality
f the city.
here; we don't want to go home; we like it better here,"
first time I've ever had any such blanket statement made
American businessman - in any overseas city - and
made this in the presence of half a dozen other direc-
Chamber
and these
4
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Memo #74
The city has the spirit which I Identify with Chicago back
in the '90s, - in contrast to our eastern cities of the United
States. Even in the '30s, when I moved to Chicago, I remarked on
the extraordinary differences in attitude between the Chicago busi-
ness community and that of New York to which I had become accustomed.
Sao Paulo, like Chicago, is a fast moving city where decisions are
made quickly - and I suppose over the telephone, and often without
the help of lawyers and documents.
chatted with Mr. Williams, president of Sears-Roebuck in
Sao Paulo. He says Sears has invested $15 million in Brazil and
has allowed its profits to accumulate until its investment is almost
$20 million. Sears hasn't taken out In dividends an average of
3.-1/2% on its Investment. Sears, wholly owned by Chicago, has gone
Into business whole hog with Brazilians. Thus if I wanted to set
up a company to manufacture refrigerators, to sell to Sears, as an
American entrepreneur here in Sao Paulo, Mr. Williams would much
rather turn his back on me and deal with a Brazilian entrepreneur
MIMI
!!everything else beine,equal." Less than 1% of Sears retail volume
here is being imported - and this includes imports from Europe as
well as North America.
sat next to Mr. Mason, executive vice president of Anderson
& Clayton of Brazil. (See attached list of guests at the luncheon.
My long and close friendship with Will Clayton, who brought me into
the State Department, gives me a special interest in this firm.
Mr. Mason tells me that Anderson & Clayton is the biggest company in
Brazil. It started here in '34 and started to manufacture only in
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Memo #74
-3-
'36. This year it will do a business of around $250 million. This is
largely in products based on oil - oleomargarine, peanut butter, salad
oil and cooking oil, et cetera. Mr. Mason told me that Anderson &
Clayton's total business exceeded a billion dollars, of which Brazil
contributes some 20 or 25%. He said Anderson & Clayton's profits after
'taxes run $10-20 billion. Will Clayton and h-is family own 23% of the
stock. WIl is still in his office every morning - at eight! - and is
still the key figure in the firm.
We have had many reports on political corruption here. Mr.
Cochran, who was at my right and Mr. Mason at my left, agree that
politics is corrupt, but both insist that there are "some honest men."
Mr. Cochran jestingly said that after 30 years in Latin America - he
would be impressed to find five honest men, When I pressed for exam-
ples of how the graft and corruption worked, I was told that at the
1 nw t
and simplest level - a government clerk might take 100
cruzeiros (500) to move your paper from the bottom of his pile to the
top of his pile.
Mr. Cochran and Mr. Mason agreed that government officials are
paid enough - "they aren't paid enough to be honest" - and thus
men running for office often spend a fortune In order to be elected
because they know of the big money which they can earn through graft,
through the spoils of office, once they are elected.
(Mr. Mason said that Anderson & Clayton has had a firm and
fixed policy never to pay graft to anybody. He thinks this
has paid off. The tax collectors here who want graft don't
bother with Anderson & Clayton.
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-4-
Mr. Mason thinks that the biggest problem the United States
-faces in Brazil is "to make our good points known." He thinks it's a
public relations problem. He feels that Americans should "mix much
more with the Brazilians." In other words, this experienced and engag-
ing American businessman Is providing Strong arguments for an increased
budget for USIA - and for better USIA leadership.
The Goodyear representative at this luncheon told me that his
principal problem was to get financing - and that he was paying 19-1144
for money. This problem is typical of the reports of the whole group
when Governor Stevenson later asked them about their difficulties.
The Swift man said his greatest difficulty was "lack of transportation':
Mr. Wagner of Lions VA, distributor of agricultural machinery, said
that his imports of agricultural machinery from the United States had
dropped from 50% of his business to 3% because of the competition with
Czechoslovakia and other Iron Curtain countries which provide govern-
ment subsidies to their manufacturers. (Lions distributes Caterpillar
Tractors among other American products.) The Union Carbide representa-
tive said that the inflation was plaguing him with a shortage of work-
ing capital. The Sherwin Williams representative said that he suffered
from high import costs on raw materials he has to Import. Apart from
financing, I rather think the principal complaint was that the head
office just can't understand Brazil or think intelligently or con-
structively about it." The representative of the St. Regis Paper
Company said that two vice presidents of his vast company went to
Washington and were told by the Department of Commerce to invest no
more in Brazil!
And of course there was a complaint that the International
Monetary Fund would not give the $300 million in extra credit to
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-5-
Brazil because Brazil would not follow the anti-inflationary policies
recommended by the Fund.
The Westinghouse representative said that he was suffering
from price competition from European firms which are aided by their
governments In the form of special credits and other advantages, The
Price Waterhouse representative Interested me most of all: he says
he suffers from a deficiency of training of local personnel; he says
the University teaching is deficient. The Dupont representative
referred to inflation as his greatest enemy. This makes It very dif-
ficult for him to maintain working capital and to pay a fair return
to Wilmington on the dollar investment. There were many comments
about the problem of "borrowing money at an interest rate we can
afford."
There was a comment about the difficulty In achieving suffi-
ciently close "joint understanding" between the U,S, and Brazil. A
lawyer referred to the ncz4=A of "1-building the bridge" between the
legal systems.
The final comment of the round table, however, seemed to sum-
marize the general feeling of the group that the companies It repre-
sents are indeed operating in a boom economy - with great hope around
each corner that lies ahead. This comment was "We are in a wonderful
market as the previous comments show, and all of us here are most
welcome in Sao Paulo as Americans."
* * * *
Two or three anecdotes.
The Brazilian colors are green and yellow. The story goes
that a Nationalist here is like a watermelon." A watermelon is green
and yellow on the outside. 'But the Nationalist Is red inside."
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Memo #7
MrMason spoke enthusiastically about our new Ambassador, Mr.
Cabot, who is "speaking out on what the United States is contributing
to Brazil and what the United States is doing for Brazil." Mr. Mason
suggests that Ambassador Briggs, his predecessor, did not do this,
* *
When President Lopez Mateos of Mexico was in the United States
he was asked what his principal preoccupation was - and he replied,
"The United States"!
* * *
Mr. Mason says that in figuring any new Anderson & Clayton
investment in Brazil, he wants to get his money back in no more than
three to four years. He was astonished that I was prepared to put
money into a Brazilian-Portuguese encyclopaedia in hopes that I would
get the money back in seven or eight or nine years. He advises against
it. Indeed, with Goodyear paying 19-112% for money, anybody with cash
can get his full capital back in five years. Mr. Mason feels that the
boom must collapse some day, that instability Is obvious In the present
economy, that there must be a setback coming - and that seven, eight or
ten years is much too far to look ahead.
The American Consular General, Mr. Cochran, told me of a letter
he had recently had from Denver. This seems to have come from a tax-
payer who doesn't like the money we are pouring into South America. The
taxpayer wrote,"March is now more lamb like - now that we get fleeced
In April"
Dictated in Brazil
arh
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41r
President
American Consulate General
So Paulo, Brazil
March 211 1960
Memo #74-
LUNCHEON FOR GOVERNOR ADLAI STEVENSON ON TUESDAY/ MARCH 22,
12:30 p.m. AT AUTOMOBILE CLUB WITH THE BOARD OF DIRECTORS
OF THE AMERICAN CHAMBER OF COMMERCE FOR BRAZIL, SAO PAULO
Mr. Thomas Romanach Director & General Manager
Consumer Goods Dept.
General Electric S/A
1st Vice President Mr. Howard L. Mason
Vice President & Director of
Anderson Clayton & Cia. Ltd.
2nd Vice President Mr. Fernando E. Lee Mgr., Mario de. Martz Maia
(will be present for cocktails but not luncheon
3rd Vice President Mr. John F. McLain
Legal Counselor
Director
Director
Director
Director
Director
Director
Director
ector
ector
ector
or
Hon. Pre
dent
Mr. Egberto Lacerda
Teixeira
mr.Henry 0.Dougherty
Mr.Samuel F.Chalfin
Mr. Paulo Reis de
-Magalhaes
Mr. Ernest
Mandeville, Jr.
Mr .Gerard C.Powell
Mr .Charles R.Taylor
Mr .Robert L *Wagner
Mr .Daniel S.Wilcox
Emory Williams
J. R. Zerbst
Mr .Robert C.Ziecher
Frank McClure
Mr. a P.
Cochran, Jr
eta et 4
GO
General Manager, Bates
Valve Bag Corp. of Brazil
St. Regis Paper
Attorney
President, Sherwin-Wil.*.iams
/a
AMF do Brazil S/A
Executive, cia, Itaquere
General Motors do Brasil
S/A
Cia. Goodyear do Brasil
Accountant, Partner, Price,
Waterhouse, Peat & Co.
Sales Director, Ltons S/A
Westinghouse Elec. Co*
Brazil
President, Sears-Roebuck S/A
Union Carbide Corporation
President, Cia. Swift do
Brasil S/A
President & Gen. Mgr.
Dupont do Brasil S/A
American Consul General
21".11
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Memo #76
3/29/60
MEMORANDUM OF VISIT TO RANCH OF INTERNATIONAL PACKERS
by Governor Stevenson and Party
This is the company which bought the international divisions
of Swift & Company and Armour & Company. Last year it did a $400
million business - about 601% In the sterling area. It earned over
$12-13 million before taxes and around *8 million after taxes. Please
get for me its annual statement. Our host, Tom Taylor, its president,
chartered a plane to take us to one of his ranches here. He is a
son-in-law of Gus Swift, second oldest of the sons of old Adolphus;
Gus was president of Swift & Company for many years.
Our plane flew over the new coffee ranches of Sao Paulo. We
circled one ranch of 7 million trees, developed by an Italian immi-
grant named Gerim r Lunadeilli. These trees take about five years to
come into productivity and are then productive for five, six or seven
A. k
Tar 014�����S lo's 4M IN 1 lk 4""
%PA ';..1 I. (..A. Th.��
11=lk 111"40=Alft
414.
P011
Lunadetlli has other
plantations for a total of 20 million trees - $100 million wholly
apart from the value of the land. He also has sugar plantations. On
the big ranch we circled, there are several *thousand employees, The
men work under contract, responsible for a given number of trees.
This whole ranch has been carved out of the jungle in the last ten
years - mostly by hand. (The modern techniques involve great tractors
which rip down the trees with the use of big chains,) Much of the
jungle land was bought by Mr. Lunadeilll at 1 an acre and is now
said to be worth $4o an acre without the coffee trees. Mr. Hickman
Price told me that such success stories are "a dime a dozen" here in
Brazil. ,I doubt
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In the state of Sao Paulo, a large percentage of the best
land has now been reclaimed from the jungle. First, the commercial
timber is taken off the land. Some three years is spent in the cut-
ting. Then the remaining t mb r Is burned off, and the land is
planted in grass. Then may come cotton. Finally, the stumps may be
pulled out. I heard various stories today and various estimates.
was told that it cost only about $1 an acre to clear the land of trees
for the planting of grass, and $3 an acre for complete clearing. I
had varying estimates on the cost of the land, from $1 an acre to $8
and $15 an acre - and on the value of the land - from $30 to $50 an
acre. But the big story is evident. The land has been bought cheaply;
it is being cleared aggressively; and it is worth a great deal more
than it costs.
In the past, the small time pioneers who have cleared the
land have farmed it fn.'', A while and when the land has become unpro-
ductive - the pioneers have moved on again into the wilderness, to
clear new land, while they have abandoned the old. The Increasing'
probability is that new techniques of crop rotation and fettilizer
will be used. The land won't be abandoned. It won't be allowed to
wear out.
The best land Is now being rapidly claimed from the jungle.
But there are hundreds of millions of acres still available in prov-
inces to the west. In Matto Grosso, I was told, only 25% or 30% of
the land is really good and of course these estimates vary from
state to state thrOughout the country
the ta e of iicLO Paulo,
was told, very little good land is left. The new settlersand plc
neers and rashchers must go further out".
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3
International Packers has five Brazilian ranches which total
about 150,000 acres. They are in partnership with the King Ranch and
are breeding the special type of King Ranch cattle, a Brahman breed
crossed with other breeds - which Mr. Taylor's managers think will be
ready to market a year younger than previous breeds. The savings are
of course enormous.
The manager of these ranches is a Mr. Irwin who is the father
oJ. Dem Tlesurivft
^1 I Yli
uoli
Congrgzbrian
from pAiybeield County. Mr. Irwin came
here in 1916. His daughter was our hostess today and served us a
wonderful Brazilian luncheon. Mr. Irwin went to the Argentine on
.C11
�wi*
1.%4-4-14mk 1-Nycl-r% rrvy% ib! nnmpanv;
is khaki clad,
booted, a man in his 60's with a leathery face and a straw hat - with
a quiet air of confidence. His daughter is an attractive willowy
blond with a 6 year old son in school in the city of Sao Paulo. She
likes living on the big ranch, with an airplane at
a town of 50,000 not too far away. This town is named after a former
president of the country - and is called "Presidente X" - (1 can't
remember the name of the president t - either Prestdente Prudente or
Presidente Epitacio.)
(We saw from the airplane a boom coffee town of 125,000
which we were told was a mere village ten years ago. We
saw paved roads running in various directions which we
were told were impassable a few years ago. More importantly
and more impressively, we saw hundreds of thousands of acres
which were jungles only a few years ago.)
International packers ships from their ranches about 20,000
head or cattle into their Sao Paulo plant each year - primarily to
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Memo #76
provide their plant with cattle in the off season when otherwise
cattle would not be available or would be very high in price. The
ranches often do not sell their cattle on a basis most profitable to
the ranches; they feed them into the plant at Sao Paulo on a basis
most profitable and productive to the plant. I was reminded of the
problem in Montevideo on the Swift and Armour plants. These Uruguayan
plants only operated three or four months a year, we were told, and
of course profitable operation requires much longer operation - and
here Is where the Brazilian ranches fill their role for International
Packers. Further, the ranches are conducting important experiments
looking towards the development of the best breeds of cattle - the
best methods of feeding - et cetera - for the benefit of the suppliers
from which the plant buys most of their cattle. The Sao Paulo plant
takes about 150,000 cattle annually, or 7-1/2 times Its own supply.
The output of this particular plant is largely consumed locally, by
the Brazilians, whereas 75% of the output of the Buenos Aires plant
is for export.
did not take notes today, because I did not think this
particular material would be of any special interest to Governor
Stevenson, who understands it far better than I do, or for use in my
Yearbook article. m dictating this hastily at night before going
to bed thinking that some of the angles here may be useful to me in
the section in the Yearbook article -that I want to devote to foreign
capital. The development of International Packers is a good story on
American foreign capital operating here ifl South America.
And a most important angle may be Tom Taylor's comment about
his competition with the British. This is with a really big British
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Memo #76
.5.
firm controlled by a family named Vestey. They have 100,000 head of
cattle on their ranches here and have been operating for may decades -
in contrast to International Packers recent development of ranches.
Tom Taylor does not have high regard for British flexibility
in their export operations, either that of the Vestey Company here in
Brazil or of British companies in general. He thinks they are too
stiff-necked and too infle.ible. He feels American dompanies and
managers are more alert, more on their toes, quicker to adapt them-
selves. He told Governor Stevenson and me a story of his problem in
dealing with the Brazilian government last September - when the son
of Lord Vestey telephoned him and proposed that both companies close
up their plants in Sao Paulo because the Brazilian government demanded
that they continue to sell their meat products at a considerable loss.
The packers were operating under price control on the sale of their
meat, while they were purchas.A.ng their cattle at higher and higher
prices. International Packers had lost money for two or three months,
maintaining low prices, but Mr. Taylor refused to take an arbitrary
attitude towards the government - and he kept his plants open - and
the Vestey plants followed suit because of his leadership. He thought
their proposal short sighted and stupid.
Of course I understand the urgent need for higher beef pro-
duction for the elimination of the hoof and mouth disease for the
improvement of the breed, for better transportation so that the fat
can be preserved. (Mr. Irwin told us or three thousand head of cattle
which had recently walked 900 miles in 90 days.- from a distant Brazil-
ian Province - to be fattened on his ranch. Only two head had died.
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Memo #76
But it would take a full year, or at least ten months to fatten these
cattle for the slaughter house.)
A dilemma of production is in the new coffee plantations.
More and more land is being developed for coffee. The government now
has a surplus of 40,000,000 bags, roughly 2-1/2 t4.mes current annual
exports. (I was told today that three-quarters of this coffee is
inferior and Is good for nothing but fuel.) Net coffee production Is
mounting rapidly. Unlike wheat, coffee cannot be turned into whiskey
or vodka - or bread.
don't see how the export quotas on coffee can be permanently
sustained oy coffee growing countries in the face of rapidly Increas-
ing productivity. I shall have to learn more about this - and discuss
this in my article whether I know more about it or not.
Dictated in Sao Paulo, Brazil
arh
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Memo #77
3/29/60
MEMORANDUM ON AMERICAN CAPITAL
OPERATING IN _SOUTH AMERICA
I wish I knew more about Nelson Rockefeller's operations here
in this continent. I remember a luncheon with him at the Rainbow
Room when he was beginning his big financial operation known here as
IBEC (International Basic Economy Corporation). He generously of-
fered to let me in on it if I would invest $250,000. This was the
minimum he would accept. He acted as if he was doing me a favor.
remember that I told him, appalled, that I just scraped up $100,000
to finance the Britannica. I. refused the compliment. I think the
story of his efforts here would be a valuable story to summarize in
my article under the heading of American foreign capital in South
America. He has had many setbacks and failures, but his flashy look-
ing supermarkets in Caracas are said to be a big success. He is not
"hulld ng up his big ranch in Brazil. Frankie Jamieson has died.
Will John Howe please find out where he can get the story?
Today on the trip to the International Packers ranches -
there was a young man named Jenks who is the son of a classmate of
mine and who was himself a classmate of John F_,11 Stevenson at
Harvard. Young Jenks says he came down as an "analyst' for the
Rockefeller Brazilian "Open End Trust". In Buenos Aires, I had met
a Mr. Aldrich, a cousin of Nelson Rockefeller, who iS in charge of
this facet of the Rockefeller enterprises here.
This open end mutual Trust, if I have the right terminology,
has sold shares to Brazilian stockholders to the extent of $5,000,0000
according to Mr. Jenks and $8,000,000 according to Mr. Aldrich.
a
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Or-
CO
Memo #77
But the the anagers can't find enough securities that are suitable.
They are already the biggest operators on Brazilian stock exchanges,
and this will show how tiny are the total operations on these ex-
changes.
Mr. Jenks estimated that the total volume of all trans-
actions on Brazilian stock exchanges, for the current year, was about
$80,000,000. And In most other countries of Latin America - there
are no exchanges. He said that the fund would have to change its
policy, he felt, and move ahead into investment banking - in order
to keep its funds occupied. And of course it is of urgent importance
to keep the funds occupied in a galloping inflation such as this.
The stockholders haven t been able to keep up with the inflation -
but they've done better than they might have done if they hadn't
been stockholders. I'm quoting Mr. Jenks.
I gather from Mr. Jenks and elsewhere, that the Rockefeller
ventures here have lost vast sums in unhappy ventures such as fish
In Venezuela, hotels in Venezuela, and other enterprises where ab-
sentee ownership has found it cannot operate* On the over-all
gather. the Rockefeller ventures have lost large SUMS of money.
Nelson Rockefeller once told
.re Plb
oftrivroor
-u
iv; mob Nur
bicr rAn
"
h he had bought
here in Brazil I find he has a partner in it. Mr. Patterson crit-
icized him because he has failed to develop the ranch. And this
puzzles me because Mr. Rockefeller told me the one reason he had
bought the ranch was that Brazil had no inheritance taxes, and that
he wanted the rannh as an inheritance for his children.
I'm dictating this memorandum not only for my own guidance -
but In hopes that John Howe can get data about the Rockefeller
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Memo #77
ventures here. I think it may be a good case story on foreign
capital attempting to operate in Latin America. Mr. Rockefeller
is very popular here and must have had top people to assist him.
Why, then, has he done so badly?
Dictated in Sao Paulo, Braz
arh
1
-L
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BRAZIL
Cat. #1712
Memo #78
wie%Ift pp logo
MEETING WITH THE CONSUL-GENERAL AND HIS STAFF
SAO PAULO - GOVERNOR STEVENSON AND PARTY
The Consul General is Mr. William P. Cochran and the Deputy
Consul General is Mr. Burton. Mr. Cochran warned us that some of
the material is "classified". (I would be perplexed if I were asked
to explain which material rates classification! I've tried to report
nothing which seems to me classifiable.
Consul General Cochran, who has been here five months, explained
that there are 34 Americans in the Consulate, (five of them in USIA)
- and 51 locals for a total of 85. (Mr. Cross, former Consul General,
was wrong in telling me that this was the biggest Consulate outside
of the capital cities of the world - Mr. Cochran says that there are
many as big or bigger
in Hong Kong, Singapore1 vnka ama and
elsewhere.)
Mr. Cochran said there are 5,000 Americans in Sao Paulo (in
contrast to 15,000 in Mexico City) and 6,000 visas arei granted yearly.
There are koo American firms with branches here - with an investment
of $900 million out of the total American investment in Brazil of
$1 billion 300 million.
Mr. Cochran says that Sao Paulo has a population of 3-1/2 million
and is the fastest growing city in the world. He says that the state
of Sao Paulo is larger than 16 of the 21 American republics He
says that this city is a melting po
irltrift
per
e%.
l_J A
1 '1
immigrants to Brazil now come to the State of Sao Paulo. that the city
Is a mixture of Italians Portuguese and Spanish. He spoke of the
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monument we passed on the way in from the airport, the monument to
"Bandirante", (pioneers). He referred to the guy at the end who
seemed to be pushing the people ahead of himincriuding the two horses
at the lead of the procession. He said that this typifies Sao Paulo
pushing, dynamic - eager to get ahead.
He introduced Mr. Burton, his deputy.
Mr. Burton said that he had been here for a year and a half or
so but that he had become a "paulista" after a month or so. That
it didn't take much time for a newcomer here to sense the drive, the
hard work of the com sun
terrif c rivalry here In Brazi
16.6 ���
4. =
sense
e ILO
pride". There seems to be
ilmn Sao Paulo and the rest of
the country, and perhaps our closest counterpart between the rivalry
between Sao Paulo and Rio is the rivalry of a couple of decades back
between Los Angeles and San Francisco before Los Angeles left
San Francisco behind! - as Sao Paulo is now leaving Rio.
Mr. Burton told us that the community of Sao Paulo is most alert
politically. 95% of eligible voters cast their votes in the
elections.
course the corruption in the city of Sao Paulo is
.16.he "ay or
W U I.1.11.1e
that he has grown rich in public
ice. he claims, however, that he has paid off to those who have
paid him of
- or something to this effect.
own phrase that an honest polit clan Is on
(I am reminded of our
tays ht.) The
Mayor is one of the three present candidates for the presidency of
Brazil Seemingly, he hopes he may put himself into a position of
having a "swing vote" between the two leadin
ndidatebs But the
people of Sao Paulo, as an expression of theIr dIsgust at the
as
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corruption, in the 58 electIons, cast ballots for alderman for the
famous rhinoceros in the city zoo -%named Cacareco. There were 540
candidates for alderman - with 45 to be elected representing 11
parties; Cacareco leading the entire list.
The State of Sao Paulo Is by far the most important politically
of the states of Brazil. Two of the three presidential candidates
come from this state. Six presidents of the twelve parties are here
and maybe seven. This Is true although only 20% of Brazil's popula-
tion is in the State of Sao Paulo, and only 25% of the voting strength.
All candidates for president and vice president identify Sao Paulo
as the key state, the key balance point, the critical center and
4 NP #1.
9.a.vvy
1,-
1:0Lf�
g1
Mr. Burtoi
ex
politic and its economy.
ained that Brazil only re
ently emerged from
dictatorship - The Vargas dictatorship in 45. In 1950 Vargas was
elected pre5ident legally and some say that the country did not
-..r.i.linill wrship until he committed suicide in 54.
v.a,,____ erne crr a
Now the country is rtming along constitutional lines. There is a
senate of 3 senators from each of the 21 states - each senator
-
elected for eight _v .trl rs -m with one-third of the members elected In
..
one election during the eight years, and two-thirds in another. T
deputies are ele te
councils etc.
.L0 ini�
four years as are the mayors, the city
There Is & literacy qualification for voting. Here in the State
ot:Sao Paulo three point eight millions qualified for registration
in 58 out of a population of 11.5 million Now the proportion Is
roughly out of 12 million.
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The system of proportional representation was described by
Mr. Burton as "very strange". The individual voter casts his vote
for individuals but each vote also ls counted by parties. I don't
understand this "strange" system and shan't try to explain it. But
Mr. Burton described how the politicians are "highly individual",
each with his personal following shifting often in allegiance from
party to party. Further, a political leader will support candidates
of his own party in one city - and oppose them in another, Mr.
Burton told us there was "no consistency or pattern". The political
leaders and parties seem constantly to be reforming - coalescing
shifting without any clear idealogical lines a constant power
struggle for votes and jobs and prestige, - with political leaders
in the same party following wholly contradictory policies at any
given time - or with a leader arguing simultaneously on both sides of
a question. Thus, as an example, a political leader can be urging
more foreign capital investment while at the same time he denies the
rights to dividends on it.
Mr. Burton explained that the politicians operate under many
pressures. The most vocal, he said, is from students - "as elsewhere
in Latin America". And to describe the contradictory policies fol-
lowed by students - he said that their leaders would deride U.S.
jazz
ridden students - for their itresponsibility while at the same time
they would walk into their professors studies and 'defecate and
urinate as a sign of protest He added, Yes really!"
There are three major universities here in Sao Paulo with
fifteen to twenty thousand students Secondary school students are
�
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also active politically. Mr. Cochran broke In to explain that there
are "many professional students who don't spend too much time in
classes." This Is the same pattern we've run into elsewhere.
Mr. Cochran then introduced Mr. Lyon (Lyons?), the Economic
Officer of the Consulate. Mr. Lyon gave us the memorandum I've at-
tachinge He explained that the State of Sao Paulo, in relation to
the rest of the country of Brazil, is like a locomotive pulling 20
empty cars! (21 states.) He said that the State of Sao Paulo con-
tributed 60% of the revenues to the country and gets back only 7% In
tax receipts. (There has occasionally been a move to break off the
state from the rest of the country, and set it up as an independent
country, but apparently it's now at an inconsequential level, a
publicity level, such as the suggestion among New York City aldermen
to secede from New York,)
Sao Paulo is the largest center in Latin America for United
States investment except Venezuela. Mr. Lyon says that the area
continues to be "very attractive in spite of the threats of govern-
ment interference". Actually, he points out this threat is "fair-
ly light in contrast to other countries". He says that our companies
here are allowed to send out their profits - but that a high per-
centage of them prefer to reinvest them in the future of their country.
Of course the financial problem is the acute inflationary move-
ment. Mr. Lyon knows of one man who remembers when the crusado was
c�ili 500
Now it is worth one half of one cent He said it
mained to be seen whether the crusado can be stabilized.
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Memo #78
Mr. Lyon listed advantages here in this boom country for American
business:
Good power resources - (see the report on the briefing by
Brigader Lima).
Good communications. (Santos is an excellent port with good rail
communications).
Good labor supply.
Fairly efficient services - light, water, et cetera.
An energetic people.
A climate which encourages hard work. The opposite applies in
Rio.)
A fairly stable government in the state and city. The state had
a surplus last year and may again this year. (Though the city
"wallows in a state of bankruptcy'.')
The state depends on transaction taxes which go up with infla4..
tion - while the city depends on real estate taxes and other
fixed taxes.
The American business community is impressed by Sao Paulo's
stability and booming opportunities. It is willing to bring in money
to invest here, - and to leave its profits for reinvestment.
I asked whether there was any real opportunity here for small and
independent enterprises, coming to Sao Paulo with know-how and modest
capital.
Price sp
shirts".
Seemingly there is not in the opinion of this group. Hickman
IV Mix&
1
rprices wou.s. "lose the
Lyon said that the big opportunity here was mostly for
the corporations
Later at lunch with the directors of the American
411.
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43.
Memo #78
Chamber of Commerce, I was told that perhaps 20 or 25% of the
American businessmen here are professional people or others with
their own enterprises - such as lawyers,doctors consultants invest-
ment people and a few manufacturers - but the balance represent
American corporations,
Mr. Cochran introduced Jim Shea,(from New London Connecticut),
the Labor Officer. Mr. Shea is going to furn...sh me wIth a copy of
the paper he had written for the meeting and which he read - and
shall therefore not report on his comments in this memorandum.
liked the conciseness of his paper and its wealth of figures and want
to review it for materialor my article.
The next officer's first name was Dick, apolitical officer who
spoke of Communism, and whose last name I did not catch. He says
that the Communist party in Brazil is "one of the most dangerous
Communist parties in the continent". He says it has 4�,000 members
second only to the Argentine. In Sao Paulo 'there are 5,400 card
carrying members who operate from 300 bases." He says the party is
"very influential in labor and student affairs". The ultimate goal,
he told us was to take over the government of the country Its
present objective is to stir up all possible trouble with the United
States to isolate Brazil from the United States and to develop
much closer ties between Brazil and the Soviet Union.
Dick told us that more than 100 Brazilians since 1953 have been
trained in Moscow, for stretches of one to four years, with many
- the full four years
411111
He says that these agents in Brazil are now
working to Join forces with the non proletarian nationalist forces".
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Memo #78
He says there is a big debate going on within the Communist party it-
self as to how fur to go, and as to how best to seek such a goal
Dick thinks that the Communist party here is losing some of its
revolutionary fervor. It is advocating less violence Its leaders
feel that more can now be done by peaceful means.
Mr. Cochran introduced the head of the USIA He too is going to
furnish us with his notes and other material. He distinguished at
once between the short range objectives, those that he called informa-
tional, and the long range - which he called cultural. He says that
the most effective single activity here is the Bi-National Cultural
Centers. There are 15 such. In the center here in Sao Paulo, 6,000
are studying English. Each year it sends 35 or 40 young "Faulistas"
to the States. And it receives in return the Fulbright students and
professors three of each are here at the present time.
Book translations are of high importance - and I am attaching
a list which the speaker gave us of current popular books, the trans-
lation of which is to be encouraged. Governor Stevenson looked this
list over and said that he had read two which are checked. I have
read one which I have underlined. Seemingly an inducement is given
to persuade a local publisher to translate and publish the book. As
an underwriting the publisher is guaranteed a firm order for 500
copies (I asked for more data on book translation and have been
promised it.)
We were told of the importance of Ae "President's Fund" which is
bringing an American symphony orchestra he
together with the Howard
singers
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0 #78
We were told of the 1400 films in the catalog here -- and these
have three mobile units which help to distribute them to labor groups,
religious groups and others
�
We were told of the radio and three television stations here to
which U.S. films are supplied.
said that all of this sounded to me exactly like the USIA when
was responsible for it, except there was more of it. And indeed the
program seems to me almost precisely the same. The only major addi-
tion seems to be television and an aggressive program of book trans--
lations.
Dictated
arh
In Bogota
�
a
�
gib
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46
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Memo #78
A Literatura Norte
Americana no Seoul� XX
A Poesia e a Epoca
As Orquestras Sinfonicas
dos EU
Melo Seculo de Vitorias
Trabalhistas
Historia dos EU da
America X, 11, III
Lincoln
Lincoln
Introdu%..ao
Jornalismo
Ciencia e S CI enso Comun
Ca irta
war., 1%0
cessiva M
i�� �0%....4wr a-A46
Atomo em Acao
16, 11110 NW. %Or
Horizontes do Poder
Atomic()
0 Novo Mundo do Atomo
Uma Nova Era Em
Educacao
A Educacao Superior nos
EE.UU
Pslcologia Social
Psicologia
Oa Grandas Empreendi
mentos
Iniciacao Simples a
Economia
American Literature in He
the 20th Century
Poetry and the Age
The American Symphony 47* H, Mueller
Orchestra
Review and Reflection Cyrus Ching
The Growth of the
American Republic
Lincoln
Abraham Lincoln
Irk
111 al is
Tntrewinntinn
Journalism
Science and Common
Sense
TrIce. A
tlaai AtInm
Atoms at your Service
The Prospects on
Nuclear Power and
Technology
The New World of the
Atom
The New Era in
Education
Higher Education in
the US
Social Pwcology
Psychology
Great Enterprise
to.
4,
Straumann
R. Jarrell
Morisonft-Comwinger
Emil Ludwig
Bejamin P. Thomas
Prnflia& lannA
James B. Conant
T. AniMeNV
Dunlap -Tuch
Gerald Wendt
James Stokley
Kande'
Francis Millet Rogers
II Otto Klineberg
Man, Money and Goods
Henry Garrett
Herryman Maurer
John S. Gambs
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Memo #78
Grandes E onomistas
onomaeaA te
da Controversia
gontinente Branco
A Potranca Cor de Ouro
Palido
Um Caminho sob o Polo
Como sao fei as as
nossas 10.163
Os Ismos
A Liberdade na Sociedado
Contemporanes
Reflexoes sobre es
EE UU.
Mitos e Homens
A Conduta da Vida
The Worldly Philoso-
phers: The Lives
Times and Ideas of
the Great Economic
Thinkers
Economics and
of Controver
he A
White Land of Adven-
ture
Cold of Destiny
Nautilus 90 North
How our laws are
made
R. L. Hetibroner
t John K. Ga b aith
Walter Sullivan
Alida Malkua
W.R. Anderson-Clay
Blair Jr
The Ism A History
& Evaluation
Freedom in Contempo-
rary Society
on
America
L'oplum des I tel-
lectuels
The Conduct of Life
Charles J Zinn
Eugene O. olob
S. Eliot
Jacques Maritain
Raymond Aron
Lewis Mumfurd
sort
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BRAZIL
VISITS TO MERCEDES BENZ AND GENERAL MOTORS P
IN SAO PAULO
By Gov. Stevenson and Senator Benton
Cat. #3.717
Memo #80
March 23, 1960
We drove through an area on the outskirts of Sao Paulo which
was closely spotted with modern factories and which Hickman Price
said had been a jungle only five years earlier. The Governor kept
asking about the factories. Next to the Mercedes Benz plant was the
wilays plant which Mr. Price had established when he was in charge of
overseas sales for Kaiser-Willys. Both plants employ 5-6,000 people
and do annual volumes of around 75 million. Mr. Price says that the
total automobile and truck volume of the country is about $250 million.
The Mercedes Benz story is a fabulous one which Illustrates
F-hgz f1
4 *mar JI 46a� 016.01144. .1.
po&tunity which has existed In this in.Llau
o"a...mr boom
economy. A Pole named Alfred Jurzykowski, who owned a series of
chocolate plants in Poland before the war, escaped in 1939 as a Polish
officer into Turkey. He had money on deposit in New York, Switzerland
and elsewhere. He pyramided this money, first becoming an American
citizen and now a Brazilian. In 1946, when Germany was flat on its
back, he signed a contract with Mercedes Benz under which he secured
the rights for Brazil - with 75% ownership for himself and with
this providing the capital. Last year Mercedes Benz bough one-third
of his holdings for $14,000,000 - to bring the two interests into
50-50 ownership. We walked through the plant which is now producing
6 and 10 ton trucks, all diesel, plus great busses which use the same
engine as the 10 ton trucks Mr. Jurzykowski explained to me that he
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Memo #8
-2-
would not sell his busses for export because he thought this would
prove "socially bad'. The Governor and I had seen long queues of
people waiting for busses in Santiago, and Mr. Jurzykowski suggested
that these people would not like it if his busses were sold for
export.
The busses and trucks are sold on 24-month terms. Mr. Price
explained that they added about 36% to the price =for these terms
3% per month. I gather that they insure the returns also because
Mr. Price said they never lost "one cruzeiro" through bad credit or
failure to pay.
The plant was clean and modern, only four years old, and a
young man who was with us whispered to me, "the total capital on this
plant was repaid by earnings in between two and two and a half years
(This represents the goal of Sao Paulo capitalists, some of whom
expect 100% a year on their money, and this helps show the true long
term nature of Britannica's investment in our forthcoming Brazilian -
Portuguese encyclopaedia - on which we can't expect to get our origi-
nal investment back for seven or eight years.)
Mercedes Benz helps finance its dealers on their 24 months
terms.
My tmpre8810n is that they are wise in concentrating on three
models, or more properly speaking perhaps their two and a half
models - because the same engine is used for two in contrast to the
�
Kaiser plant in Cordoba which has 15 models including a line of pa senm
ger cars. However, the Kaiser plant occupies a monopoly position in
Argentina which it is trying to entrench, while the Mercedes Benz
plant here has tough competition, at least on its trucks
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Memo #80
(As to busses, it can sell all it produces - and there is an
export demand which it hopes to begin to fill.)
The bus sells for $11,000, about the same price as a similar
bus in Germany. Mr. Jurzykowski estimated the taxes in this total
figure at about 25%. The original iron ore is taxed; then the ingot
steel; et cetera, and these taxes build up into a pyramid of 25%.
We were told that a similar bus in the United States would cost
$25,000,
(The engineer who showed us through the Mercedes Benz
plant said that within five years all United States trucks
now gasoline driven will be diesel driven because this is
more efficient. Mr. Price said that the issue involved is
the price of gasoline versus the price of oil. In the U.S
gasoline Is cheap. This engineer also told us that Mercedes
Benz production today is 92% "national", meaning materials
bought wholly in Brazil. Within another year, he says, the
production will be 99--1/2% "nat onal - with only 38 bearings
imported from outside Brazil. Under a recent contract, Krupp
has brought $20 million dollars worth of machinery into
Brazil and is producing castings and forgings for Mercedes
Benz at a plant about 50 miles away.
Of course the great dramatic fact of this visit, coupled
with our observation of the many plants In this new area is the
xposive nature of the Sao Paulo industrial development
Jurzykowski has made himself very quickly, here in Brazil, one of
the world's richest men. And Mr. Price said that such stories are
a dime a dozen".
GIO
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Memo #8
Mr. Jurzykowski spends three out of four months in Europe. As
we left he called through the Mercedes Benz window that he wanted us
to take over his yacht in the harbor of Rio de Janiero. His is the
kind of story to which Fortune might well devote itself: Owning 50%
of the stock in this company, he is naturally in complete control of
it.
Mr. Price thinks that the industrial production of Sao Paulo
is perhaps roughly comparable to that of St. Louis. But Sao Paulo
boasts 75% or better of the total industrial production of Brazil.
By Sao Paulo, Mr, Price means an area of 50 miles in all directions
a circle 100 miles in diameter.
The Mercedes Benz plant has no union,
The management claims
AIM
that the wage level keeps up with the price index. I don't believe It.
We then drove to the General Motors plant which is under the
direction of Mr. Klaus Doelling. This is one of four General Motors
manufacturing plants outside the United States The others are in
Australia Germany and BrIta n. A fifth is about to be started in
Argentina. There are 22 General Motors assembly plants. Mr. Price
says that General Motors fought to the last ditch - here in Brazil
a inst converting its assembly plant into a manufacturing plant.
General Motors only produces here two types of trucks: a six ton
truck and a three quarters ton "pickup". General Motors sells only
for cash. This means that its prices are lower than Mercedes Benz.
General Motors Trucks are gasoline trucks and Mercedes Benz are
diesels
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The General Motors Distributor Organization Is an old one
going back to the development of their Brazilian assembly plant
In the '20s and the General Motors dealers can provide their
own financing which permits General Motors here to sell for
cash. The conversation suggested that perhaps they could not
keep this up much longer.
We did not walk through the General Motors Plant but
visited in Mr. Doelling's office with his executives his No 2
man Mr. Mandeville his sales manager, Mr. Wilson and others.
The General Motors factory manufactures "white goods
meaning refrigerators and other hous hold appliances.
Mr. Doelling told us of plans for expansion.
The big observation of the morning of course is the
phenomenal and unprecedented Indust
a
development of this
extraordinary community. Mercedes Benz does not have a union In
Its plant. General Motors has
General Motors sought to persuade
us that It keeps wages going up to match the price index do
not think this is too common here In Brazil I don't even think
It's possible
arh
ed in Rio de Janeiro, Brazil
a
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Cat. #1731
Memo #90
3/28/60
ROUGH NOTES USED BY SENATOR BENTON IN HIS TALK AT THE
COCKTAIL PARTY ANNOUNCING THE BRAZILIAN ENCYCLOPAEDIA
Given at the University in Rio de Janeiro
Mrs. Benton and I are pleased that you could join us this
afternoon to celebrate an announcement important inthe history of
E.B. and, we hope, not unimportant in the intellectual history of
Brazil.
As owners and directors of E.B., we are happy to announce our
forthcoming Brazilian Encyclopaedia, in Portuguese. Work will commence
on th s immediately here In .�to under a Brazilian editor aided by a
Brazilian staff and a corps of consultants recruited from Brazilian
universities. We shall print here In Brazil and begin to
A4Am411--
U11:711.0
within about three years. The set will be in 15 volumes and will run
somewhere between 5 and 7-1/2 million words. It will be edited for
the entire family.
Mr. Clozis Salgado da G ma, Minister of Education told me at
lunch today that the governmental Commission which has been examining
the prospect of a Brazilian encyclopaedia has been disbanded. The
project has been abandoned. (The Ministry said the Committee couldn't
agree on who was to write the article on "atom"! - not for attribution.)
We plan an investment which is large for a private publishing
We do not expect the quick return to which the businessmen of
ft
Sa
long term future We look for our own rewards in the 70s 808 and
90s. We want to join up our Operation Britannica with Operation Pan
America.
Paulo seem accustomed.
We are placing our confidence in Brazil
11P
�
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Memo #90
As publisher and chairman, I am happy to move ahead as a
private project. Dr. Teixe raj with whom I visited this morning in
the Ministry of Education, feels that books are essential to the
development of Brazil's educational system and certainly no books
are more important than an encyclopaedic reference set.
Brazil is the most rapidly growing of the great nations of the
west. Nothing seems a surer prediction, over the next 25 to 50 years,
than the growth and strengthening of Brazil's educational system.
Only through education can this rich and potentially powerful country-
with its projected population of one hundred ....Mon by 1057 - under-
gird a healthy and flourishing democratic system of government. Only
by education can you develop trained manpower essential to the tech-
nology of an expanding industrial society and an improved standard r%41
%."46
living.
If E.B. can play a mall part in this future, the directors of
the Britannica will feel greatly pleased and honored.
I'm very happy the Brita.nica can be able to make this announce-
ment while Mrs. Benton and I are here with Governor Stevenson who is a
director of EJElej a member of the Editorial Board, a director of
Encyclopaedia Britannica, Ltd., our London company, and a director of
Britannica 's affiliated company, Encyclopaedia Britannica Films, and
Chairman of its Executive Committeeand Board of Consultants. Our film
company is the world's largest producer of teaching films and film-
strips for classrooms
call on Governor Stevenson for a few words.
die
co
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Memo #90
Senator Benton mentions specifically Dr. Anisio Teixeira,
and the Minister of Education, Mr. Salgado, in the foregoing remarks.
D etated in Rio de Janeiro, Brazil
arh
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BRAZIL
Cat. #1718
Memo #81
March 31, 1960
BRIEFING AT THE EMBASSY IN RIO DE JANEIRO.
GOVERNOR STEVENSON AND PARTY
Ambassador Cabot lead off by telling us that there were no
"basic diplomatic problems" which divided Brazil and the United States.
He referred at once to the "basic friendship" which has existed be-
tween the two countries since Brazil's independence in 1822.
He immediately added that this friendship has recently been
"tarnished". He explained that the center of power in Brazil has
shifted from the aristocratic land owning groups to the urban middle-
class. This process, which he seemed to regard as an inevitable river
running down stream, has not been completed. (Later in the briefing
it was agreed that the old aristocracy is still of high importance.)
In the process of this shifting of power, said the ambassador,
the spirit of nationalism has thrived. A vigorous anti-U.S. propaiw,
ganda has developed. From this, serious problems have developed for
the United States.
He described the new spirit of Brazil:
1) The urgent demand for fast progress;
2) A great outcry against the supposed excesses of American
business. (These excesses are greatly exaggerated in
the propaganda - but Ambassador Cabot points out that
our business men here tend to be clannish supercilious
"Ae�loNfi-
G4ti%0L
I. VI VI
&J
c5o..d Portuguese'
There are widespread complaints of "enormous
.11P4
"..t05,"
"
by American industry and big remittances back to the
United States. (Ambassador Cabot has studied this point
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Memo #81
and says that he thinks the average remittances home
may be as low as 3% of the capital investment - largely
because of the optimism of American companies about the
future of the Brazilian economy, and their consequent
reinvestment of profits
The Ambassador emphasized that profits of American
companies here are not large by Brazilian standards,
Smart Brazilians expect to earn 25%, 40% and 50% each
year on their Capital - and indeed the best of them
expect to earn 100%. (1 confess that this would be my
attitude if I were operating in this economy. This
morning a young man standing next to me as we went
Flar^ligh the MexvnerieR Benz factory in Sao Paulo, told
me that the general belief in Sao Paulo was that the
entire capital investment had paid off in two or two
and a half years.)
The Ambassador mentioned American Foreign Power and the
packing houses as examples of American industries which
"take the rap"
He told us that when the American Can Company wanted to
come into Brazil recently, it found itself against a
local monopoly which was charging high prices and which
unleashed vicious anti-American propaganda against
American Can.
Complaints against the United States for our failure to
Invest in Brazil through the World Bank, Export-Import
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Memo #81
.3d�
Dank, et cetera. Yet the. World Bank has furnished $250
million here in credit - plus another 45-73 million now
forthcoming for an important dam The Export-Import
Bank, as I understood the Ambassador, has invested $1.3
billion dollars (though I would want to check this
figure).
The total of foreign private capital In Brazil might
reach as much as $3 billion.
capital totaled $1,3 billion in '57 and is probably $1.5
billion now.
The Ambassador explained that Brazil will borrow to the
absolute hilt Last May, the World Bank and other inter
national lending institutions layed down the dictum "no
more money to Brazil until you live up to your previous
promises to stabilize your economy and to hold back in-
flation." The Brazilian administration"thumbed its
collectIve nose at the World Bank." And to everybody
astonishment it has managed to stagger through the last
- though
an were
ten months,
Of this,
United States
"scraping the bottom of the barrel
It has been buoyed up by hig
anticipated.
The conversation shi
4111P
told
vast cost over the las
President Kubitschek. First
her cot
ee prices
ed from the projected list of points
about Brasilia. This city has been built at
four or five years - as a prime project of
the Brazilian Government bought 5,000
square kilometers by
6
exercising its right of eminent domain. This
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Memo #81
year it is selling property in Brasilia a terrific prices" and
the Government is now reaping the profit - and claims that this
profit will finance all of its expenditures in 1960 in Brasilia. (I
was reminded of the Paradise Golf Club in Phoenix,
7.ona
land was bought at 290 an acre to build a golf course with the
property around it later sold to easterners at $15,000 an acre)
The Ambassador explained that Brazil is determined to expand
"regardless of inflation". It won't stop, and it doesn't know how
to stop. He intimated, at very low key, that Washington might well
relax its "tough attitude in its economic policies here e think he
was intimating that u=s0 loans may be forthcome. g, that the polIcies
of the World Bank may change.
The Ambassador does not think that it is fair to call Kubit
schek s 'Operation Pan-American" "merely a scheme to get money away
from the United States." He believes there are indeed genuine resem
blances to the Marshall Plan. Naturally,
allerh
%AO% Cp �
ag y admits, there
will be big deLic ts in the execution of plans for the development of
the economies of these Latin American countries - and naturally, under
the proposed Operation Pan American these would have to be met by the
United States."
Such potential deficits, projected for us of the U. S. to meet
naturally make us cautious. And this cautIon,explains the Ambassador,
"offends Brazil". The Brazilians take the viewpoint that they have
been our friends throughout their history and most partIcularly so
In the recent war, when they indisputably put their shoulder to the
wheel when they put major effort behind our own war effort The
Brazilians now watch us give money away to India they see us give
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Memo #81
our money to Italy for her railroads - and they are hurt and offended
because we won't even loan money to them to help Brazil's economic
development. Thus they are like a girl who feels jilted. And this
produces "a sense of resentment".
The Ambassador feels that the President's and Secretary Her-
ter's recent visit here contributed to breaking down this unfriendly
or hostile view of us. He spoke of the United States' attitude as a
�we don't give a damn about Brazil," The Ambassador stated that he
felt that Governor Stevenson's visit here would contribute toward
counteracting this impression.
The Ambassador turned to his minister at his right, Mr. Niles
Bond. The Minister warned us, as we have often been warned before
about
other
countries, that Brazil is "very different,
(For example, even the toughest revolutions here in Brazil
are different, according to Dr. Smith, because of the
difference in heritage - the difference between the Portu-
guese and the Spaniards. Thus Vargas during all his years
of dictatorship probably didn't assassinate more than 100 key
people. Some deny he actually assassinated any one. While
In a Spanish country such as Colombia, 150,000 to 300,000
have been murdered and assassinated in the present revolution-
ary movement with assassination still running at the rate of
something like 50 a week. In venezuela and others of the
Spanish countries as =eh as 25% of the total population
is said to have been killed in some of the civil wars.)
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(At a little dinner arranged one night in Sao Paulo by Dr.
Smith, was Dr. Julio Mesquita Filho. He is the pro-
prletor of Brazil's leading newspaper, 0 Estado de Sao
Paulo. This paper was founded by his grandfather and it
is the great voice of libeval opinion in the country.
Dr. Mesquita is proud of the fact that Vargas regarded
him as his No. I enemy. During the Vargas regime he was
put into jaul 14 times. And one significant point about
each jail term is that he didn't know low long he would
stay in jatl - or whether he would ever get out. One
such term ran for six months. Finally his paper was
cept
appropriated by Vargas and he
CleniTrAllef
reaa.
exile - but his life was never threatened. He told us
of the torture that Vargas' subordinates sometimes
employed. One cell mate came back and committed suicide
after torture. Vargas isn't believed by Brazilians to
be a true Brazilian. He is described as 'A Gaucho, a
man of Spanish blood." The general belief is that the
cruel Spanish blood is poles apart from the gentler
Brazilian blood. Brazilian politicians can get along
together after bitter public fights. They bury their
hatchets.)
Bou suggested that no generality applies to Brazil ex-
dii erent," He em-lha ized Its size.
"T- 4-
oLle-third
area of South America and one-third the population. Thus it isn't
just another Latin American republic." He urged upon us the view
that it is "special in every way." I jestin1y referred to the
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memorandum we had received from the State Department which pointed out
that Brazil is 90% the size of the United States. I had always
thought that it was larger. We had .to add Alaska to outdo Brazil
territorially.
* * * * * * * * * *
The Ambassador introduced Howard Cottam, Economic Counselor.
Mr. Cottam spoke brilliantly. I do not believe I have lis-
tened to another officer since we left the States whose incisive
commentB impressed me as much. He says that there are three broad
areas of economic problems:
1) The first is psychological. (And it s a rare economist
who puts psychology first!)
2) The second problem arises from Brazil's "institutional
deficienc es."
3) And the last is uthe imbalances In economic emphasis and
development,"
Now as to the first, the psychological. Mr. Cottam warns us
that the economic aspirations of the Brazilian leaders "can't be
quenched." They are determined to go ahead - regardless of conse-
quences. They are hell-bent on their own fulfillment. Further, there
is a fabulous and enormous gap "between what they have and what they
want." More dangerous and alarming, this gap is growing. It is in�
deed "frightening." This attitude affects policies in key fields.
Petroleum and coffee are good examples.
Secondly, as to the nstitntional deficiencies." First and
foremost and by far it
in the field of education. This is the
big one." Here the deficiencies are so great that Mr. Cottam sees
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"little hope for the *development of a sound democratic society or a
functioning industrial society" - if these are not remedied. After
education come the deficiencies in "commercial practices." These
are slow, cumbersome, inefficient. Then coup the deficiencies in
the Judicial system which is shot full of loopholes. This system
permits expropriations of property in the provinces - unjust and
unwise expropriations such as have recently taken place in the
Province of Rio Grande do Sul.
Then, thirdly, are the grave economic "imbalances." These
start with the lack of power. Secondly comes lack of transportation.
Thirdly comes the unhappy imbalance in food - the present great
emphactiA nn
development leaves the country with food
shortages. Agriculture is dropping further and further behind.
Thus for example there is a lack of wheat. Brazil requires
tlele1
404.0LW 4.1.1" UMIGICAL.
But this ye r it will vroduce only 350,000
tons. It will have to import 1 million tons from the Argentine,
some 300,000 or thereabouts from Uruguay - and the balance from the
United States under Law 480.
(The Governor spoke of his meeting with the Governor of Sao
Paulo who told him that Brazil was essentially an agricultural
country, and that its efforts should much more aggresively
concentrate on achieving a healthy agricultural economy.
The Governor of Sao Paulo understands this particular "im-
balance" and is backin
ans
correct It,
Cottam
said that "Sao Paulo is far ahead of the rest of the country
in agricultural planning.)
401r
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-
Mr. Cottam said that the Province of Parana last year had produced
12 million bags of coffee, more than Brazil's total exports of the
year before. (More about coffee below.) Mr. Cottam said that Sao
Paulo "is learning how to grow rubber." He spoke of the "wonderful
things happening in Sao Paulo - indeed In all Brazil." And of
course some of these are in agriculture. (1 have the general feel-
ing that all trained observers here are at times open mouthed in
wonder - while they sit in terror at the thought of a possibly
catastrophic collapse.)
The Ambassador Interrupted to explain that 40% of last year
coffee production was in storage, and that this storage of course
had to be financed. The Ambassador referred to petroleum as a
problem rivaling coffee in difficulty. He said that the United
States, in its attitude
vsn14^-xy.
uwwwcA&N.A.
8
"skeptical outraged view." Yet he pointed out that Brazilian produc-
tion has gone up from 6,000 barrels a day in 54 to 80,000 barrels
per diem in '59. 1 asked whether this was a creditable record or
the reverse. The Ambassador sa d that this "depends on the point
of view." He explained that a Brazilian would ask - How can you
expect us to go up more rapidly than from 6,000 to 80,000 barrels
a day in six years?" Indeed, one of the economic officers added,
"Some say this development is 'too fast' for proper exploitation."
Brazil's reserves don't match those of the Argentine and others.
The Ambassador further said that while this year's coffee
crop may not prove too heavy, next year's is prophesized "as a
whopper."
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Memo #81
-10-
Mr. Cottam called on Mr. William Fowler, one of his associates
in the economic division.
Mr. Fowler spoke specifically about petroleum He thinks the
Brazilians "will starve before they will change their oil policy."
He says they are highly emotional about it. The battle cry is
"Our oil is ours." He said it is impossible to reason with them.
Furthers as Mr. Philip Raine injected - (the Counselor for Political
Affairs)
- the military insists that "they won't have foreign owner
ship or control."
Mr. Fowler reported major efforts in Brazil "to sell the
Argentinian idea of oil development" - but these "fall with a thud."
Indeed, such efforts "make the problem here even tougher."
Mre Fowler says that the British and French will sell equipment
to Petrogras, the Brazilian oil monopoly, on credit. The Petrogras
administration wants American equipment, and prior to "the recent
squeeze" was able to get it on credit from American private firms -
and indeed can still get some. Petrogras employs 200 American
technicians.
The Governor asked why the U.S. Government or the international
agencies should put up money for Petrogras when private money is
available. He pointed out that there isn't enough U. S. government
money available for the many demands upon it. This caused the
Ambassador to comment that there were still other arguments to support
this view: Brazilian reserves are small and oil is in over supply
throughout the world. The Ambassador suggested that for these latter
reasons, American companies might not come in to Brazil, as they have
into the Argentine, though there are some who fear that they might
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�
Memo #8
-11-
participate "merely to maintain their world position." (This question
was not further pursued but my impression is that the Ambassador feels
that there are strong arguments for a reversal of the United States
position - and for our financial support of Petrogras.)
The Ambassador next called on Mr. Robert Herder, Director
of Point 4. Mr. Herder explained that the cost of living in Rio
went up 52% last year - with food going up 70%. Such drastic in-
creases "gave the administration a bit of a fright." In the last
three months, the rate of increase has slowed down to between 1% and
2% a month for something like 3% in total in the last two or three
months. The Labor Attache; Mr. John Fishburn, interrupted to say
that a very rapid rise was anticipated in the immediate future.
Governor Stevenson broke in with a comment he had made earlier
to me today.
ists seem to
But that the
He said that
be apologists
labor leaders
In Sao Paulo all the bankers and Industrial-
for the inflationary spiral here in Brazil
and labor groups are desperately opposed
to it. This, he pointed out is roughly the opposite of how the
forces line up in the United States. In the U. S., tile conservative
groups represented by the bankers and business leaders - are aggres-
sively for a balanced budget and a stable price system � whIle the
labor groups favor a so-called "easy money" policy, even at the risk
of some inflation. The group around the table seemed to agree with
this comment of the Governor's.
Mr. Cot am helped ex
4-1.4
4.414.
observation by pointing
the urgent need of business men for money and credit They will
pay up to 30% interest for money and more - and this "shows the
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big profits they are making and the bigger profits they can make
with extra capital." And of course the faster the rise in prices,
the more they need credit. The present situation gives industrialists
a vested interest in inflation.
The wage increases of the last few months don't equal the cost
of living increases. They don't keep up and can't keep up We
referred to our visit in Sao Paulo to the General Motors plant. The
director claims that GM keeps up wages to the price index. We were
told that General Motors is an exception. There was an argument be-
tween Mr. Raine and ttie Labor Attach4. Mr. flame said that the
standard of living of the workers was improving. Mr. Fishburn
aggressively denied this. Finally It was agreed that the living
standards of the workers may recently have improved some in the
south of Brazil but there is no doubt but that they have fallen
"terribly in the north where the workers live in pigpens,"
interrupted to say that I could see a solution to the petro-
leum dilemma - either the policy of adopt ng the Argentin an policy,
or the policy of driving through with the present policy - but I Could
not see the way out of the coffee dilemma. There was agreement.
Mr. Cottam said that the Embassy saw solution on coffee. He explained
that Santos grade No. 4 had dropped from 550 a pound to 340. But this
does not stimulate world demand particularly. The demand is rather
inflexible regardless of price. Yes, the demand. could be stepped up
If the Russians could be persuaded to 8h1 ft from tea to coffee. Or it
could be stepped up if Germany and other countries which tax coffee
heavily - could be persuaded to remove their taxes so that the product
would no longer be a luxury item for the rich. (Hickman Price told the
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Memo #91
-13-
Governor and me that a cup of coffee in Germany costs 250.) And
Indeed the Brazilians are working to eliminate taxes on coffee in
countries where these taxes retard consumption - and seem to have
made progress in stimulating consumption in Poland.
In '58, Brazil shipped 12.8 m salon bags. In '59, Brazil
announced to other producing countries that it was tired of holding
an umbrella up on prices, and that it would undersell other countries.
As a result, in '59 Brazil shipped 17.6 million bags - out of total
world shipments of 39 million bags. Thus Brazil earned somewhat more
from coffee in '59 in spite of lower prices than in '58 - in its
foreign excha
Crith
� c=# .00 W
* *
Another officer spoke up to show us the acute nature of the
hand-to-mouth government financing in Brazil_ Government employees
may not be paid for weeks, or even for months. With such a shortage
of cash, the government may dip into its pension funds. In other
words, its financing is almost on a day-to-day basis. It is very
precarious
(A day or two later I read a story in the English
language paper that President Kubitschek had ordered his
Finance Minister to print money to pay the salary in-
esreNnfQ415
4-- "
government employee
a couple of paragraphs on Page 2.)
Mirtr,
ALic btdu
4gar
rated only
The Political Counselor explained that everything in Brazil
in the field of politics right now centers around the PresIdentIal
campaign.Marshal Enrique Teixeira Lott resigned his Army commission
0
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9
Memo #81
recently after 49 years in the army to be the candidate of the
administration. As the key man in the army, he had pulled a coupe
which wasn't explained, but which was necessary "to permit Kubitschek
to come to power," - and Kubitschek had been wholly dependent on his
support during the first two or three years of his administration,
Marshal Lott is honest. He is anti-Communist. The Political Counselor
asked a question: "Does he indeed know what a Communist is?" The
Communists are supporting him in his current campaign. And he is
running with Joao Goulard, the present vice president who is a candi
date to succeed himself, who met us at the airport today, who is in
bed with the Communists, and who is their Candidate as well as the
candidate of labor. The Communists have taken over administration
of many areas of Braz lian labor with Goulard's consent; he is lazy
and opportunistic.
The opposition to Marshal Lott is Janio Quadros, former Mayor
of Sao Paulo and former Governor of the State. He was described
as a demagogue "who provided a conservative administration for the
State of Sao Paulo, with a balanced budget, and who is now supported
for the Presidency by most of the business community." Our Embassy
is "worried about his views on foreign affairs." Mr. Quadros had
visited the USSR, has had friendly relations with Khrushchev and he is
going to Cuba next week. He is not a Party man but an individual
operator.
asked why the business community would support a man who
seems so allied with Khrushchev and Castro. I was told that Quadros
Is a paradox. The Ambassador suggested that one of the grave questions
now in Brazilian politics is "whether the fat cats will put up campaign
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-15-�
money to back him." But they remember that he balanced the budget
at the state of Sao Paulo!
Another candidate for president, the third, is Adehmar De
Barros, present Mayor of Sao Paulo. He ran in '55 and polled 25% of
the vote. Like Janio Quadros, he is a "personalist," He absolutely
owns the Socialist Progressive Party. But he has lost influence due
to charges of corruption which he does not deny. In Sao Paulo we
heard stories about this. When accused of crookedness, he admitted
that he had become one of the richest men in Brazil during his term as
Mayor, but in effect he said, "Yes, I make lots of money out of poli-
tics but I always deliver to those to whom I sayI'll deliver. (He
sounds like the honest politician who stays bought!) T was told that
he is prepared to spend a big part of his fortune in running for the
offices from which he recreates his fortune. Recently he called for
TAib._eN on = tc*iPv_ston program - VPnansg he was hck'ino. Ant'URPA of the
fact he would later pull out of the presidential race - and he swore
on the Bible that "he,d be in there at the end."
* *
The Ambassador called on the Information Officer,who was pres-
ent, seemingly the deputy of USIS, James Opsata. He gave us a routine
and dull report. He says the Brazilians are heavy patrons of the
movies and radio. He reported that there are koo newspapers in Brazil
and 300 radio stations, "all receptive to USIA materials." There are
now five TV stations and TV is growing. He emphasized the 56.131;
National Centers. Sixteen of these have "American grantees." k7,000
Brazilians are studying English in them
The big Center here in Brazil
has 7,000 such students. Mostly, these Centers are self supporting.
And this�lead to Dr, Arnaud, Cultural Officer.
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+V=
Memo
Dr. Arnaud spoke of the universities which are new and weak -
with groups of faculties under a Rector - groups which haven't con-
gealed - and which often don't give credits to each others students.
He said that Mr. Kubitschek in a recent speech had promised a large
new campus near the airport to the University of Brazil. Such a
campus will bring the faculties together, which are now spread out
all over the city.
Professor Arnaud hopes for full time professors
to replace those which are now part time. He even seems to hope tor
full time students to replace the part time students.
The Ambassador interrupted to explain that the students here
are older than ours and are politically active, are Leftists and
"unruly,"
"ir
The Labor Attach, Mr. Fishburn, spoke up fluently and aggres-
sively and so rapdily that
_3 -
I missed some of his material. Manifestly,
he sees issues here more sharply than do many of his associates. He
is more -prepared to speak up energetically about them (I think if I
were to pick the attaches from all the embassies which we visited -
those which I though could best advise me on what's what and what
will be what, I would think a long time before I passed over the Labor
Attaches.)
Fishburn stated that his society is run for a few
families". He said, "They have no interest In the workers" He
said, "Neither they nor their political parties are interested in their
key prelblph.mR,
States Is
11
.1100.
RriggictiRt4=4H this is
ft
%.0.
Cin.4Q11W2
TTr--T 1t
'rider attack. Here's an easy method to detract attention
from the failures of the Brazilian aristocracy and its political
henchmen.
0
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-17-
Mr. F shburn explained that Vargas had set up the unions
frankly on the Mussolini model They are run wholly by the. govern-
ment. A union cannot be started here without a government okay.
And the government decides all important wage matters. Thus the
government connives when wage increases, during the last six months,
fail to only 60% of the increase of the cost of living. (The in-
flation is like a heavy tax on labor and even more obviously on fixed
incomes.)
Strikes are illegal here - In theory - in essential industries
- but the labor unions are beginning to shortcut these laws. In re-
cent months there have been 1120 interventions by the government In
labor union affairs. The government has this kind of complete power
over the unions. Further, it has great financial advantages in its
dealings with the unions. For example, it collects all the dues -
and keeps about 20% of them for its own private uses - returning to
the unions only 80%. The government has a couple of hundred soft and
lush jobs which it can bestow on labor union leaders who do its bidding.
In this way and others, the government has a big carrot, as well as a
big stick, which may keep it in control of the labor unIons for many
years.
However, the government does not use its power much. And
this gives the Communists a major chance to develop. They have not
been growing lately, but Mr. Fishburn thinks that the government power
over the unions is sure to wane, and with this may come a further growth
of Communist influence. He thinks that the labor leaders of Brazil
are very restless under government domination.
a
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Mr. F shburn says that the United States has excellent con-
tacts with top union leaders and is using them to advantage. We sent
60 labor leaders last year for visits to the United States. Our pur-
pose is a simple one: to give them appreciation of "our way of life."
We send them to see our educational institutions. They learn that
theirs are pitifully inadequate and deficient. We send them to visit
our Pure Food and Drug Administration in Washington, and many other
of our government regulatory agencies. They learn that we of the
United States are deeply interested in American consumers - far more
so, through our government, than is Brazil.
Mr. Fishburn feels that we are beginning to win over those
who Aren't dedicated and confirmed Communists.
(The Ambassador interrupted to say that we are also
ending up deputies - and we have learned that their
views n^nin
be
modified'
Further, we provide the labor leaders with technical data
and material - of great value and interest to them.
Brazi
labor
flatl
We were told that the United States also has a program with
ian intellectuals.
These are the men who "provide the ideas for
and all others in Brazilian society." The Ambassador stated
that 'This is the big area for our efforts."
I asked him what
concrete methods he had developed, He said that only today he had
written
of these intellectuals I jestingly commented that perhaps it would
be easier to get them honorary degrees than to get them for Democrats
letter recommending that honorary degrees be given to some
�
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Memo #81
in the United States - referring to the Galbraith and Schlesinger
letter to the Harvard Corporation.
Governor Stevenson interrupted to break off the meeting.
In response to the Ambassador's query as to our further interest,
the Governor said that he would like to learn more about Communism
and its activities here, more about the military, et cetera.
Dictated in Rio de Janeiro, Brazil
arh
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11.
12.
13
14.
15.
16.
17.
18.
19.
Memo #81
-20
ST OF USEFUL TELEPHONE NUMBERS
1. The Embassy (Chancery)
2, Ambassador - John Moors Cabot
3. Deputy Chief of Mission - Niles W. Bond
Minister for Economic Affairs
Howard R. Cottam
5. Counselor for Political Affairs
Philip flame
Counselor for Public Affairs -
Aldo D'Ales andro
Counse
Will
or for Economic Affairs
am A. Fowler
Counselor for Administration
Sylvain R. Loupe
9. Supervisory Counsul General -
William C. Afield, Jr.
10. Army Attache - Colonel Clarence A. Langford
Navy Attache - Captain Morton Sunderland
Air Attache Colonel William L Gibbons
Control Officer Edlow G. Parker
Mail
Nurse Mrs Dorothy Thompson
Hotel Copacabana palace
Copacabana Palace Apartments
Hotel Excelsior
Hotel Ouro Verde
Hotel Serrador
Delmer Hopfner
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Home Office
52-8055
26-9150 Ext 428
27-6495 Ext 416
46 7304 Ext 346
37-6108 Ext 376
57-7805 Ext 427 .
37-8033 Ext 478
57-2997 Ext 424
45 2250 Ext 423
k6-0162 Ext 410
47-0858 Ext 412
47 6949 Ext 398
27-2547 Ext 243
37-1641 Ext 294
k6-3976 Ext 356
57-1818
57-1820
57-1950
57-188o
32-4220
32-11280
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BRAZIL
VISIT WITH BRIGADIER LIMA IN SAO PAULO
Cat. #1719
Memo #82
March 23, 1960
Brigadier Jose Vicente de Faria Lima is the Minister of
Public Works in the state of Sao Paulo. He's the man who Senator
Morse told us at our breakfast in Washington, gave him the finest
briefing of any one with whom he visited throughout his recent tour
in Latin America. As we began our briefing, Consul Genera? Talirtnn
told us that we did not have to take nOtes because everything that
the Brigadier was going to tell us we would find in the attached
booklet "Plan of Action" and the attached set of charts. Yet I did
take a lot of notes.
The Brigadier's large staff sat around the table, some 30
or 35 people. They waited for questions from him, but he called on
them but seldom.
(1 take detailed notes at all these meetings and
Governor Stevenson takes occasional notes; we have
been told several times that one thing that has
impressed our hosts Is our intense interest in what
we are told - to the point that we "take notes"!)
Brigadier Lima explained that the key to development through-
out Brazil is highways. He said that in 1935 in the state of Sao
Paulo there were only 700-odd kilometers of highways which were
paved. By contrast, in the last two and a half years, 2300 kilo-
meters have been pave. This brings the state's total to 6084 paved
kilometers more than seven times the total o
935.
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Brigadier Lima explained that the Sao Paulo highways are
only part of the national network. He showed us a map which demon-
strated how the Sao Paulo highways are a "grid connecting border
states with each other". He says that Sao Paulo has spent on its
highways an amount equal to five percent of the total national budget.
He rolled along into railroads. He described the new engines-
new 4-40mcm new gauges The uneconomical railroad feeder lines are
being replaced by paved roads. The Export-Import Bank is contribu-
ting to rebuilding of the railroads.
The Brigadier moved along into a description of the big avia-
tion program. Great airports are being built which will take care
of jets.
He then stressed power development, and of course this is on
a long range planned basis, over a period of many years. The Briga-
dier told us that Brazil now has three million kilowatts, mostly in
the states of Sao Paulo and Rio. Throughout the next 25 years they
hope to Increase the kilowatts
,^ 0 -
.11.0 pert;etit, per year. Thus they
will double their power every seven years for the state of Sao Paulo.
This poses a tremendous problem of financing. They need $300,000,000
In the next seven years. The Brigadier showed a map dotted with 24
projects in varying states of development. One project to be started
this year will service a 400-grille area - w th as much
as the total now in all Brazil.
(Many of the small projects on this map are
admittedly very expensive and Governor
Stevenson expressed surprise that Brazil
1_,wer p;.acg./Aso_LcL.L
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3
under such a well worked out plan, can still
be building such small projects. Brigadier
Lima explained, rather weakly and seemingly
regretfully, It seemed to me, that these are
"inherited".)
We were told that the power projects will "help industry
decentralize". Further, they will help the smaller cities to com-
pete with the big ones.
The projects include reclamation and irri
gation and "even fishing".
Today the power output in Sao Paulo Is 300,000 kilowatts by
the state and 100,000 by private companies. Three years from now
the state output will be 900,000 and the private output will be
431,000 kilowatts.
(My notes may be wrong here, and these figures
need to be checked against the book.)
� The Brigadier's plan, with these charts, rolled on Into
education. He explained that the shortage of classrooms In Sao
Paulo calls for 40,000 new primary rooms - to accommodate 320,000
students on two new shifts - plus the replacement of 30,000 old and
obsolete primary rooms which will take care of another 240,000 stu-
dents on two shifts.
addition,In 1,100 secondary schools must be built for
110,000 students plus 30 new professional schools for 7,200 students.
(The state is now carrying the whole co
this program but is trying
mloolv %Pr
i- federalfr.,40.1 )
get
�
�
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Memo #82
The Brigadier said that there would be electricity in those
new schools - and there are plans for the use of film strips - but
no plans as yet for motion pictures or television.
(He added that the army and air corps are now
using motion pictures for teaching.)
* * *
In the field of health, Sao Paulo is underwriting a program
to develop 180000,000 free bed patient days - over the next four
years. Further, the state has a plan to eradicate malaria in 191
cities for 2,700 000 inhabitants. It Is developing 72 centers for
child care, etc., etc.
* * *
Tzysigadier Lima aARnyvihAd his plan for new jails, courthouses
houses of detention, penitentlar es, with seven new centers fo..
Alive:I/al le delinqu
nay,
�
I asked whether such over-all plans were being initiated by
other states. He thought that they were by two others (of the 21).
The Brigadier then spoke of the problem of agriculture and
the need for training regional agronomists. He spoke of the need
for agricultural loans especially to help shift low quality coffee
lands into cereals and other foodstuffs. This last is most important
in line with the present projected increases in coffee production as
trees gre
7. -, ?FI rcsmc!
The Brigadier described the loans needed for small and medium
sized ihdustry,- especially. for mechanical industries. He wants a
�
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-5
development bank for the state which will also be an export-import
bank for the state's equipment industries. He urged the need of
new lines of credit for five to seven years to finance the sale of
heavy equipment for export".
(He is not referring primarily to export
outside of Brazil, but rather to Sao Paulo's
exports so other states within Brazil.)
* * *
Brigadier Lima referred to a 'developed investment program
for the next four years - from state sources, also from federal
sources and from external sources"
He wants financing first and foremost for power and he has
It neatly worked out - so many millions from the state - a given
amount from the federal governmelt such and such an amount from
the Export-Import Bank, etc.
The schools are to be financed wholly from the current budget
and so too the highways. He has no plans for borrowing to finance
these projects.
we*.
here agaIn he must bo -r# 0
Thus there are two types of financing - direct financing from
the operating budget, which pays as it goes along, and secondly,
financing by capital which is borrowed.
The Brigadier explained that until 1952 Brazil tended to
spend everything on consumer goods. From '52 to
debt and got into trouble. Since
to save in order to industrialize - "we are now industrializing at
55 he told u
15 it went Into
Brazil was trying
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the rate of eight percent a year in the state of Sao Paulo". He
admitted that agriculture, by contrast, was only going up 3.6 per-
cent - and quickly added, "So now we are giving support to agricul-
ture".
(The Governor of Sao Paulo later complained
to Governor Stevenson about the failure to
do justice to agriculture.)
Brigadier Lima concluded by telling us that the difficulty
of getting credit "helps explain our inflation". He said, "We don't
have the means to develop our resources - within the next 25 years
we can expect to supply the wol'),(4 with beef - and on this alone we
shall earn one half or one billion dollars In exchange per year
but we cannot get this program financed in the meantime".
(He admitted that some cattle suffered from
hoof and mouth disease.)
* * * *
The slip I am attaching Is .n his own handwriting. It is
his quick analysis of the engines for the Sao Paulo railroads. Nine
percent of the engines are steam, 40 percent of the engines are
diesel; 51 percent are electric. But Sao Paulo now only has the
money to buy 12 new diesel engines the cheapest kind to operate.
(Does that third column mean the cost per type
of engine to operate? Forty thousand for each
steam engine, 14 000 for each diesel and 15,000
for each electric? My notes show he said diesels
were the cheapest.)
IMMO
a
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Note: John Howe - please take the foregoing and have it examined
in line with the set of charts and the booklet which I'm
sending through. I think this is a fascinating case story
of planning in South America. It's much the most interest-
ing we've run into. Here we have the big boom state of
Sao Paulo the boom state for private enterprise and it's
the center of big time state planning. This seems directly
to bear an Raul Prebisch's thesis as spelled out at such
length in my memo on my meetings with him and his associates,
mil
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BRAZIL
COMMENTS ON VARIOUS DISCUSSIONS ON
PRESIDENT KUBITSCHEWS "OPERATION PAN AMERICA'
Cat, #1720
Memo #83
3/30/60
We called at the Foreign Office on the Acting Foreign
Minister. Several of his associates were with him, including
Ambassador Barbosa de Silva, the Minister of Economic Affairs, In
response to questions from Governor Stevenson, he explained that the
Operation Pan America, or the OPA, as they call it here, is designed
to be the political implementation of the facts and plans developed
by ECLA. OPA is designed to furnish initiative which ECLA lacks.
Its Ideas are to be Implemented by the OAS, In cooperation with ECLA
and vice versa The ideas and suggestions of OAS and ECLA are to be
carried through by the individual Latin American republics at the
political level, all of them helping each other. Much of this was
pretty vague. Ambassador Barbosa de Silva explained that 'the im-
portant thing about OPA is President Kubitschek and Braz
11
.a.
Thi R
seemed more specific but is still hard to pin down. The Ambassador
conceded that there was some rivalry between ECLA and OAS - and one
of the jobs of OPA was to divide the work between them
Governor Stevenson explained that he had been with the
U.N. when ECLA was set up. He said that everything he was hearing
now, on the need for OPA, he had heard at that earlier time in the
U.N. - and this had led to the establishment of ECLA. The Governor
explained that the Latin American countries had asked for ECLA and
he asked whether Kubitschek was now proposing that it be abolished,
or merged into the OAS as part of the OAS personnel. The Governor
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said that he couldn't figure out the extent to which OAS is supposed
to function for OPA. Should the staff of ECLA be merged into OAS?
Ambassador Barbosa de Silva reminded us that Kubitschek
had proposed his Operation Pan America after Nixon's visit to Latin
America in '58. He reminded us of the letter Kubitschek had written
Nixon to assure him that the unhappy events in Caracas were no indi-
cation of the way Brazil felt about the United States. The OPA was
Kubitschek's suggestion as to how all the American republics "must get
'together".
After we left this meeting, as we were driving to the next
one, the Governor told me that in 1997, when he was serving as an
advisor to Secretary Dulles and President Eisenhower - he had tried
to persuade them to take more aggressive action in the
economic development. The Governor feels that the Development "Rank
for South America, after the Nixon trip, grew in part out of the
fact that we didn't think we could neglect South America while we
were moving ahead with major programs in the Mid-East and elsewhere
The Governor feels that the so called OPA doesn't seem to be a planning
group but rather a form
opaganda which pretty much bolls down
to political action to put pressure on the United States. I agree.
Late one afternoon in Rio a group called upon the
claiming it represented the rough counterpart in Rio of the
of Foreign Relations in New York. Most of the speaking was
two men a well known news columnist Barret() Leite, and a
economist, Cleanto Palva Le te.
Governor
Council
done by
young
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The meeting opened by presentation to Governor Stevenson
of a magazine printed by the organization, a quarterly and now in
its eighth issue. This is a scholarly type magazine of small circula-
tion, financed In part by the government, and distributed to libraries
and universities outside of Brazil as well as within. (1 am securing
a translation of an article from its current issue dealing with
Operation Pan America"; this is a subject of great interest to us
here in Brazil, applied to Brazil's efforts to give leadership to
Latin America.)
The
Operation Pan
schek to Vice
news columnist, Mr. Barret� Leite, explained that
America grew from a letter written by President Kubit-
President Nixon after his unhappy experience in Caracas.
He said that most of the Latin American states
InnA c#47-1,1%7.1
.4
with OPA
at least in part. He said the United States "formally agrees",
(Indicating his skepticism about U.S: enthusiasm). He said that the
big point on OPA is that it makes Latin American development "a
matter of priority". He pointed out that the Latin American countries
can be built up much more rapidly than can India, where the standard
of
living is sn very low, or Africa. Because the build-up job can
be done in Latin America so much more quickly, he feels that it should
be given a high priority by the U.S. Using the kind of terminology
which Paul
of setting
enable the
within ten
Hoffman uses in discussing the U.N. Special Fund, he spoke
a goal for a dynamic standard of living which would then
Latin American countries to make their own "break t rough" -
to 20 years.
Western Europe
the United States and Canada are no the
bulwark of western culture". The speaker contended that they should
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Memo #83
be enlarged to include Latin America. He criticized the United States
policy for giving "priority to the areas of communist danger". He
feels this priority should be given to Latin America. He asked, Who
knows what the Asian and African countries will be like in 30 years?"
The intimation is that our investment in such areas is very speculative
in contrast to developing Latin America.
The speaker reminded us that we are living in a "period of
fast historical change".
At this point Mr. Palva Leite, a most articulate young
economist, took over. He told us that he had been a principal advisor
to President Vargas at the time of the President's death. He Is now
a Director of the Bank of Brazil. He was an employee of the United
Nations for five years
the
JLJ
Mit=kri
& L � or*
nteNA
L
he now represents Brazil on the Board of
-an Development Bank.
He admitted that "in the beginning, OPA was very vague and
fuzzy". He said OPA started as "a gesture to repair the damage of the
Nixon incident" "to give the United States a chance to reestablish
Its position in Latin America". (A most surprising claim!) But at the
key meeting of 21 in November of
a most important "blueprint of
OPA was delivered". This blueprint "made the vague and fuzzy declara-
tion something concrete". Now, what is the OPA blueprint, M. Paiva
Leite asked rhetorically. Is:
1 The contention that the economically underdeveloped
countries of Latin America are "the greatest obstacle
to the development of friendly democratic institutions"
2. Their economic growth is bound to be small if the
rate of growth stays at its present level
�
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3. Without "a big push," - the present gap between Latin
America and the rest of the western world will continue.
4. A "hemispherical program" is required which will raise
living standards in Latin America - per capital to
Wo by 1970.
0 At this point, the United Nations has estimated that
the 'take-off" period will begin. (The countries will
then be able to finance their own continuing expansion.)
6. Brazil is economically two different countries. The
acute problem of development is in the northeast with
its 20,000,000 people whose per capita income is only
$100. Here the growth in productivity is only 2.7 per
cent per year which will yield a per capita income of
only $110 by 1970. (I suppose this takes into account
the growth of population.) In the south, the per
capita income is $370 for 35,000,000 - and this great
area is "about to reach the take-off".
These figures illustrate the serious imbalance of the
northeast in contrast to the "moderately developing
south'. This imbalance, said the speaker, shows that
Brazil is repeating internally the mistake of the
investing in the south
instead of the northeast - because the opportunIties
are greater In the so th a.nd there the rich are getting
icher
e";
Dy,r,41 4
ik
1.4
�
�
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T,
e foregoing certainly does not sound like a "blueprint"
but at this point Mr. Paiva Leite veered into a discussion of the
new Inter-American Developmental Bank. He said that this was a new
idea and that the United States opposed It over a long period of years
on the grounds that there were already financial institutions to do
the job outlined for the bank, institutions such as the World Bank
and the Export Import Bank. Throughout these years Brazil supported
the U.S. position. Brazil felt that without United States support,
it was silly to talk of any such bank. When the United States, in
1958, after the Nixon visit, decided that it wanted to set up the
bank - Brazil immediately changed its own position and went even
further than the United States by demanding even
Capitn1 thnn
suggested by the Untted States, Today the positions of Brazil and
_
the United States are at variance in attitude towards the bank.
(Governor Stevenson later commented to me
he
thought the 1958 American proposal for the bank developed
because of our plans for the Mid-East; that we did tiot
feel we could move ahead with major developmental plans in
the Mid East while we continued to oppose the proposed
developmental bank for Latin America. The speaker seemed
to suggest that the U.S. changed its position because of
the Nixon incident and more particularly because of
President Eisenhower's proposed OPAe
Barreto Leite,
the new columnist, had Interrupted to say that the bank
was the least the United States could do in the circum-
stances". )
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Mr. Paiva Leite fears that the bank will lack boldness. He
feels it should make outright grants to areas such as northeast
Brazil - or to Haiti - where there is little chance of repayment.
(I thought this suggestion most ingenious - that Brazil be broken
into two pieces so that one of them could receive outright grants
which are not backed or supported by the credit of the Brazilian
government, even in so-called soft currency.) Mr. Paiva Leite fears
that U.S. policies toward the bank win be much too orthodox, too
much "the old position" - that no loans will be permitted if private
capital might be available. (This position means no loans of any
kind to the oil monopoly, one of the biggest issues under debate in
Brazil.) He admits that he accepts the Inter American Bank as an
improvement - "but it's a poor solution".
Mr. Paiva Leite emphasized that the basis for future eco-
nomic development of Brazil must be In public works such as power
plants, ports, railroads, highways and transportation in general.
Naturally, there's a very low immediate yield on such projects, if
any, and this makes them unattractive to private capital. Such
capital is naturally channeled to "consumer goods" which offer the
quick profits and the big profits.
The largest profits should now be made, he says, in these
basic public areas. (He did not speak of universities.)
Another aspect of economic development is its "social
aspect The speaker said that Brazil was "still passing" from a
feudal
world".
and per
ystem its Income differences are "among the greatest in the
smal
rich group has "great influence over the government
tuates itself through this Influence, c nttnuing to enjoy
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an unfair share of the national income". Mr. Paiva Leite explained
that the government, subject to these pressures from the rich,
"becomes their agent". Other groups, representing the general popula-
tion, such as the labor unions, "are just beginning to discover their
power through elections and strikes".
The speaker emphasized that it was in the interest of
democracy in Braz...1 to strengthen the government against the present,
power of the private sector which channels the income of the country
"Into conspicuous consumption". He asked: how can the government
and the people capture the savings of the economy for the kind of
economic development which is so urgently needed? I asked about
income and inheritance taxes. The speaker explained that the income
taxes on the middle groups in Bail are roughly comparable t
in the United States, but the top tax b
acket
is %.rn-0-47 --- per cent.
Further, the rich people evade their taxes. The corporation tax is
only 26 per cent. And inheritance taxes are very, very low. They
are state taxes. (1 presume the states cannot ra se inheritance
taxes or their rich citizens would move from one state to another.
* * * * * *
Mr. Barret� Leite, the news columnist, took over again in
an effort to explain to us the fact that the Brazilian government
really has "the power". He said, "when the first settlers came here
they immediately founded the state and thus the state was established
before society was established". He contended that the government
is the most powerful capitalist".
Although the railways in the early
days were financed by foreign investors, they were only built through
state favors and support and now all but one of them is owned by
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Memo #83
the state, (The government took over the railways, we were told in
Sao Paulo, because the private owners would not make needed invest-
ments for expansion.)
In discussing power development, the Governor agreed that
the day of private power probably was over in the new countries. He
expressed surprise at the technological nature of the power develop-
ments described to us by Brigadier Lima in Sao Paulo. The Governor
said that the Soviet Union had abandoned this type of power develop-
ment in favor of another which is more efficient.
* * * * *
Mr. Paiva Leite sought further to describe the nature of
OPA1 in response to a question. He insisted that it is indeed
something new - it is a state of mind". Governor Stevenson
retorted by saying that everything he had heard about Operation
Pan America, he had heard during his service in the U.N. from 1945
to 1947. This was when ECLA was set up. During this period, said
the Governor, the hope was that the way to get the needed develop-
mental job done - was through ECLA.
Mr. Paiva Leite replied that the spirit of OPA Is that "we
must get on with ,this". The Governor added that he didn't challenge
this spirit but he would like to know whether a new international
organization was contemplated. Or will ECLA personnel be merged
into the OAS? Mr. Paiva Leite said that ECLA had done a fine job and
that no new organization is planned. He said that economic thinking
prior to ECLA 'had been dominated b
the advanced and industrialized
count ie ". He said that ECLA had reversed this. But what ECLA had not
�
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achieved and what OPA wants done - by BOLA or by someone else - is a
blueprint of projects for each country. OPA isn't prepared to say
who should develpp these blueprints. Perhaps the OAS should do so.
But unhappily the OAS has had third rate people". It is being
reorganized. It requires people with boldness With the cooperation
of ECLA, these new people can launch country by country studies.
(Mr. Barreto Leite interrupted to say that ECLA was primarily a
fact-finding body.)
Mr. Paiva Leite said that OPAis proposed country
by country
study projects would supplement the factual reports of ECLA. He
said that OAS is now in process of making such country by country
studies. Then it will be up to each country to take its own study
and develop it. The U.N. Sppcial Fund should assist and so too
should the Developmental Bank. Presentations must be prepared, based
on these studies, for the Inter-American Bank the World Bank and the
Export-Import Bank.
I had to leave the meeting at this point to join Mr.
Byington. He complained that the group on which I have just reported
was very left wing and much too oriented towards .a state controlled
economy.
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BRAZIL
Cat. #1721
Memo #84
3/29/60
CALL UPON THE GOVERNOR
BY MR. AUGUSTO FREDERICO SCHMIDT
PRESENT - GOVERNOR STEVENSON SENATOR BENT ON AND DR SM ITH
Dr. Schmidt had been casually described to me as President
Kubitschek's most intimate friend. His duties, I was told, have
been as general world ambassador on behalf of Operation Pan America*
He has a solid reputation as a poet and Is a rich business man. He
opened our visit by telling us that he had never concerned himself
with politics until introduced to them by his friend, President
Kubitschek* He referred to his major business as that of operating
supermarkets and he added self-coifidently, "They are doing very
well". I'm attaching a letter which he wrote Governor Stevenson last
October. He spoke continuously and rapidly in French
a quarter or more. He was eloquent and belligerent,
later told me that he was violently anti-American.)
Mr. Schmidt complimented Governor Stevenson
for an hour and
(Hickman Price
most extrava-
gantly throughout. He said that everything that the Governor had
ever written "has encouraged Operation Pan America". He said that
President Kubitschek has made speeches "repeating much of Governor
Stevenson without knowing it". He referred specifically to the
President's recent speech to the U.S. Chamber of Commerce here, which
am attaching. When I asked him who had written the President's
speeches, he modestly admitted that he had.
Schmidt told us that he was about to become the new
Brazilian Ambassador to the European Common Market When Governor
Stevenson indicated surprise, he said that his Job in this new role
0
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Memo 48'4
would be "to explain the OPA to Europe" and to develop Brazil's
trade with Europe.
Mr. Schmidt spoke in high terms of President Kubitschek,
telling us to "make no mistake Kubitschek is very smart the
smartest Brazilian politician in a long while".
In some way which I did not understand through the transla-
tion, he tied this up with his argument to Governor Stevenson.
"This is why you should explain OPA when you return to the United
States".
Mr. Schmidt gave us the customary explanation of the back-
ground: the OPA "flowed from an act of friendship" by Brazil towards
the United States after the Nixon incident. President Kubitschek
had personally wanted "to do something about the Anti-American feel-
ing". Much of the misunderstanding of OPA is due to the stupidity
of our State Department. Dr. Schmidt said he had spoken twice to
Secretary Dulles about OPA and that the Secretary was "preoccupied
with helping Russia - without knowing it". This caused the Governor
to chuckle to himself and to say to me, "a melancholy experience".
And it reminded the Governor of the fact that Khruschev had told him
that he would hope that the Democrats would win if only we would
promise to keep Dulles:
Mr, Schmidt charges that Secretary Dulles told his under
lings in the State Department to sit on their hands, that Kubitschek'
OPA was = plot to get money from the United States". Mr. Schmid'
said that he knew positively that there had been personal and most
violent disagreements and arguments over OPA within our State
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-3*-,
Memo #8
Department - which did not even show common courtesy in dealing with
President Kubitschek and Brazil - although some of our officers did
indeed give 'lip service".
He begged us not to confuse OPA with money, saying em-
phatically, "Don't speak of money!" In lofty tones he assured us
that OPA was designed not to let the Democratic experience die in
Latin America. He added, 'And everyone is depressed by Washington's
reaction".
As opposed to the time of Pres_dent Roosevelt, when
Brazilians enjoyed 'direct contact at the top" - in recent times
they have been blocked off by a man named Siracusa who controlled the
Latin American desk In the State Department. President Kubitschek�
d d indeed have a chance to try to explain his OPA to President
Eisenhower on his recent visit, and President Eisenhower "showed good
will
but Dr Schmidt fears that Ris-erfhlbuzir "doesn't know what it is
all about".
Milton Eisenhower came into the general indictment. Due
to his background at Johns Hopkins, perhaps, Dr. Eisenhower seems
think that the OPA is just philanthropy". But it is not Further
it is not a scheme for the United States to purchase good will Nor
is it "a toy or a plaything". Nor is it a question of "gifts".
Nor does it mean forming any new organization.
ly 'doesn't want to create more jobs that will
Dr. Schmidt built up to his climax.
rather triumphantly, "OPA is a political polic
It to OAS which "gives cocktai
Dr. Schmidt emphatical-
accomplish nothin
He stated flatly and
� He contrasted
parties and accomplishes thing
in the economic field".
4
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Explaining nothing further about his concept of what OPA
actually is, Dr. Schmidt switched the subject and said that he would
now speak of Brazil-United States economic relations. These are
decreasing. German trade and prestige Is growing. The new Brazilian
industries, financed outside Brazil, are largely European, Remember-
ing Mr. Byington's comments about the rapid growth of Polish trade
here, I asked about it. Dr. Schmidt replied that the Poles give
credits on steel and machinery which "no American would dream of".
He told us of a steel plant which is to be paid for over eight years,
offered by the Poles. And the payment is to be with coffee, cocoa
and other farm and manufactured products from Brazil.
We expressed
10.4=Cr141:%
3 34, %sae'
In such offers an
I V-%
response
to
request from the Governor, Dr. Schmidt promised to give us a list.
Dr. Schmidt went on to say, that "private Initiatthve Jo the
United States has not changed"
Wel 171nni-
it t
repeats the same
difficulties and mistakes, regardless of new conditions". He warned
that if things 6o on as they are now 'going "within ten years Brazil
wa_11 take the dollars it earns by selling you coffee and use them to
buy .machinery in Europe - the terms offered by the Europeans are so
much more favorable". Yes, German cars, tractors nia41.inals are
rapidly taking over the Brazilian market.
Why, Dr. Schmidt asked - why doesn't American enterprise
show "more skillfulness?" Competitive conditions for U.S. industry
are the same all over the South American continent, but they are at
their worst in Bra-4,
ndustry at one time was far stronger
in Brazil than United States; then American business surged to the
front but now it is losing out. Today Brazil buys from the United
S
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States only only what Europe cannot supply. The United States is not
competing successfully with Europe's lower prices and better terms.
Yet Dr. Schmidt insists that Brazil wants to do business
with American private industry. (Even though in his opening remarks
he told us he was going to Europe to stimulate Brazilian business In
Europe and with Europe!)
Why doesn't the United States government, he asked; help
American firms? He has proposed that We underwrite credits for our
companies, as do the Germans, the British and others. He has urged
this upon the State Department. But he gets no answer. I told him
that such a policy would require an act of Congress, but he disdained
to comment. When I told him that I thought the American business
community would oppose such a governmental policy, at least at the
present time, he emphatically told me T didn't know what I was talking
about that indeed the business community was unanimously in favor
of it. He suggested he never dmet a businessman who didn't favor it.
I told him that I didn't believe General Motor
tzn-tuld want
government financing Kaiser and Willys in their efforts to develop
export business in Brazil and I was sure that du Pont wouldn't want
to finance TStevenson and Benton" In their efforts to develop an
Important new chemical enterprise, with U.S, government money, selling
our chemicals to Brazil. He either disagreed or wouldn't listen.
Later when I ran into Hickman Price I asked him about
this and he thinks that there are possibly a majority of
American companies who might favor the kind of U.S. policy
Dr. Schmidt advocates, but he agreed that the big companies
o
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Memo #84
such as General Motors and du Pont would oppose it. I
doubt if Hickman Price is right. However, when I used to
deal with the NAM it was the big companies that controlled
NAM 's policies and statements. Mr. Price admitted there
was a group In New York which had been advocating such
governmental policies for years "but had gotten nowhere".)
Dr. Schmidt softened to tell the Governor that he regarded
his conversation with him as historic. He said the Governor was in
a position to get through' to explain OPA to the people of the
United States when he got home. He said, 'Brazil is convinced that
we cannot survive merely as an exporter of primary products". He
explained that everything is against such a future for the Brazilian
economy. Technology is against it. Perhaps coffee will shortly be
produced In a labora o
T
Schmidt spoke poetically
---
the moon while we grow coffee". He spoke or Brazil's "terror"
being separated from the developed countries.
go to
He explained how
ii "fears it is being out-distanced more each day"
"develop en is
eNr11141=birl
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jor
hmidt emphasized that the
the people of Latin America. He
said they felt that "social justice could come through it." Taking
money from. the rich to give to the poor isn't enough, and the people
know this
They know that they must develop their countries econom
Ically. Yes, the two magic words are - "social justice" and "develop
ment." Dr. Schmidt added emphatically, we shall get development
either through socialism or through democracy!"
* * * * * *
a
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Memo 04
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We returned to the subject, what exactly does OPA mean?
Tar. qohm_at started out moderately enough, "As Americans I understand
that you want a practical definition." Then he provided a definition
which seemed to me far removed from the practical.
He said that OPA means that he wants the United States "to
accept a new policy; and this you have nOt done yet." He added,
"If you think of financing only, then all Is lost." He told us that
he wanted the United States "to accept a general climate." This
climate he defined as helping the countries of Latin America to "a
climate of hope". He told us that we in the United States were in
grave danger. We must thus work together with the countries of Latin
America for the future of all of us.
We pressed for something more specific. With a laugh, and
he didn't laugh much, he said that up until now he had been the
theoretician of OPA. He produces the "big objective". He doesn't
think he should be called on to spell out the details. He can't tell
how any particular set of details may work out - but the b4g objective
should remain constantly before us.
(1 was reminded of Will Rogers story in World War I.
He said he would get rid of the German submarine menace
by bringing the Atlantic Ocean to a boiling point, which
would kill off everybody in the submarines. Rogers remarked,
I have now given you the big idea and it's up to you to
work out the details".)
Dr. Schmidt told us that during the decades we in the
United States were busy making money we in Brazil were defending
ethical and literary ideas.
He said it was therefore now up to the
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United States "to teach Brazil how to take advantage of our own
riches." He saId that he had proposed "a congress of productivity"
to be called by the United States for all of Latin America. But this
too had been turned down by the State Department He said that what
Latin America needs is a "mystique" of work.
Seemingly seeking to become more specific, he suggested
that the Inter-American Bank needs to be changed into a "source of
know-how." Let the bank bring new techniques, he urged, to Latin
America - let it help educate Latin America for the new age.
(There was no mention throughout the meeting of the
United States extensive technical cooperation program with
Brazil under which we now have over 150 United States
technicians and professors in Brazil, working on four
joint U.S.-Brazil services - working with federal, state and
private agencies and institutions throughout
MeNwl
1111L8.
was there any recognition of the U.S, funds for technical
cooperation in 1960 totaling 6.6 million dollars, nor of
the total spent sine the start of the bilateral program
In '42 which will exceed $50,000,000 by the end of 1960.
Nor any recognition of the $8,000,000 being spent to
eradicate malaria in Brazil, etc. If Dr. Schmidt knows of
such activities on the part of the U.S. government, he
gives no recognition of them.)
* *
Governor Stevenson spoke of the
allure In Brazil to change
education from the feudal to the modern." Dr. Schmidt agreed but
C
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did not suggest anything to be done about it. However, he contended
that ten years ago "no deputy ever spoke of economics," By contrast,
OPA is now popular. It was even represented in the recent carnival
by a special float. (This didn't seem to me to be.a symbol of
economic recognition by the Brazilian people - but rather a symbol of
hoped for favors from the United States!)
Governor Stevenson asked Dr. Schmidt to expand his idea of
the Inter-American Bank as a source of economic education. Dr. Schmidt
sa d that he didn't want to turn the bank into a philanthropy and that
If he had real Influence with President Kubitschek - he would have
"done muc
uot
supply experts to Brazil."
hmidt said that
50 times as many experts are needed as are at present at work in
Brazil. And he thinks the Bank should provide the top flight experts.
Brazil, he says, Is losing 50 per cent of its agricultural crops
through inefficiency - and Ecuador half of its bananas. He would like
to see the Bank finance commissions of technicians for studies of
agriculture, of transportation, etc (It sounds to me as If he's
expecting the Bank to act as If it isn't a bank expecting bankers
to act as if they weren't bankers.)
Governor Stevenson kept at him. The Governor explained the
importance right now of developing "a specific program" which would
be understood. He told Dr. Schmidt that such a program was "particu-
larly important In the United States." The Governor said that he
thought the tIme was now ripe in the United States for consideration
of such spec if
He said warningly, and significantly, but with a
mile We must not lose the present chance in a flood of oratory we
must be careful not to lose it in a flood of words that never jell".
4.
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Memo #84
-ao
The Governor expressed the strong hope that Brazil would take the
lead with "specific proposals and a program".
Dr. Schmidt fairly shouted his disagreement. He said that
the idea to get across is that plans will be made later and only
then "we shall win the victory". He wants the whole subject thrown
open for discussions and for specific ideas of the United States.
Then he added in a spirit of accommodation, "We do of course have
concrete ideas but they are not all In my head right now". He sug-
gested he held no special brief for them. "If you don't like them
throw them out". He asked the Governor to give a leoture on the
general idea" when he returned to the United States. He said the
theme of this lecture could be summarized in two words. He explained
that "the Latin countries want an objective plan, a practical and
actual plan and do indeed want to be serious and not just pictur�-
esque". He emphasized that what was wanted was in his two words,
objectivity and actuality".
Dr. Schmidt resisted my suggestion that such a lecture in
the United States would be greeted with questions. Why is Brazil
spending ko per cent on armaments? He dismissed this question with
the curt rejoinder that the army was a very powerful political party.
Why aren't the rich people taxed in Brazil? He dismissed this with
the statement that our rich people paid much too much in taxes, and
that the Brazilians needed to develop capital.
He said he would like a gathering first of nine countries
and later of the 21 American republics. In 1958, he made a speech
in Washington which was badly misunderstood, yet nine months later
Secretary Dillon repeated the speech - and later N-ixon did the same.
a
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When he tried to produce a plan in 1958, as he did, the State Depart-
ment dismissed It with the one word, "Impossible". Dr. Schmidt
thinks it unwise right now to talk in specific terms, (assuming that
he does indeed have them In mind). And he added, "It's. Utopia to
think about disarmament until Latin America can get rid of its
military cliques".
He urges us to quit talking and thinking about money. And
about specific plans. Let all such come later "when we start think-
ing correctly, when we are re-educated, and then wewon't need help
from anybody!"
Dr. Schmidt assured us that he is now struggling to develop
a real economic plan for Latin America. He suggested he would like
to call it the Stevenson Plan! He said that the Europeans "had
made the Marshall Plan" - "and we must make a plan for Latin America."
He wants a plan that
element of finance".
As we were getting up to leave he mentioned the "question
f petroleum" and dropped it immediately. He repeated that the
objective of OPA is to persuade the United States "to help us under-
stand ourselves".
Later
an instrument of reason" - and with no
* *
The foregoing was dictated shortly after our meeting with
Dr. Schmidt. The following is dictated the same evening, after a
din
the
given for the Stevenson party by Mr. Bond the Minister of
balmy
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Ambassador Cabot warned me that Dr. Schmidt speaks in
authentic tones for important groups In Brazil and throughout Latin
America. He says that everything would be exactly the same, in rela-
tion to the United States, if Dr. Schmidt dropped into the Atlantic
Ocean. This I think is obvious. More interestingly perhaps is the
suggestion that jr. Schmidt may be acting deliberately, or possibly
even at the suggestion of President Kubitschek, as a kind of agent
provocateur in dealing with the State Department. He may figure
that a good thorn in the side of the State Department may prove
highly beneficial to Brazil.
The Ambassador says that the committee of nine of the OAS
which Is now debating OPA and its proposals - will lead to further
discussions by the committee of 21, the representatives of all the
members of OAS and that studies are being made in line with my
report, in another memorandum of our conversation with Mr. Pavea Leite
on the needs of each and every country. (I do not understand the
Inter-relations between Erosac, the U.N. Special Fund, OAS and its
sub-committees, and ECLA. I wonder who doe ' All of these various
groups are involved in implementing OPA.)
After listening to the *Ambassador, I am even more sure
that pr. Schmidt and This authentic voice should not be discounted.
Whether he is a deliberate provocateur is a question I'm unable to
A a*
16" 'low
a
The Ambassador emphasizes that the Brazilians have great
pride. Right now floods are pouring through the northern areas to
the point where one of the great public works projects, a big dam
may burst As many as 200,000 people can lie in the path of this
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Memo 04
13
torrent. The Ambassador has asked the Brazilian government whether
it will accept help. He has spoken of helicopters and food. The
great need will be for transportation. The Brazilian government
won't as yet admit that it needs help. Under American law, seemingly
we can only intervene at the request of the Brazilian government.
(In my article I might mention the fact that I was in
Europe at the time of the great flood in the Po Valley in
1051. I secured an airplane from the U.S. Army to tour
the Po Valley with the seven Senators from the Conference
on Europe - and set up an organization subsequently for
Po Valley Relief - and later received a decoration by the
Italian government - the highest it gives to a foreigner.
Mr. Cottam was in Rome at this time and remembers the
incident. I think some such dramatic move might be indi-
cated here in Brazil if the dam really breaks and the flood
ensues. Ambassador. Cabot says that this dam is an example
of Kubitschek s determination to do more than he should -
f the way that his reach exceeds his grasp. He saved
money on the dam, we were told - for Brazilian highways,
etc The engineers wanted it higher; he decreed it lower.
* * * * * *
The Ambassador suggested that a part of Dr. Schmidt's and
President Kub tschek's objectives may be to switch discussions with
the MI ted States from multilateral discussions to 'bilateral
did not have a chance to discuss this enough to
discussion
u �erstand it in any depth But I'm mindful of the rapid transition
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�14�
Dr. Schmidt made in our visit, when he suddenly switched directly
to the relations and activities of Amertcan business firms in Brazil.
mu
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Brazil
Cat. #1722
Memo # 85
3/26/60
QUICK COMMENTS GROWING FhOM THE DINNER AT MR. BOND'S
(MINISTER IN THE EMBASSY AT RIO)
ATTENDED BY GOVERNOR STEVENSON AND PARTY
�
Ambassador Cabot quoted Mr. Espinosa, head of one of the big
parties of Colombia, "If we educate the masses, we are lost". He
said that this attitude was fundamental in South America". I feel
this is an important point
for me to make 4 p-%
.a. my = ticl,
The Ambassador and his Economic Counselor reported that one
thing that Is held against American companies throughout south
America is that they do not try to shield their employees from edu-
cation - they pay them better, often even keeping their wages up
to the rising costs of living, giving them so-called fringe benefits,
etc. Many other Latin American employers and industrialists resent
this.
was re A4LAAeA of the early hatred of Henry Ford by Detroit
Industrialists because he instituted the $5 day back before World
War I or thereabouts.
Ambassador Cabot pointed out that India gets 40 percent of
the money available under Public Law 480 - in outright grants.
Brazil doesn't. The 480 money ia handled with Brazil
W.4 ILO
Ambassador Cabot points out that Brazil traditionally is America's
most friendly and intimate ally in the hemisphere. India is the
neutralist country". Naturally this difference in policy by us
causes unhappiness here in Brazil, And I myself don't understand it.
Perhaps the explanation is the series of Influential ambassadors
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Memo # 85
we've sent to India Bowles, Cooper and Bunker (I rather figure
it's unlikely we shall ever collect the loan money from either
country.)
The Ambassador mentioned that the Export Import Bank charges
six percent for its money here in Brazil, and earns big profits on
its loans. The Soviet Union only charges two and a half percent.
* * * * * *
On the subject of the urgent need for our technicians and
experts here, Mr. Cottam told us that the United States has 25,000
trained geologists and Brazil has only 100. This helps explain
why Brazilian oil resources have not been explored and investigated.
* * * *
Cottam seems to agree with President Alessandri of Chile
that the ECT.Jsi st ff = if not communist infiltrated - is at least
"oriented" toward state control and away from private initiative.
I do not think that Mr. Probisch's memorandum bears this out. In-
deed, in his memorandum he pays tribute, to private initiative
again and agair. Perhaps this Is because he is so sensitive to
criticisms of this kind. Our Ambassador in the Argentine criticized
Probisch and ECLA for "statism" (See my memo on our visits with
Probisch.)
Mr. Cottam pointed out that our technical assistance program
Is "a pittance" in contrast to Brazil's needs. Further he pointed
out that part of it is geared to our own selfish interests - such
as the major segment devoted to aviation control or the weather
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e o #85-.
3
(I didn't get exactly what in this general area). He reminded
us that our malaria program here is part of a world-wide program.
And the Ambassador gave a warning that is needless, at least in
my case, but that I think I should mention In my article - that we
of the U.S. should not look for gratitude or expect gratitude.
Mr. Heuer, who for five years was Assistant Legal Counsel of
the USIA In Washington and who Is acting here as our Protocol
Officer assigned by the Embassy, says it's perfectly obvious that
the USIA should be merged back into the State Department. He said
that Ted Seibert was a good administrator who made decisions
instantly but that Mr. Larson was such a bad one that he allowed
the papers to stack up on his desk until they were several feet
high. Further, he says, Mr. Larson was a most unhappy and ill-
advised politician whose speech in Honolulu helped destroy him.
Mr. Heuer advocated the setup in the State Department, which I
recommended in my testimony to the Foreign Relations Committee
in 1953,
of three under--secretaries, one in the diplomatic field,
One in information and cultural activities, and one for economic
affairs.
* * * *
Our Economic Counselor,
"Achilles heel is his lack of courage.
Mr. Cottam further told me of the many economic studies which
have been devoted to Brazil and its development For instance
there was a U.S Brazil Economic Commission which terminated in
53 when the U.S. refused to put up the money to finance the
Cottam says that Kubitaoh
4-3
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Memo 85 -
recommendations. This turned up a veritable 'five foot shelf" of
recommendationn. These were basic to Kubitschek s goals in hiS last
campaign when he promised '50 years progress in five years". After
his election he brought in a group of "solid Individuals" who worked
together in a bank, the BNDE and they set out to implement these
recommendations.
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Cat. #1723
Memo #86
3/30/6_
MEMORANDUM ON THE DINNER TENDED TO GOVERNOR STEVENSON
IN RIO DE JANEIRO BY ACTING FOREIGN MINISTER ALENCAR
attaching the speech of the Acting Foreign Minister
Alencar and it's another example of Latin rhetoric. Perhaps I
shall want to comment on this rhetoric, so characteristic of these
countries, in my article. I've always been amused at the Latin
Americans who list themselves in their biographical material as
orator", something no American or Anglo-Saxon would think of.
I've heard the Governor give at least 50 or 60 extempor-
aneous speeches on this trip and he never
toni
ht. And tonight only briefly. This
heard him say that he once responded to a
repeated himself until
is the second timeI've
most flattering intro-
duction with the comment that he did not know whether "the toast-
master would go to heaven for his charity or to hell for his
falsehood". Very deft indeed.
The Governor said that the great
issue throughout Latin America is whether the great goal of demo
cracy will prevail. Shall we have the triumph of government "by
the consent of the governed"? This is indeed an apt generality -
and m going to need more such generalities in this article!
The offices of the Foreign Ministry surround a great and
beautiful courtyard dominated by high palms and containing a large,
beautiful fountain - pool.
At the far end is a Roman type columned
portico a building of 1930 vintage which Is said to house an
exceptional library. Down the left hand side runs an old colonial
40.
411
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Memo #86
palace which which has been remodeled. The front end, where we had called
upon the Acting Foreign Minister the day before, is a palace built
in 1842 called Ita Maraty. The Foreign Office is so well known by
this name that this will probably cling to it when it moves to
Brasilia. Like the Quai d Orsay, the name is synonymous with the
Brazilian Foreign Office. This palace is known to Brazilians as
"the Palace of the Golden Boy." Its owner, in the middle of the
last century, had a son who was very sick. He pledged the son's
weight in gold to the church if the boy recovered - and the boy did!
As
Tails=
left we were taken Into a room to see the very badly done oil
portraits of Brazil's three emperors. Emperor Pedro II, who ruled
for roughly half a century before he was deposed in 1889, is much
revered and by everyone. He held this great country together and
this was no mean trick; there were countless secession movements.
When he was deposed in a movement led by a man named Comte, he
was so much respected that he was offered five million cruzeiros.
He refused with the statement that the country needed the money
more than he did. His family was permitted to keep their land
holdings which included the whole of the fashionable town of Petro-
polis. His great grandson lives in Petropolis today and makes his
money whenever a piece of land is sold because his permission is
necessary and he collects five percent of the sales price. Because
this prince mother was merely a countess, her marriage was regarded
as morganatic, and the theoretical heir presumptive is a Cousin who
is a cattle rancher in Paranha. The pretender's brother is a colonel
In the Brazilian Air Corps, -Colonel Orliof, known as Prince Juan.
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3- .
I asked about the number of supporters of the alleged pretender and
was told they were 11 in number, his 11 children* The whole royal
family seems to be held in affectionate regard* It is the only
family in the country that retains its titles. Emperor Pedro II
would not permit the inheritance of a title by a son - and I was told
that this is one reason why the royal family did not develop a
strong and loyal nobility as supporters*
At the dinner, I chatted with a bright young Foreign Service
officer, Vladimar Murtinho, who is the head of the Cultural Rela-
tions Division in the Foreign Office* He lived a lot of his boy-
hood in Ecuador where his father was the Brazilian Minister. His
sympathies are obviously on the side of the Ecuadorans in the
present dispute with Peru about the boundary. He says that Peru
won the war of 1941, took 95 percent of everything under dispute,
and now ref s to yield on the other five percent. He took me
to a man who was personally present when the Ecuadorans signed the
Rio treaty in 1942 at 2:00 o'clo�.,
.#1014% morning. They were under
heavy pressure from Brazil to do so, and some pressure also from
the United States
Peru had continued to threaten Ecuador and
Ecuador was prostrate. Braztl in effect told the Ecuadorans to
sign the treaty or Brazil could not answer for what happened. As
the Ecuadorans signed the tears streamed down their faces.
They knew that their own personal fate in Ecuador would be to be
accused of treachery, and indeed today they are regarded as traitors.
This young man says that the Peruvians are formalistic", and this
is precisely the impression I received in Lima; he finds them
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Memo #86
stubborn and stiff necked; they are so set on this issue that they
now refuse to have any commercial relations with Ecuador. The only
goods today that come into Peru from Ecuador are "contraband".
(This astonishing statement will help explain why Gab o Plaza wanted
normal commerc al relations with Peru, thinking these would greatly
help to settle the border dispute.)
* *
The Acting Foreign Minister at dinner told me that Brazil
is very proud of its Foreign Service which has a tradition of more
than 50 years.
There are 46 career ambassadors and six who are
serving as appointive ambassadors At times there have been as few
as two or three political appointees, with all others from the
professional career service.
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Memo #86
This is for me, and for our Ministry of Foreign Affairs,
a particularly gratifying occasion: we have with us, tonight, a
distinguished American statesman - Governor Adlai Stevenson - who,
With the members of his suite, has arrived in Brazil after visiting
several countries of Latin America.
do not believe that there could be in the United States
any other political personality who, not having occupied yet the
Presidency of his country, enjoys among us a wide popularity and
intellectual prestige as Mr. Adial Stevenson, whom we have the
great honour of receiving this eVening.
The admiration and the affectionate interest with which
the Brazilian people welcome our eminent guest is not only due to
his outstanding intellectual acumen and the refinement of his culture,
nor can be exclusively attributed to the impact throughout the world
of h s great personality - the personality of a man who has run
twice, with unsurpassed brilliance and gallantry, for the Presidency
of his country and is today as before the living depository of the
respect and hopes of millions of fellow citizens.
We are quite aware that we have with us, tonight, a man
of great learning, an active thinker, a master Of rare intellectual
subtlety and wide cultural background, to whom the problems that
beset the modern world appear through an ecumenical vision impreg-
nated by a deep sense of human nature and individuality.
Moreover, what makes the personality of Adlai Stevenson
particularly attractive to us is, it seems to me the fact that
our distinguished guest is well aware as far as International
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Memo 86
problems are concerned, that it Is urgent and necessary to find
a solution to the plight of the underdeveloped nations, lest we
all face tomorrow the shipwreck of democracy and the twiligh t of
freedom.
We have read many of his books, speeches and lectures,
finding them to be the authentic work of an honest and sound politi-
cal thinker and scholar. Addressing his countrymen on International
relations, he impresses by the wisdom of his concepts, the sincerity
of his statements and the courage to stand for his convictions. He
suggests, he warns, he criticises or he defends, whenever he thinks
appropriate, and in doing so he shows the exact measure of an
Independent mind.
There are many chapters of his books dedicated to Asia.
He has seen that continent and apprehended with incredible accuracy
the aspirations of a mystic and long suffering people. He travelled
throughout Russia and came back with a complete analysis of the life
of the people and the mechanics of the government in the communist
world. Having extensively heard and seen, his conclusions are pieces
of advice that represent a wonderful contribution for the understand-
ing of the desperate problems of the modern world.
And now that you have come to Latin America you have closed
the circle of your international studies. You arrive at this con-
tinent on the precise historical moment. The Latin American nations
that already have a democratic tradition and that have the task of
improving its political inst t tions, are perfectly integrated in the
Western World. We have lived through ethnical political and social
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Memo #86
.7.
problems for which we have been striving to find adequate solutions.
We are now facing the most serious problem of our lives - the problem
of economic development - for we are convinced that of its solution
depends the maintenance of democracy and freedom in Latin America,
What this hemisphere is lacking is a new vision, a more realistic
and objective vision; a new and dynamic continental concept, taking
into consideration what those countries have in common and respecting
4ts national characteristics. It is important to offer a new sense
of purpose, a perspective of hope to the Latin American peoples.
They need to abandon its situation of mere exporters of natural
products in order to strengthen their positions so as to be able to
fight for freedom.
Allow me to quote here, Mr. Adlai Stevenson, your own
words when, writing about Asiatic nations, you said: "millions of
people desire today a better life, having found out that poverty,
hunger and sickness are not the immutable destiny of man".
This Is exactly what the Brazilian Government has been
insisting on since May 1938 when President Kubitschek, interpreting
the unanimous feelings of all Latin American Nations, launched the
Pan-American Operation. His main purpose has been, precisely, to
emphasize the fact that we cannot dissociate the concept of collective
security and democratic perfectioning from that of economic develop-
ment and consequently that of social justice, considering that it
would be unwise to conceive a defensive organization based upon a
weak economic
�P'S
16��
ure and onnait ons of underdevelopment
The Brazilian Government has been insisting that it is
�
necessary to eradicate through a wide and bold economic policy, the
�
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Memo #86
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evils of underdevelopment In order to demonstrate that it is possible
to achieve prosperity and social justice without sacrificing the
freedoms of democracy and without resorting to the brutal and inhuman
planning of totalitarianism.
Greeting tonight a statesman who, I am convinced, is still
going to play an important role In the political life of his country,
specially in the field of foreign affairs, I take great pleasure in
recalling that, upon his return from the Soviet Union, Mr. Stevenson
wrote: "I came away from the Soviet Union more convinced than ever
that the battle of the future is economic and political..." I dare
to foresee that, after visiting Latin America, our guest will take
back to his country the COflViCtiOfl that not only Asia and Africa are
the battlegrounds where the forces of freedom are fighting the force
of tyranny but that this hemisphere, our continent, traditionally
allied to the United States and so justly proud of its love of free
dom, is also threatened by the foes of democracy, and that it will be
able to remain as a bulwark of the West provided the process of its
economic development will be accelerated within the framework of a new
and more dynamic conception of Pan-Americanism.
Mr. Adlai Stevenson - in your person I welcome: one of the
highest expressions of American statesmanship and I make my best
wishes for your personal happiness and for a continuous strengthening
of the friendship and cooperation between Brazil and the United
States
�
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BRAZIL
Catalogue #172k
Memo #87
3/31/60
MEMORANDUM ON VARIOUS MISCELLANEOUS ITEMS
FROM RIO DE JANEIRO
"Favella" is the Rio name for "slum". It's a beautiful sounding
word. This was the name of a mountain which became spotted with
shacks for the very poor - squatters who developed some rights by
the mere fact of occupation. Later similar developments sprang up
on the many mountainsides of this beautiful city. Right behind the
big lush, expensive apartment houses are these masses of shacks
running up the mountains and at a distance they look as if they are
built on the roofs of each other each layer, one right above the
other, on top of the one beneath. These shacks have no sewers, no
water, but many have electric lights. Unpaved, little muddy paths
wind up among them. We visited one which seemed largely inhabited by
Negroes, not because of racial discrimination, but because the eco-
monic lot of the Negro is lower.
All these slum areas are known as "favellas" - after the first
one. Estimates vary on the number of Rio's inhabitants who live in
such squalor. It's agreed that they number 200,000 at
Estimates run up to one-sixth or one-quarter of Rio's population of
flirNo rseNn
Each of these beautiful cities of Latin America is infected with
terrible slum areas. The slums are characteristic of all the big
cities we've seen with the exception of Sao Paulo. They are the
blight
Aese great communities.
Offsetting these blights is the
unexpected energy and vitality of these Latin American cities. They
aren't the sleepy towns of-the O. Henry short stories. From Mexico
�
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-2--
City right straight through Medellin and Santiago and Buenos Aires
and Sao Paulo - I have been astonished at the general spirit of get
up and go, of enterprise and imagination and business determination.
This is the new spirit of Latin America.
met a professor whose card is around somewhere and whose name
I'll give later, a professor of Brazilian literature at two of the
universities here. He can't earn enough money at either one to sup-
port himself. I asked him about his students. Are they lazy and
worthless as alleged by some observers of Latin American students?
He Bays no; that the students can't be characterized so devastatingly.
But then he laughingly said that what the South American universities
need isn't the kind of visiting professors often recommended in high
level reports - but rather young men who are unmarried, who will come
down and live with the students. He says the Rio students are
clever enough but they need these young United States students who
are experts in the 'methodology of study'. This was a new phrase for
me:
(I think maybe we'd better send down some of our girl students
to help impart such expert insight!)
* * * * * *
Herman Smith's extraordinary associate in Rio is Dr. Celso da
Rocha Miranda. Talking about inflation at the wonderful dinner he
gave us at his intimate club he estimated that it is roughly compar-
able to a ten or 15 per cent extra tax on the workers. Now this is a
most interesting estimate. It helps explain how this steady inflation
is helping to finance this boom economy, and why so many rich people,
including bankers and Industrialists, are for it. The Governor and
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Memo #87
- 3-
have marveled at the way the leading bankers and industrialists
rationalize the inflation here, the very groups who most energetically
oppose inflation In the United States. And whereas our labor unions
and many so-called liberal groups advocate federal policies which will
stimulate the general level of productivity, even at the risk of a
little inflations independent leaders of the labor unions here in
Brazil want policies followed which will eliminate the risk of infla-
tion. (And thus eliminate this form of so-called regressive tax
which bears so heavily upon them.)
Dr. Miranda points out that the inflation has also penalized
greatly the landlords, who are handicapped by rent control as in
Paris and whose income he estimates has been reduced to something
like one per cent of return on their capital. The landlord's only
good chances he says, is to liquidate - if he can find a buyer, but
this isn't easy because real estate is not a good way to hang on to
money in this inflationary economy.
Dr. Miranda points out that the inflation has "obliterated"
the fixed incomes of groups dependent on them; it has "obliterated all
life insurance". This Is accompanied by terrible injustice.
* * * * * *
sat around with a group of businessmen in Sao Paulo trying to
figure out what we could do with a million dollars - to preserve its
purchasing power five years hence - assuming that we knew absolutely
that money would continue to depreciate at 50 per cent a year. There
wasn't one of these men who had any sure remedy.
Even Swiss francs
are under pressure said one. The money can't be protected in Brazil
by putting it into land or real estate. The only chance they agreed
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is to keep it in one's own business, "and keep it turning over as
fast as possible". The fever has been biting into this economy for
20 years and although the cost has been frightful and bitter to many
groups in the economy this one prescription has been generally fol-
lowed by the business community 'keep turning it over and over".
The Mercedes Benz management whose cars we watched coming off
the assembly line add 36 per cent to their sales price, when they sell
on installments, so that they'll be sure to pick up their forecast on
what they will otherwise lose by the inflation during the period of
time payments e My impression Is they also insure themselves against
loss.
* * * * * *
Dr. Miranda explains that there are two kinds of inflation.
He is accustomed to the first kind, as is everyone else. This is the
constant depreciation of money. But the second kind is what he calls
the "hot money". This takes the form of cash payments to farmers for
their coffee. The minute they get this cash, they fear that the
money is going to depreciate greatly in value
1=NO
ndeed the
,t.P.mrse%4A
1.-11G VILLCA.2.%1
that it will vanish. So they rush out and buy anything Into which
they can convert it and this of course greatly forces up prices.
Dr. Miranda states that last year all the new printed money went to
the coffee growers - and it was this "hot money" which forced up
prices
He thinks that Kub t chek made the wrong decision. The farmers
should have been paid in Treasury notes or in some other manner over
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Memo #87 -
a period of time. But of course the political pressures were on the
President to dish out the money.
Dr. Miranda says that the United States, in contrast to its
gross national product, has 11 per cent in cash in circulation.
France has 25 per cent. Italy as 20 per cent plus. But Brazil, he
says, has only 17 per cent. From these figures he asks - does Brazil
indeed have too much money in circulation? I told him that perhaps
the French kept the money in socks under their mattresses, instead of
spending it as do Brazil's coffee farmers!
�* * * * * *
Governor Stevenson has several times mentioned his visit with
the Governor of Sao paulo, a call on which I did not accompany him.
The Governor of Sao Paulo is Carvalho PInto. Mr. Miranda explains
that this name means "Oak Chicken". He says the Portuguese are very
astute businessmen and the Brazilians are their natural inheritors.
We talked about the dominance of the Portuguese in business in the
Far East where before the war they acted as accountants for so many
of the big European firms and where they have been accountants and
money men for three and four hundred years. He says the Portuguese
are so smart because they have such a big shot of Jewish blood. The
Jews, when they were driven out of Spain, he says, settled in
Portugal in large. numbers. He attributes the Moorish blood in all
Portuguese plus the Jewish blood - to the explanation of their
business acumen. He says that it is the Jewish background that ac-
counts for names lIke Carvai:tio Pinto, which means 'Oak Chicken",
though I'm damned if I get the connection.
* * * * * *
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ern� #87
Governor p
o was sought as a presidential candidate by at
least one of the big parties and we were told by both. But he was
put Into the Governorship of Sao Paulo by *Tonto Quartos. Mr. Quartos
is one of the two leading candidates for the presidency and Governor
Pinto's loyalty is such that he's unwilling to challenge him.
Governor Pinto is an intellectual who told Governor Stevenson
that the whole focus of the economic effort in Brazil is out of key
because of the failure properly tO emphasize agriculture. He says
that the basis of the Brazilian economy is fundamentally agriculture
and the failure of the Brazilian government properly to develop
agriculture is going to accelerate migration to the cities which will
prove most unhappy for the country. He wants to develop government
policies that will arrest the present over-expanslon of industry and
which will center on the diversification of agriculture, notably from
coffee into other crops
The Governor and I are naturally perplexed by the Brazilian
coffee policy. The farmers seem to receive for themselves only about
40 per cent of the world price for coffee. The government is building
up vast supplies in its warehouses - now totalling 40 million bags in
contrast to a world annual consumption of 39 million bags - and
Brazilian exports last year of 17-1./2 million bags. A small crop is
anticipated this year but a boom crop next year.
The rationalization of the policy, if there is any, is that as
coffee production steps up per acre in Brazil, as it Is rapidly today
this will make it easier to
maintain Brazil 's dominance in coffee while making it easier for
Brazil at the same time to diversify Into other crops.
with improved techniques and plants
MID
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Hanging over Brazil is the threat that a substitute will be
developed for coffee, chemically produced. Somebody at the Holland
briefing told us that there is something like 35 different chemical
ingredients in coffee and that 33 of these have now been isolated.
Such a development would of course be catastrophic for the present
Brazilian economy. Ever threatening Is the growing competitive threat
from Africa. Also, the quality of Brazilian coffee Is below that of
coffee raised in higher altitudes, such as Costa Rica, Colombia and
other coffee.
(Rumor has reached me since dictating the above
that a chemical substitute has been developed for coffee
so perfect that "expert tasters" cannot tell the differ-
ence between it and high quality coffee, and that the
price of such a synthetic substitute Is only one-fifth
of present world coffee prices.)
* * * * *
I had a most interesting private visit with Mr. Byington of
Byington an
%.0
any of Rio who has ___e separate corporate operations
and subsidiaries. He is theoretically the distributor of Britannica
Films but can't sell many because of the import restrictions on
foreign exchange. Mr. Byington reported that the communists were push-
ing hard on two key fronts labor and education. He says that their
objective in the field of education is to eliminate all private insti
tutions and to center every kind of control in the hands of the
government.
Mr. Byington emphasizes the communist threat in Brazil. He says
that the government unions_ are being rapidly infiltrated by communists
6
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Memo #87
who are growing stronger and stronger. He has formed a group of
businessmen whom he calls 'Producers" who are studying communism and
trying to develop real facts upon which to oppose it. He says that
the Polish Embassy here is the center of the communist activity, a
big embassy with important trade activity. Not long ago Poland was
doing only a tiny business with Brazil, a few hundred thousand dollars
a year. Last year the Polish businesS was ko million dollars and with-
in a year or two it will be 70 million dollars. The Polish Embassy
works Intimately with the Soviet Embassy in Montevideo, from which
the agents infiltrate Into Brazil.
Mr. Byington says there are 35,000 Brazilians now enrolled in
a 48-lessomCommunist course, attending it six nights a week) getting
their. "brains washed" with communist doctrine and propaganda. These
men are labor leaders and others. He described specifically lesson
23 which is titled, 'How to get the Americans out of Brazil". He says
that phrases from this lesson run through the speeches of Sakarno and
Nasser. He's highly alarmed by the communist threat in Brazil, to
which he feels his countrymen have been all too oblivious,
* * * * * *
One of the most remarkable things about to happen Is the visit
of Jonto Quadros next week to Cuba, The Chairman of the Foreign
Relations Committee of the Brazilian Senate, Senator Afonfo Arinos de
Mello Franco, sat next to me at the lunch given by Ambassador Cabot.
He's one of ten top political figures going along to Cuba with Quadros
who Is the"opposition candidate" to Marshall Lott. Quadros is
paradoxical figure a demagogue who is supported by the business
community, in. part because he balanced the budget of ciao Paulo when
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Memo #87
he was governor. Some think the odds now seem to favor his election.
When I asked the Senator why Quadros was visiting Castro I was told
that in Quadros speeches, whenever Castro's name is mentioned, the
crowd applauds enthusiastically. Now the reasons for this are inter-
esting, and I don't really understand them. Castro appeals to
idealistic young people because they believe that he's honest. (And
do too.) He appeals to many because he's the David thumbing his
nose at Uncle Sam, the big Goliath. And of course he symbolizes the
guy who kicked out the kind of dictator which the United States is
accused of supporting. He stands for 'land reform which is so des-
perately needed in many of these countries, and which provides him
with a great fighting slogan. Although he lost his standing with
the literate and informed political leaders of Latin America, many of
whom think that he's all washed up, tile forthcoming visit of Quadros
to Cuba, which will perhaps be a world news story, shows that one
extremely astute Latin American politician thinks that friendship with
Castro will pay off for him and in a big way. His opponent, Lott
has the official communist support in Brazil - but he Quadros seems
to be seeking any unofficial remnants in Havana.
Here we have the picture of the great country of Brazil wanting
help from the United States and seeking our loans and financial
assist-
6 %,catus.A f.- A
....
ance. Ye one ld i tiviu ..% t.,4
top advisors, going to Cuba to visit Castro. This is perhaps a
sample of the tribulations and the inconsistencies in Latin American
politics
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BRAZIL
Cat. #1734
Memo #93
March 1960
BRIEF SUMMARY OF THE SAO PAULO LABOR SCENE
(Note by W.B.: This is a paper prepared at my request
by the Labor Attache in the Consulate
Sao Paulo has approximately 25% of the labor force of Brazil,
The labor force of the state is estimated to be close to 4,000,000
with 2,500,000 in agriculture, some 1,000,000 In industry and approxir.
mately 500,000 In commerce, banking, communications and transportation.
American firms and Invested American capital provide jobs for
approximately 100,000 workers in the state of Sao Paulo. American
firms have a good record in labor-management relations. Most American
companies pay relat Tiely
and abide by Brazilian law.
evvtat
ell. IL
=ages, and have good working condita.ons
Only about 20% of industrial, transportation commerce, communi-
cation and banking worke
are members of 250 local unions in the state
of Sao Paulo which are in turn affiliated to 17 state federations and
four national confederations.
The labor movement _ere in Brazil is different from hat of the
United States and grew out of the paternal stic structure created by
Gatulto Vargas during the period of his dictatorship 1937 - 1945. Under
Vargas advanced legislation was enacted into law. However, the Vargas
administration also enacted legislation giving the state broad power
to intervene in trade union affairs which in effect made them entirely
controlled by the Min_
try of Labor.
The Vargas regime was over
by a military revolution in
1945 and for a brief period the Brazilian Trade Union Movement en-
joyed some degree of freedom. However, within two years the Communists
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.2.
were in such a position of influence that the Government felt it had
to impose strict controls once again. Since that time the Government
through the Ministry of Labor has exercised a great deal of control
over the labor movement.
In recent years, however, the labor movement has been more
vocal in objecting to government controls, and in gaining economic
benefits for Its members. Trade union demands were responsible prima-
rily for the issuance of regulations permitting free union e ect nns,
and allowing the national confederations to affiliate with the Inter
national Confederation of Free Trade Unions (I.C.F.T.U.). Strikes which
in theory are str ctly controlled by law occur and occur quite fre-
quently. In the state of Sao Pau o alone during 1959 there were some
309 strikes almost all because of worker discontent with the rapid
increase in the cost of living which is estImated to have risen from
35% to 50% during 1959. These strikes are tolerated because all major
political parties are well aware of the political importance of organ-
zed labor, and court the votes of the working class. Most of the
strikes are of a short duration, and the workers have been gaining
at least part of the increased wages they have been demanding.
Here in Brazil the rank and file generally tend to support their
leaders during strikes over wages hours, and working conditions.
However, experience has shown that trade union leaders have had little
Influence in political electIons. Many campaign or support candidates
for all types of public office but their efforts for the most part have
been unsuccessful.
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WAGES
A federal minimum law was enacted in 1937 and has been amended
several times since. Present minimum wages for unskilled workers
amount to Cr$ 5,900, approximately Us$ 32.00 at the present free market
rate of exchange, in the city of Sao Paulo and range down to as low as
5,200 cruzeiros or US$28.00 in the outlying areas of the State. There
is however a shortage of skilled workers. Skilled workers earn from
10,000 cruzeiros to 250000. The longshoremen in Santos enjoy relative-
ly good wages with an average of Cr$ 25,000 per month, approximately
US$ 150 per month. Sao Paulolabor force could not on the whole be
called highly skilled but it is rapidly becoming more so as enrollment
In technical and vocational schools Is Increasing. Modernization of
equipment in some industries particularly textiles has caused some
unemployment but expansion of plants and improved production methods
are providing more and more jobs. Purchasing power is low and many
government employees and white collar workers have two jobs to make
ends meet
COLLECTIVE BARGAINING
Collective bargaining exists. However, the Ministry of Labor
actively enters every phase of negotiating and approves each contract.
Labor courts exist apart from the regular courts and consist of local
boards of conciliation and judgement, regional labor courts, and a
supreme labor tribunal
management relations as
comes under the jurisdic
Almost every phase of normal every day labor
e understand the term in the United States
ion of the labor courts such as grievances,
interpretation of contract, etc.
a
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C O14MUNIST INFLUENCE
One cannot deny some Communist Influence in the gao Paulo labor
movement but the Communists are by no means in a position to take over.
On December 2, 1959 according to the local press an attempted general
strike promoted by the Commun sts in protest over the high cost of
living and food shortages turned out to be a dismal failure as the
government and the Army moved in And completely dominated the situation.
In addition the local press reported that the Communists were recently
ousted in elections held in the Sao Paulo State Federation of Metal-
workers, and suffered setbacks in the Santos City Central, and in three
large local unions in Santos. However, the Communists are making some
hay in trade union circles by adopting the ultra-nationalistic hate
America line,
Although the three largest national confederations are affilism
ated with the I.C.F.T.U. delegations of Brazilian trade union leaders
have attended the Communist dominated W,F,T.U. meetings in 1953 and
1957. Many Sao Paulo trade union leaders have visited Red China, the
Soviet Union, and other Iron Curtain countries.
OUT LOOK
In recent years the Catholic Worker Circles, a worker group
sponsored by the Catholic Church, has been actively co,sbntting Commu-
nism in Rio de Janeiro and Sao Paulo, They have set up courses in
worker's education, and have recently opened a full time six week
trade UfliOfl leadershIp
Rio de Janeiro.
-aining program at the Catholic University of
In my opinion in the years to come their program will
make a contribution to the lessening of Communist
Brazilian labor movement,
Anflilmnce
.4eweie.M\WW4
t.
eareewer
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Memo #93
In addition, the U.S. USOM Point Der has an exchange program
for government labor officials and trade union leaders. These
people spend three months in our country at U.S. expense and study
our labor-management relations the structure and history of our
trade union movement and American productivity and technology. Under
this program approximately 70 Brazilian trade union leaders visit the
U.S. each year, and almost all of them come back with good impressions
of our free enterprise system and the progress workers can make
through free trade unions.
Visits of U.S. trade unionists have been particularly helpful
in our efforts to lessen Communist influence. In recent months we
have had visits from Sarafino Romualdi Inter-American Re' resentative
of the AFL-CIO and Andy McLellan, Latin American Representative of
the International Union of Food and Drink Worker Association.
Right now we have a team of U.S. trade unionists led b
William C. Doherty, Jr., Inter-American Representative of the Postal
Telegraph and Telephone International, visiting Sao Paulo and con-
ducting a
We
the first
auspices
for April
trade union seminar on collect
also expect to have a group
statewide convention
of the Sao
27-May 1.
ve bargaining.
of U.S. trade unionists attend
of Sao Paulo trade unions under the
Paulo State Trade Union Council and scheduled
Trade unionists such as these, speaking Spanish or Ital an
and some Portuguese generally Impress Sao Paulo trade union leaders
with the progress trade unions can make in a free society.
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U.S.I.S. Is also making a contribution to the lessening of
Communist influence by disseminating through radio, television news
papers and other communications media literature, films, and other
information In Portuguese on laborimmanagement relations in the U.S.,
the history of the U.S. trade union movement and our labor legisla
tion.
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BRAZIL
Cat. #1714
Memo #95
April 1,1960
MEMORANDUM ON TRIP TO BRASILIA
President Kubitschek and the Foreign Office in Rio insisted
that we visit Brasilia. They provided the airplane,
lunch and guides.
I, myself, wanted to take our one trip from Rio to Bahia, the old
colonial capital further north. I resisted Brasilia and protested
but I'm glad I went. The experience was remarkable and rewarding.
This newly created capital will open officially on April 21st when
the government moves from Rio de Janeiro. Brasilia is roughly located
in the very center of Brazil. The Constitution of 1860 or thereabouts
calls for such a capital, in Brazil's center, but it has taken Presi-
dent Kubitschek to put it over for 1960. He and his associates have
been bitterly criticized for the expense - and for their impetuous
haste - but I am assured that the whole country now
and is proud of its new capital. Today's criticism
carping comments about the architecture, the layout
cetera.
001
accepts the idea
centers around
the location, et
Five or six different sites were considered. One reason for
the choice of the present site is that it was a wilderness a mess
of scrub trees on a plateau about 3,000 feet above sea level where the
land was worthless and could be condemned at virtually no takeover
cost. Indeed we were told that the land was purchased at $4 for 12
acres. Such a 12-acre plot is now selling, we were told, at $15 per
square meter. In the shopping center, the shops built by the government
and offered for private sale are now selling at two and a half times
their construction costs. The heavy costs of the development of
Brasilia during the current: year, ill be met by the profits on such
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sales Brasilia thus seems to be one of the greatest real estate pro-
motion schemes of all history. A great dam was thrown up to form an
artificial lake Eighteen months or so back the American firm which
had this lake under contract threw up the job saying it could not be
done in time. But it has been done. The land around the lake is being
bought by speculators, embassies, those who want it for private homes,
etc.
Brasilia as a planned city is illustrated in the attached
little map.
In the semi circle are nothing but apartments and shops,
with a shopping center for every group of SiX blocks. In the diagonal
running up and down are the great Government buildings, and also the
main shopping and entertainment centers. In the areas off to the left
and right are sections where private land can be bought for the buiiing
of private homes The apartments in the six-story buildings, and there
are no buildings over six stories except the banks and government build-
ings, run from I bedroom apartments to 4 bedrooms (plus other rooms such
as living room dining room and kitchen) Later bigger apartments will
be built cooperatives for those who want to buy them But most of
tn
e who want more rooms are expected to go to the outskirts to build
private houses
The most interesting aspect of the apartment houses is that
they are owned by the various Ministries. Thus all tne people who
for the
houses ow
and askod
e P4
nis try
for example, will be housed in apartment
by the Finance Ministry. (When I laughed about this
thout makin
Ilindea. which
son-in-law work for
old that with more maturity -would come other
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On the opening on April 21st, 5,000 apartments will be ready
which are expected to house 20,000 people. These will be added to the
Qn nnn
4.1rea rq-wr i 4 n
tr
4_ n
r%=ttgmremd around m
gt.Q.h1-Ft7
aooden
and otherwise - for a total of 100,000 population. Our guide prophe-
sied that there would be a population of 300,000 within three years.
We were met at the airport by the president of a company
called NOVACAP, which means "the new capital," (Rio is already
jestingly being called "the old capital.") His name was Mr. Pinierho.
He was a deputy in Parliament who favored the building of Brasilia
Because of his advocacy, he was set up as president of the key company
which controls all other companies. He is an engineer. He has re-
signed as a deputy.
The architect is Oscar Niemeyer, the man who won the contest
building of the United Nations and who is famous for his great
in Caracas and elsewhere throughout the world. He is accepting
t from this venture. He is now living in Brasilia and working
for the
designs
no prof
at a salary of $300 a month.
The first building was begun only in March of 157. It was
completed in April of '58. Today there are great roadways completed.
We saw 11 tall buildings to house the various Ministries - plus the
buildings to house the Congress, and the capital building largely under-
ground with a projecting dome and a saucer shaped companion piece -
for the Senate and the House. We saw the Supreme Court building which
reminded Governor Stevenson of a drydock. We visited the President
offices, magnificent and expensive, and the beautiful and breathtaking
new residence palace for the President The pictures of these buildings
will speak louder than my words. As a group, we were greatly taken by
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- 4-
Niemeye
seem to
marble,
schools
church.
s remarkable designs which made the President's residence
float out of the ground. We lIked the extraordinary use of
the balconies, et cetera. By April 21st, we were told that
and gymnasiums will be operating, warehouses and shops and one
Everything in Brasilia is planned and ordered. Thus all the
banks will be together in one section and they are all tall sky-
scrapers. They own their own land and are building their own build-
ings. All the embassies will be together. All the theatres.
The night before, at the cocktail party announcing Britannica s
new Brazilian encyclopaedia, Governor Stevenson had said that Brasilia
was now "the world's most famous city." told him that I thought it
was destined, in the next few months, to be 'the world's most dis
cussed city."
Satellite cities are planned for workers. These will hold
small houses and apartments.
For the opening on April 21st, people
over Brazil - bringing their sleeping bags.
Of course President Kubitschek is driving for his early
opening because he wants the city dedicated before he leaves office
come from all
ten months hence. I can't blame him for wanting to be the firs
president in the presidential palace. A lot of the furniture is
already in place, including a set of the Encyclopaedia Britannica in
the library.
Brasilia is a sample of Kubit hek driving energy and his
determination to build the symbols of this country's proud destiny
at all costs
The city is built in the middle of a vast wilderness
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Of course it should build up. rapidly, even though the land is poor
and will require plenty of fertilizer and special care. It's the new
spirit of Brazil.
(At the luncheon given by the President I asked h m whether
Brasilia would contain a giant statue of him, comparable
to Christ which towers over the harbor at Rio, or to the
President Aleman statue which dominates the campus of the
University of Mexico; and the President seemed to regard
this as a tremendous joke and leaned across to tell it to
the Ambassador who was his Secretary General and who sat
at my left and who must have been his intimate associate
for decades -0- he was his secretary when the President was
a Mayor.)
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0
0
CHILE Cat. #1678
Memo #44
March 5, 1960
CALL UPON PRESIDENT JORGE ALESSANDRI AT HIS OFFICE
IN SANTIAGO, CHILE
BY GOVERNOR STEVENSON ACCOMPANIED BY
SENATOR BENTON
President Alessandri is a bachelor in his fift s who, we were
told, does not drink or smoke. He lives in a small apartment a few
blocks from the presidential office and frequently walks to and from
his office. He Is a former businessman and the son of a former
President. He speaks quickly and with authority. In his appearance
and his manner, he reminded the Governor and me of Mussolini. He
talked at a very rapid clip for more than an hour and warned us as
we left that he had spoken in confidence. Governor Stevenson re-
plied, 'I don't quote Presidents." Later when I complained, about
the general absence of candor in most of these interviews Governor
Stevenson said he felt that President Alessandri had perhaps been
among the most candid. I had the feeling of far greater candor in
many of my interviews in the Soviet Union.
The President explained that Chile is sponsoring a conference
for all Latin Amer an countr es on disarmament. He wants prelimi-
nary conferences between the United States, Mexico and Chile on the
preparation of an agenda. He said that Chile wanted to present some
very simple proposals:
1. A common and agreed upon type of accounting on defense
expenditures. (He says
of
he countries have secret
budgets He says that Chile is one of the few Latin
American countries where the armed services exercise no
political control He commented that this was "an
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2-
unfavorable position for Chile in such negotiations".
(The Governor said that on the contrary it seemed to
him this put Chile in a most favorable position to take
the initiative.)
2. He wants all purchases for armaments made known quickly
and fully. He doesn't like to read
pectedly in the papers.
3. He feels that the Rio Treaty makes
Article 9 for countries 'to act at
about them unex
t possible,
once"in the
under
case of
44
military aggression 'without waiting for the appointment
of a committee or the findings of a commission." He wants
this more clearly understood and agreed upon.
He said that he presented this viewpoint to the President
of the United States - "and he agreed in a message to
ress."
President Alessandri says that if all countries knew
that in case of attack they would have immediate asslst-
ance - then they wouldn't have to purchase "old fashioned
equipment in Edrope".
The President wants the United States, in its distribu-
tion of aid o give preference to those countries which
do not purchase armaments He says such a U.S. policy
would act as "an automatic regulator". He points out
that this could be a point of enormous potential in the
economic development of these countries He feels such
an incentive will make all countries want to allocate
more of their own budgets to economic development - and
�
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much less to armament, (He points out the inconsistency
of Brazil purchasing armaments in Europe while at the
same time seeking aid and loans from the United States.)
The Governor sald he thought that Premier Beltran of Peru
approved President Alessandrt's view, Alessandri snapped
back that Beltran didn't control Peru and that the next
President will probably be a man from the armed forces.
(Odriasz)
If there are more specific proposals which the President has in
mind for his proposed conference, he didn't enumerate them. In re-
sponse to a question from the Governor he said he could not reduce
Chile's arms budget, (The same answer we received from the Finance
Minister.) But he wants the budget stabilized. He doesn't want to
increase it.
The Governor pointed up the importance of the leadership of
South America on dtsarmaments to the rest of the world. He said he
had hoped the Geneva nuclear negotiations "would break the deadlock".
He added, 'If they don't, the world needs another means". He asked,
'Can't South America lead the world by its example?"
President Alessandri replied sharply that the answer depended
on the cooperation of the United States. He said he was pleased by
President Eisenhower's reaction. The Governor asked him to be more
specific. President Alessandri said the U.S. should join in a state
ment, and wild that it will help at once in case of aggres
J.. L �
A 4-
to�
the same time he suggested the appointment of a committee but he
doesn't want leadership by the United States to await the findings of
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-
the committee! committee. He said that too many countries are too much afraid
to watt.
asked about the problem posed by a Castro in Cuba. He replied
that this problem is very well defined in Article 9 of the Rio Treaty.
The aggressor must be a foreign country - and must be an American
country. I asked whether this would mean the United States would have
to intervene in Santo Domingo in support of Trujillo if Castro at-
tacked Santo Domingo. The President said flatly that this was just
what the treaty meant. I mumbled something about the dilemma for
U.S. policy.
The Governor asked further about Castro, The President replied
that he opposed Intervention in Cuba just as does the United States.
The Governor then asked about inflation, the issue with which
the President Identified himself in his victorious campaign. The
President replied, "We are now at the most difficult point. We've
had 20 years of demagogic government. The salaried classes expect
automatic increases and this gives away the productive capacity of the
country faster than we can increase it." The President explained he
is now, trying "to correct the imbalance between local and world
prices." He said the cost of living in Chile went up 35% last year.
His government, which took office In November of '58, was confronted
with this big increase in the early months of '59. But his measures
were so efficacious that he claims in the last six months of the year,
prices only went up in total.
He is now faced with "a big opposition campaign". Last year
such a campaign forced him "to raise salaries and wages 30%". Now
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044k4
this kind of increase is demanded once more. He is against it. He
told us the story of the Schweiger Coal Company, This has an annual
profit of $160,000. A raise in wages of ten per cent creates an extra
expense of $480,000. The opposition wants a 35% increase. This would
cost the Schweizer Coal Company more than $2,000,000 in extra costs.
Thus of course the price of coal must go up. The President added,
II have ordered that there shall be no raise in coal prices. Of
course, the Schweiger Coal Company can raise wages if it wishes." In
condemning demagogic appeals, and in his use of figures, the President
talked like an accomplished Chamber of Commerce orator, and in the
best sense.
Explaining the difference between the current year and the
problem last year, he said he felt he had no choice but to raise
wages last year because prices had gone up so sharply. However, he
said the Congress had doubled his own proposal of a 15% increase and
he had no veto over the congressional action. He exi4ained that he
lacked a majority in Congress.
We asked about land reform. His interpretation of the new land
bill is different from that of the agricultural expert in the Embassy,
The President says the new land bill proposes to distribute only land
which is already in the hands of the government. He exp aired that
much government land had been "very badly exploited" land which has
been held by government employees by government managers who have
den
.cri the vt-1,0A8
'MOP'
f th�e peasants living
the lands. The Prei
aid that there have been previous laws demanding changes but
these laws have not been complied with. He feels this land should be
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taken from the people who are not developing it and given to those who
will. He wants to give the new owners the credit to buy and develop
the land. He estimates that he's talking about 30% of all the land.
He clearly states that he doesn't contemplate breaking up any of the
big estates.
He explained a good bit about the ownership of lands through the
operation of"social security".
suppose this means funds invested
by social security officers. He says "social security" owns land and
big buildings in Lima which operate at a loss. He says he's selling
the buildings. He told us Chile was one of the first countries in
the world, in 1924, during his father's regime, to establish social
security. He said Chile %opleA t
Ari
German system but instead of a
private system, the operation has been under the government and the
results have been disastrous".
He says it's extremely difficult to
reform the social security administration because of "interests".
In his campaign he said these past unhappy mistakes had brought Chile
to its present predicament. He feels the country approves his efforts
to remedy them.
The Governor asked about the stagnation of the economy. (This
expression has been used several times here.) President Alessandri
re 11 d,"It's a political campaign against me; there isn't any." He
cited as an example the increase in metallurgical production.
He told the Governor he had read with interest of our meeting
with the students. He said his administration is opposed by the
Marxists and by the Christian Democrats led by Senator Frei, and
another tifl whose name I missed. He said he was pleased the Governor
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-7-
position "coincided exactly with my own". He said the word "capital-
ism" has been turned into a nasty word. He regretted the fact that
Senator Frei wasnot an economist, though he called him a scholar. He
shrugged and said, "God made men with defects". And he added, We
won't ever be able to construct a political system with the virtues
both of democracy and communism". (The Governor interjected, 'Unfor-
tunately men will continue to look for it!")
The President agreed that economic progress in recent years in
Chile had been less than formerly. He thinks this is due to the '29
crisis. Prior to '29 he said, South American countries and companies
contracted loans through private banks. With such loans, they financed
public works and other enterprises. Such loans increased trade.
Unfortunately, he added, 'this system was abused from '25 to '28 - it
got out of control - and the world crisis put all these loans in de-
-Pault " .
MeNva V.Nel
AVI�olvfir 6.416.0,
comments sadly that there are no more loans available
and money must be raised from taxes.
He feels that foreign Investment is impossible for utilities
because the rates are held down". Thus
1414%
LP 11 %.�
government must finance
the utilities. They've got to be financed out of the annual national
budget and this means "a great diminution of projects - and of course
of our ability to import". Here again, he referred to a private con-
versation he'd had with President Eisenhower. He said he had told
President Eisenhower of the need to re-establish loans, but under
better controls President Alessandri added "My views here wOuld
be heresy to the International Bank". He wants the loans to cover the
financing of local costs as well as purchases from abroad. He repeats
ear
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sadly, "Unfortunately, the funds from many loans in the twenties were
used unwisely".
The Governor asked whether the peso is over valued and the
President did not give a clearcut answer.
The President told us that unfortunately, Many people who are
really Democrats don't understand the reality of the communist prop-
aganda and form of government",
The Governor asked him for his comments on U.S. policy.
The President replied that he feels the suggestions he had al-
ready made were very important.
The President warned us that the communist influence in the
International agencies, - in all UN agenn
is
muleibh +- v,
,161,4144.411.41
we may realize. He said, 'Many of these agencies arrive at conclu-
sions which are not warranted by the statistics". He claimed these
international agencies "have preconceived Ideas whIch they bolster
with statistics that are used as an excuse to attack the imperialist
U.S.A." He attributes this to communist infiltration.
President Alessandri has made stud es of these reports and he
says he understands statistics, These studies putport to show a state
of poverty in South America which is not always real. Such propaganda
should be combatted. Here in Chile, the Communists spend a lot on
propaganda through their Marxist parties.
Governor Stevenson asked Where do they get all this money?"
President Alessandri said they get it from behing1 the curtain
and they also take part or the salaries of all communists
fm.. 4 S
not made clear but I suspect he meant that the Chilean
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communists must contribute part of their salaries to the party, such
as Union Members must pay dues to their
Governor Stevenson asked, "How can
The President replied that we must
local Unions.)
we combat this?"
"Introduce fundamental re-
forms if we are to preserve liberty". He said that the United States
embassies should have propaganda agencies to combat the campaign
that the United
countries. The
show the monies
the case of the
They contribute
Chile 1:)e-ndb. fo
States "siphons off" wealth from these Latin American
statistics on this subject are phony. They don't
left in the various countries, over the years. Take
big mining companies, said President Alessandri.
$100 millions yearly to the Chilean economy which
equipment to give work to other uhileans. Sound
studies should show the investment of profits which are not with-
drawn, but which are ploughed back into the companies. Many politi-
cians don't want to understand this,
The President thinks much of the problem is a simple matter of
propaganda. As President of the Chamber of Commerce, he said he
could
explain the facts! One must understand he said "that 60% of
the profits of the mining companies goes to the Chilean government".
The students with whom we met had said these companies receive more
favorable treatment than Chilean companies. Alessandri said flatly
this is absolutely false'
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Cat. .#1684
Memo #49
3/16/60
"BR EF NG SESSION" AT THE U. S. EMBASSY IN SANTIAGO
WITH AMBASSADOR HOWE AND HIS ASSOCIATES
The Ambassador said that "the student letter" which is
receiving such publicity here, addressed by the students to Presi-
dent Eisenhower on his recent visit - (the letter and his reply will
be found in the briefing folder) - is believed to have been written
by Mr. Tomie, "a left wing Christian Democrat". The Ambassador said
that the papers had commented favorably on the letter. And he added,
"This cannot be merely a statement of students"
* * * *
The Ambassador called on Don Zook, his political officer,
who to.A.d us that the present government had been freely elected;
that Chile is "one of the few free democracies of Latin America";
that President Alessandri is "able and honest and seeking a sound
government basically of the right wing". Alessandri, whose father
was president before him, was elected in September of 58 and took
office in November of 58.
Today there are 16" recognized parties in Chile in contrast
to 29 some years back. In the '58 election, these 17 parties com-
bined around five presidential candidates, four of whom Mr. Zook
called "major league". Senator Allende, who came in second, had the
support of the leftist groups. Alessandri received 31 percent of
the popular vote and Allende 29 percent - roughly the vote of the
right versus the lef
The vote "polarized around these
the other three candidates receiving the other 40 percent
Alessandri is the first frankly conservative presiden
which Chile has had in a long time. He's been plagued by his lack
it
a
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of control of the legislature. He has to rely on his former oppo-
nents, who control the legislature, in order to legislate. He has
the natural support of the Conservative and Liberal Parties both
right wing, and he has won the support in addition of the biggest
single party, the Radical Party, He must often compromise his pro-
gram, in order to tailor it to the Radical Party whose support is
essential to legislative action.
The opposition to his policies comes from the extreme left
and from left of center such as the Christian Democrats. The
Communist Party is small. It has been illegal for ten years. Now
that it Is again legal, 1.t helps prnwpAtm, "strong articulate opposi-
tion, but often irresponsible opposition". Senator Frei, who leads
the Christian Democrats, (on a previous disc I said I thought that
Senator Frei was head of the Christian Democrats, will you please
correct that and make him flatly head of the Christian Democrats.
Correct that earlier memo.) inspires a great deal of devotion in his
followers.
Looking ahead, Mr. Zook says that the "time factor is very
Important".
President Alessandri would like to win legislative con
trol in the congressional elections in April of 61. If he hasn't
made a constructive effort to out through a good program, the parties
that support him will lose seats in the legislature. Mr. Zook feels
that this election may be 'Alessandri last chance". If Alessandri
fails In 61 in 64 Chile may elect a president who is 'heavily
Indebted to communism".
President Alessandri is putting major emphasis on the need
for arms control. Mr. Zook said that the President wants to get
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-3--
the money for other purposes'. (Later we were told both by the
Finance Minister and by the President himself that there was no
real chance to cut down on Chile's expenditures for armaments, now
running at only 14 percent of the budget, but that the great objec-
tive is to avoid increasing these expenditures.) Mr. Zook says that
25 percent of the budget - not 14% - is for armaments.
Mr. Zook told us that he thought that many political leaders
here might talk to us about the need for widespread limitation of
armaments. He said there was a desire for OAS to be the sponsor of
such a move, on a motion of Chile with the aim a formula for arms
control. A committee would be set up with representatives from all
South American countries except Bolivia and Paraguay - with Mexico
and the United States added. The discussions by this committee
should be followed by a conference, "to explore the field and to
determine the points on which agreement can be reached". For example,
can agreement be reached on the percentage of the budget of South
American countries which can rightly be devoted to arms?
President Alessandri first publicly announced his disarmament
program in an interview with the New York Times last November. The
purchase of a cruiser by Peru brought the matter into the open. (He
had privately expressed himself along sim lar lines earlier.) Mr.
Zook says that Chile wants our support for President Alessandri's
plan; it wants the U. S. to participate, wants our advice. Will the
U. S., for example, use its influence with Peru? Al]. South American
countries have agreed to Alessandri's proposed approach except
Colombia, Peru and Venezuela - who haven't replied.
�
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The Foreign Foreign Minister recently commented,
on a good flight, but we don't know how to land!".
The Chileans would like to see the Peruvian-Ecuadorian dis-
've taken off
They'd also like to settle their
This latter dispute
is over land In an uninviting region and also involves the dividing
line of the Beagle Channel. Chile and Argentina, on previous occa-
sions, have agreed to settle by arbitration, but they've never been
able to agree on how to arbitrate. (Maybe it's oil ) In part the
put e
ettled by Juridical
0.6411:211".P.,
dispute with the Argentines in a similar way.
problem is one involving prestige, but in part it might be economic.
(Oil?)
Chile states that the Argentines keep changing the terms of
reference. Chile thinks that pressure groups such as the Argentine
navy keep pushing against the civilian administration - and President
Frondizi of the Argentine is unable to stand up against such pressures.
* * *
The labor attache took over, but I do not have a record of
his name. He told us that the labor groups in Chile were "politi-
cally oriented". He said that as yet there was no strong support
for Raul Castro 's idea, but that there is "lots of support in Chilean
labor for all regional and all world
The
arnInu
sts
labor groups here don't want to desert the CTAL. However, the
communists control only about 50,000 workers out of the 500,000 who
V.,,re rg�.4.t
�
4d (-4 rIP
11.1'.647
notes indicate that 'American copper companies are excluded", but
don't remember the meaning of this phrase unless
unions are not dominated by the communisi,
�
means that tb
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The speaker said that labor was fragmented in Chile. The
central organization Is known as Couch. It tries to lead, but it
can't. The communists, once the dominant force in it, are now
getti rvb weaker. Perhaps a total of 300,000 - in theory - belong
to Couch but very few pay their dues and many won't participate
actively* The political parties move in and out of Couch on politi-
cal grounds. The Christian Democrats and the Radicals have pulled
out. The major political parties all have "labor departments".
Couch's Council, when President Eisenhower was here, let down a big
banner featuring a picture of Castro.
In response to our questions, we were told that the com-
munists have a following among the intellectuals of Chile; also
in education including their "very effective influence among the
universities".
The third officer took over - Mr. Thomas R. Favell, the
Economic Counselor, He said that the most urgent problem is infla-
tion, with a long
I.
istory back
thirties. In recent years
the average upward movement of prices is about 33 percent per year;
formerly it was 80 to 85 percent. President Frondizt's administra-
tion is fighting inflation and regards this year "as the year of
decision".
Because of inflation, the rate of savings and investment
Ia
L 11 NOY
normally 1
- somewhere about ten percent - with
half going into replacement rather than into new equipment.
The per capita income is $350, double that of Peru, but
behind that of the Argentine and Uraguay. The total productivity
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Memo #49
has been going up only about one percent per capita and in the past
six years has actually declined. (I do not know the period covered
by the one percent per capita, perhaps since the war.) The fluc-
tuating price of copper has been a handicap.
Mr. Favell says that the stagnation has to be licked and he
thinks that the administration must stop the inflationary spiral
before real economic development is possible.
The problem of land and of agricultural production are in
part dramatized by the fact that Chile has shifted from a net ex-
porter of food stuffs to a net importer.
The development of public services has been retarded by the
frozen rate structures. (Some improvement lately.)
The importance of copper in the economy is shown by the fact
that a one cent change in the price of copper means $7,000,000 to the
Chilean Treasury Department - and actually $10,000,000 with the indi-
rect effects thrown In. Copper is by far the biggest export product
(60 percent of the total) and is now expanding. Fifty thousand tons
were shipped last year, the biggest production in history.
Seventy to 80 percent of the copper is sold in Europe. In
1958, the United States Senate failed to extend the suspension of our
import tax on Chilean copper. This tax is now 1.7 cents a pound in
contrast to four cents or thereabouts - as I remember when I was in
the Senate, and when Senator McMahon and I successfully worked to-
gether for an extension of the suspension of the tax. The 1.7 cents
under the 58 Act, goes up when the price of copper is under 24 cents
a pound.
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There was little to attract more U. S. investment to Chile
until three or four years ago but things are picking up. Now there
is perhaps in sight another $300 million or 0000000,000 in new in-
vestment in copper. (Chilean copper is now 20 percent of total
world production.)
Another officer took over, whose name I did not catch, *He
was the Agricultural Attache, or expert. He said that Chile is
now normally 80 to 90 percent self-sufficient in the production of
food. In the year just ended, Chile will import coffee, tobacco,
tropical fruits and sugar.
A great deal of Chilean land is "under-used". Last week a
law was passed giving the President power to reorganize the Ministry
of Colonization. The President can distribute public lands which are
not being properly used. Further, he can "break up and colonize the
big estates". (We had contradictory reports on this later.) The
idea of such a law is several years old, but the continuing inflation
has killed it. (It has been profitable to hang onto land during the
great inflation; Ambassador Muller later told us that his $20,000
Investment in his "farm" is worth something like $200,000, and this
In real dollars wholly apart from the inflation.) Under the new
law, the President also has the power to take a lot of small plots and
pull them together into a large and efficient operation.
The land is not as concentrated into large holdings and a
few hands as many people have said. Time once reported that 55
*Probably John S. Burgess Jr.
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-8-
percent of the land was owned by 25 percent of the people. The
speaker says that he estimates that 40 percent is owned by three
percent.
The Minister of Agriculture once described the Chilean land
cycle. When the farms are small, the unprofitable ones are sold and
the good ones take over - building .up bigger and bigger holdings.
These large holdings are then sub-divided by inheritance into small
ones, and the process begins again.
The political group known as FRAP in the last campaign
capitalized on land reform with maps. These maps dramatized how
the public land would be distributed through "colonists". FRAP
proposed to take over unworked pi'
A
Vc1.4CJQ.tI4.L 14.1'
and further proposed a system of incentives to stimulate production.
Ambassador Howe, before his appointment, was in charge of
our Technical Assistance Program in Colombia. He says that the
Technical Assistance programs often -slips back", but .the objective
of them is to get important projects started which will 'Ater be
turned over to the local countries and administrations. The present
Technical Assistance Program in Chile totals $2,9840000. We were
shown a big pie chart, a circle broken up into 14 or 15 colors
representing the different segments of the program. About a third,
somewhat more, goes into agriculture. Roads get $228,000; labor
gets $309,000; there are substantial segments for health and for
"exchanges". One hundred and fifty thousand dollars is an under-
writing to the University of Chicago which is setting up a Setiuu.J.
of Economies at the Catho
UniversIty of Santiago. This is the
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second largest university, equal in prestige to the University
of Chile and in some departments better. (Mr. McCausland of the
Embassy told me he thought the wealthier boys from the higher grade
families went to the Catholic University, in contrast to the Univer-
sity of Chile, but this was later denied.)
We have not had a program of economic aid for Chile, only
Technical Assistance, and this since 1943 has added up to around
$20 or $25,000,000. The loans from the Export-Import Bank etc. have
totaled another $4ol000,000.
In 1959, a total package was worked out with the United
States which added up to $123,000,000 for the year. This package
involved money from the International Monetary Fund, $50,000,000
from the Export Import Bank; stand-by fund from the U. S. Treasury
to bolster Chilean currency; $2920000000 from private banks; and
suppOse the World Bank must have figured in this also. (1 did not
have time to get these figures and this breakdown exactly.) President
Alessandri later told us that "right now is the critical time" but
all agree that progress as been made in stabilizing the currency.
When Alessandrt's administration took over, the foreign exchange
reserves were a tiny $5000000; now they are $80 000s000. Further,
there is an important psychological change.
There is now a modest
flow of capital back Into Chile. Confidence is resuming.
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CHILE
Cat. #168
Memo #4
March 17, 1960
Visit with Foreign Minister German Vergara and Finance Minister
Roberto Vergara, In Santiago, Chile. The Foreign Minister served
once before as Foreign Minister, and was with Governor Stevenson
for several months in London, in 1945, during a United States
Conference. These two men are not related, although their names
are the same.
Present at this meeting were Governor Stevenson, Ambassador Muller
Chilean Ambassador to the United States), and Dr. Carleton Sprague
Smith.
The Foreign Minister apparently understands English well but
because he speaks it haltingly, preferred to converse in Spanish.
I understand he is about to leave for Europe for an operation on
his eyes, and there is some uncertainty about his return. The
Finance Minister is fluent in English; he lived for a dozen years or
more in the United States as head of the Chilean Development Corpora-
tion and credit is given to him for arranging the first loan of the
Export--Import Bank to finance the Chilean steel mills. Many consider
him to be the strong man of the Cabinet. He seems to have sponsored
many Cabinet Ministers, whom he regards as proteges -such as the
minister of Labor, and Health, Mr. Pablo Perez; and Mr. Eduardo
Figueroa formerly head of the steel industry, and who is now Presi
dent of the Central Bank.
Governor Stevenson pitched into the subject of disarmament
were told that in 1915 and in 1938 arbitration agreements had been
signed with Argentina, but no settlement had ever been reached on the
border problem Now, we are told the Argentine government has
asked for more land than ever before. We inspected maps in order
to achieve a better understanding of the argument over the t8lands
near the Straits of Magellen. There are three small islands, Lennox
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Memo #48
Nueva and and Punta, which if fortified, would control the Strait of
Magellen. The Finance Minister says that only 22 people live on
them - and about 1500 sheep. The Finance Minister is of the opinion
that the Argentine Navy thinks these islands may be good bases some
day but he regards this idea as wholly obsolete.
He suggests that the Argentine Navy tries to keep things stirred
up. He stated that "the armed forces are political parties in the
Argentine - the Navy is one party s the Arthy another," He has heard
that right now there is a split between the groups in the Argentine
armed forces - some wanting to maintain a legal government and those
wanting to call off the elections. He says that these groups are not
sympathetic to Chile's desire for disarmament
Ambassador Muller said he thought that President Frondizi was
honestly willing to arbitrate, but the armed forces seek to hold
things in abeyance by "asking for more," Ambassador Muller feels
that President Frondizi would favor disarmament. He spoke of the
Minister in the Argentine Cabinet, Mr. Alsogaray who is referred to
as the Prime M..,nist4mr runs the economy and who plans to
military expenditures," The Ambassador told of a visit by MinIster
Alsogaray to Corboda where he explained to the chiefs of the garrison
that he intended to reduce military expenditures. He has laid down
this dictum to the three Secretaries of the armed forces and Is said
to have the agreement of two of them.
The two Ministers Vergara reported that never before have
Chilean-Argentinean relations been in such good shape. They agree
on transportation, tourists everything except the border problem
(I am not clear as to the nature of the border dispute apart from the
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Memo #48
islands, but the land under dispute seems to be thinly populated and
relatively unimportant.)
The Fore gn Minister asked Governor Stevenson to speak to the
Argentine government about arbitration, The Governor said he thought
it was important to settle the Argentinean Chilean argument in order
"to isolate the border dispute between Peru and Ecuador as the only
problem standing in the way of South American disarmament," Ambassa-
dor Muller suggested mutual guarantees to all countries against
aggression. He as-ed why the Rio Pact couldn't be made stronger
why immediate intervention couldn't be agreed upon in case of any
aggression, without waiting for the meeting of the Foreign Ministers
and for subsequent agreement to Intervene. He said that this idea
would "permit a single country to disarm without waiting for general
agreement,"
The Foreign Minister said that the burden of disarmament is
beyond the capacity of Chile. He further said,
surest ones looking at the shining military boot
11
e can't have the
It was agreed that the Ecuador-Peru dispute can't be talked
about until after the Ecuadoran lecf-ion The Foreign Minister feels
that Chile is not in a good position to take the lead "because of
the wounds with Pe r .
he
be PanIfic The Governor
said that he felt that Minister Beltran of Peru would welcome the
leadership of Colombia and Chile, The Foreign Minister suggested
Brazil as the best termediary, b-
4-
le Go,�Ter
ap
,d skeptical,
The Foreign Minister felt that Brazil could mediate, though perhaps
she couldn't arbitrate. Brazil would act with the backing of the
United States, Argentina and Chile he three guarantors of thc
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-4-
agreement in 1942 to settle the border dispute by arbitration.
Ambassador Muller felt that the OAF committee of ten might take the
lead, but the Foreign Minister felt that the committee had too muah
to do,"
The Foreign Minister thinks the problem is very difficult and is
not prepared to pass judgment between Ecuador and Peru. He says
"we need judicial determination." The Governor said he had hoped that
public opinion would force Ecuador and Peru to settle their differ-
ences and he asked the Foreign Minister how pressure could be brought
upon them. The Finance Minister commented that Peru could "walk
over" at any time she wanted to and the Foreign Minister added,
"Ecuador has only one frigate," Although there was no consensus on
which country was right, or on how to resolve the problem, there
seemed to be general agreement that the council of ten which imme-
diately runs into the Peru-Ecuador problem when it tries to move
ahead - is not qualified to handle the problem.
The Ministers expressed regret about the two cruisers purchased
by Peru -- "crazy," said the Foreign Minister. We were told that
the Peruvians are angry because President Eisenhower didn't go to
Peru, and the Foreign Minister added that the fellows who sell
armaments have good propaganda" - because now the Peruvian Navy wants
more ships
The Governor suggested that there was no real trouble in
Colombia or Mexico on the Ubjtf disarmament and there
shouldn't be any trouble in Chile that the real trouble stems from
Peru, the Argentine and tTthose countries which have shadow military
governments."
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Me o-#48
There was some talk about putting the subject of disarmament
and the Peruvian Ecuadoran border dispute on an agenda of the regular
OAS meeting. Ambassador Muller prefers a special conference on
disarmament to consider the recommendations of the committee of ten.
He wants to avoid too long an agenda, at a regular meeting. The
Finance Minister added, Why not put the Peruvian Navy to useful
work?" He said the American government did everything in its power
to prevent the sale of the cruisers to Peru. Ambassador Muller
quoted British Ambassador Caccia in Washington as saying,"If you
South American countries can't agree among yourselves to disarm -
we're going to sell you the cruisers - but if you can agree among
yourselves, then we'll send the cruisers to the scrap heap."
The Foreign Minister said that If Chile couldn't force arbitra-
tion with Argentina through unilateral action we shall ask another
country if it can't help us get Argentinan.agreement "
The Governor asked how much under a disarmament program, Chile
could save on its budget for arms The reply was, "The 14 to 17% of
our budget wh ch we now spend on armament is small The problem is
not to increase it. Yes, we can save money on the Navy and the Air
Force, which are the most expensive, but we don't think the 14% can
be reduced very much.
be happy
it doesn't go up."
When reference was made to Mexico's 6%, the F nance Minister
said, Mexico is a country with a neighbor on her north too big to
attack her and a neighbor on the south too small to fear
Ambassador Muller asked about the recent 'Buy Amer can" poll
emanating from Secretary Anderson created by the so-called "gap
I'
He asked if this couldn't be changed.
The Governor said he thought
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-
it could. could. The Governor said he had spoken against it, had written
in "Foreign Affairs" against it, felt it was a contradiction of all
that the United States should stand for - and that it would fail.
The Ambassador said much more cooperation was needed "between
Point Four and the lending agencies." He said the latter "wait until
someone comes in to see them and asks for money," The Ambassador feels
that the lending agencies should initiate surveys of raw material and
manpower problems. The Governor agreed. He said he had hoped the
ECLA would come up with regional proposals. The Finance Minister
spoke of Paul Hoffman 's recent visit. The Minister wants a loan to
finance a study made of Chilean water resources. Such a study would
be very expensive, requiring drilling equipment, trucks, etc. He
stated that Chile Is 20 years behind In its efforts to study its
underground water resources - that water geology is almost as impor-
tant as oil geology. He complained that no agency Is prepared for
such a loan. He said that the Export-Import Bank could make the
loan legally, but would have to change its policy In order to do it.
He complained about Paul Hoffman's Fund, because in order to get help
on such a project, Chile would have to make a major contribution to
the Fund itself. Chile would also have to put up the local funds.
Both these requirements cost so much that the Finance Minister
doesn't feel that he would net enough in aid from the Fund - for him
to proceed with it, (I later heard that an important project of the
Fund had been laid down and agreed to in northern
Mr. Santa Cruz U. N. representative in Santiago,
of the Finance Minister. He says they are not co
Chile would only have to put up about one hird o
Chile. I asked
about these charges
rect. He says that
the total funds
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-74m
and he thinks it's a good thing for each country to contribute one-
third of the total. Of course he takes the view that Chile should
make its contribution to the Fund in any event.)
Ambassador Muller suggested a pool from all the lending agencies
to study the natural resources of the various countries. He said
that the bad feeling which exist among the lending agencies keeps
them from cooperating as they should. He fears that the New Develop-
ment Bank, just being organized, won't do the real job for which it
was designed. He says this new bank should pitch in to "wholly new
type projects." (1 suppect that many more of these surveys have been
made than we know about; I've heard some
around without indicated aQtion for many
The Foreign Minister commented that
of them have been kicking
years.)
Latin America "doesn't need
a Marshall Plan, which was devoted to rebuilding destroyed factories.
Europe had the trained men and the know-how. It had its goals. Latin
America, on the other hand isn't in a position to spend as much as a
billion dollars a yea
It needs first to determine and evaluate its
natural resources, to train its people, to set up it goals." The
Finance Minister told us how welders had to be trained for a special
job recently. He
pared the problem
eighty years ago.
He sal4, "Mr. Hof
The AmbasBador In
dot
said that universities had to be built. He corn-
of Chile today to that of California fifty to
He ended up by referring to Paul Hoffman once more.
an had the right approach but he is too expensive."
ted that his suggestion of coordinating all pro-
the piecemeal. approach, "will give the United States
even if no more money is spent,"
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Memo #48
This caused the Finance Minister to state that during the last
20 years the only financing 'has been for specific projects" and he
commented "sometimes going through Washington in an effort to get
these projects financed leaves a man so exhausted that he hasn,t
enough strength left to say thanks!"
He feels that Chile can build electric power plants after the
right study of water resources has been completed.
The Governor again asked about the leadership of ECLA where
was it? - where is the leadership of the Operation Panamerican?
The meeting broke up very hastily as we ad o rned for a formal
luncheon given by the Foreign Minister; an affair at the exclusive
Union Club - a club very similar to the National Club in Lima. I
don't know of any clubs in the United States comparable to these in
expensive architecture, ornateness and luxurious appointments.
imagine they were built at the turn of the century and would be
impossible to reproduce now.
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CHILE
To.
Mr. John Howe
W4
� t
rio+. tee
Lpvt t
AU*
Cat. #1682
Memo #47
March 16 1960
I am returning Mr. Romualdi's memorandum because I do not see
what else I can do with it here in South America. He is enormously
respected and very knowledgeable. Note that he represents the AFL-CIO
here in South America. My impression is that he is their #1 policy
maker applied to their Latin American policies and relationships
Now of course one of the big issues the United States faces in
Latin America is the charge that we are friendly towards dictators
Note in Romualdi's memorandum that the resolution in Caracas in 54,
rIngtnricIA
1-Y17
es, is aimed at commun.:. m rather than at dictator-
ships or the suppression of civil liberties. Note the greatly expanded
resolution at Santiago in August of '59 when the United States
fostered giving to the 043 "the power to investigate the relationship
that lack of representative democracy and the suppression of human
rights and civil liberties in one country may have with the threat
with invasion from abroad".
This is a provision, I would gathe
nder which pressure could
be brought on OAS to investigate what is going on in Cuba right now.
You recall that Ambassadors Hill and Willauer favored such "prosecu4-
�...; a. Tv La 14 013
- and Wlllauer thought that Costa Rica was the best
country to make the charges.
This material is immediately appli
covered in some of my other memorandums
err
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4,�
Memo #47
Of course one of the great issues involved here in Latin
America is the extent to which these countries must break out of
their watertight compartments and unite. Bolivar dreamed of a great
united South America, though he recognized a far greater problem
involved here, due to the racial complexities and the two great
languages - (and more people in South America according to Ken Holland
speak Portuguese than Spanish!). The Governor this morning expressed
the feeling that the way in to integration will probably have to come
through economic policies, notably the present effort to develop "a
common market". Ambassador Puga said that United States policy had
opposed the common market here until recently. I had not heard this
and expressed skepticism and asked for some evidence. His reply is
illuminating. He said, It Isn't so much that the United States
overtly opposed the development of a common market; but it did not
indicate that it favored it; by its failure to take a policy of
approval, and to provide encouragement, in substance this meant
opposition and it was impossible for these countries to get together".
The Ambassador pointed out that 80% of Chilean products now
have free access to the United States markets, 'Except when copper
drops below a certain price and has to carry a tariff" - and the
Governor asked whether it wasn't true that 00% of all Latin American
products had free access to our markets - thus, for example, we have
no tariffs on bananas or coffee. I commented on the unhappy dis-
crJill nation against Peru in its four key exports, but Peru would not
be typical
We should get some basic figures, which should be easy
to assemble, in this economic area. I do not believe the Latin
American countries themselves would want a full and free market which
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Memo #47
today would include the United States, Mr. Prebisch points out that
they definitely need
Thus the steel costs
Chile are 25% higher
Pittsburgh until the
some protection if they are to Indust iallze.
at the new and modern mill in Concepcion in
than Pittsburgh. They won't achieve parity with
present capacity
to between 800,000 and 1,000,000 tons.
475,000 tons - is boosted
This is an excellent example
and we need seek no further. These figures are correct and came to
me from the present head of the Central Bank in Chile who was for-
merly in charge of the steel company.
We shall have to discuss the bommon market in the article and
the basic material should now be assembled.
Dictated in Chile
arh
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CHILE Cat. #1686
Memo #51
March 14, 1960
MISCELLANEOUS NOTES FROM SANTIAGO, CHILE
I was told flatly today that 21 percent of all the irrigated
land in the most valuable areas of Chile s "In natural pasture."
(In other words, it is being wasted.) This comes from Mr. Swenson,
Deputy to Mr. Prebisch. Mr. Swenson is a Minnesota-Norwegian Demo-
crat who worked in Washington during the war, ending up in UNRA, and
who has been here for ten years. He came down to spend only a year.
He tells me that ECLA, of which he is Deputy to Prebisch, has a
report to show this great waste of land. I pressed him for the
reasons. There are several. The owners of the big estates don't
need the extra revenue, and thus they allow a big part of their land
to remain uncultivated. Secondly, there is the acute Inflation In
Chile. Owners don't want to sell the land because they will do
better keeping it as a hedge against inflation. And there are
many others.
Mr. Prebisch and Mr. Swenson suggest that Beltran of Peru and
Alessandri of Chile - that they are indeed the "Hoovers of Latin
America", (Don't quote them!) They say that Beltran and Alessandri
are "able, incorruptible and responsible" yet they are the Hoovers
Now this is an important angle applied to my title
Voice of Latin
America", (They don't like the phrase, 'Voice of outh America and
I've decided I don't either
prebich
Ys
at he Itkes to compare the problem
with birds - air problem of leadership.
Birds lay "quiet eggs". He
says the problem in Latin America is to la the eggs for eagles'
He says that Latin Americans need "eagles". And when the Latin
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Memo #51
Americans say this they think frequently of Franklin Roosevelt
of course replied that there are not many Franklin Roosevelt - and
there are damn few eagles - Maybe some of these countries are now
lucky to have Hoovers.
Another anecdote. This afternoon my phone rang frantically.
Governor Stevenson had sent a cable to Dallas. The cable company
wouldn't take it.
the United States. Would I guarantee the cable if it went to Dallas
Texas?
I was informed that there were six Dallases in
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CHILE Cat. #1685
Memo #50
March 161 1960
MEMORANDUM ON VISIT IN CHILE BETWEEN FORMER AMBASSADOR
TO WASHINGTON, AMBASSADOR MARIANO PUGA
GOVERNOR STEVENSON AND SENATOR BENTON
A former Chilean Ambassador Do Washington is an attorney
named Puga Mariano Puga. He had dinner with us in Pucon last
night. I asked him to explain the charges of the opposition leaders
that the copper companies here in Chile had spedial privileges. This
was one of their major charges when they called on the Governor on
our last morning in Santiago. One of them is going to write me a
letter documenting the charges. Mr. Puga said that when he was a
deputy, in 1951 or 52, he assembled figures and presented them and
caused quite a sensation with them.. These were figures on copper
exports from Cuba between 1931 and 1952, for 21 years. 52% of the
money paid for this copper in foreign markets was spent in Ch
on wages, new investments, expansion, et cetera.
e
But $847 million,
or 48%, remained outside of Chile. This in part is the ba is for
charges by socialists and other leaders that the natural wealth of
Chile is being exported, without adequate compensation to the Chilean
economy.
A new law affecting copper companies was pa sed.along in
956. In recent years, only about 25% of the total value of the
copper is remaining overseas, while approximately 75% is invested or
paid out within Chi (But Mr, Puga and many others are uneasy
because much of this 75% goes to the Chilean Treasury, In big chunks,
rather than finding its way into private inve8tments where he thinks
It would be more beneficial to the econo
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Memo ft5O
over a
Mr. Puga thinks that the copper companies today are indeed
Mlfairs
cm having special prv1leges, he says they
may not be permitted to earn enough on their investment He says
they have increased their investments by $250 million or thereabouts
in recent years
I think all such figures should be easy to gather and
verify. Mr. Howe might start by asking the Public Relations Depart-
ment of Anaconda and Kennecott to provide an analysis: We can com-
pare their analysis with the report that Is allegedly to be sent me.
We have been told several times here that the total invest-
ment today of the copper companies is $600 million. This must in
elude the recently invested $250 million. Looking only at Ambassa-
dor Puga figures, which he showed us in detail this morning after
our dinner - it does not seem to me that the net return to the two
big companies, represented by their sales price for copper in world
markets which Is not returned to the Chilean economy - and part of
them of course must cover their expenses outside of Chile while only
part accrues as profits or dividends - this retained income does not
seem to me to be excessive.
Ambassador Puga referred to a law of many years back which
did indeed give these companies, also the nitrate and iodine com-
panies, the privilege of keeping monies outside of Chile which
accrued from export sales. (And Mr. Puga keeps Insisting that 4
is much too much!)
Mr. Puga would like to see much more private investment in
Chile in enterprises such as oil. And of course he points out on
oil that the first need is to take care of domestic consumption* over
and above domestic consumption comes the exports which can then be
converted into foreign exchange.
Dictated in Chile
arh
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CHILE
MEMORANDUM
T BY SENATOR BENTON WITH MICHAEL
CULTURAL OFFICER IN SANTIAGO
Ca 1688
Memo #53
March 14, 1960
RN IS
The Cultural Officer here In Chile, Michael Karnis, says he
spends 75 per cent of his time on "exchanges". This of course is the
role of the State Department. Thus in effect he spends three-quarters
of his time for State Department responsibilities (those which Bill
Fulbright kept in the State Department the student exchange and
cultural area.) while he spends one-quarter of his time under USIA.
Yet he regards himself as a USIA employee.
have a lot to learn about our domestic legislation applied to
these programs. He told me of Public Law 584 which gives permission
to use 480 funds to promote the Fulbright Program. Originally, the
Fulbright Program was financed by money derived from the sale of
post-war surplus property. Now seemingly we have a new Public Law
484, which converts funds known as 480 Funds, which I gather grow
from disposal of agricultural surpluses, to the purposes of the ori-
ginal Fulbrlght Act. I would like to have a quick memo explaining
what Is happening in this legislative area, and I'm sending a copy
of this to Newt Minow so that he may give this to me.
Mr. Karnis says that three years ago, under then existing legts-
la ion $700,000 was allocated for exchanges by a "country team".
He says the Ambassador really made this allocation. And this came
out of the total 480 Funds for Chile.
This $700,000 gave Chile an exchange program "second only to
Brazil". The program includes several forms of exchanges, and this
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Memo #53
must apply apply in many countries, and I have not understood the breadth
and scope of the exchange program since I was sponsoring it 15 years
or so ago in the State Department.
1. First there is the USOM training program, and this sends
many, many people to the United States.
2. Secondly there is the military training program, and of
course this sends many people, under the auspices of the Defense
Department.
3. Thirdly, there is na 402. (This seems to be the State
Department Program of Exchanges - and Mr. Karnis says $198,000 is
allocated this year to this program.)
4. Then there is the great program of private exchanges, and
of course Mr. Karnis is asked to play a key role on many of these,
principally, I gather, the clearance of students from the standpoint
of their quality - and their passports
5. Fifth, and finally of course, there is the Fulbright Law
584, and under this students move in quantity both ways.
(I think I should have a quick memorandum describing these
five different forms of student exchanges and roughly how
they work.)
Mr. Karnis says that he's responsible for processing the last
three. This year he has administered a program of about $500,000
(pl 402) under 480 funds
Under the three different programs for which he's responsible,
he has a total of 500 exchanges, both ways, including professors
lecturers and technicians. His fear is that tunds under 584 will be
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3
depleted, greatly reduced from the $700,000 spread over three years -
to only $300,000 at the very top, spread over three years. (He says
that a new agrecent is now being negotiated for only $3,000,000 and
he thinks he will be lucky to get ten per cent of this $3,000,000 -
over three years.)
Mr. Karnis feels that the exchange program is flour most vital
long-term program applied to building our relations with Latin
America". He's not alone in thinking this.
I asked him about the program for teaching English. He says
that one reason that Chile has such a big program is that English Is
better known and more highly regarded here than in any other South
American country.
irfAu& O'k r 4- h a 4-
n=
ft I
years of English is required for
every high school graduate in Chile. He hastily conceded that English
was not well taught.
He told me of the 13 "Bi-National Cultural Centers" sponsored
by the USIA, These have 7,000 students studying English. They have
eight U.'S, citizens ass gned to them as "USIA grantees". They
recruIt many Americans locally to help them teach English.
The teaching of English largely produces the revenue to support
these centers. However, the USIA has a budget here of about $125,000
and roughly 20 per cent or $25,000 of this budget is allocated to
these 13 centers. (About $2,000 a year per centev roal,theaverag )
Although the teaching of English produces the revenue, Mr
K.arnis
attaches high importance to the cultural events - the lectures the
discussion of folk lore the social events such as camera clubs,
stamp collecting clubs, mountain hiking clubs, et cetera - the movies
et cetera
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In response to my question, he told me that the British have
five such centers here in Chile; the French have three; the Germans
have three* the Italians have two; and Red China and the Soviets
each have one.
For the most part and on the average, Mr. Karnis thinks ours
are better, at least in their appeal to youth. He concedes that the
French and others may appeal equally or even more to older people.
Mr. Karnis agreed that Britannica Films belong in the film
catalogue. He says that the films in these centers are "generally
informative". He wants more than this from them.
And he told me that a former ambassador killed off the independ-
ent library under the USIA and consolidated all American libraries
in Santiago into the BI-National Center. I visited the library.
Behind the desk of the librarian with a 1937 set of the Br tannica,
very dirty and well thumbed. It occupi-
itself.
Mr. Karnis said that 75 to 80 per cent of Chileans are literate
but that the literacy rate is declining. Chile has prided itself on
ANN.
place of honor all by
being in the vanguard in the I i ht against illiteracy - bu
pow .18
per cent of urban people are illiterate and 22 per cent of
Indeed there are no schools to attend for many children. The popula-
tion is go ng up 180,000 a year, schools cannot be built or teachers
trained to keep up with this population increase.
Many schools of course are running in shifts with part time
teachers or underpaid teachers
Karnis In response to my question said that he agreed with
nn tt USIA officer in Quito on the great lack of textbooks
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Memo #53
and suitable English teaching materials even though Chile is much
more advanced than Ecuador.
I'm attaching Mr. Karnis' card. also attaching a little
folder which he gave me.
The little man at the right in the cartoon
Is the "John Doe" of Chile. m also attaching several folders given
me by the manager of the Cultural Relations Institute in Cuzco
Mr. Bernard.
A whale of a Job needs to be done to tie together the informa-
tion I am sending through. For example, these pamphlets on the
Cultural Relations Ins I ute in Cuzco. Someone glance through them
to see if an interesting angle can be developed on them applied to
the article for the Yearbook. Please note the personal inscriptions!
Dictated in Peru
Arh
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CHILE
Cat. #1687
Memo #52
3/16/60
CALL UPON GOVERNOR STEVENSON IN HIS HOTEL SUITE BY
THE OPPOSITION LEADERS IN THE CHILEAN CONGRESS
This was the last morning in Santiago, as we were leaving for
the plane, and I did not get the names of any of these political
leaders. m sending a copy of this memorandum to Mr. McCausland
hoping he will comment on it, because I'm sure there are inaccuracies
due to my inability to hear all of the translation and hoping that
he may perhaps fill in any missing material and give me some of the
names.
As I entered the Governor's suite, a good looking younger man
of about 40 with horn-rimmed glasses was speaking passionately along
the line that the present administration "approves the existing order"
He said, "We who are here with you want change; this has happened
in France during the French revolution; it happened in the United
States in the Civil War; we in Chile are held back by anachronistic
institutions. The lack of food here in Chile is causing inflation,
yet there is fertile land which is not being used".
The speaker went on with fervor, "First we need agrarian reform.
Secondly, we need capital. In our exports of copper and of nitrate
re shipping our capta1 abroad. Six hundred m llion dollars of
such capital has gone abroad in ten years, yet according to your own
Department of State the total U.S. capital investment in these enter-
prises is only six hundred million dollars. These firms should con-
tribute more to the Chilean economy. Thirdly, we want to correct the
imbalance of wealth. Our rich Chileans don't save money as rich
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people do in the United States; they spend it. The Governor agreed
that he wanted the rich people of Chile to save and to invest in
Chile! We must have social reform to Incorporate the income of our
rich people into our economy.
"Fourthly, we need foreign capital, such as for the development
of our oil production. The United States and the Export-Import Bank
won't loan us money for oil exploitation. Thus they push us Into
other hands. We understand that you in the United States have an
anti-monopoly bill originally created by the opposition of your
government to the oil trust, the Standard Oil Company. Why is oil
as a monopoly in private hands bad for the United States - but good
for Chile? You should oppose a private oil monopoly here, and should
help us develop our own odl industry,
"Fifthly, United States policy should not be identified with
the privileged enterprises
_4b 4-
%1 .L Li L
e kind which operate here under
American ownership and direction''.
(Later on I asked this speaker to document for me the special
privileges which he charges are enjoyed by the American copper companies
in Chile. I wasn't able to understand what these were. He is going
to write me and expound. He's going to write me in New York, please
have the material translated and please acknowledge.)
* * * * *
Another speaker wanted us to understand that Chile is not totally
undeveloped that it is ahead of many other Latin American countries -
that the Inflation has held back capital development in Chile and
that costa have been high In certain fields such as oil He said that
the.. hIA. ecv
ould not proper
developed by priva
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Memo #52
capitalism, on the US. model - or by state capitalism like the
U.S.S.R. He wants the United States to process -W per cent of its
copper here.
The Governor asked about the wages paid by the copper companies
in Chile, whether these were not a contribution to the Chilean economy.
We were told that 65 per cent of the dividends of the copper companies
stay in Chile. (A lot of the figures about copper are not clear to
me, as illustrated by another memo in which I ask for clarification.)
The Governor asked just what the special privileges of the copper
companies were. These were never spilled out so I could understand
them.
The Governor suggested that some of the conversation seemed to
attack private capital from abroad on the one hand, and to ask for
more of it on the other. The Governor pointed out that private
capital will naturally go to those countries where there is an oppor-
tunity for profit.
He warned these political leaders that there
wasnct enough government capital available to do the full job for
Chile; that they would make a great mistake if they slam the door on
private capital; that they needed private capital as well as govern
ment capital. He asked why the Chileans did not work out some scheme
on oil like the Argentinians".
The Governor patiently explained that the World Bank funds were
limited. He suggested that perhaps one reason the World and Export-
Import Banks didn't want to invest in the Chilean government's oil
company was that private capital was available for oil exploitation.
I mentioned the risk involved in oil exploration and development but
the Governor
he didu %,h..1..s was the key point.
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Another speaker said that the discussion illustrated how hard
it was for the United States to understand Chile and vice versa.
He said that the traditional structure of Chile was "founded on
private property and this is a paradox when 70 or 80 per cent of all
the people of Chile have no private property".
One of the speakers warned that if there was no economic develop-
ment for his country - for Chile - then the whole "western system
runs the risk of disintegration". He said that 'the dynamics of
western society demand Chile's development - and the incorporation of
all underdeveloped countries into a general world system". The
speaker contended that the private capital system, giving rewards to
investors distributed these rewards at "different levels" (I suppose
this means too much to the rich) - and that for this reason the
capital must be provided "at the public level". The speaker said
that this was the way to "increase world commerce and mutual exchange".
The Governor said that he did not quarrel with many of the state-
ments made, but that he felt the last speaker was wrong when he
claimed that private capital necessarily "protects the old levels".
He said that the United States had distributed capital, and eliminated
great gaps between rich and poor, through taxes - high corporation
and high individual taxes. The Governor's implication was clear that
many of the economic problems under discussion were problems that
only the Chileans themselves could fix. The Governor said flatly,
It' you permit oi
rences
tdo con J.nue,
this is your fault and not ours".
Another speaker said that he opposed an economic system which
the I a power Qf the labor masses in order to fight
ii vs.^.0*
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inflation, He emphasized that if the buying power and participation
In the national income of the masses Is not increased - then produc-
tion can not increase. (This was clear contradiction of Alessandri's
present policy to hold wages down.)
* * * * * *
Still another speaker said that the problems of the "different
levels here In Chile," are not merely those of Chile alone. He
wanted real time to discuss the matter.
* * * * *
A congressman from one of the agricultural areas asked why the
United States didn't help agriculture. He said that the steel mill
gets the big loan, but contributes only two per cent to the economy -
while agriculture gets no loan and contributes 37 per cent of the
total Chilean productivity. He said the World Bank had been studying
the problem of agriculture for ten years but doing nothing about it.
The speaker regrets that Governor Stevenson and President Eisenhower
have said that they approve the economic policies of the International
Fund.
The Governor replied that he had said only that he approved the
fight on inflation,
* * * * * *
Another speaker insisted that the Alessandri Administration's
fight against inflation was "based on classical principles which make
the rich richer". (The Governor laughingly referred to the "trickle
down" theory which is discussed so widely in the United States.) The
speaker further warned that present United States policy will inevit-
ably become "very unpopular". . He attempted to pin responsibility on
0
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-6-
the United States for holding down wages in order to combat inflation.
He said that the policy of the International Fund "will create anti-
American feeling". When the Governor suggested that perhaps the
United States wasn't wholly responsible for the policies of this
Fund, the speaker indicated that he thought that the policies were
indeed made in the State Department. He said, 'The Fund Is inter-
national, its power is fully influenced by the Department of State."
(This was the phrase of the translator.)
Another speaker volunteered that the Soviet Union is becoming
interested in South America and is offering loans.
The Governor pointed out that the basic economic argument in
Chile seems to be very much the same as that in the United States -
between those who believe that inflation can be controlled through
fiscal policies, strict and severe ones, and those who feel that it
can best be met by a vigorous policy of economic growth, The Governor
said he strongly favored economic growth but that he felt that Chile
had reached a point where drastic methods were needed to curb infla-
tion. He again warned the group against arguments and policies that
would drive out private capital. He said that he hoped that credit
and capital and lending agencies would develop in Chile for the
benefit of prIvate entrepreneurs. He further said he hoped that the
Chilean economy would develop in such a way as to get rid of the
political feeling about exporting capital".
I think the principal impression I had from this meeting was
the strength and passion of the proponents of the various ideas
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which were were a mixture of sound and valid criticism of Chilean
policies and U.S, policies also, mixed with doctrinaire political
dogmas, misinformation - and emotional fervor.
mil
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CHILE Ca
CHAT WITH DON EDUARDO FIGUEROA
P ESIDENT OF BANCO CENTRAL OF CHILE
.01;r7t
3/11/60
Mr. Figueroa sat next to me at the luncheon given by the Foreign
Minister. He is a small handsome bachelor in his middle forties. He
spent five years in the United States, studied at MIT and actually
worked in the steel plants in Pittsburgh and Chicago. Before becom-
ing president of the Central Bank he was in charge of the new steel
mill which has recently been erected in Chile, financed by the Export-
Import Bank.
The financing cost of this mill was $140,000,000. Eighty million
dollars of this came from the Export-Import Bank. Twenty m Ilion
dollars has already been paid back and the balance is being paid back
on terms extending from seven to 15 years. The other $60,000,000 was
put up privately and the mill is privately owned by Chileans.
The present production is about 450,000 ingots. Seventy-five
percent is used domestically, and 25 percent is exported. mr. Figueroa
says that the base price on the "hot steel" now iS as cheap as in
Gary, but the total cost is 25 to 30 percent higher because production
has not yet been achieved for sufficient spread of overhead and finan-
cial costs. With d ub.s.
e.preseht production, he tells me, costc,
will equal those in the United States.
Seventy-five percent of present production is being used domes-
tically and 25 percent is exported. The latter must be sold at under
cost of production. (1 remember the old custom of our own steel comm
panies - selling steel in Europe at prices much lower than in the
States')
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Memo #70
Figueroa stresses the fact that the eighty million dollars
borrowed from th,.. ExportImport Bank was all spent in the United
States divided among a large number of suppliers, and thus created
much business in the United States* He says that another $80,000,000
has been spent likewise* He told me of the 135 American families who
during the mill's construction were living in Concepolon where it was
built. He said these families did "very great good to achieving
unde standing of Americans".
Thirty-five young Chileans were sent for training to the United
States and these men are now the departmental superintendents In the
steel mill. Virtually all of them returned to take these jobs.
chatted with him about our visit to the University of the Andes and
he likes the Bogota phrase, "The greasy handed engineers". He agrees
this is an important aspect of what young men from Latin America
learn in the United States - respect for work and how to work with
th Ire hands.
Mr. Figueroa says that steel is the best example of U.S. cooper
ation in Chile's industrialization, but copper fabrication is also an
example, copper of course is Chile's number one exports Nitrates
are number two, and steel is now number three. Copper contributes
6o percent of the total exports
Mr. Figueroa much prefers the Export.Import Bank to the World
Bank. The latter requires government guarantees. This opens up the
door for government ownership in many countries orat least for
government participations it not government control. He strongly
favors private rahlp and control, which is easier to achieve
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Memo #70
without government guarantees, and thus is easier under Export
Import Bank loans.
asked him about ECLA and he thinks that ECLA is helpful
In planning "along general lines" -� 'but of course ECLA has no
money!"
!nil
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Cat. #1639
Memo #7
Bogota, Colombia
February 23, 1960
Meeting with a group of 15 or 20 Labor Union leaders, in
Governor Stevenson's suite, Present, in addition to the Union
Leaders, were Governor Stevenson, Senator Benton, and Robert A.
Hurwitch, Labor Attache of the United States Embassy, who
acted as Interpreter.
There are two labor union confederations In Colombia. One
Is the CTC, whose president is Mr. Silva. The other Is the
UTC, whose president is Mr. Diaz. Both men were at the meet-
ing. The former is the older and was organized in the thirties.
President Lopez seems to have been one of the sponsors. It is
the liberal and traditional group. The latter Is closer to the
church. Perhaps It can be described as a Catholic-oriented
group. The two unions often cooperate, and often issue joint
statements, The Governor asked whether they had jurisdictional
troubles. The answer was, "There have been instances of prob-
lems but we have an agreement not to pirate." He asked whether
there was a chance for the two to merge together into one group.
The answer was that talks have been going on, that the time is
not ripe, but there is hope that it will come.
A recent census by the Minister of Labor reports that
there are 1,000 local unions in Colombia. We are told that the
UTC has the majority of members - or at least the majority of
the dues-paying members. Two-thirds of all labor is agricultur-
al. Here progress in agricultural unionization has been very
slight. In the service industries and among white collar groups
the going has been difficult, very slow - but there's been
more progress than among agricultural workers The greatest
progress is with industrial labor. The group estimated that 60
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Memo #7
percent of all industrial labor is now organized. (In the
textile and petroleum Industries, better than 85 per cent.) It
is not very difficult to organize the industrial workers when
they are together under one roof, even though management often
opposes organization, and seeks to destroy the unions after
they've been set up. In general, in the industrial field,
"Labor has imposed organization during the last ten years".
The Governor asked whether they were pushing at all times
in an effort to increase membership and the answer was an
unequivocal "yes".
The UTC and the CTC do not divide up the field by agreement.
Nor is one vertical and the other horizontal. Both compete for
unionts right across the board. The majority of the textile
workers is in one of the unions, but some textile workers are
in the other. A majority of petroleum workers is in the other
union, but there are some who are organized who are not.
Both the unions belong to ORIT (Organization Regional
Inter-Americano de Trabajo) and both belong to the ICFTU
(International Confederation of Free Trade Unions). The latter
is the world organization of free labor unions which was or-
ganized in opposition to the WFTU the communist-dominated world
organization. ORIT Is the Latin American subsidiary of the
ICFTU Mr. Hurwitch says that ORIT is almost wholly the single-
handed creation of
Romuaidi whom We 'let, at the brief
session at the Institute of International Education.
Mr. Silva president of the CTC and the senior labor
leader present (he was also much the older, perhaps a man
41.11d1{
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Memo #7
his earlyefiftles - in contract to the rest of the group, whose
average age was perhaps in the late thirties) - Mr. Silva says
that both unions regard themselves as defenders of the demo-
cratic way of life and that both stand for peace in the nation.
The Governor asked about the problem of communist in-
filtration. Mr. Silva replied first "as president of CTC". He
said that the communist threat is a general threat and is
world-wide and of course affects Colombia. He said that the
communists have indeed penetrated into the unions In Colombia.
Those who oppose the communist leaders and propagandists "are
called 'anti-democratic', in the pay of Yankee imperialism".
Mr. Silva thinks that the communist danger has lessened be-
cause their propaganda is "a worn-out record'. But he con-
cedes they have "succeeded somewhat" - mostly in his own union,
the CTC. They have captured some of the local unions. He
warns that the democratically disposed labor union leaders must
be alert.
Mr. Diaz, president of UTO, then spoke to the same
Question. He said that the communist campaign is strong and
very difficult to combat by the non-communist leaders. Work-
ing in the favor of the communists have been the economic
conditions in Colombia and the extreme poverty. The latter is
readily exploitable. Mr. Diaz said that reactionary factory
owners help the communists when they refuse to meet with th
democratic union leaders. Mr. Diaz said the UTC had had to
expel some unions which had fallen under communist domination.
4
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�13
(Although the rural workers are not more than five percent or-
ganized, and many unions In the rural areas are of construction
workers - these have been heavily infiltrated by communists,
where violence has been common.) Another group that has been
the object of communist infiltration has been the construction
workers union.
The Governor asked about communist Influence with
petroleum workers. A leader representing a petroleum union
replied that the world is indeed split into two camps. He
said that there is world-wide competition between the two
systems. In this struggle, as part of the communist campaign,
the Soviet labor union agents concentrate in those areas
where United States investments predominate. Such an area is
petroleum. The communist agents mask themselves as liberal
leaders; they infiltrate into the petroleum unions; they play
up the predatory goals of American capitalism. Although a
great majority of union leaders in the petroleum industry are
democratic leaders, the speaker reported that the petroleum
union depends for its legal counsel upon a most charming and
able attorney who was a former communist (Dr. Diego Montana
Cuellar) and who is still "very close" to communism. This
man has an influence "out of proportion".
asked about the present efforts of Cuba to exert
leadership in Latin American labor groups - notably the ef-
forts attributed to Fidel Castro 's brother Raul. Mr. Espinosa
who Mr. Hurwitch said had traveled widely, replied that there
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Memo #7
.5.
was no influence as yet in Colombia emanating from Cuba. But
he said that Cuban efforts can cause much trouble. He is just
back from Caracas. Mr. Espinosa said that in Caracas he saw
clearly "the Soviet hand behind Raul 's idea of a neutral South
American labor movement, a third force playing up nationalism".
Mr. Espinosa thinks this Cuban movement will "pose grave prob-
lems". Its aim, he says Is to destroy ORIT and ICFTU.
Mr. Silva spoke on the same question. He is just back
from an Executive Board meeting of ORIT at Miami The Cuban
leaders 'boldly" (because they are Indeed direct competi-
tors of ORIT) asked ORIT to send representatives to a proposed
meeting of the third force" which is shortly to be called In
Caracas (or Havana). Mr. Silva is hopeful that ORIT will suc-
cessfully counter the Cuban threat. Plans are being made to
combat the Cubans. Mr. Silva even went so far as to say that
he was "optimistic". However he urges upon Governor Stevenson
and upon Canadian and American labor leaders that they be-
come more aware of the Cuban and communist threat and that they
help publicize "the plight of their South American brothers".
In response to another question from me we were told
that the labor groups most friendly to Rau.i.
071 C25 4- lei dio"N 1:b
thi
,r1 h R
communist dominated efforts are those in Venezuela and
also parts of the Chilean and Bolivian labor movements. These
groups have all indicated an interest in going along wIth the
Cubans", said Mr. Silva.
The foregoing caused the Governor to ask for guidance
on what he should say as he goes through South America. I
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Memo #7
asked that Silva and Diaz prepare any suggested statements so
that we could take them along and study them. (They didn't!)
The Governor then asked for frank criticism of United
States policy. Mr. Diaz said that gifts from the U. S. were
not sought but that loans were needed. He didn't answer
the Governor's question directly, but told us about the
national apprenticeship service (NANS) which trains young
Colombians. Not long ago bids were asked for machinery which
Is required to help in the training. Mr. Diaz said that the
U. S. firms put in the highest bids and offered the worst terms.
The European bids were much better. Mr. Diaz is bothered by
the United States' failure to understand the Importance of this
enterprise, and by the failure on the part of American manu-
facturers. I attempted to point out that the manufacturers'
bids are not related to our government's policy.
Then of course, said Mr. Diaz, there is the problem of
the prices the U. S. pays for raw materials such as coffee.
The leader from the petroleum union
= Alfonso
Perdomo) who had spoken earlier suggested that Governor Stevenson
call upon American business men abroad to show much greater
understanding of the problems of Colombia and other workers.
He said that the United States has been hurt by the alliance
of our big business leaders with Latin American dictators
who oppress the workers. He spoke of "a McCarthy-esque
attitude" on the part of our business leaders overseas He
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.7.
said they have joined hands with the dictators to label efforts
at social progress "a socialist plot".
I asked whether American business wasn't improving In
its alertness to the Importance of these social problems.
The petroleum leaders said that American business had indeed
improved since May 10, when the Rojas dictatorship fell!
Mr. Diaz and others responded to the Governor's request
for criticism of U. S. policy by saying that Colombia and other
countries "want the good neighbor policy of FDR and the good
partnership policy of President Eisenhower" - but they hope
these policies can be implemented by acts and deeds - good
acts and deeds are needed as well as good words. The labor
union leaders look around and tee poverty everywhere, very
low standards of living. They don't expect to develop standards
to rival those of the United States But they do want their
living standards raised to the point where they can develop
"the feeling of dignity w
_4%.;r1
4,,
Governor Stevenson
- in a framework of liberty.
ha
glninaR17g4d"
The Governor asked whether this
was one way of asking for greater financial investments from
the United S-vates �
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Cat. #1641
Memo #9
INTERVIEW IN HIS OFFICE WITH DR. JARAMILLO,
GOVERNOR OF THE STATE OP ANTIOQUIA OF COLOMBIA
Governor Stevenson and Senator Benton
Antioquia Is a state in Colombia. Medellin Is its capi-
tal and is said to have a population of 500,000. Antioquia
itself has a population of two million of Colombia's 13 mil-
lion. Although Medellin Is the richest of Colombian cities,
and is the manufacturing city in contrst to Bogota, some-
thing like Milan In contrast to Rome, many of Antioquia s
people live in lowlands that are poor and unhealthy. I was
told by an investment banker, named Dr. Jose Gutierrez Gomez,
next to whom I sat at Governor Jaram llo's luncheon, that
practically all of Medellin's leading citizens are native
born of old families, and that practically "93 per cent of
the capital Invested In manufacturing comes from local sources."
Textiles are the big Industry and production efficiency is
claimed to equal any in the world except Japan.
Few people from the outside have come and settled here
in recent times. Call, which is much better located from the
standpoint of distribution of manufactured goods, is the
headquarters for the Container Corporation plants and for
many other American businesses.
There are about 200 Americans now living in Medellin.
Three yearthere were 600 dec1ine Is account
4PAIwykqkom
'kJ
by greater decentralization of American Industry in Colombia
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Memo #9
and by the fact that more Colombians are being employed to re-
place Americans. The city has grown rapidly, with over half
a million population, and the contrasts are sharp between the
wealthy families and the beautiful residential sections on
the one hand with great and widespread poverty and under-
nourishment an the other.
Governor Stevenson opened the Interview by asking Governor
Jaramillo what his principal problem was. Governor Jaramillo
is a good looking, attractive man of about 50 who has served
for a total of 12 years as Governor, now in his third period
of service. He lived for years as a political exile in the
United States and his English Is good. He serves at the
pleasure of the President He says that his problem Is money.
He used as his illustration the fact that 8,000 children In
Medellin can't go to school because there are no suitable
facilities. I later inquired about the number of children
of school age and was told that the total was 400000 - or else
that there were 40,000 in school - I don't recall which - but
the estimate seems very low in either case out of a popula-
tion of 500,000. Of course "school" refers only to the six
grades. Governor Jaramillo expla ned that the city of Medel
lin is supposed to build the schoolhouses; that state of Anti-
oquia Is supposed to pay, the teachers; and the federal govern-
PS
vavic
o"s
1111�%,..% iNo%grw.ft
J.41Ci
4.�
&VC:LA. 401401;k0 4OLL
Problem of revenue Is very tough for the states because "Con-
gress takes the new revenues for the federal government".
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Memo #9
In response to a question from Governor Stevenson the
Governor said there was a gasoline tax and that the federal
government helps build the roads between the various states.
He said that the federal corporation tax rate was 36 per cent.
There s also an Income tax which runs up to a maximum of 52
to 57 per cent. Of the 15 million citizens of Colombia, about
six million or 42 per cent are employable. Of these, only
200,000 pay any Income taxes, I gathered that everybody is
required to file a return and pay one peso (fifteen cents) -
but this should be checked, I gathered that this return may
be related to registration for voting. (Governor Jaramillo
said that political participation was stepping up sharply be
cause of the Inter-party fight.Lng the struggle of the groups
for control of the two old parties, and also because the vote
has recently been extended to women. The Governor laughingly
commented that the women are greatly interested.)
Governor Jaramillo said that his state collects revenue
from a tobacco tax and also enjoys a liquor monopoly.
In response to a question from Governor Stevenson j Gover-
nor Jaramillo said that the trade unions were spreading and
de
uhat most, industries were orgtznized, that,workers'
that first the workers tried to work
directly with the employers, but then
which however, is strictly voluntary.
matter of communist Infiltration.
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-4-
Governor Jaramillo does not feel that the commun sts are
particularly responsible for the disorders that have been BO
prevalent throughout Colombia since 1948. He said that in his
state, the bandits had been cleaned up and the disorders were
at an end, (I was later told that one reason Medellin has
grown so rapidly is that people came to the city to secure
police protection and to avoid the risk of death in the coun-
try.) The Governor showed us, on a map of Colombia, the state
in which "banditry" is still prevalent. I did not get the
name of this province but it Is the same area of Colombia
which is famous for Its archaeological remains. The Governor
said that the army was mopping up these disorders; that the
bandits were largely groups of only three, five or s x people;
that 95 per cent of the country was now at peace; that he ex-
pected complete quiet and peace by the end of the year. I
told him of the map we had seen in Washington with the various
shaded areas showing communist-dom nated areas of Colombia.
He says this map is now obsolete.
Newspaper men were present throughout the interview and
had the feeling that this made candor on the part of the
Governor impossible. Governor Steveri on and I later chatted
about the fact that we have difficulty securing Information
st here 1. Co1onhla.
In Washington we were actually told that they are better run
d better governed than the balance of the country, and that
this
fundamental reason why it is difficult to eradicate
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Memo #9
them. One of our Consuls here told us that the killings in
the country are still running at the rate of 25 to 50 a week.
Mr. Silvert's memorandum gave us an estimated total of 100,000
since 1948, and this was confirmed during our dinner last night
by a talented young textile executive named Fernando who is a
vice president of the company of which Burlington Mills owns
50 or (I believe) 60 per cent. Fernando emphasized that these
killings had occurred largely in the country districts, with
very few in Medellin. Mr. Fernando said that many city people
had been killed when they visited their country homes. (Of
course It is this kind of threat and peril which has pulled
the Conservative and Liberal Parties together and which helps
explain why all the top people we've met here in Medellin,
whether Conservative or Liberal, speak so enthusiastically
of President Lleras Comargo.)
A few other quick comments on my observations and conver-
sations here In Medellin.
The American community with whom we visited at a cocktail
party at the country club (very similar to a country club in
any mid-western city - John Fell Stevenson said a dance he
attended there was 'just like at home"), and for whom Governor
swe e
1111 1
reativ interested in Ameni
an laws which will give assistance to American industry In
tition overseas with the Italians French West Ger
as and others In many areas we were told we are
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Memo #9
being undersold. undersold. There was considerable feeling that insti-
tutions should be developed which would permit our industries
to extend more liberal and generous credits.
The Medellin business community here is very friendly
towards the United States and many of Its members (and their
sons) have been educated In the United States. The leading
citizens here, who are rich and come from powerful families,
are exceedingly attractive personally, very cordial and agree-
able, genuinely pleased and flattered by Governor Stevenson's
visit.
I think it's fair to say that the opinion Is widespread
that Colombia is entitled to every special break from the
standpoint of U.S. policy because it Is so friendly towards
the United States and because of Its long record as a
democracy and its present determination to maintain its demo-
cratic institutions. The church is powerful here and there
were Catholic dignitaries both at Lancaster's dinner (our
Consul) for us and at the Governor's luncheon.
I visited at some length with the young 46-year old
engineer executive a former Ambassador to Italy, who has re-
cently been made the d of the utilities here In Medellin.
All electricity, ga
one company which Is
telephone water are combined Into
nicipally owned. This is the common
pattern in Colombia. (This man told me there are about eight
foreign-owned or controlled utilities.) My Informant thinka-
t t forel capital is unwise in investing in Colombian util
and I agree. The attitude of President Lopez Mateoct
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In Mexico bears on this. The Mexican President won't permit
the electricity rates to go up, as a political matter, and
without higher rates it's impossible at present to raise new
capital. A similar problem is faced here. The rates will
have to go up to finance greatly needed expansion of Medellin
utilities. The shortages here are acute. I saw a queue
waiting for a bus that was two blocks long. The people at
the end of the line had A wait ahead of them of a minimum of
an hour. One of our Consuls told us of one of his servants
who needs a minor operatIon. She s on a waiting llst with
six months to go. These are small evidences of the urgent
need
- 4b1.%#.7% ir�zn, 1 gm
a. A
comparatively rich city.
Governor Stevenson and I walked through the market. The
stalls were small, unkempt and dirty. The market was not too
dissimilar from many of those in Asia. It contrasted sharply
with the clean, modern market building which we visited, three
or four blocks long, a great covered concrete building, in
Mexico Cit:y. The C
rNirriloN. 4 in TAW 4 +-I-t 71 CI
commented, "Look
t all
this food and yet people are hungry here in Medellin".
In a ceremony at City Hall Governor Stevenson and other
members of his party were given a parchment scroll declaring
the hospitality of the city and giving us the counterpart of
the freedom of the city. I shall attach my scroll. The
Governor was also given a golden xey. These scrolls are
Decree 39 of 1960 of the City Council, signed b 'El Alcalde
de d lin." (The Mayor.)
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Memo
.8_
Later I chatted with our Consul in Medellin Mr. Bruce
Lancaster, about Governor Jaramillo. The Consul praises him
highly. He says Jaramillo is from the "upper middle class"
and can earn a very good living professionally - thus is not
dependent on his job as Governor. He has turned down several
ambassadorships overseas because the President needs him as
Governor. The Consul thinks he's one of the two or three
most important Governors. But he says that even this enlight-
ened Governor, who admitted to Governor Stevenson and me that
the gap between the rich and the poor here in Medellin Is much
too great, is not remotely as enlightened, applied to current
social problems, as men In both political parties in the United
States. The Consul says there is no sense of social responsi-
bility here among the rich people, and the ruling classes as
we understand It in the States.
Mrs. Lancaster told us of the difficulties in raising
a thousand dollars for a children's hospital to separate the
infectious cases, such as the children with measles or mumps,
from other children in the same ward. This money had to be
raised by selling cakes through her Episcopal church, which
has 60 members, and in other such ways.
The Consul said, speaking of the attitude towards workers
in the factories, If a guy falls into a saw and cuts off his
arms he's fired, and if nthat'sU vyr ghti
He said further, "Begging is a good profession here". When I
asked him whether the town had a hundred millionaires he
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Memo #9
replied, 'At least one hundred". But they do not give their
money to hospitals or charities. A recent hospital being
built by the Manufacturers Association here was called off,
In mid-stream when half built, because the government passed
some compensation laws - and the feeling then was "Let the
government do it!" Wm not sure I've reported this story
exactly and It should be checked with Governor Stevenson who
was with me when we heard It as we returned from the country
club.)
mu
February 24, 1960
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Cat. #1642
Memo #10
February 29, 1960
DINNER BY PRESIDENT OF COLOMBIA AND OTHER
FAST OBSERVATIONS IN BOGOTA
The enormously popular and revered President Lleras
gave a dinner at the Presidential Palace at which he lives,
a stag dinner, at which I would guess there were perhaps 70 or
80 seated at one table in the big dining room. A great oil
painting of Bolivar dominated one wall - with enormous 18th
century tapestries of shepherds and shepherdesses In idyllic
romantic poses, on either side of the portrait. Along the other
wall ran a balcony and below the balcony was a courtyard In which
the band of the Armed Forces played. Before the dinner President
Lleras showed us through many rooms of the Palace, including the
romantic room that holds a tall portrait allegedly of Bolivar's
most famous mistress, Manuella or Manuellita as she Is called
in the diminutive.
WM.
After the dinner, and the key speeches, the guests again
adjourned to the great drawing room and we stood around for at
least an hour and a half. Coffee was served, and the waiters
carried trays around offering various cordial
Very few people
sit down. The problem Is that a visitor finds himself with one or
two men and does not know how to extricate himself. There Is no
system for moving people around or shaking them up. (I complained
to Governor Stevenson about this the next day and he says he has
a system. when he finds he has run out of conversation with a man
to whom he Is talk
he brings up a subject and then suggest
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-2-- Memo #10
"Can't we find someone who can tell us about this?" - using his
companion to Introduce him to someone else!)
I was very fortunate in the two companions who addressed
themselves to me for a full hour and a half. During the latter
part of the conversation, when it was after midnight we found
our way into the main room and there we found Governor Stevenson
in close and private conversation with President Lleras; when it
was close to half past twelve, I discovered that some of the guests
had excused themselves and left. I did the same, and the Governor's
son John Fell Stevenson, left with me; and ten or fifteen minutes
after we reached the hotel the Governor followed so I later wished
had stayed until the end of the party in order to say good-by
to the President.
My two companions were Dr. Samper, Rector of the University
of the Andes and I shall cover my discussion with him in another
memorandum I am writing about our vis t to the University - and
Dr. Rafael Parga Cortes, the Governor of Tolima Province, who
lived for many years in London and speaks excellent English - and
ntioned, as part of his background, that he had been Minister
of Education in Colombia in 1943.
Dr. Parga, who laughingly said that he had been 30 years
a politician is Governor of the Province w
le re tin A e% 0.1.)cs n c2
A"- c=p 'ft..� Tbo Nap. &do% 1r3
violence still exists here in Colombia. He estimates that on the
average there are ten to twenty assassinations in Tolima each week.
He is a man in his seventies and is seemingly greatly respected.
gather that he moves unmolested through his Province. I tried to
discover from him why it Is impossible to put an end to the violence
and he told me the oft repeated story of the men who have been
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Memo #10
-3-
assassinated; whose children have seen their parents murdered and
their sisters and mothers ravished, who become themselves vengeful
murderers and bandits at ages as early as 10 and 12; et cetera.
He says the problem now is to teach the guerrillas who later become
bandits - to teach them how to do useful work. Some of the younger
ones hold work in contempt and have spent their entire lives as
guerrillas and bandits - and the problem is to set for them a good
example - some of the older ones that they respect.
The Colombians are charming and most attractive people and
Dr. Parga Is an excellent illustration. It is very difficult to
understand the streak of cruelty and violence which runs so close to
the surface. Colombia has suffered some three civil wars and some
40 or 50 minor outbreaks between the two parties. The hate and
bitterness between them is traditional, even to the point where they
seldom seem to inter-marry. There are more liberals th�J.r conserva-
tives, but the conservatives have dominated In the rural areas and
the high percentage of the assassinations, at least in the earlier
days of the current violence were of liberals. The liberals dominate
in the poorer city areas notably in the areas populated by refugees
who came to the cities to escape the violence.
Dr. Parga does not answer directly my questions as to how
to put an end to the violence. He asked whether instead of disarm-
ing everybody, taking the guns and rifles away from all those who
have them It might- not be better to arm everyone. I conceded that
one hundred years ago on the frontier of the United States everyone
had a rifle or two in the house.
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Memo #10
The theory here is that you won't be able to take the arms
away from the bandits and guerrillas or others who intend to use them
egally - and all you'll do, in such a drive, is to disarm innocent
people who may need their arms with which to protect themselves. This
Is the kind of question by which the Colombian politician is troubled.
* * * * * 4E * * * *
There was an argument between Dr. Samper and Dr. Parga about
the rights of the students in relationship to the University and the
faculty. Dr. Samper is a former businessman, only one year as Rector.
The University of the Andes has pioneered in taking away from the
students the legal rights they enjoy at most South American universi-
ties described in part in my memo on the University of Mexico.
Dr. Samper and I agreed that we don't feel that students belong on
the University Council and we agreed they should not be given rights
over the curriculum or over the professors we don't
apprOVOM
f stu-
dents rights to force the professors to give easier classes and
examinations, or to pass students who have failed. Dr. Parga how-
ever, takes the side of the students. He defends their dominant role
in University life, saying simply, I'm a politician."
Much of the conversation is of course idle chit chat and the
hour and a nalf drags out very long ndced
even though I wa ingu-
larly fortunate in my companions. And the total of three hours on
my feet before and after dinner, in this high altitude - I must
admit I ound tiring
(Governor Stevenson doesn't seem to feel the high altitude
ake up
in the morning rather early, around 6 or 7 o'clock, and lie awake for
in Mex
o City or here
and I feel it only in two ways
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Memo #10
5 or 10 minutes, dozing, before I go to sleep again. I may do this
two or three times. I never wake up in the north until the alarm
goes off. Also, occasionally, I feel happy to lie down /or a half an
hour or an hour during the afternoon - the well known siesta which Is
practiced In Bogota as it is in these other cities in Latin America
when I can get a chance, which Is rarely. The liquor is said to be
much more biting in Its impact In these high altitudes but I have
not noticed it particularly even though all of us are drinking more
than usual because of the many functions)..
* * * * * * * * * *
The President before dinner, as we visited the rooms of the
Palace explained that Bolivar 's life was crowded with women and his
appetite for them seemed insatiable, but Manuella emerged as the
most famous She wrote a famous letter to her husband who was an
English physician. She said .&aa effect
dear husbanch you are an
impeccable husband and I respect you greatly. But even you should
1111J143(
le ve you; how could y
.111.
possi
IMP .40
SIN
any woman leaving you for Bolivar (See page 199 - 'The Four Seasons
f Manuella" for full text). The room in the Palace which is the
center of romantic attention is the one in which Bolivar jumped out
of a window about twelve feet above street level and ran to get the
help of his troops - while Manuella detained the conspirators who
were searching the Palace for him A famous aide-de-camp of his a
Britisher, named Colonel Ferguson was killed on the stairway by the
conspirators The grandfather of the President was one of the con-
spirators. Manuella distracted them and put them on false scents
thus giving time for Bolivar to escape. (The next day we visited a
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Memo #10
beaut
and gracious home which was built in 1800 by a rich tobacco
grower, who was In love with the wife of the Viceroy and used his
home to entertain the Viceroy and his lady: - but which was bought
In 1820 by the Colombian government and presented to Bolivar. (See
page 2441 "The Four Seasons of Manuella). Here Manuella lived and
we were taken by the director of the home, now a national museum,
through the beautiful garden walk, Into the small house which con-
tains a built-in pool of running cold water, used as a bath, and were
shown the many rooms crowded with mementos of Bolivar, with walls
hung with his portraits, cases full of his swords and other trophies,
and of course the famous bed of Bolivar and Manuella, about 3/4 size,
and with secret compartments In its legs
* * * * * * * * * *
Most certainly I shall want to describe one of these protocol
dinners in the Yearbook article. Perhaps this is a good one. The
hour is set for 8:30 or 90 In this case there was a receiving line
consisting of the President and his Cabinet of Ministers - and after
Governor Stevenson and I had gone through the line we were added to
it, and ',hen filed by the 70 or 80 guests. Following this was well
over an hour of standing around while uniformed waiters served whiskey
drinks. One waiter would offer a tray with the highball glasses, with
perhaps an ounce of whiskey, and another would then ask whether ice
and water was wanted - or soda. The guests would gather in groups
or by twos and threes In our case the President took us through some
of the rooms but dinner wasn't served until a good 30 or 40 minutes
we turned to the main room A colonel who was a military aide
was hovering nearby. I think we sat down to dinner about 10 o clock
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Memo #10
_7.
after being on our feet for an hour and a quarter (otherwise it would
have been an hour and a half - we arrived 16 minutes late!) At all
these affairs there are place cards. Three wines are served white,
red, and champagne. There's a printed menu and usually side courses.
At the end of this particular dinner the President rose and read a
6 or 8 minutes speech in Spanish. When Carleton Smith stood up and
offered to translate the President's address, the President said he
would do his own translation. He then read his manuscript in English.
Governor Stevenson had been making notes throughout the dinner and
throughout the speech - as he always does, and then spoke with ease,
with wit, with originality - and emotionally moving, with material
closely keyed to his audience. One remark I should use that he made
in his speech, 'As Lincoln said, a nation cannot live half slave and
half free; and Franklin D. Roosevelt said, "we cannot live half boom
and half bust and so I say that the Hemisphere cannot continue in
peace and prosperity while it is half rich and half poor."
an. al�
P.S.
am attaching the menu at the President's dinner
P.P.S. - Governor Stevenson in his speech reminded us that
Die
arh
a
Lleras had previously been President of
Colombia succeeding President Lopez when he was
only 29 years old.
ed in Bogota, Colombia
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Me #10
February 29 1960
the President's dinner which I have described In another
memorandum from Bogota I sat between the Foreign Minister and a
Mr. Araugo - another Minister in the President's Cabinet Mr. Araugo
is now acting as Minister of Labor. I told him Governor Stevenson
and I had met with the labor leaders and I asked him who the lawyer
was to whom the leader of the petroleum union referred as the man
who had influence "out of proportion". The Labor Minister had been
visiting with this lawyer that very afternoon. He's a famous man
here in Bogota. His name is Diego Montagna. Of course the Labor
Minister states flatly that he's a Communist. He has many clients
assigned from the Petroleum Worker's Union. He is a man of great
power
The Minister explained that although Colombia Is the
second largest producer of petroleum in South Americaits production
Is only 150,000 barrels a day- versus Venezuela's 3,000,000. Colombia
exports about half of its production.
He pointed out the obvious fact about the political aft 11
iations of the members of the two big labor unions � The UTC with
its Catholic church Influence has a majort y of members who are
conservative The CTC
Lopez
&live
and m
th it backgx
o FL -Idea
has a majority of its membership who are liberals. As Mr
told us the CTC has had the greatest problem with Communists
t Communists are in the CTC The petroleum workers are with-
In the CTC
Dictated in Bogota
arh
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Cat. #1650
Memo #18
March 1 1960
MEMORANDUM OF VISIT WITH STUDENTS OF THE
NATIONAL UNIVERSITY IN BOGOTA
When the Governor was receiving his honorary degree, he
was approached by a group of young men who sought a personal
interview. They assured him they were non-Communist students
of the University. Their movement is called the "Movimiento
de Accion Popular" (Popular Action Group), How important is
this group or how much publicity it has yet received, I. have
not been able to determine. The students say It contains
professors as well as students (and my other memoranda show
the much greater importance of students in the political
spectrum here In Latin America than we are accustomed to at
home).
The leader of the group which called upon us is a most
remarkable young man named Guillermo ("call me Bill') Mannettl.
He's been liying in the States because his father has been a
key member of the Pan.m.American Union in Washington. The father
is a leading intellectual, author of several books on sociologi
cal problems, and has just been named Director of an important
44er 44l TYMMi
UlMJs
Partswthe ,44v4 ion responsible for
liaison with UNESCO members.
The students made such an impression on the Governor that
he invited them to a quick hamburger lunch at the hntga so they
could do what they told the Governor they wanted to do take
us out to show us some of the very poor districts in Bogota,
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Memo
those occupied by the refugees. We asked "Bill" to bring
along half-a--dozen students, all of whom spoke English. He
showed up with ten or twelve and to the best of my own judg-
ment, he was the only one who spoke English easily. At any
rate he did all the talking. But most manifestly the other
students, whose ages the Governor asked, and who were 21 and
22, many of them, all looked up to him. As a matter of fact,
on short acquaintance, Bill Mannetti was one of the smartest
young men I have ever set eyes on. (He's the kind I'd like
for the Export Department of the Britannican He and most of
his friends are In the second year of law school.
The boys had a jeep and the Governor and I rode in
4 4 ?n,4
VV to
Bill and two of his friends to an area known as "Tunjuelito."
This is said to be one of the oldest sections of Bogota. It is
a new refugee section, settled in '47 when the refugees first
began to come into the city and rapidly filled up between 50
imnd 2.3 wnn - -- = VA.
AebesersAiseter
111%...%14.J.Laet,
ience in
74.11.ft
1.0%0
ther
4&.
ruLml areas was at _Lido p==m.
half a million refugees in Bogota,
from all parts of the country. In response to a question grow
ing out of our luncheon with Lauchlin Currie, who says most of
the refugees came
rt
the city in search of greater opportunities,
Bill. stated flatly that 450,000 of these refugees in Bogota were
there because of violence in their rural communities, and the.L
fear of assassination, and only 50,000 came to seek greater
econornc opportunity. A worker only earns five or six pesetas
a day, but if he has ten children as many have seven out of ten
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0 l8
children according to Bill are illegitimate) he needs ten
pesetas. $1.50) Because of this problem, Bill says there are
40,000 to 50,000 prostitutes In Bogota - "which is very high
for a city of a million-two-hundred-thousand!"
And of course, the workers take to beer. Indeed, Bill
says, 'The great problem of the worker Is beer - and it is beer
which makes these workers drunk and then criminal." Bill says
that Bogota has the largest beer cvnsumption per capita in the
world. (I had earlier met Mr. Samper, head of the big beer
company here, which does 63% of the total beer business - and
which, together with his other products, although beer Is the
biggest, did a $90,000,000 business last year.) Bill complained
that beer "made husbands desert their wives." His arguments
reminded me of those I heard in my teens in the U.S. (1 was 19
when prohibition took effect on July 1st, 1919!)
Bill Manngatti is a passionate liberal. He states that the
Right Wing_ conservatives were Nazis and FascIsts and staged
�������i .11���
parades during the war and wanted the Germans to win. He said
that In 1945 the Liberal Party was split two ways and this re-
sulted in the election of a conservative president, Mr. Oseino
Perez. Bill thinks that President Oseino Perez with whom
rnor St-.venson n hv hIs reception
Bill thinks
on the evening of our trip with the youngste
that President Oseino Perez was a "moderate." But Gomez and
other conservatives decided on violence as a technique of liqui
dating the liberal opposition. According to Bill there were
225,000 more liberal votes cast in 45 than conservative votes.
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Memo #18
Bill stated flatly that the conservative reactionaries decided
to assassinate 250,000 liberals. This was the beginning of the
era of violence.
Governor Stevenson asked about the clergy. Bill said that
10 per cent of the clergy tried to stop the violence and some
of them died as heroes in the effort. He spoke of two great
martyrs who symbolized this 10 per cent. This Is the ten per
cent that tried "to protect the people." By contrast, "five
per cent openly incited violence - even in their pulpits they
led the assassins on, and with pistols." Bill said this left
85 per cent who were "moderates,"
Bill told us that "the church Is improving; it is now much
more advanced, often much more advanced than some of our poli-
ticians. it is even occasionally in the vanguard of social
problems."
Bill proceeded with this castigation attacking the present
government. He accused it of a "lack of a sense of values or a
sense of social responsibility; it spends two-and-a-half million-
dollars to fix up Bolivar Square which could wait 100 years; and
it will not spend the one million which is needed for schools to
care for the 75,000 children of Bogota who are without schools,"
The Governor asked B111, Will the agreement between
the-
two parties last? Bill replied I approve of the agreement
except that the next executive must be a conservative as agreed
to by President Lleras and this next president can turn out to
be a Right Wing reactionary."
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Memo #18
(I don't recall whetherI've commented elsewhere on this
extraordinary agreement. The two big parties, the Conservatives
and the Liberals which have opposed each other so bitterly for
scores of years, Including 3 civil wars, and have been killing
each other for the past 10 or 12 years in the rural areas, have
agreed to alternate on the presidency - to divide exactly evenly
the members of the national legislature - to split evenly the
members of the cabinet, plus one general - to divide the gover-
nors of the provinces - the mayors, etc. This agreement grew
from the internal violence and continuing crisis. It is supposed
to last for 16 years.)
* * * *
As we reached the district ITunjuelito" Bill commented,
"There are practically no conservatives here; it was the liberals
who had to flee in fear of their lives and came here;
4-* les Awl.
L
A0111"�
�4.00164.01�V�
servatives didn't come here because they were not being perse-
cuted; the Communists are growing rapidly here, but not as rapidly
as in the rural areas."
Bill went on to tell us that the Communists are training
160000 men for the Communist army in the Department of Cunbina-
marca, the very department of the area in which we were visiting.
Bill said that the Communists "contracted many villages," con-
firming a report which had come to us earlier.
The area consisted of a vast mass of one-floor brIck struc-
tures, many of one room with an occasional one or two or three
room brick house which didn't look so bad. The streets were
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Memo #18
unpaved and Bill pointed out that they and all adjoining land
turned Into a morass of mud with the rain. The worst feature
was the open furrows alongside the streets which served as
sewers.
came to a large playground where youngsters of 7 or 8 to 11 or
12 were playing football. The Governor got out and posed for
photographs. There, was a school teacher in charge. At this
playground, Mr. Carde, who was following us in a car and who
is the Time Magazine correspondent here took me aside and
said, "This isn't poverty in contrast with Caracas where every-
thing is foul, wait 'till you see Lima. here this is good by
comparison." I must adm t that the children look healthy and
well fed and the Governor commented on it Later as we rode
back Into town, the Governor said he had seen infinitely worse
Bill said there were practically no schools though we
poverty In Karachi, Hong onts�-�and ma
areas of the world,
and that he even thought there were districts in Chicago which
could rival what we had seen. I commented that there weren't any
districts in Chicago where the sewers were in the street.
We left the students suddenly to get back into town. We
liked them and particularly young Bill Mannett
Indeed I think
they typify the hopeful young vital spirit of these exploding and
underdeveloped countries.
visit to te
The Governor later commented that the
drU %MI
'.4
informative as the conversation With
Dictated in Bogota
ang
Ar.lk *
studeL
as
ir%4�carembcati
% IL
the way out.
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Cat. #1649
Memo #17
March 1, 1960
VISIT TO THE UNIVERSITY OF THE ANDES IN BOGOTA
-by The Governor's Party
My knowledge of the University of the Andes began in
New York when at breakfast with Governor Stevenson and me
Adolf Berle urged us to visit the University. Today the
assistant rector, Dr. Ramon Zubiria told us that Mr. Berle
Is head of a Foundation in New York which raises money for
the University. Dr. Ramon Zubirla says that the University,
founded only eleven years ago by the man who is now rector of
the National University at Colombia, the University which gave
Governor Stevenson the honorary degree - Mr. Ramon says that
the University is the only completely private and non-politi-
cal and non-denominational university in all South Americas
My acquaintance with the University was fostered last
night when I visited at length with its rector, Dr. Jaime
Samper Ortega, after the President's dinner; Dr. Samper Is
an engineer* He has only been rector for a year. He refers
to himself as the administrator, and he manifestly looks to
Mr. Ramon for educational leadership. Mr. Ramon is a cripple
who walks with a cane, who gives a limp broken hand for a
handshake. He has his Ph.D. in romance languages from Johnz
Hopkins* His English is excellent. He talks with enthusiasm
and fire Between Dr. Samper and Dr. Ramon, I learned that
the University has a faculty of 131. 4 of these are full
time which In itself I understand, is remarkable among
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South American universities. Seventeen are Americans. Today
we visited the building dedicated to economics. The acting
head of the department is a Professor Hunter from Michigan
State, who has been here for eighteen months on a two year
loan. The department is not yet accepting graduate students.
But It has turned out many research projects and is supervising
students writing their theses for their baccalaureate. Within
two or three years, Professor Hunter hopes that the department
may be in a position to offer the Master's Degree. Research
projects cover studies into marketing of agricultural products,
plans for economic development, etc. I am sending along by
suitcase to Mr. Howe a most Important project of this depart-
ment a bibliography of economic work dealing with Colombia.
What makes this bibliography distinctive, as I understand it,
Is not only that
4+ 4 a
.16 167
he first such bibliography dealing
with such materials - but that the nature of each particular
reference is in a paragraph or two.
The University now has about 800 students; 250 or 300
of these are girls, and the number of women is going up all
the time
The tuition is 700 pesos per quarter $100) or 0,400
per year.
Dr
Samper said this is about half the tuition of
private secondary schools. The University has no dormi-
and this poses problems because only half of the stu
ve in Bogota. There are five American students
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Memo #17
Dr
Samper and Dr. Ramon regard the University of the
Andes as 'the private University for Colombia." As a private
university it can do things Impossible for the research insti-
tutes or the state or federal universities. Already this is
having an important effect. Dr. Ramon expects that the effect
will spread from Colombia across the continent.
One way in which the University is a private university
is that the students are not given any legal rights over its
operation. For example: there are no students on the University
Council. The rector tells them that every student has the full
right at all times to be heard, but that no student has the
right to direct the policy of the University. There have been
no student strikes with demands on the professors to change the
curriculum, to make it easier or to give passing marks to stu-
dents who are failing.
saysthere was one "strike,"
by 43 medical students who refused to go to classes for half
a day because they were going to be mixed with 20 other students
of similar level, when they transferred to the medical school;
they felt the other 20 did not have the sound and thorough prep-
aration which they had had; they refrained from going to classes
as a demand for higher standards for the 20 - rather than lower!)
Dr. Ramon says that South American students in most South
American universities are "passive" - "the professors lecture
at them. The students at the University of the Andes are urged
to be "active." We visited a few classes. The groups were small
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Memo
and the the students seemed active and participating. The most
interesting place we visited, to Governor Stevenson and me,
was the "laboratory" in which a big group of students were
studying English. Each one was in a little cubicle with ear
phones. We stood in the "control room" with a couple of teach
erso We put on the teachers' ear phones, which can be adjusted
to each or any individual student, and we heard the Instructor
In English, on tapes made by the University, repeat an English
phrase - "The furniture in the room is yellow" - or some other
such - and then the entire group would repeat the sentence
immediately afterward. When I asked how the group would know
what the sentence meant, I was told that the preparatory work
had been well done. I said to the Governor, "These students
are pronouncing more English in this one hour of Instruction
with constant pronunciation, a good 40% of the total time
period, than you and I had a chance to pronounce French In a
couple of months of instruction when we were boys." The teach-
er told u that this was a very common method of instruction
in the United States. She then showed us a sample filmstrip
provided by the USIS, which is also used in the teaching of
English. The tape that went along with this filmstrip gave
the
the oral
Fkia. isf, UP .0. WA. diS
-
ccompany the visual
on the screen. e teacher expressed deep gratitude to
IS would be interested to know how widely the USIS
in such distribution.) (Mitch Mitchell (EBF) has
reported on this.)
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Memo #17
Dr. Ramon put vividly the relationship between faculty
and students. He said, 'In Peru and other South American coun-
tries, the students have representation on the university council
and a decisive role on the curriculum. But not here. At other
Colombian universities the students have representation on the
board of trustees, but not here. We handle the students differ-
ently. We are in permanent dialogue with them.
Dr. Ramon went on to tell us that although the University
had no religious affiliation, it was on good terms with the church.
It has a chapel and a chaplain. Attendance Is voluntary.
Part of the program of great pride is the affiliation
with many American universities. This started with a tie-up with
the University of Illinois, worked out when George Stoddard was
president. After two or two-and a half years of engineering
training at the University of the Andes told the rector that
I liked the name of his University and that with a name like
this there should be no height to which the University could not
scale.) he brightest boys are selected for their next two years
in the United States Families are approached to see how much of
the cost they can carry. The balance is loaned to the student from
Fund which now totals 2-million pesos � The program was almost
eked says Dr. Ramon when the peso was devalued from something
like 2.7 per dollar to 8 per dollar now 6.75) But they have
11100=piverwoussi
date they claim that the students do remarkably well
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Memo
when they return to Colombia. (This program was originated by
President Lleras when he was president of the University of the
Andes and he referred to It in our interview with him.) He
thinks the atmosphere In the United States is 'best for boys."
He says they go to the United States "from a tense environment'
in Colombia. I gather that he deems that the Colombian environ-
ment is highly disciplined, strict and catholic and totalitarian.
He says, "our boys find tolerance In the United States." They
find freedom of discussion among political parties, freedom of
religion, and most importantly, they learn the dignity of work."
They find they are rooming in the States with boys who though
they may be Nelson Rockefe-Iler's sons," are working in cafeterias
or filling stations Thus these Colombian engineers who get their
preliminary work at the University of the Andes and then two years
In the United States come back to Colombia and aren't afraid of
work. Says Dr. Ramon, We are proud of the fact that they know
how to get grease on their hands; we like the United States
because it exposes our students to a newculture."
Dr. Ramon thinks that a year in the United States would
not be enough. Two years is necessary. He stresses the fact
that the students are receiving "a new balance between the human-
ities and science." (This new balance
trio stress
M.I.T. and some other U.S. engineering schools.)
did not get a full list of cooperating United Sta
universities, but among them today are Illinois Pittsburgh
Texas1 Arizona and Kansas
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did not deto
Memo 17
-7 -
A big part of the problem of the University of course
is its financing. Dr. Samper at dinner last night talked to me,
only half in jest, about his problem of persuading the rich peo-
ple of Colombia to give their money to philanthropy. He agreed
that the rich South Americans resemble the Europeans, who do not
traditionally give money to philanthropy, much more than they do
North Americans.
We were given a great big bunch of papers including some
of the studies in the Department of Economics. One is headed,
"Mercadeo Del Arrod En Bogota" and another Mercaedo Del Arrod
Res8�cecco En Bogota Ce." There are In Spanish and too heavy to
send along home by air mail. Another is headed, La Ensenanca,
De La Economeia En Colombia." This one s by Professor John M4
Hunter and James Anthony Short Ternent2
But am sending along some of the material we were given.
And urge
%InirmwimairimAr
letn.
Dr. Samper, The
Problems of Education in Colombia", and the article on the "Univer-
sity of the Andes." I want to review this material as write my
article for the Yearbook.
We liked the outdoor class e visited, an English class ,.
with a most attractive English woman as each And the tuden
ched along
t.
Whe,
ass was outdoors because
of shortage of facilities, or because the day was beautiful we
Our 'ext class was taught by a young man with
iecticutl The buildings of
it 1 I I NOP
his M.A. from the Un
course are cheap and poorly built; the location Is marvelou
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Memo
The building In which the laboratory reading room is located
is a former jail.
The enthusiasm of Dr. Samper and Dr. Ramon, and Pro-
fesso.,. Hildebrand, who showed us around, was contagious. We
left with the conviction that The University of the Andes is
an important pioneering venture, serving a present need and
with a most remarkable future.
Dictated in Bogota
Attachments
arh
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eh 13.960
Cat. #1651
Coming back from the trip with the students e Governor got or
for a broadcast at a big modern building which is controlled by the
remarkable Monseigneur whose broadcasts cover Colombia and penetrate
into some adjoining countries and who is known as "The good Monseig
neur"o A 50,000 kw station is being built for him His listening
audience Is estimated at 500 000. By radio he teaches the illiterate
how to read. He gets some one who knows how to read In each village
to act as the leader. The group works together under the guidance of
the broadcasts. He also puts on programs dealing with agriculture
how to take care of the land how to get better seeds, et cetera. He
started in a little parish church, then added a loud speaker for those
who want to listen outside. Not long ago he was chosen UN Man of the
0 Year". Mr. HurwItch thinks he is basically anticlerical He has
received a total or 28 mill
1:101^Ifterds -IssiNne
to
S
esos from the Colombian government
t h, and seems to have a system of "blackmail
over the government He even. has a weekly newspaper with 75,000 cir-
culation almost the circulation of Bogota's big daily, El Tiempo
This magazine deals largely with rural questions
Not long ago a group that opposes clerical influence went to
President Lleras and demanded that his subsidy be cut ott. The
liberals who
re members of my own party, come and see me when you have a pv0p08a.L
filch will promise to do the country as much good with the same amount
President refused. He told them
Come and see
me
at money".
The Monseigneur's e is Salcezo.. He seems to be a
of Father C tain with enormous power and on the right
Mr. Hurwitch called him anti clerical I do not know.
Dictated in Bogota
vers on
de.
arh
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Cat � #1652
Memo #20
March 1 1960
MEMORANDUM ON " BULLFIGHTING
We had the greatest good luck the two greatest bullfighters
In the world appeared in Bogota on our one Sunday Dominguin and his
brother-in law, Ordonez. I have already reported something about
this. But this afternoon Dominguin (Luis Miguel) came by to call on
Governor Stevenson and went with him to a reception. He is a very
handsome man of 34, alive and friend
with the sensitive feminine
face of a poet or, perhaps, a ballet dancer to whom toreros often
are compared. He was here in Bogota at age 14, training to be a b
ttme bullfighter. He was too young legally to fight in Spain. At
age 15, he first fought in Spain. Dominguin started "with small bulls"
at age 10. He said he was a very small under-sized boy at 14. Ordonez
married his sister and he has trained and developed Ordonez. In Spain
the bullfighting season is from March 1st to October 1st. In South
America1 it 18 from October 1st to March 1st. Only six countries in
South America permit bullfights - Mexico Guatemala, Panama, Venezuela
Colombia and Peru. He's been here countless times. The bullfighting
here Is only once a week, on Sunday. He says that he and other bull-
fighters and the banderilleros are supposed to keep in training
during the week but they don't do it very well. He offered Governor
Stevenson a
e te and he refused the cigarette, stating that he
had to keep in training. Dominguin says there i
a great deal to be
said for fighting every day, as he does in Spain during the season
with the exception of an occasional day going from one city to another
It Is easier to keep in training. The routine is good discipline.
In a soft voice he said that twenty years of bullfighting is enough
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Memo #20
2-
"but what can I do?" He expressed regret that he hadn't known that
John Fell Stevenson was along. He said he would have taken him out
and shown him some fighting "with some small cows"! Dominquin is
quietly but neatly dressed, with a very loose fitting collar to his
white shirt but elegant neckties. His hair is soft and silky and
noticeable, in a Byronic manner, but he does not wear the traditional
little tall of hair customarily worn by the toreros, which is a mark
of the torero. This he puts on for the ring. He says that people
etther greatly like bullfighting or greatly dislike it. He always
stops in the United States on his visits to Latin America, and will
be there in late March.
He suggested that there was not only a great deal of brains
required to be a bullfighter but this was true in any form of human
activity - even necessary for the shoemaker. When I asked him why he
came out into the ring for some of the fighters, after his own appear-
ance he said that he thought they were in trouble and was worried
about them
ore than he ever was about himself. He and Ordonez
married sisters and he trained Ordonez. With us was the editor and
publisher
the rival
asked him
together?
"Not when
of El Ttempo the big paper of Bogota. Dominguin said that
y between them was of course for the papers". The Governor
"Do you and Ordonez, who are such bitter rivals, travel
He glanced at the publisher of El Tiempo and replied
the newspapers are listening!" He said it with a smile
but he added "sometimes we are the victims of our own propaganda."
By his he meant that sometimes the big rivalry built up in the papers
causes one or another of them to take chances that are too great
Yesterday
at the Foreign Minister lunchsitting next to the Mayor
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Memo #20
-
of Bogota and with Dr. Gonzalez at my left, Secretary-General of the
President's Cabinet, both men agreed that Domingutn is indisputably*
the world's greatest bullfighter. But the crowds often prefer his
brother-in-law. (A bigger crowd surrounded Ordonez after the fight
and took part in lifting him to their shoulders and carrying him
around the ring).
There are many descriptions of the famous Dominguirnfar better
than any I can attempt. For myself, I liked his fighting a lot better
than that of Ordonez. Dominguin is true perfection. Watching him,
you can't imagine that his blood pressure has gone up a decimal.
Particularly spectacular is his trick when he stands against the wall
so there is no escape for him if the bulls swerve towards him and
then brings the bull past him, right next to him. In response to a
question from the Governor, he said he had been in the hospital
eleven times. This is most dangerous work even for the greatest.
And it Is easy to see why these men become idols of the women, as do
some of our motion picture actors. Mr. Hurwitch said that he once
saw Dom nguin standing leaning against a terrace smoking a cigarette,
with 20 or 25 young girls literally kneeling in a circle around him.
But a big part of the brains called for by Dominguln today
is in his role as impresario. He and his brothers are staging the
fights They are the Jack Kramers of the bullfight business. They
decide who the bullfighters will be. They underwrite the ring and
the expenses and take the profits. Thus last Sunday, the first three
bulls were Spanish bulls and these were the first Spanish bulls seen
in a ring in Bogota in 22 years.
The Spanish bulls are (said to be
great deal tougher and fiercer. Next Sunday, Ordonez and Dominguln
11 have their real "mano a mano", in which they will be the only
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Me
o 20
wo fighters and each will kill three bulls This is the big contest
for the "propaganda".
Dominguin retired as indisputably the world's
greatest. Then his brother-in-law did so well that people began to
say, including some distinguished critics, that he was greater than
Dominguin. Dominguin, eight years older, came out of retirement to
stage the great series of "mano a mano". (Soccer is now a much great-
er sport in Spain than bullfighting and bullfighting is said to be
supported largely by the tourists gather that the "mano a mano"
series is bringing great new life into the bull ring).
The financial awards to the bullfighters are enormous.
Dominguin and Ordonez were said to earn from $15,000 to $25,000 each
for their one fight last Sunday. They must be among the highest paid
people in the world, in terms of earned income rivaling or exceeding
the greatest salaries and income in TV and American show business.
But they net far more My informant said, 'They pay no taxes' Just
how this trick is pulled off, did not determine. Perhaps income
taxes in Spain are low, or even non-existent.
P.S. - The first thing Dominguin talked to me about was the fact that
he had followed my yacht of last summer, the 'Flying Clipper",
into Majorca just one day after we had left and he expressed
his dpep regret for missing us
P.P.S.- Both Dominguin and Careras the great Colombian bullfighter,
had dedicated their bulls to Governor Stevenson on the pre-
vious Sunday - when the Governor received the great ovation.
P.P.S.- Dominguin has two brothers in his business operation who take
the rap when things go wrong. His brothers are roughly com-
parable to Bing Crosby's or Walt Disney.
Dictated in Bogota Colombia
arh
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Cat. #1653
Memo #21
March 3, 1960
CALL UPON PRESIDENT ALBERTO L
SENATOR BENTON AND DR, SMITH
THE PRESIDENT OFFICE
Mai
AS CAMARGO BY GOVERNOR STEVENSON,
WITH AMBASSADOR MC INTOSH - AT
This is President Lleras' second term as president. He suc-Ip
ceeded President Lopez when he was only 29. He is a small scholarly
looking man with buck teeth, I commented later that In mannerisms
and appearance he resembled a professor of Greek at a small New
England college. He is a practicing Catholic and prominently on the
wail of his office is a great oil painting by Vasquez, one of the
best known Colonial painters. It is
1697 - for many years in Europe, but
in 1925 - by Spain, as I recall it -
President and Governor Stevenson are
a large Crucifixion, painted in
given back to Colombia - I think
(Dr. Smith will remember). The
acquainted; they were given hon
orary degrees together by Columbia University.
I'm attaching the
brief bipgraphy given us by the rimbassy! Most certainly President
Lleras has had one of the most remarkable political careers of our
time - and Is one of the most respected political
The Governor opened the interview by asking the President
about disarmament. The Governor asked why South America couldn't
take the lead for the world setting the world a great example on
disarmament. This question led to the problem of the border argument
between Peru and Ecuador. The President said the two countries were
about to agree and had agreed on the complete border except for 80
kilometers when suddenly a new river ^ppea-e
Peru wanted to fi
ish the negotiations by cleaning up the 80 kilometers
ww4L-4.11..1
to start all over again. The President said that Ecuador now has a
conservative president but the liberals are more numerous among the
e,44
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Me-no #21
-2-
voters and cannot move on the issue. During periods when Ecuador
can move and could come to an agreement, the internal sLtuation in
Peru has kept Peru from agreeing. Thus Ecuador buys jet planes "that
are out of the country when they take off!"
Ambassador McIntosh Interrupted to say that he did not like
our United States Mutual Security Act. He thinks that the Act should
deal only with hemisphere defense. I do not precisely remember his
point and my notes are not clear here - and this is a penalty for the
delay of three days between the meeting and the dictation.
The Governor asked about the problem of violence In the rural
areas. The President said that over 150,000 people have been killed
since 19480 He described how young people would find their families
killed and would take to the jungles, how they would start careers of
banditry at age 9 or 10, how they have killed and burned all their
livs and have known nothing else
t; Irvfh rriiri. er
41111.10,
�
,LX
annetti, told us of one young man who started at 10 had killed
every pollee o ricer he saw and by age 21 had killed close to 1100
different individual officers- this story sounds apocryphal but Bill
assured us that this young man is well known to the country).
The President said that perhaps only 200 key bandits were
identifiable by name, but there are tens of thousands of actual and
potential bandits This led him into a discussion of the problem of
land ownership and tenure and settlement. He explained how many had
been pushed out of their farms and properties; how they are now a ra d
to return to their homes. how they and their children cannot under-
stand how and why they have been robbed and desecrated; how funds
must be created for agricultural resettlement and development The
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President explained that restitution is very difficult indeed. The
new owners are entrenched. If force Is used, this can create new
killIngs. He told us of the tribunals which have been created. They
are supposed to work out deals, to come to terms on concrete payments,
to figure out whether restitution is wise or unwise, et cetera.
The President wants to plan great enterprises of resettlement
in the state owned lands. He thinks that large numbers of refugees
in the cities will want to move to such areas. He concedes that this
program is "very costly". He says it Is being postponed because of
the more urgent problems of education, et cetera. Here is where he
feels Colombia needs sources of international credit - for agrarian
reform. In Colombia, he said, such a program is possible without
taking lands from its owner or occupant. There is plenty of available
unsettled land owned by the government.
reNnAcy lar4 =
rvin, this
Colombia needs money for
reports that even -ithout
such improvements, there is already under way a movement towards the
land. Ambassador McIntosh asked whether a team of experts might come
here to develop the kind of plan the President advocates.
The President complained that bankers think that the best
creditors are manufacturers which can be quickly productive. But he
says nothing is more urgent than the land resettlement program. He
further pointed out that the Commun sts "are working hard in rural
sections".
The Governor asked whether most ,-.4%
the
%A.Lkoha would resettle
on land or "are they constitutional guerrillas The President
thinks they will resettle. He assured us further that many who are
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Memo #21
in the city for protection want to go back to the lani. (Lauchlin
Currie disagreed sharply on this).
The President thinks that the United States made a mistake in
our policy in Bolivia. He said we have invested more than $100 mil-
lion in Bolivia, "a very large sum". Because we didn't want to inter-
fere in local matters, we did not push land reform. He thinks Bolivia
should have concentrated on land reform.
The President says that the Communists have used the violence
and unsettled conditions in the rural areas - to spread communism.
They have told the displaced farmers, 'Your family was killed and
you lost your lands because you were liberals" (or conservatives, as
the case may be). You must fight the land owners who now have your
land and who have killed your relatives. We communists shall give
you land." Thus the President feels that land is the kg%17 to
fight against CQmmunsmn Pnio
�
The President said that Colombia is now en
ng a rate of
economic growth of 3.5%. Ambassador McIntosh interrupted to say that
this was "quite good' The President flatly contradicted him and
said, "No, not at all his Is not a good rat-4z for an underdeveloped
country".
The President pointed out that with Colombia's rapidly
growing population, within five years the country would be adding
year to its unemployed unless trade and economic
tepped up.
Id that many or the agricultural workers
unstable and hard to handle, the Ambassador
production would not be a healthy agricul
er can't more cocoa be raised? Colombia
150,000 peop
gr
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-5--
is now buying cocoa from Ecuador at the rate of $6 million a year.
As to cocoa, the President replied that Ecuador spends the $6 million
on Colombia textiles. This question was not pursued. Nor was the
question of greater oil production. The President pointed out that
last year Colombia went from an o 1 deficit of 15,000 tons to an
export surplus of 15,000 - n only one year.
The Governor stressed the need for greatly Improved education.
This problem is "tremendous", said the President, and it Isn't merely
a question of quantity, but also of quality. Colombia desperately
needs technical schools. It needs a great change In attitude and in
curriculum. The President commented that the feudal life of Colombia
Is "preserved In education and agriculture" He says that more than
45% of all Colombians are Illiterate. The problem of education grows
daily. The President says that 1,200,000 Colombians are not In school
who belong in school. And those who are In school are studying as
they did in the 19th century. There lsn t any instruction about agri-
culture and its development, he says or about technology.
The President told us there are 1,000 to 1,500 Colombian
students now in the United States. He feels that the impact on the
Colombian economy would be 'tremendous" if this number were greatly
stepped up. (Here is an example of the great importance of a scholar-
ship program which I touch upon in my memorandum on our visit to the
University of the Andes). Fifteen years ago, says the President
there were no economists In the Colombian government. Now there are
many who've been trained In the United States But most
4.-.
4.7111.07i
afford such training "are rich people". (The implications of this
last remark seem obvious)
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The President pointed out that 55% of the economy of Colombia
is agriculture, yet "our universities last year graduated only 50 or
60 agronomists". He said there was no school in Colombia for animal
husbandry. It was the President himself, when he was President of
the University of the Andes who worked out the scholarship program
under which 300 engineers have been trained at the University of
Illinois. He reports that all of these came back to excellent jobs
in Colombia. But he says that now only four or five a year are being
trained - because Colombia has no dollars. (1 do not know how to
reconcile this with the reports we've had from Dr. Ramon at the Uni-
versity of the Andes about the 2,000,000 pesos fund for scholarships
for engineers - perhaps President Lleras is low in his figures or
perhaps I got an exaggerated idea of the number of students financed
by this loan nd.
* * * * * * * *
Governor Steve
�
reported
on his long talk with Preside
Lleras at the President's dinner, a day after the foregoing interview
that Pres den
Tleras does not think that communism is a major threat
uuth America.
He thinks the Communists know this themselves,
that they realize they cannot take over. The President told the
Governor that the Communists operate in South America primarily to
embarrass and upset the United States and to discredit the United
States throughout the world by showing that the United States cannot
even get
The Pres
Castro w
regime w
long constructively and easily with its closest neighbors
ent does not fear communism even in Cuba. He thinks that
I be assass nated, and that any successor Cuban communist
I be short lived.
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The Governor epo ed that the President's comments were
exceedingly frank, and he is one of the most sophisticated and In-
formed political figures in the hemisphere about Vice-President
Nixon whom he feels has learned and developed enormously during his
term as vice-president - about Milton Eisenhower who has visited
Colombiatie times and whom he holds in affectionate regard but
many of his comments about these political leaders and other reflec-
tions on American policy are not such as to be entrusted to memoran-
dums
Dictated In Bogota
arh
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o#2
A.Lber o LLT4RAS Camargo
NT
Liberal; born in Bogota on July 3, 1906; left school at 17 to
become a journalist- worked as journalist in Argentina and Europe from
1926 to 1929- became editor-in-chief of El Tielvo in 1929- began polit-
ical career In 1930 when he was appointed Secretary of Liberal Party
(1930-33); served as Secretary General of the Presidency in 1934-35
and as Minister of Government from 1935-38 and 1943-45; Ambassador to
the United States 1943; Minister of Foreign Relations 1945; Designado
(roughly equivalent to Vice President) in 1945; upon resignation of
President Lopez in 1945, Lleras became President for the remainder of
Lopez's term (1945-46); Secretary General of Pan-American Union 1947-
54. President. of the University of the Andes 1955-56; elected -President
of Liberal Party in March 1956; from November 1956 to February 1957
served as a UN observer to investigate Hungarian situation; elected
President May 1958, inaugurated August 1958 for term ending in 1962*
in addition to duties with El Tiempo, was editor of now defunct El
Liberal, founder of the magazine Semana and director of El Espectador
during the time it was called El Independiente)
Speaks English And French. married to former Ba ta Puga
(daughter of an ex President of Chile); couple has four children.
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Cat. #1654
Memo #22
March 3, 1960
CALL UPON THE FOREIGN MINISTER OF COLOMBIA
BY GOVERNOR STEVENSON, AMBASSADOR MC INTOSH AND
SENATOR BENTON - FOREIGN MINISTER - DR, JULIO CESAR T AY AYALA,
The Foreign Minister is a handsome, articulate, witty man
of 46 a little on the fleshy side. He is of Lebanese descent.
He has four children. (He spoke of one of his children in the
American school., and of a daughter in the German school which he
says is "the biggest foreign school here.") He spoke in hesitant
English, but good English, and we liked him for it.
The Foreign Minister's office used to be the President's
and is very modern, in a modern building, with great glass walls.
A large Ivory or bone crucifix adorns the wall.
ILM
nist-er commented that President Eisenhower had re-
cently proclaimed a "good partnership policy." He suggested
that the importance of this policy isn't in its name, but will
come in its results. He said that he hoped for "a continuous
policy of helping each other." The principal problem he said,
is of course "the social problem." In Colombia, this centers
in the big differences between the rich on the one end and the
poor peasant on the other. The former live like most North
Americans he said, while the life of the latter is miSerable.
He spoke of the fact that the increase in population comes much
faster than the increase in productivity. Colombia needs more
schools, hospitals highways. To get these United States help
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Memo #22
-2-
is urgently needed. This problem he added is general through-
out the continent.
The Governor asked, "What are you doing to close the gap?"
First, said the Minister, comes the austerity program
General Rojas spent all the government's money. Imports have
h'ad to be reduced by 40%. A Planning Commission, directly de-
pendent on the President, has been set up. (I later met the
young man who is the head of this Commission and who is said to
be very brilliant. He told me that he was in Harvard in 1946
and later at Oxford. He's an economist.)
The Minister thinks the situation is improving but not
fast enough. He said that funds were urgently needed for high-
ways and for public power. The Ambassador commented that in
some countries many factories had to shut down for the lack of
electric power. This has not yet happened in Colombia, but
there is nonetheless a shortage of power.
The Minister wants the repeal of double taxation. We
were told that such a
legislation and that
bill calling for It. (The Ambassador explained that
change In U.S. policy requires special
ongres man Hale Boggs has Introduced a
very few
American corp inns Qualified as western hemisphere companies,
with tax rates at 38% instead of 52%.) He feels that the act
should be liberalized so that many more companies can qualify.
(This relates back to our conversation with the
Costa Rica when
melli
eI Jo Ur
toned these western hemIsphere companies.
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- 3--
thought the application of the 38% rate was far.more wide-
spread than the Ambassador says it is.)
The Foreign Minister says that to eliminate double taxa-
tion we need both U.S. Legislation and inter-American agreements.
The Foreign Minister said he was asked in Congress last
year why Colombia didn't open relations with the U.S.S.R. (And
the Governor said, "And why not?") The Minister reminded us
that in the outbreak of violence In 1948, when General Marshall
was attending the Conference here in Bogota, both General Marshall
and President ()spina attributed to communism the assassination of
the Liberal leader, Jarge Ellecer Gaitan. Colombia then broke
relations with the U.S.S.R. During the communist demonstration
at that time, Castro was held under arrest In Bogota for two days
for the distribution of handbills attacking the United States.
The Mints
e r
spoke w th appreciation of the fact that the
United States Is one of the few countries In the world with no
import taxes on coffee - nor taxes of any kind on coffee. The
Ambassador says that the coffee producing countries should launch
an aggressive campaign advocating the repeal of German taxes on
coffee, and other country's taxes In Germany, the taxes make
the price so high that coffee is largely the privilege of the
rich.
The Governor asked whether money could not be saved from
the Colombia budget by cutting back on the armed forces. The
41�emsrs
LOGOS.
replied that
15 of the budge
he total cost of the armed forces is only
He does not think that, in view of the present
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Memo #22
troubled conditions conditions existing in Colombia, this can be cut further.
He says that Colombia has the smallest percent of its budget de-
voted to the Army of any country in the hemisphere. Colombia has
only two ships, whereas Peru bought a cruiser! The Minister agrees
that the costs can be greatly cut in Peru and elsewhere, but not in
Colombia.
The Governor asked how long it will take to eliminate violence
n Colombia. The Minister said this was a very difficult question
to answer because the violence was attributable to so many causes
the political causes, the criminal element, et cetera. But he
said conditions were much better sInce Prsicie_t TA
rnR' inaugura-
tion. The Governor asked whether conditions were improving due to
better economic conditions - or to better policing. The Minister
said that the answer is largely psychological - "more confidence" -
but also that economic conditions are improving, - there has been
progress in sanitation, highways, schools, and in the resettling
of people on deserted farms. The budget last year was $100 mil-
lion for resettlement and rehabilitation. Although there's only.
$80 million this year in the Federal budget, there is really a
great deal more than this because much more work is being carried
forward under the budgets of the various ministers.
Governor Stevenson asked about communism. The Minister re-
plied that its future in Colombia depended on economic conditions.
WP Rairi +17.1=1.7
n1NT
ear�sys.ft4c14ii
�
4.e�ook.Ati
tamed a consulate here. We asked about Cuba. The Minister said
that Castro is "abnormal loco, crazy." The Minister said that
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although Castro still has strong support in Cuba, he has lost re-
spect throughout Latin America. He concedes he has some friends
among the workers and students, but "even in these groups he has
lost strength." The Minister doesn't like Castro 's sugar agreement
with the Soviets. This makes other countries ask, 'Why shouldn't
we too dea,1 with the Soviets?" The Minister said that "behind
Cuba is communism and the problem of communism is now much more
difficult in South America because of Cuba. The Minister fears
that Cuba can prove to be an important step for under-developed
countries toward communism.
The Governor asked how many Moscow trained communists were
in the country. The Minister replied that there were perhaps 5,000
communists in Bogota but only "300 experts." The party is legal
but communists cannot vote.
The Minister said that in all Colombia he thought perhaps
there were 100)000 communist= but most of these are not really
declared communists but merely followers of Communism. He com-
mented, 'The 100,000 are not lost to communism; many can be re
deemed." He told us of a town only one hour away from Bogota which
has been communist for 20 years.
Perhaps remembering the man we saw in Washington the Gover
nor asked about the town. Is it serious?" With a laugh, the
Minister gave the ambiguous reply, It's a problem when you try
to solve it The Minister told us ho
authorities, its own schools and taxes He said
republic of 15,000." He added the government policy is to con
tam n It to keep it from spreading.
his town has its own
It's a little
The head of this town
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man named Machan.
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Memo #22
ink I have the spelling r gut He was
trained for three years in Moscow.
Many take trips to Moscow for training, says the Minister.
He added with a laugh, "Communism is a main industry here." But
he thinks it is not growing. He thinks the policy of containment
is working. He thinks it has been "stabilized."
This word caused the Governor to ask, "What about the sta-
bility in Venezuela?" The Minister answered, 'The Venezuelan
government has difficulties." He explained that the communist
leaders in Venezuela had been "contained on an island" and only
yesterday the Foreign Minister of Venezuela told him, We are not
in any danger; the government is strong." The Minister said he
can understand why the Venezuelan Foreign Minister feels compel-
led to gIve h m such assurance
is the position( of the government." But,
by he must tell him that this
he Minister added,
"I think it true."
The Minister told us that President Betancourt of Venezuela
now has no cOmmunists in his government,"though formerly he was
friendly to communists,"
The Foreign Minister made a most favorable impression on
the Governor and me. I am attaching his brief biography given
US by the Embassy.
Dictated in Bogota
arh
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Cat. #1662
Memo #30
March 2, 1960
BRIEFING SESSION IN AMBASSADOR McINTOSHIS OFFICE
IN BOGOTA - FOR GOVERNOR STEVENSON,
SENATOR BENTON AND PARTY
In the Ambassador's office, Present were M
ells, coun-
selor of the Embassy, Mr. Hurwitch, Labor attache, a political
officer, and one or two others.
The Ambassador opened by saying that "the revolution" here
in Colombia in 19481 showed the "vicious element underneath." He
termed the present year, "our first real year of recovery," He
said that Colombia's great need was "more political maturity."
He told us how Colombia had had to take in its belt by re-
stricting its imports by a full 40%. He said that non-essentials
were now prohibited. An important result is that the bank now
has $200,000,000 In reserves.
The Ambassador spoke from his background of four or five
months here in Colombia, plus his service previously as Ambassa-
dor to Venezuela and Uruguay. For 25 years before he became Am-
bassador to Uruguay, he was general manager of a company called
"American Steel Export Company," or some such name, apparently
a successful export firm. He has traveled widely in South America
and throughout the world. I was surprised, however, that he did
not call more upon his staff, some of whom seemingly had long ex-
perience here. (Throughout our stay we have been in the hands of
1^ina trAmies�Ir nx7^1,-101-%
Mr. Rob esti=
on both the Governor and me.)
The Ambassador went on to tell us that "people are killed
daily." He said one of the great problems is Who will succeed
�
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Memo 30
President Lleras?" (We have yet to hear anything but praise for
the President.)
The Ambassador says that nearly 300,000 people have been
killed since 1948, and at minimum 250,000. (The President later
told us, "In excess of 150,000." Other Informants, including Mr.
Siavert in his memorandum, say "in excess of 100,000.")
These killings started politically, and are described fur-
ther in other memos I am dictating. The Ambassador says that the
army still reports, 'Ten liberals and twelve conservatives were
killed yesterday." He thinks it's significant that the Army makes
this breakdowns
Hundreds of thousands have been dispossessed from their
farms. The guerillas descended on the farms and killed the people
ruthlessly. Now the Army can't find the murderers. When they do
find them, and put them in jail, the jails turn out to be no good
and t ey escape. There
no capital puniGhment henrc4,
is one reason for the high state of excitement throughout Latin
America about Carol Chessman.) The government is now building a
penal colony on an island, but many skeptics think that the boats
will lie off shore and the prisoners may readily escape.
However, the banditry last year is only one-half the year
before. The trend is in the right direction. Many of the bandits
are young men and who have known no other life.
Although the principal culprit seems to have been the Co
servative Party, prominent throughout many of the rural areas, the
Ambassador says that each party,
e areas they have dominated
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-
confiscated land land from owners belonging to the other party. Many
of the farmers were frightened and sold their land for a fraction
of its value, or deserted it and left. Today there are many
squatters, and these are protected by law. If they stay on for
30 days or more, and it may be the owner of the land doesn't even
know they are there they acquire legal rights.
The Ambassador reports that a law has just been signed
giving claimants to these lands the right to appeal to newly es
tablished quasi judicial courts. These courts are supposed to
adjudicate, and to work out terms of payment and settlement.
The farm workers are 'Campasinos," the Ambassador said, and
are a very vicious violent class. They behead people ruthlessly
with their machetes.
When the conservatives started the violence In 1948, with
the Army which they controlled using force against the liberals;
the latter reacted by forming themselves Into guerilla bands.
This was the beginning. This too is described in other memos.
Originally there were two issues which split the two
parties: the clerical issue on which the conservatives generally
lined up with the church, and the question of centralized
ment, favored by the conservatives. The feeling has been
ter over the decades that as recently as ten years ago, a
a
govern-
so bit-
promi-
party 14%,...ficzr said "No iberal would shake hands
th a conservative." Ten years ago, says the Ambassador, the
members of the two parties seldom mixed socially.
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Memo
The Ambassador reports that the church did nothing to stop
the violence. Indeed, the priests often incited the violence.
(Colombia is 90% Catholic says the Ambassador, second only to
Spain as.a Catholic country.)
The Amoassador says that there has been practically no kill-
ing in the cities and this of course is one reason why terrified
rural people move to the cities.
When the dictator, General Rojas, came into power, a woman
wouldn't walk on the streets in the cities in safety. Thus there
was danger and rowdyism People would band together to walk down
the center of the street in the evening. Rojas established order
and, according to the Ambassador, if he had quit a year earlier,
he might be looked back upon with admiration and respect - instead
of being confined to his house under arrest, with all his property
Ifiscatcd, convIcted,by the courts Orthe country.
The Ambassador summarized the problems involved:
1) Eight or nine million of the 13,000,000 are In poverty
2) Violence still widespread.
The country is dependent for export on coffee - for
80% of its total export
4 Who is to succeed President Lleras?
5) Education 50% of the people are illiterate.
The Ambassador
realize its danger
sciousness,
us tha the ea
the wealthy eor%
herelass doesn
-k "social con
In Uruguay, where he served previously, he knew a
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o #30
man with $1,000,000 a year income, who pa Id no tax and who wouldn't
dream of buying government bonds; and then in El Salvador, he des-
cribed fifteen families of enormous wealth who could easily have
put up $1,000,000 a piece to strengthen and benefit the economy of
the country - in a period of crisis when 15 million was urgently
needed - but who wouldn't dream of it. In Venezuela he only knew
one wealthy philanthropist. Thus, basically, the attitude in
Colombia is the same as in other South American countries - but
perhaps somewhat better. The Governor commented 'The educated
rich don't realize their danger or responsibiltt
It
The per capita income in Colombia is $190. This Is above
Paraguay and Bolivia but it's the lowest of the big countries.
The Ambassador said it is about in the middle, of all the countries
of Latin America.
The Ambassador keeps returning to his theme, "On the sur-
face things now look good, but underneath there is potential dyna-
mite. It's quiet now, but at the heart of the problem is deep and
bitter poverty."
asked the Ambassador for written material from the files
of the Embassy dealing with this whole problem of violence. I was
astonished to discover that no report has been written, The Am-
bassador stated, however, that a "violence team is now writing a
report." He feels that the violence should be completely curbed
in 8 to 12 months. He doesn't explain why Is not curbed.
In discussing industry here, the Ambassador says that the
textile industry is very efficient and can compete with any In the
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-
world except Japan. However, the attitude of the corporation
managers is very different from ours. The head of the biggest
textile industry won't publish reports about the business even
though it is a publicly owned company with public shareholders.
Further, he is furious over the new antimonopoly bill. He is not
only president of the big textile combine, Colte ar, but he pri-
vately owns a separate company which acts as distributor for the
company. He is going to resign as president, he threatens, rather
than relinquish his distributorship. The Ambassador commented
that a vice-president of General Motors might quit his job to
become a Cadillac distributor, but that he would never expect to
hold his job and distribute Cadillacs at the same time.
Three of the four biggest companies in the country are in
textiles. The fourth is a brewery. (Later, Mr. Samner, Presi-
dent of the brewery, told me it would do a $90,0000000 business
this year and was the biggest bu81ne55 in Colomb a.) The third
industry after textiles and beer, is tobacco.
The Ambassador says that foreign capital is welcome but the
business leaders don't want it to compete with local industry.
They want it to go into new fields which need technical help. The
Ambassador says the government officials understand the nature of
the real problems of the country much more sensitively and deeply
than do the business leaders. One evidence is the anti-monopoly
legislation�irg to IP�reanY' p the control of manufacturing and
distribution by a few families. Control in one field has often
been by single families
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The
bassador,
President
nature of
government is definit...ly not left wing, said the Am
nor is it socialistic - but "moderately liberal."
Lleras, says the Ambassador, Is acutely aware of the
the problems facing the country. Recently his govern
ment proposed a tax on land which is not being fully utilized.
This proposal met with "terrific resistance by land owners." The
Ambassador thinks the President will fight the proposal through.
The young people, sayd the Ambassador, are more aware of the so-
cial and economic problems than are their parents. The situation
Is improving.
An unusual fact about the Colombian budget in contrast to
others in Latin America, is that 40% comes from corporate and in-
dividual incom
xes. Recently there has been a tax reform bill.
The Ambassador thinks there is very little corruption In the Co
ombian government, 'No more than In the United States."
The Ambassador says the President
tunity "about the social responsibility
Stevenson stressed this responsibility
ZIRUI
is talking at every oppor-
of the rich." (Governor
n the speech with which
he responded to his honorary degree. I am attaching this nter-
esttng speech, from which I want to quote in the Yearbook article.)
The Government is now trying to check into tax payments -
to make sure it's not being cheated. One technique Is to check
bank withdrawals at the end of the year - to make sure that people
-a
not "44-�-4-
ment
oa."...oft0%.0.to.ftker"t,
44.01,16.)11A41.0GC46.4.
111.11�o
gov
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-8-
he Ambassador continued, "The national concept of unity is
the big political fact in Colombia today." As perhaps I've ex-
plained elsewhere, the Constitution was amended a couple of years
back dividing all elected and appointive officers between the two
parties. Thus half the Cabinet members must be conservatives and
half liberals. (There are more liberals among the electorate but
fewer trained liberals for top jobs, and thus It Is now easier
for liberals to get such appointments; a couple of the liberal
Cabinet Ministers are in their early thirties.) The National
Assembly Is divided 50-50. So too, the governors and mayors. The
Presidency will alternate between the two parties every four years.
Thus the two parties are going equally to share the spoils of
office. They have called off competition. The grave peril of
the country and the widespread violence led them to this truce,
(The Ambassador thinks there may be as many as 400,000 more votes
in the Liberal Party, but the conservatives have the support of
the church and more landed and money support - thus helping to
create a balance of power.)
The conservatives are now split into three groups which are
fighting bitterly. Much of the bitterness centers around the
personalities who lead these three groups. The Lopez (?) group
is the biggest. The second has dual leadership but the most
im-
portant leader is the former president - Ospina elected president
in 1945 only because the Liberal Party had two candidates and the
liberal vote was split. A third faction disagrees with the six-
teen year truce and wants to go back into direct and immediate
competition with the Liberals.
�
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- 9--
The Liberal Party has a dissident wing arguing about social
problems. Thus the Liberal Party is spilt into two groups. This
wing is lead by Lopez, the son of the former president of the 30's.
The Lopez wing flirts with the left and with the Communists, says
the Ambassador.
asked the question whether it was possible to freeze such
a situation for sixteen years. The Ambassador ducked the ques-
tion: he replied that there is no problem right now because of
the personal prestige of the president.
Governor Stevenson asked about the armed services. The Am-
bassador estimates there are 35,000 In the army, but that the
army has little political power; 4,000 in the navy; 3,500 in the
air force; 25,000 In the national police. Although these figures
don't add up to 72,000, the Ambassador estimated that the total
Is 72,000, He flatly said that the jet plane story told us by
Senator Morse, which Senator Morse received from "The Good Mon-
signor" (described In another memorandum) is false.
The Ambassador explained that the two parties are not split
clearly according to class lines, but are vertical parties, much
like our own in the States. Although the conservatives are
stronger In the rural areas, and among the monied and landed
groups, and the liberals are stronger among the urban workers,
both parties contain rich and poor, worker and professional men.
Our meeting broke off suddenly for our call upon the For-
eign Mini ter
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-10
P.S. Later at lunch the Mayor of Bogota, next to whom I sat, Dr.
Juan Pablo Llinas� told me that one difference between the liber-
als and conservatives is that, "The liberals favor free education
without any religious influence.
Dictated In Bogota
arh
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�
RECEPTION COMM
TTEE FOR MR. ADLAI STEVENSON
prof. D Luis LOPEZ de Mesa
Dr. Belisario BETANCUR
Dr. Antonio ROCHA
Dr. Roberto GARCIA Pena
Dr � Jose GUT IERREZ Gomez
Dr. Ignacio COPETE Lizarralde
Dr. Hernan ECHAVARRIA
Dr. Jorge OSPINA Delgado
Eduardo ZUELTA Angel
Eduardo ZALAMEA Berda
pr. Guillermo GOMEZ Moncayo
Dr. Alfonso LOPEZ Michelsen
Dr. Guillermo HERRERA Carrizosa
T 'web
4.# a. �
Dr. Ramon de ZUBIRIA
Dr � Jaime POSADA
Grcigclrio OBREGON
Dr. Alfredo VASQUEZ
Bernardo 3. CAYCEDO
Leading Colombian Intellectual
Senator and Vice-President of the
Laureantsta wing of the Conserva-
tive Party
Member of the Foreign Affairs
Advisory Committee
Editor of 'El Tiempo"
Former Ambassador to.the United
States
Head of Banco 'de la Republica
Former Minister of Communications
Former Minister of Mines
Former Ambassador to the United
States
Newspaperman and Colombia's repre-
sentative to UNESCO
Editor of "El Siglo"
Son of former President Lopez and
leader of opposition Liberal Wing
Conservative Senator
Prominent business man
Vice Rector, University of the
Andes
Rector, University of the Americas
Secretary General of the Ospinista
wing of the Conservative Party and
member of the Foreign Affairs Ad-
visory Committee
President Linguistic Academy
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Cat. #1735
Memo #94
Dictated in Phoenix
Transcribed in New York
4/25/60
To Governor Stevenson
From: William Benton
You asked me - over the phone in Chicago - what conclusions
I'd reached about U.S. policy applied to Latin America.I've been
trying to find time ever since to jot them down.I've reached a good
many tentative
discussion and
ones. They're the kind to throw on the table for
review in an effort better to define our interests
and fix our objectives. Maybe you'd like it if I pretended to be
Secretary of State - and jotted down a few of them - if only to
stimulate your own thinking. I'll dictate rapidly and I hope you
won't hold me to everything I say. The suggestions of course fall
Into several categories.
I have not tried to weigh the individual cost or the total
costs. I realize well the limitations on the desirability of
ing in Latin America, and on our capacity to do so. However
-41110.
C the best Ideas aren't too costly - and some of th
7.4.� 1.0aJ 110
tive may prove very costly Indeed. All ideas must of course
weighed in relation to individual cost and total cost
invest
some
fe
In the Economic Area (not listed ifl order of importance)
1) First and foremost, I think Prebtsch is rt ht T think
we should help these countries with their planning. I liked your
line am one American who is not afraid of the word planning".
Thus I would try to help each country help itself. There are In-
numerable avenues open to us Further, would try to help the
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Memo
various countries get together with each other. For the past several
years, I've been serving on the so-called U.S. Committee for a United
Europe, Thin Committee has had the blessing of the State Department
and the Administration. I think we have need for a U.S. Committee
for a United Latin America. The charges against the U.S. - that
we've dragged our feet on the projected common market in Latin Amer-
ica - are quite correct. Our failure to help provide leadership has
deterred these countries from trying to coalesce. You'll recall that
the Foreign Minister of the Argentine told us that some of the seven
countries which recently signed the common market agreement - don't
know what it's all about. The U.S. should help them find out.
2) Further in the economic field, though the difficulties
are great and often seemingly insuperable, we must lend a more sym-
pathetic ear to the Latin American desire for commodity price stabil-
ization. We must help achieve understanding of the fact that we are
not ourselves in a position to guarantee such stabilization but that
we are eager to cooperate and provide leadership. Many Latins do not
now comprehend the almost insurmountable barriers on many commodities
which are items of international trade and on which the U.S. Itself
Is often only a fraction of the market
3) I of course am wholly opposed to
copper and think this should be repealed.
0111.t.00MAOIL.
=4�,
ax on Chilean
I oppose restrictive legis
lation against lead zinc or any other commodity. favor U.S. poli-
cies In all areas that will eliminate such trade barriers between the
United States and Latin America and as rapidly as possible. We must
think of these countries as a developing market for our goods and
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stress this domestically in contrast to the Idea they are merely a
neighborly opportunity "to do good"
4) To encourage more initiative by American private business
in Latin America, I think we should re-examine our tax laws.
willing to give our private companies a better break. We should also
examine the possibility of helping them finance their exports through
longer term credit policies. You know of the German and British
policies. You will remember our meeting with the American business
community in Medellin. And do you recall the complaint of the St
Regis representative in Sao Paulo? He accused our Department of
Commerce of being misinformed. When two vice presidents of his com-
pany in the United States, his superior officers, went to consult
with the Department of Commerce about Brazil - they were told to pull
out of the country!
5) We need to provide more credits. The activities of the
Ex-Im and World Banks should doubtless be stepped up. (The U.S. and
its policy is inextricably identified with the World Bank.) There
are lots of perfectly sound projects, which will pay out, and which
need financing. We should have started the Interamerican Development
Bank long ago, without waiting for the stoning of Nixon or a crisis
in the Near East. This bank
deally, should follow "soft policies.
think I put the problem in a nutshell when I said that it should
not be run by bankers It should be run by men like Paul Hoffman.
All the lending agencies need much closer cooperation so
they arent competing - and can better decide how to finance the
development of Latin America's natural resources Among other things
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they need need to cooperate on surveys such as those demanded by Finance
Minister Vargara of Chile (water resources!)
6) I think we should seek more dramatic projects. Perhaps
the attack on malaria was one; I don't know. The cure of hoof and
mouth disease is such a potential. Tom Taylor says the elimination
of this will in itself add 25 percent or 30 percent to the productiv-
ity of the cattle. Cleaning up the water - so that the tourists won't
be terrified - is a good one. Yes, Montezuma has had his revenge and
it's time to put an end to it. An attack on infant mortality should
be organized. In some districts of Brazil it's 50% or some such
incredible figure.
More dramatic and simple ideas are needed which everyone can
understand. Those I've given may not be the best but they will convey
the idea. They are more dramatA.c and will be more widely understood
than the steel mill we financed for the Argentine under Peron!)
This mill is owned by the Argentinian government. While we denied
the need for Latin American steel mills, we financed them in Chile
and the Argentine. I don't believe we were given much credit.
The policy of loans should be supplemented by more direct
grants - or perhaps matching grants. I want to get more information
on how law 480 works, on how it might work, on whether it should be
expanded or amended.
8)
land refo
%V�LLJ
land
Herter is quite right in his speech of this week about
m. He
wrench the statement
ef
belated but he's right - even though it took
of us. You wIll recall
as the single most critical problem In Latin
MM
M(3)
MM
M(3)
a�
not sure how U.S. policy may fit into this area. Of
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course credits in some countries would speed up land distribution.
This Herter indicated. And Beltran In Peru wanted great highways
over the Andes so that the Indians will move into the new land.
Highways and schools for the new lands will undoubtedly speed up
their opening.wondering how much some of these countries, such
as Peru and Chile (you will remember how very different President
Alessandri's interpretation of land reform was from the Interpreta-
tions we received from Mr. Santa Cruz and from our agricultural ex-
pert in the embassy) - I'm wondering whether the possibility of open-
ing up the government lands is causing some of the governments to
fail to face up to much needed legislation applied to lands now in
the big estates and already available for cultivation (You'll re
member our friend, Professor Giesecke and his prescription at Cuzco
9) What we can do to assist these countries on their tax
-������
is beyond me -
e sub 4
should be examined. Among
objections to the avoidances of taxes by the rich throughout
r Latin America IS the psych
crinpl kl hAnk t. Ti q
exchange of experts in government administration the work of
men like Herbert Emmerich through the UN - the training of better
economists for Latin American governments, as reported to us in
Colombia and elsewhere - all such steps should help towards the
urgently needed government and t
10) There's a whole package of further miscellaneous Ideas--
Improved agriculture the efforts to decentralize and cut down of
the slums, the cure of Inflation, greater incentives for savings he
return of foreign balances kept abroad by the rich he need for
better government financing (Beltran), the need for lower interest
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-6-.
rates, etc*, etc. The CIO AF of L should receive more encourage-
ment and help in their efforts to bolster the free labor unions.
In the Political Area
1) At the political level, I think you are right when
you suggest taking the OAS out of Washington. Perhaps Senator Aiken
is right on the Panama Canal.
2) We must do what we can "to consult" - so that we shall be
less exposed to the kind of charges leveled against us by Mr* Alfredo
Vitolo, the talented Minister of the Interior in the argentine. We
must foster the policy of cooperation identified with F.D.R.
3) We can appoint better Ambassadors. We need more men like
the remarkable Mr. Patterson in the Argentine whom you met only at
the briefing session. (I urge you to read my memo on my conversation
h4m.
We can bring our Ambassadors together into regional meetings
so that Ambassador Hill in discussing a meet
(1.124�M WAA
argued about and on which there was violent disagreement between
him and Ambassador Bonsai - won't be talking about a meeting more
than a year previously. There is a big chance greatly to improve
communication among our Embassies in these countries. Many of the
problems they face are common ones, and the experience of each is not
sufficiently transmitted to the others.
4) One of the biggest political areas of all is your favorite
subject of disarmament. You have this well in mind and I won't
elaborate on the Peru-Ecuador dispute etc. My memos are full of it
Might a disarmament conference help. Can we help Alessandri with his
�
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- 7-
publicity? Might a disarmament program be stimulated if it were
tied up with education. Might the money saved on armaments be
invested in education - with assistance from the U.S.? I agree
that this is merely a propaganda twist. But there isn't a country
that we visited which couldn't productively use its entire military
budget for the training of teachers, the building of schools, et
cetera. such a twist might put the so-called "military cliques" on
the defensive.
5) What was there in Roosevelt's "good neighbor policy" to
match the name itself, the Roosevelt smile and charm - and his visits
to Latin America? These countries suffer from a sense of mistreat-
ment and abuse. They feel they've been neglected and they have been.
Roosevelt flattered them, as your trip has done. They need to be
flattered - subtly if possible - but flattered nentheless President
Lleras' present visit is a wonderful example of how to flatter
his speech to the Congress, for example. More such ideas are
(We should encourage our universities to give honorary degrees
distinguished Latin Americans on a greater scale.)
6) At the psychological level, we need some kind of dramatic
act to show that we do not like dictators. This may be tough to
develop, because we must be careful to maintain our policy of non-
intervention. But if it were legally possible to kick Jimenez out
of the United States I suspect this one act would do us more good
than another hundred million dollars in capital for the Inter-American
Bank. At minimum can't we make it clear we don't like to have him
here in the U.S. Most certainly we should take a stand against
dictators through our representatives in OAS Indeed, It was
them -
ded.
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suggested to us that OAS should be used to protest and investigate
Castro 's alleged communism (and some of his acts of dictatorships
7) We should have more of a_program to take care of the _patri-
ots who have to go into exile when a dictatorship takes over. po you
remember the story told us by Foreign Minister Arcaya of Venezuela?
He sat for 60 days - wasn't it? in Panama trying to get a Visa into
the United States. Such a program would cost very little.
8) We should listen sympathetically when Betancourt's
daughter wants a tiny sum for her proposed sociological study in
Venezuela. You will recall she wanted to study the impact of the
American community on Venezuelans, and vice versa. Thereis no
philanthropic foundation in Venezuela to provide such money. Our
big foundations are very sensitive today about their public relations
and their standing with the Congress; a word from the President or
the Secretary of State and some of them would develop Latin American
programs on a bigger scale. They might even be effective in teaching
the rich Latin Almeribans to begin private giving to philanthropy.
(That law in the Argentine which compels everybody to leave four-
fifths of an estate to the children should be repealed)
The USIS exchanges of students and others, and our propaganda policy.
1) The USIS needs better leadership, bigger budgets and more
status Too much of its policy is geared to our own Congress - and
not enough to Latin America. Seemingly its Spanish and Portuguese
broadcasts were interrupted
or several years. This was an unhappy
mistake. They have recently been reinstated on a limited scale. They
should be greatly epped up and improved. You will recall our
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provocative visit with Mr. Grisolgo Larralde, leader of the People's
Radical Party, the leading opposition party in the Argentine. I'm
attaching a copy of this interview, to remind you, with a few para-
graphs marked. Mr. Larralde wants an organized service to the
Argentinian papers, to its labor leaders and others, about communism
and its activities; he wants the materials which he read during his
visit to the United States - he wants these translated and distributed
in the Argentine so that people will learn better that there are two
sides to communism. He Is right and this need applies everywhere in
Latin America.
2) The USIA should be re-integrated into the State Department
from which it never should have been separated. (Dulles was per-
sonally and wholly responsible for this blunder.) Its head should be
an Undersecretary of State. Aside from doing a much better job of
general short term propaganda, it can greatly step up the exchanges
of people and other long range programs.
3) Important for the long range is better teaching of Encr sh.
Mr. Bennett, our USIA representative in Quito, has ten different
EnglIsh courses from Great Britain and the United States, and not
one is sufficiently simple and elementary for use in the Ecuadorian
elementary schools. Last year he worked with the Minister of Educa-
tion in Quito to make the teaching of English compulsory - and now
he's embarrassed because he doesn't have the proper materials. They
have never been developed. This of course is ridiculous.
The head of our Exchange Program in Lima complains that the
brightest young men at the University of San Marco can't get Into our
colleges and universities, even when she can get scholarships for
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them, because because they can't pass the English examinations, Thus the
students come to the United States from the private schools and from
the rich homes, where they have had the English training. This is
unfortunate. The better teaching of English at the higher educa-
tional levels is of top Importance.
4) Cheap books are urgently needed, and particularly text-
books. The translation program should be very greatly accelerated.
Mr. Bennett complained that American textbooks in Ecuador cost $4.50
to $15. He has spent most of his life as a printer. He says they
could be printed in Mexico City or Buenos Aires - and sold in quanti-
ty at 60 cents. The book publishing industry, if given greater
leadership by the State Department or USIA, and if it were told that
this is a matter of high American policy, could contribute much to
working towards such objectives.
Similar opportunities are available in the field of motion
pictures where the UNESCO Convention, permitting importation of
educational and classroom films without duty, should be approved
and where the distribution of such films - and of film strips and TV
programs - should be greatly encouraged and expanded. (The USIA has
virtually no Britannica Films in its libraries and there isn't a
White or Baxter physics or chemistry course in all Latin America.
6) We should ask young people to go and come between the
United States. and Latin America - on a far greater scale. All too
many of the Latin young are frustrated by lack of educational and
economic opportunity they seek an association in dignity with
each other and with us. Why shouldn't the President ask 100,000
American familIes to take a Latin student into their homes for a year?
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The students should speak reasonable English and should be reasonably
screened. This would be Et great new channel of intercourse and under
standing. And Lt wouldn't cost very much.
Yes, we should even bring their beauty queens to the United
States as well as their valedictorians. Your only rival at the bull
fight in Bogota was the current beauty queen who sat nearer to me
than you did!
7) I don't know how to develop more interest in Latin
America on the part of our press. This is most desirable. How do
we get more American newspapers to send representatives to Latin
America? If the men are there, they will write the stories
Education and the Universities
1) A great deal can be done with government leadership to
encourage the interests o our private philant r^p e
n A. ...tool-
can education. We learned this from Jim Perkins and his companions.
If a Secretary of State had ever asked our great foundations to
develop a sound and constructive elementary course to teach English
I'm sure this would have been done. Similarly if a Secretary of
State held a meeting about the teaching of Spanish In the United
States - and Portuguese, in view of the fact that over 50 percent of
the people of South America speak Portuguese - sure this would
greatly stimulate interest
Miami schools. Even if sue
Spanish is already compulsory In the
a meeting did not greatly expand lime
diate interest n these two languages and in their literatures, such
a meeting would be greatly appreciated by our neighbors to the South.
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94
12-
2) One of the greatest opportunities and needs is to build
up the Latin American universities. One excellent illustration o
how to do this is furnished by the project at the Catholic University
in Santiago under the auspices of the Economics Department of the
University of Chicago. Mr. Patterson in Buenos Aires told me this
is now the best Economics Department in all Latin America. (The
importance of economics departments Was stressed to us In Mexico when
we were told that the Department of Economics at the University of
Mexico is dominated by Marxist professors and that the Marxist-
trained students infiltrate from the University into all governmental
departments and big business'.) From the Catholic University eight
or ten young men are now in training at the University of Chicago,
taking their PhD's, and committed to serve on the economics faculty
for four or five years on their return to Santiago. Four Chicago
professors, I think it is, are in residence there. Mr. Patterson
now examining similar opportunities in the field of Business Adminis-
tration and five other fields at the University of Buenos Aires. Ted
Schultz is working with him on the Santiago project and on key agri-
cultural problems. Patterson has a major project in Business Adm nis-
,
rat on worked out with Columbia; and one in Agriculture with the
University of Iowa. He's using funds available from Public Law 480.
Such activity should be greatly expanded.
Another example is the University of the Andes, said by its
vice-rector to be the only non-sectarian private university in South
America. (No students on Its Council.) I think my memo on our visit
to this promising institution shows that Adolf_Berle is quite right
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pushin ing the the Foundation in New York designed to help finance it..
Such a university, if financed, could help raise standards for the
entire continent.
If the U.S. can help improve the Latin American universities
in the next ten years, it should be worth a great deal of money to
us In the following 50 years. I don't see how these countries can
build sound democratic processes - or technological societies -
unless they greatly improve their universities. In Brazil, the
executive in the Ministry of Education responsible for Brazil's seven
engineering schools - tells me he can not now find enough students
in Brazil, from the secondary schools, to qualify for engineering
training - to keep up with Brazil's expanding economy - much less to
give it leadership.
We should tackle the universities both at the private level,
our foundations and philathrop_Lsts, and at the publIc level
our programs of assistance. I happen to think this is the
through
through
easiest of all projects and perhaps the most
long pull proportionate to the money involved.
steel mill in Chile, every university in Latin
given a shot of adrenalin.
3) Through the Latin universities, we should seek to build
up scholarship about the United States. We should also encourage the
development of scholarly interest in Latin
versities We need more groups at our own
to Latin American archaeology, literature,
Important over the
For the price of the
America could have been
America by our own uni-
great universities dedicated
history, et cetera.
) Although the universities are perhaps the best example
and the easiest to grab hold of we should assist the more backward
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14
of the Latin American countries in their attack on illiteracy.
Torres-Bodet s eleven year program is an example of what is needed
everywhere.
Adlai, I've dictated the foregoing hoping this may stimulate
you and that a carbon of it may stimulate me. It's not-all inclusive.
shall think of many variants and twists as I write my article for
the Yearbook. Your question merely made me decide I might as well
begin now.
I hope the foregoing may provide you with some helpful and
stimulaing ideas. I'm working on a slow deadline from ED and you're
working on a fast one from Look.
I shall indeed appreciate any
comments or criticisms. Won't you give me your views when I stop
over on the 30th? 1- then if not before? Of course my own closing date
on the Yearbook article isnit until July 1 - with publication for
next March. - when we shall have a new President! - and this great
gap poses quite a problem in itself. If you decide to dedicate your
story in Look to expounding ideas of the kind I've covered in the
foregoing would like to quote you and attribute the ideas to you.
know that if I read all the memorandums again which
expect to do in the next two weeks, I would develop additional ideas
and many additional arguments But because you asked your question
by telephone in Chicago, I thought I would send through this very
hasty memorandum
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To: John Howe
From: William Benton
Further on 'The Voice of South America"
Cat. #1698
Memo #64
March 21, 1960
Patterson points out,
that of course the Voice of South America is the voice of the
world; I myself nailed this down in a-previous memo. But he points
-
out that the voice is articulate because of communications, The
Indian who can't read knows someone who can and this man In turn
has read a copy of Life magazine or seen a Hollywood motion picture.
'The Good onse calir" of Bogota, about whom I wrote quite a memo,
is truly on the frontier - and 80 too for that matter is the Benton
Foundation!
When you see
Patterson talk to him further about his general
basic approach to the fundamental problem involved throughout the
gnIt'AInga ebnnti�gi,to Using terrna very. 1Oosely, wh eh is what I'll
have to do In this article, he speaks of the United States as being
somewhat right of center.I've put it well to the right. He speaks
of Latin America as being somewhat left of center. This again varies
from country to country. He refers to the pressure of the masses of
the people on their political leaders ThIs reminds me of Kubit.
schek s remark that he's In a hurry - that he has no time to watt
because the infant mortality rate in some areas of Brazil is 30, 40
and 50 percent. The pressure for haste, generated by the masses
gives the communists their opportunity to exploit the fundamental
differences and attitudes between United States people and their
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government and the peoples of these countries and their political
leadership.
think all through this article should run my comments on cour1sm
and its significance
agricultural land refo
tiether m discussing the universt
or
the rule of the military or any other
subject. The sub motif of Latin America Is the communist threat
Is the phrase leitmotif?" Here's a good phrase. It's always there
even when you don't recognize the tune. There isn't a conversation
that we're having on these visits that doesn
come back to Castro or .communism
A most interesting point made by Mr. Patte
the sktil of the
communists in recognizing immediately the threat to them of a
constructive Lazy vh, a
those appl ed to
ties which m going to cover in a later memorandu
.700,4
univers
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Cat. #1697
Memo 03
March 21, 1O
To Mr. John Howe
From: William Benton
going to dictate shortly quite a memo of off the cuff impressions
of the Sotth American universities and their predicament, m very
eager to get the full report from Ken Holland on the Santiago meet-
ing, and as soon as possible, When will they have it ready? Please
send a duplicate of it to Mr. Albion Patterson in our embassy in
Buenos Aires. I hope Ken will give me any confidential background
memo as well as his official report.I've decided I ought to give
a big section to the universities in the forthcoming article. The
material is not only very dramatic but of enormous
importance.
John, one reason for
something can really
be grabbed, and th
long range
doing a big job on the universities is that
be done about them. The ISSUC is concrete, can
ice is rcon ive...y Lr4sIrif1cant. At a tiny
fraction of the cost of the pipeline for natural gas, just installed
here in the Argentine - a terrific beginning can be made on the
rehabilitation of some of the untv
ittes which have been raped and
wrecked and the sound and constructive development of the others.
Will you please write Ted Schultz and tell him of my Interest here
and of my talks with Mr. Patterson and tell him how eager I am to
have any reports or records or comments he has on the great experiment
on which he's cooperating with the Catholic University In Santiago?
You'll get more of a clue on this from another memo I shall dictate
shortly.
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Memo #63
A scholar named Phil Glick in Washington is doing a major quick
study for OAF on education in Latin America. Mr. Patterson is
going to get me a copy. Here's how I'll have to get the real
material. I'm not going to be able to pick any of it up in the
field. The meetings here are farces. I've got to get the material
from those who've applied themselves to seeking it. Ted Schultz
Is doing a book right now on Latin America. Mr. Patterson says he
has a couple of very good new ideas This book sounds marvelous
It's about the economics of development. When you write Ted tell
him about the article I'm going to write and tell him I would like
to publicize some of his material - that the article isn't to come
out until next March - and ask him to send along to Lis anything that
will be helpful or could help to guide us.
Mr. Patterson says that one of the important points in the book,
and it's like Ted Schultz to come up with something like this, is
that the money put into the training of people down
*ter e
MO
productive judged by hard cold economic reality - than any other
money that can be invested in any other way. This doesn't surprise
me one damn bit and I would have made this statement myself anyway,
without any research or scholarly background. Indeed I think I've
said it many times in many speeches. But coming from Ted Schultz,
with his background and scholarly reputation this has great impact.
ea
of 114mwirieturirlip the.
w.
allty of people and raising
the level of the productive arts' This is better rhetoric than
identify with Ted. It's a good phrase and glad to take it right
over.
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Memo #63
John I've chatted with Mr. Patterson about Ambassador Beaulac
objection to my projected title and we've decided that the Ambassador
is being too literal
Let's stick to 'Me Voice of Latin America."
And My f st paragraph should explain it as I suggested in the
memo last night This Voice fundamentally is the masses of the
people struggling for the new freedoms made possible by science and
technology-- in agriculture, industrialization etc And of course.
the Voice is often indistinguishable because it becomes a loud roar
le 8peak3 with different tongues in each country and with many
tongues within a country; 11 build up the paragraph and make the
Ambassador's point about the fact that there is Indeed no such
cultural entity as Latin America no political or sociological
entity such as South America.
Mr. Patterson is going to be in New york before I get back and
have urged him to have a visit with you. Indeed I s est you try
to get him for an evening. He is wonderfully stimulating. Note my
letters to Perkins and Ken Holland.
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Cat. #1681
Memo #46
March 16 1960
ORANDUM ON SOUTH AMERICAN
One of the most famous University presidents in South America
Is Gomez Mias of the University of Chile. In Lima and Cuzco we ran
into Professor Birkhardt, head of the Council of Learned Societies,
President Murphy of the University of Kansas, and James Perkins, Vice
President of the Carnegie Corporation All were returning from the
recent meeting in Santiago, sponsored by the Carnegie Corporation, and
by Ken Holland's group. All urged us to visit at length with President
Gomez Mias. This proved to be Impossible. But I urge Mr. Howe to
telephone Ken Holland's secretary and to secure the report that his
organization is writing on the Santiago meeting. Mr. Perkins told the
Governor and me that a careful agenda was followed for a week. Presi-
dent Murphy thinks that the whole subject of the improvement of South
American universities is now d
f
lr "on the table" for review,by
our, great Foundations - growing out of this meeting. Such subjects
were frankly discussed as the key and critical role of students, which
is often very deleterious to university standards; the universal use of
part time professors who do not live up to their responsibilities; the
blight of politics which adversely affects many of the universities;
cetera.
have learned practically nothing about these subjects, and
contrary to my hopes and expectations, we've largely ignored the untver-
81 les. When we have visited them, the affairs they have arranged have
not been informative. This was true at the University of Mexico where
we met the key deans and faculty members at a champagne-hors d'oeuvre
affair one afternoon where the Governor made a graceful little speech-
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Memo #46
but from which we received no benefits except the views of the
extraordinary new university buildings. (The campus has a great
giant statue of President Aleman who fostered and built the univer-
sity, and some $30,000,000, or more was poured into the University
during his regime when a plan
was built which probably couldn't
be equalled in the United States for $100,000,000.) Similarly,
attended an affair at the University at Quito - on whichI've re-
ported - and now most recently the Governor and I sat on either side
of President Gomez Mias at the University of Chile, at a small table
at the end of a great horseshoe with two tables stretching down to
the left and the right of us, and with people standing behind these
tables suppose 100 or 150 representatives of the University
faculty. For an hour and a half we answered questions, 90 or 5%
the Governor but I joined in occasionally.
One of the professors
also a ,senator, gave us the standard complaint that we had spent
$4o 000 000 000 in Europe on the Marshall Plan -440 billion yes,
though I corrected him and told him it wasn't more than a third of
this - while we neglected South America. But again we learned
nothing. And in this case we didn't even see the University.
ed in C 4 e
arh
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Cato #1643
Memo #21
February 23, 1960
BR
NO" BY AMBASSADOR WHITING WILLAUER OF COSTA RICA
Present: Governor Stevenson and Senator Benton,
also at intervals William Blair,
Dr. Carleton Smith and John Fell Stevenson
The Ambassador explained to us that Costa Rica is looked up
to by the hemisphere out of all proportion to its size. The Ambassa-
dor is very concerned about the Cuban situation. He says that Costa
Rica is being harmed by developments In Cuba. He suggests that Costa
Rica can be an ideal "complainant" on Cuba before the OAS or the UN.
The Ambassador explained that the Caribbean is our Mediter-
ranean. He speaks of "three great similar areas, the enclosed sea
areas, the Caribbean, the Mediterranean and the China Sea of South
East Asia."
He emphasizes that the problem today Isn't just Cuba.
He asks What is Cuba doing to the Caribbean?" He states flatly
that it is the beachhead of international communism. He cites the
grave effect:
1) The field of public information was one of Castro 's first
fronts for attack.
Castro went after the AP and the UPI
"the sources for public information in this area." He
created his own press service. This "shows a wide con-
spiratorial objective." This press service is called
"Prensa Latina". Already this has had a big effect. The
service secured "A good scoop on the Paraguayan invasion.
The Ambassador explained that "of course they were on the
Inside." In response to a question about the Cubans
activit
In broadcasting, the Ambassador said that
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news story had announced a forthcoming construction of a
big transmitter.
In Cuba, the Communists "now have an .area where they can
operate with no restraint." This is the first time in
the Western Hemisphere.
Cuba gives them a bastion from which to operate for in-
filtration of the Labor movement throughout South Ameri-
ca. They will junk Tolledano. They will start a third
force, inspired from Cuba." They have cancelled their
Cuban labor affiliation with Crete. Forthcoming is a key
labor meeting in El Salvador. Here in Costa Rica the
Communists dominated the banana union and merged with
one not so suspect. The Ambassador expects this merged
union to send its representatives to El Salvador and to
_to the Communist orbit.
4) The Communists have acquired 'Cuba's diplomatic network."
Cuba has Ambassadors all through Latin America whereas
the U.S.S.R. has only had three or fou
Castro is re-
placing all Cuban ambassadors with his Communist repre-
sentatives. (El Salvador has declared the new ambassa-
dor persona non grata.) Through this diplomatic Cuban
network, the Communists now will have much greater free
dom in espionage, in the use of the pouch (to smuggle
funds for example
In the use of radio, etc
Through Cuba the Communists will drum home the theme
song of agrarian reform" (which worked In China where
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Memo #11
Ambassador Willauer served for twelve years in our for-
eign economic administration and later as president of
General Chennault's airline) Many countries need agra
rian reform including Costa Rica. Cuban reform is a
great torch." Of cOurse the Ambassador thinks it is a
"phony" because it is so poorly conceived, The Ambassa-
dor thinks that the Cuban peasant will remain a serf of
the state and will not indeed become his own landlord.
But in "afrarian reform", the Communists, through the Cu-
ban effort, have their hands on a real problem, a problem
which needs solving, and one which they can brll1ant1y
exploit.
In Cuba there is a base for revolutionary military expe-
ditions, (1 have not heard much aboutthese.) The Am-
bassador says that they have been wandering all over the
Caribbean. These are groups of 50 to 100 armed men who
have been landing on foreign shores with revolutionary
intent, The Ambassador thinks that their "apparent
clumsiness is a part of a deliberate design." He says
there have been eight such expeditions in Costa Rica and
six in Honduras all aimed at Nicaraugua. In all these
expeditions, a pattern emerges: a) the arms have been
contributed by Cuba; b) the groups have been trained in
Cuba. c) no more than five or ten per cent of the men
have been Cubans The men in these forces think that
they are part of "an elaborate plan". They expect to
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Join an uprising in the countries which they invade. They
expect parachuters supplies, et cetera. But In no case
has any such support developed.
The Ambassador asked, 'Can this be a way to liquidate non-
Communist revolutionaries?" Many of the men in these
groups could be embarrassing to the Communists. He asks
"Is this a-way to kill them off?" The Ambassador points
out that the Communists "don't really want to liquidate
dictators until they are themselves ready to take over."
These little expeditions "cause enormous chaos." They
keep American and other foreign firms from wantint to
make investments. One objective of these little expedi-
tionary groups says the Ambassador, Is to cause depres-
sions
Now I have
papers. I was surprised at the foregoing report and at
the great importance the Ambassador attached to them.
ad much about
groups
They. are indeed a most dramatic story.
Now the key problem for American policy is, what do we do
about Cuba? I have previously sent through a memorandum on Ambassa-
dor Hill's ideas applied to Castro and Cuba. Here are Ambassador
Willauer These were the two men both political appointees, who
took the minority viewpoint in the Ambassador meeting of the 20
Ambassadors from the Latin American Republics. (1 learned from Am-
bassador Wi1lauer that this meeting to which Ambassador Hill attached
so much Importance took p
ace back in :rch of 1959) Ambassador
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Wi auer's ideas have important similarities to Ambassador
Hill's but are not exact parallels
Through the OAS, we should denounce dictatorships
and urge "an aggressive program of human rights."
We should say to the twenty Latin American
Republics "We will agree to anything that you
agree to in the field of human rights."
(The Ambassador points out that they will not
be able to agree.) This proposal puts us on
the offensive. It lays the ground work for
our attack on Communism It "gives us a suitable
public posture.
We Should then, present the evidence (let Costa
p
esent
on the Communist infiltration
in Cuba. We should call for action under the
Caracas resolution of 1954.
A part of our dtle
is that we haven't known what to do ab
Incidental
says Ambassador Willauer
it
President Figueres complimented
Ambassador Willauer and said that
'Your Ambassador
from the beginning recognized the Communist
influence in the Castro movement."
OAS may sa-
II so
VW'
We must then re-examine
our policy in relationship to the OAS-
ml
opened up serious questions which we did not
pursue.)
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Memo #11
Ambassador Willauer had prepared himself carefully for the
meeting and had detailed notes. He spoke with emotion and even with
passion. He referred frequently to his background of 12 years in
China. Referring to this background, ,he speaks of himself as an ex-
pert on Communism Indeed this latter is his censtant theme. He says
that C. D. Jackson and Roy Larsen, his close fr ends, prevailed on
him to� become Ambassador to Honduras because it adjoined Guatemala -
and because they wanted him as an expert on Communism to be In a
neighboring state where he could examine and report on the Communist
infiltration into Guatemala. I might also say that he sees a Commu-
nist behind every lamp-post - but seemingly he has been quite right
to the best of my present knowledge, on the Castro issue - and Ea do
not like to level such a haphazard charge. Like Ambapsador Hill, he
is bitter in his criticism of Ambassador Bonsai. He holds Bonsai
partly responsible for "our failures in Washington" to understand
l)
depth and nature of the Communist threat in Cuba.
arh
"Pc
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Cat. #i644
Memo #3.2
PRESENTATION BY COLONEL HOLDEN OF THE
EMBASSY IN COSTA RICA - RE PANAMA CANAL
Introduced by Ambassador Wia.lauer to Governor Stevenson,
accompanied by Senator Benton
Colonel Holden represented the War Department in negotiating
the most recent new agreement with Panama. He spent several years
in the Canal Zone. The Ambassador introduced him to us to prepare
us for our forthcoming visit to Panama. The Colonel impressed me as
an able, sincere and informed officer.
Colonel Holden explained that the original treaty with Panama
was in 1903. President Theodore Roosevelt's administration conceived
the idea of breaking Panama from Colombia. There had been no separa-
tist movement. But we had not been able to work out a successful
treaty with Colombia for the building of the Panama Canal So we
maneuvered and schemed and broke off the Republic of Panama, and then
negotiated our treaty with the new republic. This treaty was in per-
petuity. The key phrase in it was that the United States was to have
full and complete control over the Canal Zone "as if we were sower
eign." The Panamanian Foreign Minister who negotiated this treaty,
who stated later, 11We tried to give you everything" - and who later
boasted about putting in the phrase "In perpetuity" - was named
Bunau Varilla. According to the Colonel he is now regarded in
Panama "almost as a, traitor."
The second treaty was �in 1936. in this we made concessions
In the Treaty of 1903 we had guaranteed the independence of Panama.
This was repealed in 1936. We raised from $250,000 annually to
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Memo #12
2-
$430,000our payment - for an "annuity." The word "annuity" is impor-
tant - in contrast to "rent" or any other word. This increase was
exactly in ratio to gold's appreciation in terms of dollars in the
early '30s - when Roosevelt devalued the dollar. We also agreed in
the 1936 treaty to a single wage scale for Panamanians and Americans.
Our third and most recent renegotiation was in 1955. This is
called the Ramon Eisenhower Treaty, Ramon was a former head of the
Panamanian Police, who became president of Panama, and was president
at the time the treaty was negotiated. He was later assassinated.
This treaty raised the annuity to $3��930,000. We again agreed to one
wage scale only, (I'm not clear upon what is the difference on this
point between the '36 and '55 treaties.) We gave Panama the right to
levy income taxes on their citizens who were earning money in the
Canal Zone.
The Colonel emphasized that the tolls on traffic through the
Canal have never changed. These were not set in 1914 when the Canal
opened. There was a long period during which they were figured out.
The Colonel Is vague as to whether they were finally crystalized in
the '20s, or perhaps not until the early 30s. At any rate, they
have never changed. He says they could go up 300 percent or 350 per-
cent, and it would still be cheaper for the ships to go through the
Canal than to go around the Cape. The Colonel manifestly deems that
the danger of international control3 through OAS, or otherwise Is
in part the threat of an increase of the tolls He told us that two-
thirds of all the traffic going through the Canal was shipments from
United States ports or shipments to United States ports thus that
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any increase in rates would fall directly on U.S. manufacturers and
consumers through the extent of two-thirds of the total. (When we
reached the Canal Zone, we checked into this figure. The true figure
is about 40 percent.)
The Colonel called our attention to a study in 1942, I think
it was, called the "Stanford Study," This projects the need for the
enlargement of the Canal. This study considered alternative routes
but ended with the recommendation for the same routes. The study
concluded that two billion yards need to be displaced, in order to
enlarge the Canal to the requisite size, and this would cost $2
billion.
When we reached the Canal Zone, we discovered that
the study by Stanford University, projecting traffic,
showed a forecast for 1970 which is now being exceeded
in 1960. Furthermore, there are some 300 ships which
have now been built which are too big for the Canal.
Yet Colonel Macalaney, to whom we talked in Panama,
says that the Canal would be wholly adequate for many
years to come except during the periods when it is
being repaired and cleaned up - and also except for
the ships that are too big, most of which were not
designed for American traffic.)
am not clear about the need for a newer and bigger cana
or how soon, and this seem
mea most important point applied to
any suggestions for internationalizing the Canal - or any discussion
of the future of this great structure.
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4-
In the most recent treaty negotiations, Panama asked for its
flag over the Canal. In 1955 this was not a publicized issue. The
request was rejected because the United States is "as if it were
sovereign." The fear Was that if the flag was granted, another and
further Panamanian request would follow and would have to be granted -
for example, its request for all postal rights for the Canal Zone,
or for the full authority over the road strips, or for the use of its
currency in the Canal Zone. The ultimate request or demand would be
the expropriation of
die
�
(When we reached Panama, we were told the Egyptians
have a big legation and are urging just that.)
The Colonel pointed out that there is a growing barrier be-
tween the people living in the Canal Zone and those of Panama. He
"People don't leave the Zone. He said there is, "A s
dislike both ways."
1011011110Nelo
The one idea he advanced to counteract this was
his question, 'Can we integrate the school?" He commented. "The
seat of the revolutionary trouble has always been the University."
He said one small mark of advance is that the signs in the
Canal Zone �are now in both languages.
There are some 10,000 troups in the Canal Zone and 8,000 U.S.
employees. The employees are much more important because practically
all of them are, in salary and status of the officer class Some of
them have been there for three generations. These are the ones with
he big incomes and the ones who are the most isolated. Among them
are one hundred United States pilots who earn from $16 - 22,000 a .
year, according to Mrs Harringtonwife of the American Ambassador
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Memo 12
whom I asked about the pilots later in Panama. This is a sample.
Many of these employees, such as the p lnts are classified as
"security employees," and this automatically eliminates Panamanians
from potential employment.
Colonel Holden described three major current problems:
1. The Panamanians now ask reaffirmation of the fact they
are "titular sovereigns." They want us to admit they
still own the land. Colonel Holden reports that in 1908,
President mart reinterpreted the fact that we had "all
rights as if we were sovereign,"
2. The second problem relates to labor and the rates of
pay. Many Panamanians thought that our lasttreaty meant
that all Panamanians were to receive American wages.
But the truth is the agreement meant that only those in
atlon in which 5i of the employees were
m this particular classification all other
any classlf
Americans
employees, the remainder which were Pana
rt
.
these
were to receive the American rates. There are several
dozen cla sifications This opens up grave problems on
Interpretation. Furthermore, there would still be dif-
ferences in pay - even in a classification agreed upon
for equal pay because
to receive 25% extra because they are serving outside
their country. They also have living allowances There
agreed that Americans are
are a lot of technical points here which are not clear
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to me. It's crystal clear that there is
argument and confusion.
0
of room for
The third problem is the very tough nut known as "third
country purchases." In the 1955 treaty it was agreed
that everything for the use of the Canal Zone was to be
bought in Panama or the United States unless such pur-
chases were "unfeasible." This has opened up great room
for argument what is meant by "unfeasible?" For in-
stance, take beef. The cost 10 the United States, let
In New Zealand, it's 300. A
purchasing agent bought the beef from New Zealand. Pana�
ma complained, thinking that a ruling would benefit Pana-
ma, claiming that it was not "unfeasible" to buy the beef
from the United States. This point on beef is not yet
settled but Colonel Holden seems to think that the beef
will be bought from the United States. Indeed he states
us say, is 600 a pound.
this flatly, and of course, the result is that the em-
ployees in the canal Zone will pay twice as much for beef.
Of course, the big issUe is the flag. I shall report
further on this in my comments on our interview with
President Ernesto de Ia Guardia of Panama. But T shan't
report in too much detail because the issue is changing
rapidly. Panama is facing important elections in May.
The President is to be inaugurated in September. Colonel
Holden suggests that after the new Panamanian President
is inaugurated, and after our own election in November
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- 7--
then we shall have to sit down with Panama and "look at
the flag issue along with other issues."
Our cutback in troops In the Canal Zone from 175,000 - during
the war, I presume - to the present 8 or 10,000 - has resulted In un-
employment in Panama. This has helped accentuate Panama s complaints.
Colonel Holden polo s out that Panama does not want the Canal
internationalized, This is a matter of top importance.
(President Figueres of costa Rica told us he had Joined
others in suggesting that the Canal Zone be turned over.
to OAS. President Figueres is emphatic on the fact that
the OAS does not belong in Washington. He has suggested
that the Canal Zone be set up as a "District of the Amer-'
i as" with all OAS ambassadors in representation there -
in spite of the lousy clImate. Governor Stevenson in
his press conference in Panama, suggested that this
might be the future of the Zone.)
The Panamanian government, it is believed would far rather
keep the United States as the owner - and would far rather negotiate
a deal with the United States - than with OAS. Panama feels it has
a much better chance to get concessions from the United States than
from OAS.
arh
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Cat. #1645
Memo #13
February 23 1960
SOME NOTES ON THE VISIT
WITH FORMER PRESIDENT JOSE FIGUERES OF COSTA RICA
(Unhappily I was not able to get an oppor-
tunity to clicate these for several days
and although I think I'm faithfully trans-
cribing my limited notes, I have forgotten
much on which Idid not take notes, and am
unable to fill out many points on which I
would like to have elaborated.)
Dr. Figueres starts from the basis that the problems are
very tough here in Latin America but that those of Asia are much
tougher. He is aggressive and he Is Optimistic. He is a fighter
and I could easily imagine his dying behind the barricades.
We visited Dr. Figueres at his famed farm La Lucha. This
means "The Struggle" or "The Fight". He and his brother started
their enterprises in 1928. This 1,000 acre farm was built up slow-
ly. He regards all of it as under cultivation. Six hundred acres
are In reforestation and he hopes this will come in cycle" in a
stretch of 12 or 13 years. The other 400 are largely in cabuva.
One of the high spots of our visit so far has been the visit to
the rope factory in the middle of his farm. Some 70 or 80 families
live on the farm and some 150 or 160 people are employed.
chines in the factory start with the leaf of the cabuva and run it
through to the end product smoothly coiled ropes of various sizes
destined not only for domestic consumption but for foreign dist Ibu
tors. The small factory has its own power plant operated by water
power
le ma-
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This farm, which Dr. Figueres described as his "hobby" is
owned by a corporation which also owns coffee plantations and other
business interests. Dr. Figueres and his brother own about half of
this corporation and the balance is owned by their associates. Some
associates have quit them and started their own business, but friend-
ly relations still prevail. Dr. Figueres says that some of the pres-
ent associates do very well financially. The farm Is not as impor-
tant as the coffee plantations. The two Figueres brothers were born
in Colombia of a Basque physician who was born in Barcelona. They
speak Catalan. They started with nothing and have developed these
remarkable enterprises.
It was at La Lucha that the revolution took form along in
1947 or 1948. At the peak of the fighting, Dr. Figueres was leadir
in the field 600 men who were
1
rmed and dis ciplined. They
were mostly students and university graduates of intellectual capac-
ity. They were fighting about 5,000 badly trained and badly led
opponents. After their victory, there was a provisional government
and then Dr. Figueres was elected President Under the terms of the
Costa Rican constitution he could not succeed himself. Dr. Figueres
says that the old right wing reactionary forces, which were venal
and corrupt are supporting the present admA.nistration which Dr.
Figueres opposes. (I refer here to Silvert's excellent memorandum;
theremuch background available in it and elsewhere and I shall
not try to elaborate further.)
Jose Figueres who is known as Don Pepe to everybody, includ-
ing the taxi driver who took us to the university looking for him and
the Governor. The driver- asked the guard Where is Don Pepe?"
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Don Pepe seems to be one of Costa Rica's leading personali-
ties. He is closely allied with the liberal movements throughout
Latin America. He speaks of President Betancourt of Venezuela,
President Lleras Comarga of Colombia - and other liberal leaders
throughout the continent as his close associates and friends.
(Critics of Don Pepe say he thinks he's 'too big for his country
that Costa Rica's problems are 'too small for him".) Don Pepe 's
principal interest in Governor Stevenson's. trip, as his attached
memorandum written from Lawrence Kansas will Indicate, is to see
to it that the Governor is properly guided so that he will under-
stand the importance of the liberal and progressive forces in the
various countries we visit - and will be properly allied with them
r t,tAres sees the great issue of Latin America as that
f the "dormant people" struggling to break the chains which have
bound them - struggling upward towards the sun, towards a more per-
feet position and a better life. He is deeply concerned about
United States policy. He says that South America has 'nothing in
common with China and the U
except that we are all human
beings." Yet he makes the extreme statement that "unless there is
a change in the United States policies in relation to the Hemisphere,
there is the absurd possibility that South America may turn towards
the Soviet bloc." To him the United States seems complacent pros
perous, indifferent to South America. The U.S.S.R. and China seem
aggressive, dynamic. The United States should be warned he says,
that the latter may win out
He likes to point out the parallel between the New Deal and
the present urgent need. Yet he is strongly against "chant
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Memo #13
applied to South America. He says flatly, "The New Deal could not
be solved by charity, and the problems in South America won t be
solved by charity or by grants." Again and again he stressed that
"the liberal groups do not want money given except in an emergency."
He feels that there is "a tendency in the U.S. to let Amer-
ican business do the Job." He warns that this will make for trouble.
The ways of the South American countries will not always be the ways
favored by American business. What these countries want, he points
out, is to develop their own resources. They do not want to be
dependent on American business.
The problem is made very difficult for the United States
he warns, because we must seek "to protect the Latin American coun-
tries from their own oligarchie He concedes that business has
changed greatly, and for the better, within the United States. This
is not true in Latin America. When North American business men come
to South America and meet the rich and entrenched business and social
leaders, they may like to think they are meeting their own counter-
parts. But the rich oligarchies of South America are not like the
successful and wealthy business leaders of the United States".
Dr. Figueres is interested in new capital for South America
but he stresses that what is needed is more than capital The South
American countries also need knowledge; they need men and they need
leadership. He told us the story of a GI who brought $10,000 to
Costa Rica and developed a new chicken industry "a whole new
ii�
dustry; he revolutionized the raising of chickens here; his leader-
000". He told
ship and his skill was far more important than hi
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Memo #23
us also of a man whose name I later determined, a Mr. Robert Anson,
a young American pilot, who came to Costa Rica and founded a company
named Sala which now employs 400 Puerto Ricans and only two Americans.
This company fixes airplanes; it gives them complete technical and
mechanical overhauling; planes come to Sala all the way from Canada
to the Argentine including U.S. Army planes. Here too, he suggests,
is an example of what Costa Rica needs over and above capital, and
it is also an example of the opportunity Costa Rica offers young
and talented men who bring leadership and know-how.
One of President Figuerest complaints about the United States
policies (which is one of my own!) is that we "never take the initia
five". We are constantly fighting a rear guard action. He stressed
in particular that the peoples of Latin America are more Interested
In freedom than they are in economic development. South America
"is waking up - its aspirations are being aroused etc." I told him
that In this sense the problem in South AmerIca is similar to that
of the problem throughout Africa and Asia. What I called the "Voice
of South Amer ca", when I walked with him while Governor Stevenson
was working, and asked h m about many of these problems I told him
was indeed 'The Voice of the World" - except of course Latin America's
Voice should be clearly heard, he feels, because it is much closer
to us
Figueres points out that the South American peoples are
aging a war of their own which Is unknown to us in the United
States t least this Is true In eight or ten of the 20 Latin
American countrie
He says t unknown to us because we're
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-
preoccupied with with the cold war with Russia. The South American
"dormant people" are waking up to their opportunities and aspira-
tions and to their own internal problems. He adds that the Indians
of Peru, Ecuador and Bolivia are "still a stratum without aspira-
tions".
Dr. Figueres says there are 30 highly trained Costa Ricano7m
m(3)
the Marx-Lenin Institute in
Mosco
who spent a good year in
While the, are gone, their
families are taken care of. Most of these are working against the
United Fruit Company In the "banana union".
These Moscow-trained agents tell the people they are work-
ing with them for better conditions. They agree with the people
that of course they want "freedom" too, But their objective is
to persuade the people that they shk.Juld sacrifice present freedom -
in the long range hope that through such a sacrifice they will get
better conditions and ultimately will get tin_ ir freedom also. Dr.
Figueres explains that they "dress up this sacrifice as merely a
temporary loss". Dr. Figueres told us of a Peru banker who cynically
commented, "The optimists in Peru are learning Russian; the possi-
m sts, Chinese". (Governor Stevenson said he had heard this one
before!)
Dr. Figueres has strong views about Castro. He told us the
full story of his visit to Cuba last March in an effort to be of help
to Castro. He spoke to the Cuban people at a large rally, after sev-
eral days in Cuba during which he was unable to get an appointment
with Castro, and received a great ovation. Castro disagreed sharply
with what he viewed as pro American conciliatory remarks by Figueres.
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Figueres had telephoned several times in an effort to see
Castro, and to get his guidance on his speech. There were two points
dealing with the U,S, in the speech that made Castro "angry". A day
or two later, just as Figueres was about to leave Cuba without having
had a visit to Castro, the latter arrived with his entourage at 6:00
o'clock In the morning. (Castro never goes to bed until 8:00 A.M.
Dr. Figueres Is deeply depressed over Castro, "who had a great oppor-
tunity'. He says there are crack Soviet experts working close to
him He says Castro
.11.
S a paranoiac. Dr. Figueres
COL.1
emplates the
suicide or, even more likely, hs assassinatloi
(Castro sounds comparable to me to a Danton or Robespierre, rushing
Inevitably toward destruction.
Events in Cuba are marching so rapidly that I do not see
any point at t
about Castro.
time in dictating the many conversations we've had
on everyone's mind and lips here.
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Cat. #16k6
Memo #14
February 23 1960
MEMORANDUM OF INTERVIEW WITH-
PRESIDENT MARIO ECHANDI OF COSTA RICA
Present: Governor Stevenson and Senator Benton
President Echandi is a very attractive man in his late for-
ties handsome and witty but with no English. Ambassador Willauer
was with us when we visited with him So, too, was the President's
entire Cabinet which sat in a circle but no one of whom contributed
anything to the interview.
President Echandi represents
sition to former President Figueres
the coalition of groups In oppo
There is said to be bad feeling
between the two men but they got along cordially enough in our pre-
sence. All the Right Wing conservatives are supporters of Echandi,
aid
Govern�
States
in Sou
world."
too her are some of the
Some corn
e tist groups
t of the President which I now forgetcaused
should leave no
(Nicaragua
ship is of
tics and
Ambassador
4 e t
J. 167
Opening
comment to state that, 'The United
equivocation about its democratic convictions."
adjoins Costa Rica and the Samoza dictator-
course a major issue in Center American poll-
we have heard more than once of the American
to Nicaragua, Thomas Whelan a North Dakotan
who has been there for many years and who is charged with
undue friend
mess with the Samoza family and regime.)
Governor Stevenson wen
on to point out that "disarmament
would be a fine moral example
the rest of the
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Memo #1k
In line with a comment from President Echandi about stabiliz
ing the market for commodities Governor Stevenson said that he felt
that the United States should always be prepared to "explore the sta-
bilization of commodity prices," But he warned the President that we
should not "underestimate the infinite difficulties," This point
comes up everywhere, and usually very early in the conversation. for
example in Colombia from where I am dictating this memo, 80 percent
of the total foreign exchange depends on the export of coffee and
nothing is more important to the economy than the coffee agreement
The President was very interested in the problem of capital
investment He asked why more foreign capital could not be invested
in Costa Rica, "as the English did in the United States, allowing
their capital to remain there?"
opment with Arri4zr
a
cap
imam exasig.
developing tax inducements wh
The President wants "a common devel-
:�,.4 -I. I e
help attract outside capital
Costa Rica, He said, 'Puerto Rico is a good example where United
States capital does not have to pay taxes in the United States," He
told us that Costa Rica has a new law under which new industries pay
no taxes can import machinery free - and that this law is designed
to attract capital
Governor Stevenson said that there would be no tax in the
United States on money invested In Costa Rica which is allowed to
accumulate, and which Is left in Costa Rica, 'I said that if the
pany qualifies uride
U
ax
a western
corn
nere corpora
tion" when such money is brought back to the United States under the
special law which I believe was originally sponsored by Nelson Rocke
feller, there is only a 3 corporate Income tax Instead of 52%
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Governor Stevenson Stevenson pointed out the logical and obvious fact
that what inhibits United States investments in South America, much
ore than taxes is lack of confidence. This doesn't of course apply
to Costa Rica and its government as much as to many other countries.
But the Governor pointed out that the nationals of many South Ameri-
can countries keep their own capital in Switzerland, the United States
and elsewhere. He asked, "If your own nationals won't invest their
own money in their own country, is it likely that foreigners will
Someone at this meeting, perhaps it was Governor Stevenson, said that
he understood that the enormous sum of $250,000,000 in Colombian
money was on deposit in Europe and New York. (In Mexico City, Gover-
nor Stevenson sat next to a rich banker-industrialist who told him
he had $12,000,000 in
banks of New York and asked him if he had
an ideas as to how he could best invest it
ference
States,
tun ty
Ae
pand
tun
that
that
The President contends that American money should go by
e. Would a common market develop
the opportunity for capital
The President takes the position that there is great oppor
y right now in Costa Rica. He de the surprising statement
only one ninth of the arable land is under cultivation. He said
industry is just getting under way. Be pointed out that there
to the stable countries who are friendly to the United
such as Costa Rica.
brought up the question of whether there was adequate oppor
Or such capital in contrast to opportunities available else
Lat n America whIch would ex
Is great oppo
tunity for the raising of beef. He said that Costa
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- 4-
Rica produced a surplus of milk, of cocoa of the best quality, and
of sugar - yet it has to import its candy. Why doesn't someone open
up a candy industry? He said Costa Rica has the best timber yet
no system for processing the timber for export. He said the country
needs a cement factory.
Now a most Interesting comment from the President is that he
wasn't seeking 'big capital" but many chunks of small capital. He
would like a lot of small enterprises coming in, such as is implicit
in the foregoing, rather than the big corporations such as the United
Fruit Company.
The Governor asked him about the opportunity in the field of
merchandising
retaIling and wholesaling). I don't think the
President understood this question. He replied by stating that he
preferred having Costa Rica manufacture its own products instead of
importing them."
The Presiden told us that the tourist trade is now financed
100 percent by local capital Why won't foreign capital come in to
build hotels and to help develop the tourist trade? Why won for
eign capital cooperate and compete on an equal basis with local capi-
tal? The President emphasizes that there are very good workmen and
craftsmen in Costa Rica. He mentioned the enterprise Sala which is
described in the memorandum on our talks with President Figueres
Here Costa Rican workmen do all the difficult mechanical and techni-
cal repair work on airplanes
(Costa Rica is largely white for the reasons pointed out in
Silvert's memo and is largely literate.)
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The President talked at some length about the new highway.
He said the United States is contributing $2 for every $1 by the
Latin American countries. But he asked, What about the maintenance?
What if we cannot maintain the highway? Will you give us two to
one on maintenance? The U.S. has prohibited tolls. What are we to
do?" Ambassador Willauer pointed out that the highway cannot pay off
in the first five years, either through gasoline taxes for mainten-
ance or through additional tourists. He says there will be land-
slides, and that the highway will crack and settle, and that mainten-
ance costs will be at their peak during the first five years. Am-
bassador Willauer seems to agree that the United States must continue
subsidies for maintenance. Governor Stevenson did not disagree. The
Ambassador asked about gasoline taxes, but I do not now recall t
import of the President's reply.
On the night of our call at his office, the President gave
a party for about thirty key political and business leaders I sat
between Senor Jaime Sole a, President of the Banco Central and
Senor Alfred Vargas, Minister of Foreign Relations. The latter is
a lawyer who seems completely new to foreign policy. The former has
been president of the bank for nine or ten years and has apparently
done a remarkable job in maintaining the stability of the currency.
President Figueres had appointed him and praised him though I
thought reluctantly. M
.Lera told me that his principal weapon
was the fact he could always threaten to resign. Seemingly he feels
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that this threat gives him considerable political power. When I
asked him whether his bank had bought the Indian gold jewelry, as
has the Banco de Republica in Bogota as a basis for its gold re-
serve, Senor 'Vargas suggested that Mr. Solera bought the best for
himself! I'm not sure I understood the implications of the joke1!
�
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ECUADOR
VISIT WITH MR
HEAD OF USIA IN
IAM BENNETT
SENATOR BENTON
Cat. 1665
Memo #33
March 4, 1960
In Quito I visited with Mr. William Bennett, in charge of USIA,
and I feel I have erred greatly in not visiting at length with the
Public Affairs Of In Mexico City and Bogota though I doubt
whether there are many with the Imagination and initiative of Mr.
Bennett. I was greatly taken with him and his ideas. I shall try
to visit with the Public Affairs Officers at future stops. I think
I'll get much more out of them than out of many other things we've
been doing.
Mr. Bennett started a magazine at age fourteen and sold it for
enough money to pay his way through college. The magazine is still
operating. He says he has been In the printing business therefore
ever since. He operated great printing plants In Man.A..aa connected
with the USIA. He was responsible for printing a USIA magazine in
twenty-eight languages with a circulation of over one million. He
says that offset printing is virtually non-existent in South America
and greatly needed in order to bring costs down. He says he can
print for one third of the cost in Ecuador of printing costs in the
United States. Typesetters are paid $1.25 a day, for example. The
printers are good in Ecuador but the machinery is all obsolete. He
says there is excellent printing machinery and facilities in Mexico
City, Rio and Buenos Aires.
Now Mr. Bennett begins with the view that the great and first
opportunity of U.S. propaganda policy is the teaching of English.
Of course his was a discovery of the French back in the seventies
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Memo #33
and there has been a significant item in the budget of the French
Foreign Office for close to 100 years for the teaching of French
throughout the world. The theory has been that if people are
studying French they will not only read French books and reel an
affinity to France but they will come to France in order to perfect
the language.
This will help make Fars the cultural capital of the
world, wholly apart from the
'U. A
ijj
-
When I was in the State Department, I remember my as
develop.
hment when
found there were five and ten different radio programs in many of
the Latin American countries, going on each week or each day, teach-
ing French at the expense of the French government
Mr. Bennett thinks that there Is potentially 'big money In the
teaching of English". He asks why the Britannica does not go in for
it and in a big way. He says the demand is enormous". The USIA
program in Ecuador Is now teaching English to 11,000 E uadorans
through its 'Binational Centers". These are the cultural American
!,-
Ecuadorian centers" set up as propaganda vehicles through the USIA.
In Ecuador, they are wholly supported by the revenues which accrue
through teaching English. They charge $12 for a six weeks course.
-They have a thousand students paying such a fee in Quito. Mr.
Bennett says that with good equipment and suitable materials he
could expand his 11,000 very quickly into 50,000. He said We now
do It the hard way, only through teachers and without any modern
techniques or devices".
J16
yea.
__.^u�Lri.0%41!
wvNowli
h the MInistry of Education he secured
a decree which makes English compulsory in Ecuadorian schools
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Memo #33
starting in the fourth grade. He says, "Now I'm greatly embarrassed
because I do not have the teaching materials to provide."
Until last year, university students in Ecuador who studied
English did not list it for credit towards their degree. Thus it
didn't make any difference whether they passed their English courses
or not. Last year, Mr. Bennett secured a ruling by which uni
students must take a setback If they fail their English, and
receive credit towards their degree if they pass it Here again he
is embarrassed because he can't help out with modern techniques He
says he knows people here in Ecuador who've studied English for
twelve years and who cannot read it write it or speak it When he
produces scholarship students for the United States, they must quail
fy on English, and he is greatly embarrassed because they can't.
Mr. Bennett has himself accumulated nine various kinds of text
books and courses which teach English. Five of these come from the
United States the so-called Fries system which he says comes from
Michigan- the Army system which he identifies with Monterey the
Rockefeller system which he identifies with Puerto Rico the Berlitz
system (rhis conversation was in a car going at fifty miles an
hour,taking me to the airport, and I am dictating it from recollec-
tion a day later - and my memory must be checked by someone who has
background In this field.) The key point is that
all of these systems are much too advanced. Thus
tion in Spanish for teachers In the
n teachers who are weak in the_u�
when they do not have clear Inatruc
early element
English to
tions in their
Bennett says that
there Is no instruc
y course. How
ow such systems
own language?
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Memo #33
He says that several of the systems are correct in that they are
phonetic systems but that they are all much too complicated
Bennett has wondered whether he will have to sit down himself
and try to work out suitable books to teach English in Ecuador
told him of our experience watching the class studying from tapes at
the University of the Andes. We talked about filmstrips and I told
him of our projected project with Torres Bodet We agreed that
motion pictures aren't required for the teaching of English but
rather suitable textbooks records or tapes, and perhaps filmstrips.
In order to get his deal through for English at the University level
he
so that the student would
have to study hard in order
to pass
"made ,a deal by which he promised to provide the tape equipment
He re-emphasizes, Vtle teaching of English should be our biggest
propaganda objective". I shall come back to this in a moment
Mr. Bennett opened up his conversation with me by telling me
that he was greatly frustrated in dealing with American book pub--
llshers He says that they try to sell their textbooks here at $4
and $5 apiece, even $15. The libraries don't even have such textbooks
He says that the textbooks should be printed cheaply for sale in
this market at a price of roughly 600 As an expert printer, he is
persuaded this can be done and his frustration comes because
American publishers won't do it When he was in the Far East he
had Scott Foresman persuaded to open plants in Tokyo and they were
going to produce f lms in japan to go along with the textbooks but
this project fell through He says the urgent need is to get text
books on a pocketbook bast
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Memo #33
I told Bennett about our Physics series and our Chemistry series.
He had never heard of them. Isn't this a breakdown in our promotion
techniques? Shouldn't we develop a list of a few hundred kay people
throughout the world to whom we automatically send our key material?
Some of this will strike sparks. We can pick up enthusiastic people
who want to promote EBIF - people such as Bennett. I asked him
whether he was right in talking only about textbooks in the sciences,
and we agreed that the two great needs in a country like Ecuador are
the techniques for teaching English and science. I asked him why he
did 't promote our Chemistry and Physics series, and his immediate
reply was that these schools do not have projectors. I told him that
we ought to be able to give them the projectors If they would buy
the films.
This of course led us into a discussion of "Law 480", about
which I know virtually nothing. This is the law under which our
fft.o.fteft4�="14.-eftft
provided
Embassy.
dentally
sur luses are sold In these cou
IL0
es,
es irk
CZ Ii
exchange is
in local currencies for special projects approved by our
Thus there are lots of sucres available in Ecuador. Incl.-
the sucre is a hard currency. The National City Bank lists
it as the fourth hardest currency in the world - better than the
pound or the dollar - preceded only. by the currencies of Portugal
Belgium and Switzerland! Bennett says that If we are paid in sucres
here in Ecuador, we can convert these sucres into dollars
Now I shall try to summarize and pull much of the foregoing
to ether with some comments:
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1) There may be an opportunity in the teaching of English for
Britannica, or for the Film Company, or for both. I have frequently
mentioned this myself in memorandums to Bob Conger and others. m
not clear whether there is a promising commercial opportunity or not.
believe we should explore the matter. Tentatively, am doubtful.
I'm also doubtful of Alex Ladas project in Mexico in illiteracy,
and for the same reasons. The techniques for attacking illiteracy,
and for teaching English, are very simple. "The Good Monsignor" in
Bol via is attacking illiteracy through the radio. The University �l
the Andes Is teaching English with cheap tapes which it makes itself.
And the United Nations or anyone else can cheaply and easily make
filmstrips for the teaching of English or for Illiteracy. I doubt
whether the profit margin is sufficient for us, though the need Is
urgent and great and the market is enormous.
We should look into this field, it seems to me.
As. Harry
Houghton puts it We need a plan." We've been kicking this around
for a long time and we need to develop the information which will
help guide ua Other officers like William Bennett ought to be
talked to
2) The possibilities of marketing records or filmstrips or
tape applied to the teaching of English - may be allied to the
sale of printed materials in the form of textbooks If I were
McGraw-Hill I believe I would lIsten intently to William Bennett,
and try to figure out how to sell my textbooks in quantities in under
developed countries like this and with them to sell my films
Bennett says that Ecuador Is not a completely centralized author
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Memo #33
with everything decided by a Minister of Education. He says there
are six autonomous school systems with independent power to decide.
The two biggest schools In Quito are private. There are seven dif-
ferent universities in seven different cities each seemingly
independent and each city is equipped with electricity.
told Mr. Bennett about the supplemental material which
companies our Physics and Chemistry courses, and I told him we
would send him a full set at once, together with our catalogs on
Physics and Chemistry courses and our other films. He's promised to
write us at length when he has received our material and ideas
Mr. Mitchell will have to decide whether to handle this himself
directly from Wilmette, or whether to channel this through Mr. Ludas
As you will see this interview further persuades me that we have a
very great deal to learn about EBF s overseas activities - and that
to date we have and quite necessari y been operating on a most.
superficial basis.
3) And this leads me to the films. asked Mr. Bennett why
the Embassy should not allocate money under "Law 480" for the pur-
chase of our films He seems to suggest that he thinks this can be
done. He said he would like to make Ecuador a pilot project on
films" that Ecuador is the second poorest country in South America
and that any plan that worked here in Ecuador should work even more
easily in other countries.
Mr. Bennett wants us to see George Allen. He complains that
Allen and the USIA have never developed "a worldwide system for
teaching English." Why doesn't Allen employ Michigan or Ber itz or
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Memo #33
one o our universities to provide the kind of material for teaching
English which Bennet wants Surely this ought to be one of the most
important projects imaginable for USIA I'm really trying to inter
pret Bennett in this question. Indeed, if I were Allen, I would -
bring the textbook publishers together and knock their heads to-.
gether, greased by American money, so that they would move into
these countries with the textbooks at the low price which Bennett
wants. And my hunch is that he is right, that these textbooks printed
In Mexico City or Rio - or printed with offset machinery here in
Quito - could be sold at 600, all within the price range he sets up
and wants, and at a profit
Now it's late and I am far away, and I've spent as much time
dictating this memorandum as was consumed in my conversation with
Benn tt! Might I be in order if I suggest a follow-through in the
form a discussion of all of the foregoing subjects between Bob Conger
who has been here in Latin America and who will be way ahead of me
on much of the foregoing, and Mitch Mitchell? Ideally, Alex Ladas
and John Rhodes would fit in on this. Perhaps Harry Houghton will
be available Harry and John Rhodes will be startled to learn that
there Is not a set of the Britannica in Quito later than 1946 This
set iS in the Municipal Library. The USIA set of the Britannica is
1929. This is a subject of regret on the pare of our officers in
Quito. Most certainly we need a new method of selling Britannicas
to the United States government or a distribution overseas. This
too rates careful and thoughtful study by Harry Houghton and John
Rhodes and our Br tannica Sales Department. Seta of the Britannica
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Memo #33
here are valuable promotion for Bar a, and for the de Sas in their
efforts to sell eets to individuals
Now we most certainly need a full study of everything potentially
involved for both companies in "Law 480"!
Will Mr. Mitchell please guarantee a follow-through with Mr.
Bennett with whom I was much taken?
Dictated in Peru
arh
P.S. - Bennett told me that "Law 4801 prohibits giving money to
pay off debts. Thus the remarkable American School in Quito, and
shall send you and the others to whomI've sent a copy of this -
a copy of a memo describing our visit to this American School -
cannot get funds under "48o" for repayment of loans for build ngs
already built Bennett's trying to work away out of this dilemma.
But under 'It8o" he can and does give large sums to this American
School and others for new buildings. And the question is why such
sums cannot be given for the purchase of projectors and IMF films.
Mr. Cornish Principal of the American School and an unusual woman,
Mrs. Betty Jurgensen Moscoso both regretted the fact that EBF films
were so expensive that they could not get them and use them They
are getting and using films from the USIA but they do not seem to
be conscious of any EBF films among them This whole area needs
exploration Why aren't USIA libraries supplied with more EBF
films Why can't sums under "480" be provided to suitable prospects
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Memo #33
such as the American School, for the purchase of EBP films and pro--
jectors? Now I do not want long personal memos coming to me to
explain these questions, or others I've raised in this memorandum or
others. I ask them only so that Mr. Mitchell and our associates,
together with Newt Minow can explore them and debide what the right
questions are - and then set up procedures under which ttle questions
can be an wered for the benefit of all of us. Please don't think I
am asking any questions on which I want any personal or direct
response.
�":
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ECUADOR Cat. #1657
� Memo #25
March 4, 1960
Incidental intelligence gleaned at the dinner given by the
Vice President, Francisco ILLINGWORTH Ycaza, at the new
Foreign Office on our first night in Quito, Ecuador.
Dinner was attended by Foreign Minister Carlos TOBAR
Zaldumbide and many members of the cabinet.
The Governor sat next to a young Minister of about thirty
who has played a key role in Ecuadorian finance -- and in the con-
tinuing high stability, of the sucrev The average age of the cabinet
is only forty.
'talked at length with a Mr. Halinski, a Pole who works for
the United Nations and is its representative in Quito. He told me of
Paul Hoffman recent three day visit when he started at 8:30 in the
morning with breakfast dates and worked through until one or two
o'clock the next morning.
He said that no one had ever accomolished
so much in three days. Incidentally, he tells me that there is a UN
retDrese
ever*Tr y,
re.o4 Li ;a am
I sat next to Ambassador Ravndal who told me that he'd been
in the hospital in Washington last year for a couple of months due
to an ulcer which developed from the "high tension created by high
altitudes," Ambassador Ravndal says that the doctors told him he
would have done better
'd not been a teetotaler but had had
couple of cocktails every nights Another serious effect of high al i
tude, says Ravndal is the loss of memory. He said he had not noticed
this as yet applied to his wife and himself even though he has been in
Quito for three and a half years. Ravndal says the normal tour of duty,
because of these bad effects, is only two years When he left the
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Memo #25
hospital, Undersecretary Henderson told him to return to Quito but
impl ed he would seek another post for him.
At the dinner Vice President illingworth chatted privately
with the Governor and told him that "regionalism must precede any
successfua operation of the common marke
I!
�
The Vice President threw
up his hands in a gesture of futility at the thought that a small
country like Ecuador could indeed ever become a viable economic unit
After the dinner, Bill Blair came up to Subsecretary Ponce
(second cousin of the President) with whom
for years was legal counsel to the Foreign
Subsecretary he studied law in the United
was chatting.
Office before he
States and seems
(Ponce
became
a warm
and cheerful friend of the United States.) We were in a great high
ceilinged drawing room dominated by a picture of Bolivar, which ad-
joined the big dining room and which is the Told part f the foreign
office, used by the Foreign Office for key groups whenever they meet
in Quito. Bill Blair asked for a telephone. Secretary Ponce exclaimed
with a laugh, "This is the social part of the Foreign Office and we
wouldn't think of installing a telephone," Ponce took him on a long
tour of the business part
for
When
hour
cons
Ambassador Ravndal at a dinner explained
promotion faced by a career officer. Ravnda
t visited with h.LL1 ifl Bud pe t he was
a day learning Hungarian, and afte
derable proficiency in the language.
simply the competition
Is a master linguist.
pending a couple of
five years or so he achieved
This was his eighth language.
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Ravndal describes this competition as: first from the politicians
that have to be taken care of (examples would be the two Lodge
brothers, Mrs. Luce, Bill O'Dwyer, Senator Ferguson to the Philipines
etc.); secondly, from political donors and key figures who want to be
ambassadors (I'd do better - put Mrs. Luce in this category, together
with Jock Whitney and indeed the three prior ambassadors we have
visited - Ambassadors Hill, McIntosh and Willauer); and thirdly,
personal favorites of the President or of the Secretary of State who
have worked closely with them and who have "caught their eye," This
group would be a kind of "palace favorite." (Excellent examples from
y o n days in the State Department would be Chip Bohlen, Selden
Chapin and Jack Peurifoy.)
le great
man scientist and natural
von Humboldt, the
centenary of whose death was celebrated last year, is
here in Ecuador
Humbold
The big hotels in OU>Ito and Quay
qui
great figure
are IA)
The important current in the Pacific which so affects
Ecuador's climate is called the Humboldt current." was told at
this dinner that he left several descendants. illegitimate, Ecuadorans
Ith blue eyes and blond hair
I laughingly described von Humboldt as
the last man who knew everything." (The following day President
Plaza confirmed the Humboldt descendants and mentIoned one es
Manuella, Bo
Istress the last ten years of his life,
again featured in the conversation, partly I suppose because she came
from Quito. The group agreed that she was South erica s most famous
woman. Mr. Balinski suggested that there was a second he I an
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-
mistress of of Cor es. The following day at the home of Gab o Plaza's
wo sisters, we
C vj a 'L�11
told that one of their ancestors was Manuella s
executor or legal counsel in Quito. The Plaza family has a great
many letters from Manuella, written after Bolivar 's death. Although
she was in extreme financial difficulty, she refused to accept a
legacy from her English husband. Dr. Smith has located her famous
letter to her husband and I shall try to send it along. I must say
s the most famous letter I've heard about in ome years and has
been mentioned to us again and again. This is the letter she wrote
her husband, an English shipping merchant who wanted her to leave
Bolivar and return to him. The general tenor is-
y dear husband,
you know you have my respect and I deem you to be a most admirable
man but surely you can understand why I leave you for Bolivar; better
five minutes with Bolivar than a lifetime with you."
There was a photographer at the Vice Presiden
dinner and
afterward when he offered to sell me a picture, as we were getting
into the car, I expressed surprise at such a proceeding at a formal
dinner in the Foreign Office given by the Vice President of the
country but I bought the picture - and when I got home I found that
it was a picture that had been taken that afternoon at our meeting at
the University. After the meeting with the University Council, we
were each given about half a glass of champagne. I remember commenting
that s uhe only
atMeN1101
-gariVc24 ohnMp n(4.
to its Students. In the picture which I'm attaching, the rector of
the University is standing between Governor Stevenson and me. At my
right the tall man Is Ambassador Ravndal and the short one in front
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Memo #25
-
of him him is the vice rector of the University. Others are students
or other members of the Council.
The next night, at a dinner at the Ambassador's we were
entertained by some Ecuadorian musicians, a trio. I was told that
Ecuadorian songs are sad, that the music and themes are characteristic
only of Ecuador. I liked the theme of one of the songs, "If the wood
Is green, it's the smoke that makes you cry." One of the guests ex-
plained to me that the green wood referred to a young maiden.
mkg
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ECUADOR
Cat. #1656
Memo #24
March 2, 1960
MEMORANDUM OF CALL UPON THE RECTOR, VICE RECTOR AND THE
COUNCIL OF THE CENTRAL UNIVERSITY IN QUITO ECUADOR
The group of 6o or 70 arranged itself around a horseshoe table
with the rector and Governor Stevenson sitting in the center at the
head. The rector read the attached statement which Is a good example
of the kind of rhetoric in which Latin Americans like to specialize.
The Governor and I smiled later over this statement--and I submit it
as a kind of case study--"In this dark hour, in which the lords of
material strength pretend to acquire a monopoly of truth, ..." After
the Governor replied In his usual courteous and skillful manner, the
rector explained that the council consisted of nine students, nine
deans--representing the various schools and divisions of the univer-
sity�one representative of the Ministry of Education, the rector and
the vice rector. The rector explained that this was the 'highest
organ of the university, and that the organization of the university
was very different from universities in the United States." The
Governor smilingly commented, "1 used to think as a student that I'd
like to run the un vers ty but later on in life I decided that students
had better not run our universities!"
The Governor opened the meeting by asking about the acute
shortage of facilit es for education at the elementary level The
rector surprised us by saying there was no shortage of primary teachers
but merely of secondary teachers. He was not responsive to the Gover-
nor question.
The Governor told of our visit to the University of the Andes.
He asked about the splendid program under which twelve American univer
si ies cooperate with the University of the Andes which loans money
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o#24
to its best qualified students to take their last two years of en
gineering in the United States. The rector replied that Ecuador
had many students who went to the United States and to Europe for
special studies. He said he favored an interchange of students, not
only of graduate students but of technically trained professors."
Again, he did not speak directly to the Governor's point.
Referring to the Indians, the rector said that "a part of the
problem in Ecuador is the large percentage of Indians who do not
speak Spanish; we do not know the percentage; the real problem is
economic." � At our previous meeting with the president just ooncluded,
he had told us that 95 percent of the Indians in the S erra District
did speak Spanish. (Here is a sharp contradiction of the type we
meet frequently.)
An American exchange professor rose and spoke at some length
about student exchanges One interesting statistic he told us that
five universities in the Un4ted States have over 1000 foreIgn students;
and that at MIT 12 percent of the total enrollment comes from outside
the United State�).
One of the students spoke up to say that a basic problem
South America is the high level of armaments which keeps funds
diverted from education. He told the Governor that the solution of
such an "international problem should interest him "as an American
statesman." The Governor has been
ering on this theme and of
course replied by saying that it was imperat ve to relieve South
America of the burden of armaments
The Governor again repeated that
Latin America should lead the world in disarmament. He said that he
hoped the problems In Latin America which provoke armament--will soon
be resolved.
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The student replied by saying that the military problems
center around rivalries between Ecuador and Peru, between Bolivia
and Chile, between Guatemala and British Hondurae--also in Panama.
Comment was made on the paradox that the countries without
the border disputes have the biggest armaments--Argentina, Brazil
and Chile (although there is of course a minor border dispute between
Chile and the Argentine).
One student demanded the stabilization of banana prices.
quoted at some length from a report I had just-read on the United
0
0
Fruit Company, notably the pages dealing with Ecuador, a report
signed by former Pres dent Gab o Plaza. This particular question
about bananas on the part of this student helps illustrate how wide-
spread is misinformation here.
By and large I felt that the time at the university wasted
wcaQk
a
0
I even think we would have done better sleeping an this first after
noon in this high altitude. Of course, one reason that the meeting
was largely valueless was that it was so big. The meeting helps
Illustrate the element of "risk" in the advance planning done for us
through the Embassies. It Is never possible to know how matters wil
work out--and how productive the meetings will be--and often meetings
such as this are planned for the benefit of our Embassies and their
public relations staffs--rather than to contribute to our own infor a
tion.
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ECUADOR
Cat. #1658
Memo #26
March 2, 1960
Memorandum of Meeting With The President, Camilo Ponce Enriquez, of
Ecuador. The meeting was attended by Governor Stevenson Ambassador
Ravndal Senator Benton and Dr. Carleton Smith.
The meeting was in a long ornate room, the President's office
in the beautiful 16th-17th century presidential palace on the main
square of Quito. This square has the look of the kind of central
square described in the O'Henry stories and elsewhere of an above
average republic. Ambassador Ravndal acted as interpreter.
The president is a man under 50, medium height, bright eye
good profile, handsome, who speaks vigorously and gives an impression
of candor -- although I do not think he told us anything that could
possibly be regarded as confidential. He is the first Conservative
elected since the '90's. He secured 29% of the popular vote but was
elected because the other 71% was divided among several candidates.
Candidate No. 2 received 28.5% of the popular vote. When we asked
former President Gab � Plaza about him, on the following day, he said
that President Ponce had provided a responsible administration- that
he had been moderate in his policies; that he had paid for the ex-
travagancies and debts of predecessors, such as for the purchase of
jet planes and destroyers; that he had strengthened the Central Bank
and maintained the high stability of the currency. (Indeed President
Ponce boasted to us that the National City Bank said that the sucre,
the Ecuadorian currency named for General de Sucre, Bolivar 's top
associate and closest military ally, -- that the sucre was "the
fourth strongest currency in the world." The top three, I later
learned,are the Belgian, the Swiss and the Portuguese
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The President opened the conversation by mentioning the impor-
tance of United States citizens understanding Latin America and the
joint problem shared by the United States and Latin America in the
fight against Communism. He emphasized the great differences in
social structure among the twenty different countries of Latin
America.
The President said that the Communist thrat operates in three
phases or areas:
1. The political phase, and "this is very dangerous". The
Communists claim they are democrats; "they are very subtle".
2. The Communists capitalize on the racial problem; "they set
indigenous people against the Immigrants," reviving the hatreds of
five hundred years ago between the Indians and the whites,
3. They operate destructively and subversively "on the eco-
nomic front".
The President feels it is difficult to fight back on poInts 7#1
and 2. We don't want to criticize our own political system or en-
gage in arguments about it -- and we indisputably have the problem
between the whites and the Indians - but "we can attack on area #3."
The President points to Ecuador's "great potential riches." These
must be re-distributed, he said, 'both the material riches and the
educational riches." Ecuador must bring up the living standards and
the welfare of the masses of the people.
ted to question the President's work distribute"
I asked whether the problemwasn't the creation of new wealth rather
than "re-distribution" The President replied by saying that in
Ecuador there are immense riches which are unexplotted," He said
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-
that Ecuador Ecuador can produce and export more bananas, more sugar, etc.
He said the country needs capital and it needs technical assistance.
Governor Stevenson again asked about the Communist activities,
and I asked whether the President would comment particularly on Com-
munists interests in the field of labor. The President replied
that "the Communists were not threatening in terms of numbers, but
like yeast, Communism germinates itself." (This is exactly the way
Ambassador Ravndal translated the phrase.) The President explained
that the Communists were very adept at exploiting the masses "who
don't know where they are going or what they are up t
of the riots of last year. These were in Guayaquil.
He spoke
He said the
Communists were at the bottom of telems (We've had other reports
saying that these riots didn't have any of the normal manifestations
fle.birnrett-
r ni-..fa
He said It was on..L through government inter-
vention that a revolution in Guayaquil was prevented. He explained
4- e% 4..Incl
Aoi4%#
rleNrrvrrcvin
tR do not have "n a-trect influence' but added,
"they know how to exploit dissatisfaction and how to direct it
against the government."
The Governor asked about the Communist influences emanating
from Cuba. The President replied briefly, "The Cubans have come
here to Ecuador and have had influence over some individuals but
have not had large scale influence,"
The Governor asked how the President proposed to improve the
lot of the people, notably in education and through land reform.
The President replied that in the cultural field, his admin s
tration had endeavored to improve the schools. In three and one-
half years it had built 300 schools. (2,000 more are needed.) He
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said there were 300,000 to 400 000 children who lacked proper facil-
ities and teachers He said his administration had also built a
technical school in Guayaquil.
In the economic field, the President said that his administ a
tion had devoted itself to two major problems: roads and hydro-
electric power. (Ambassador Ravndal broke in and said he had been
here all three and oneg-half years of the President's administration
and he was "a happy witness to these activities.")
The President spoke of the new port of Guayaquil", - one of
six ports being improved and opened. He spoke of the fact that labor
is protected through social welfare legislation against accidents,
unemployment etc. But he added that "many are not covered." Those
covered by social insurance are the federal employees and those who
work for public and private companies. The "indigenous employees"
are not covered. One special feature in Ecuador, said the President
th
^
vuoirs�s
ex=mimlirs,
to bui.La
a house). He did not explain how this worked.
The three big new buildings of Quito are large modern ones with
a big nameplate "Casa de Seguro", the new Social Security Building,
the new Foreign Office' and the new building about to open for the
Congress (It is this last building which was to have been ready for
the Inter-American Conference planned for Quito, and It is a lucky
thing for the builders that the Conference has been postponed!)
When the President was campaigning he said he had promised
land reform He has done two things: 1) encouraged a study of the
problem by the UN and 2) launched an important private project which is
now under way. The problem is not said the President to take land
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away from big land owners and redistribute it to the peasants.
Ecuador has lots of good government-owned land. The problem is to
show how this land can be opened up and operated profitably. The
President's representatives are now dealing with technicians to de-
termine how to bring in people who will train Ecuadorian farmers to
operate the land properly.
The President commented, "If I had gone hog-wild we would have
had inflation." The President Is proud of the fact that the repu a
tion of the sucre is better than that of the dollar.
(I have just been interrupted for twenty-four hours and I
hope the balance of this memorandum does not prove to be
to6 repetitious.)
The Governor asked, "Isn't the Castro land reform movement
popula
In reply the President sought to distinguish 'between the
thinking people and the others
11
..14.4 .�%
11= LJW110
qesliw%
Cii.JLGA.VG0
I asked about Communist infiltration into the labor groups in
Ecuador told him that in the United States we had been told that
the labor groups in Ecuador were "one of the soft spots to which the
communist-led Cuban labor movement might appeal." The President re-
plied that this was correct He said that unlike most
the labor movement in Ecuador i
Communist movement He said the
tries in South America
with the international
been exported to Mosco
the workers themselves are
great mass are "oriented t
the Cuban movement is not
answer this question direc
other coun
affiliated
leaders have
for their education. But he.contends that
not Communists He states flatly that the
wards the West." I again asked whether
ndeed a threat The President didn't
ly but stated that he thinks that it is
a threat all through South Americ
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The Governor changed the subject by asking 'How much do the
Ecuadorian people participate in politics?" -- "How large is your
electorate?" The President replied that Ecuador's population is
4 million (we have frequently been told that it is 4.4 million; this
Is the Embassy's figure, for example). The President said that
1,060,0Q0 of these are registered. (Former President Gab o Plaza
later told us 1,100,000 -- this would be exactly 25% of the total
population) To be eligible to vote a man or woman must be 18 years
of age and must be literate. (Later we were told that to prove his
literacy he must write his name, but that if there is any suspicion
about it, he must take still further tests.) Of the 1,060,000 the
President stated that 800,000 vote,
The President assured us that Ecuador "has much civic fervor,"
The Governor pressed the point further by asking What kind of poli-
tical life do the Indians have?" The President conceded that most
Indians do not take part in politics. (Some place in our papers
occur the figures on the number who do not take part in politics;
they show that 50 of Ecuador population is Indian; 10% Negro-
10% white; and 30% Mestizo). Most Indians are illiterate but "those
who can qualify do take part'. In response to a further question from
the Governor, the President assured us that in the mountainous regions
95% of the Indians can speak Spanish. (Ecuador consists of three
major areas- the coastal area; the Sierra or uplands, in which Quito
is located; and the so-called "Orient which is the great area in
size, located on the east side of the Andes sweeping down to the
Amazon. It is in the Oriente where exists the acute border problem
with Peru.)
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The President. told us that he had started a major road
open up the Oriente. He says this area is very fertile, "with great
riches". He anticipates that his road will join up with a road from
Brasilia. he Ambassador interrupted to tell us that he had visited
the Oriente and that is is so fertile, that he himself, with is own
eyes, "has seen elephant grass nine feet high which grew in the short
space of two weeks,")
Another project of the President is to open up the port of San
Lorenzo -- and to hook it up by road and railroad with a Colombia
border city, the name of which I missed and thus directly with the
Atlantic Ocean. This project, said the President, will be "a substi-
tute for the Panama Canal, and this is very important to the United
States ir tIme of war Plai have
.4�11,
go Aranflnd P
t!
I asked about the President's victory in 1956 - the signifi-
cance of his victory with only 29 percent of the total vote. He told
us that although his total was only 29 percent, this was the largest
number of actual votes of any candidate in the history of the country.
He does not think that any one of the four candidates who are now
running for the presidency -- election day is June 5. will secure
over. 29 percent even though he may exceed his total of vote (On
all sides we are told that three of the four candidates are running
neck and neck .11. +NM the fourth being the radical left-wing Communist-
supported candidate.)
The Governor asked the President how he felt about American in
vestments and in what fields he favored such investment The
President replied by saying that he had tried to make it clear in
many, many speeches that private capi
a
11 receive absolutely
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-8-
equal treatment and protection with Ecuadorian capital. He has
sought to create a feeling of confidence for foreign investors, but
unhappily the amount of such capital has been small, The President
doesn't advise rapid change from agriculture to industry, but he em-
phasizes the fact that there Is a great opportunity for capital to
exploit Ecuadorian raw materials through developing new industry.
Thus Ecuador has cacao and sugar and cheap labor, but lacks a choco-
late factory. (This is exactly the same point made by the President
of Costa Rica.)
For another illustration, he took the 15 or 20 million stems of
bananas which are rejected at the docks, after labor and transporta-
tion costs have been paid to bring them to the coast. (Later I was
told that Ecuadorian bananas some time back had constituted six of
the seven lowesL, qualities of bananas graded on the American market
and now constitute six of the seven highest qualities of bananas --
because of the new rigorous policy of rejection.) These 15 or 20
million stems are rejected because they are too small or because
they've been damaged. They are "a complete loss." Yet the President
says the bananas could be used to make flour or "corn flakes" and the
stem itself can be made into paper, The President has heard that the
French have a system for so using the stems. Further, he has heard
that these stems are "better than jute."
As we wound up our meeting, the President said that he thought
the most important thing the United States has in common with Ecuador
"Is faith." He asked Governor Stevenson on his trip through South
America to do what he could to regenerate the joint faith of North
and South America. He conceded that the United States is now
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necessarily carrying the burden." But he insisted that if the united
States is going to triumph over Communism -- it must have the support
of the 180 million pepple of Latin America. The Governor replied that
he felt that North and South America had failed adequately to exchange
views with each other. Thus the OAS is an organization for officials,,
providing offictals an opportunity to communicate -- but not the
people. Both the Governor and the President spoke of the failure
of press reporting in both continents. The President said that he
was getting lots of information about the United States as is his
administration, but the important thing on which we are failing,
"is to distribute such information to the masses". The President
said he read the New York Times regularly, and subscribes to it, "but
almost nothing is published in the New York Times dealing with South
America and Its
prol-�14:1mR
� �
I
C:�.1
As we broke up, I commented that the flow of the news tends
follow the route of immigration of people. Thus there is a great
deal more published in the United States about Europe than vice
versa -- New York carries more news about Great Britain than London
does about New York. I said I assumed that news abe5 t Spain received
better coverage in the Latin American papers than vice versa.
We
atmosphere
of Indians
were due at the university and broke off the meeting In an
of high cordiality. As we left, we found a large group
in the President's anteroom, a delegation calling on the
President from some outlying village. We met the teacher who was 4
full-blooded Indian, with poncho and pigtail. Later, the following
day at lunch, the Governor asked former President Gab o Plaza when a
man ceased to be an Indian and became a Mestizo. Gab � Plaza replied,
when he puts aside his poncho!" Another common answer to this ques-
tion When he putR on a nair of shoes."
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ECUADOR
cat. #1655
Memo #23
March 31 1960
Meeting with Foreign Minister Carlos TOBAR Za dumbide
(1 like the way our Embassy in Quito capitalizes the name
of the father by which a man is normally known, though the mother's
name, throughout Latin America, normally follows.)
* *
This meeting was late in the afternoon at the Minister's
office and was attended by Governor Stevenson, Ambassador Ravndal,
Senator Benton and Dr. Smith. We were late and were to see the
Foreign Minister later at dinner at the Ambassador's home. The
Governor selected the question of Cuba as perhaps the most interest-
ing one to discuss at our quick meeting. (The call in this case,
was largely because of protocol). When the Governor asked about Cuba,
the Minister spoke at some length. He said that the Caribbean was a
world apart, with a different mentality. He said he had spoke.
4- es
to ft.?
Batista 's ambassador to Quito and had told him that he didn't know
which was worse - Batista or what would come after Batista. He
referred to the "infantile quality in Castro. But he added imme-
diately, "Castro is waving a flag which stirs a reaction in the lower
classes throughout Latin America; anything that promises a new social
order will raise an echo."
The Minister pointed out that it is "not easy to counteract
Castro because he is so demagogical". But he said that he did not
�
think Castro would last very long politically. He commented, 'Castro
program is ju-
a serious one"
At the beginning, he said, 'All Ecuador was enthusiastic"
then he added, "now It is cool".
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Even if Castro is not a Communist, said the Minister, he lets
himself 'be taken along." The Communists infiltrate. They have
a large influence in Cuba he reports ana this Is increasing
In response to my question about Cuban efforts with the labor
movement of South America he said he had detected- no influence thus
far but he conceded that the Cubans could have an influence on
Ecuadorian labor.
The Mini ter said that the Cubans had fired all their ambas-
sadors The new one has not yet arrived here. He reported that
President Betancourt of Venezuela had kicked out the replacement.
I asked the Minister whether Cuban ambassadors throughout the con-
tinent, if they were Communist dominated as reported, were not a
serious threat. The Minister said he did not think the threat was
serious here in Ecuador, but he felt it was very important elsewhere.
Ambassador Ravndal interrupted to say that he thought this develop
was most serious He reminded us how the Czechoslovakian Embassy
here in Ecuador had interfered with internal policies and the
Ecuadorarr. had kicked it out
The Governor asked whether Castro might not prove to be a
Cuban Kerensky.
The Minister did not reply directly. He explained that the
Communist party in Ecuador was small and "makes no dent and is of no
danger." But he said that the Communists in Ecuador "worked on groups
which are not Communist and through them exercise. a big influence".
He mentioned specifically a group of laborers on the coast which he
said was not a union which is known as the CFE
This group is now
allied with the Communist
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The Communist party is legal in Ecuador. When the Governor
asked the Minister for other examples of groups with which it is
influential the Minister mentioned socialist groups
(1 assume he
referred to the Marxst-socal1sts and not the groups which support
Gab � Plaza's candidacy, some of which carry the name socialist).
The Foreign Minister Is a slight man of medium height with
wavy, curly, iron-gray hair, very handsome a chorus girls dream of
a Latin lover - and, I am sure, most adept at the rumba.
Dictated in Ecuador
arh
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#Memo 23
ANNEX 6
Carlos TOBAR Zaldumbide
Minister of Foreign Affairs
Born in Quito, December 29, 1912, son of Dr. Carlos TOBAR
Borgokno, Foreign Minister and unsuccessful Conservative presidential
candidate in 1912. His sister Rosario, married Chadwick Bragglotti,
now U. S., Consul General at Seville, Spain. Tobar's stepfather is
Dr. Ricardo CRESPO Ordonez, Senator for Highland Agriculture and
brother of the Minister of Social Welfare, Nicolae CRESPO Ordonez.
Tobar graduated from the Federal Institute of Technology i
Zurich, Switzerland, in 1934, and studied diplomacy and law in PariS,
1934-37. He was Second Secretary of the Ecuadoran Legation at Madrid,
1939-41; Second and then First Secretary at Rio de Janeiro, 1941-44;
First Secretary and Charge at Lima, July-August, 1944.-0He was then
asked by Foreign Minister Camiio PONCE nriquezoto serve as his
Under Secretary, which he did until Ponce's resignation in July, 1945.
He was a delegate to the Conference on Problems of War and Peace at
Mexico City and the United Nations Conference at San Francisco in
1945.
From 1945 to 1948, he devoted himself to the family interests,
Including a bakery in Quito, a potato farm, and a dried milk plant.
In 1948, he campaigned for independent presidential candldate Glo
PLAZA Lasso, and upon Plaza's election was again named Under Secretary
of Foreign Affairs. In 1949-50, he served as tecretary General of
Public Administration (staff assistant to the President), and in
52, returned to the Under Secretary post. With the election of Jose
VELASCO in 1952, Tobar returned to private life; but in 19560he cam-
paigned for Conservative candidate Camilo Ponce, and has been Foreign
Minister since Ponce's inauguration on September 1, 1956. Tobar and
Minister of Public Works DURAN are the only two members of Ponc4 s
original cabinet who are still in office.
� Tobar is married to Adela EASTMAN Lasso, daughter bf a Chilean
Minister to Ecuador and a first cousin to Gab o Plaza. They have three
children. Tobar is slendet blackhaired of medium height. He
speaks French and some English
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ECUADOR
Cat. #1664
Memo #32
3/7/60
MEMORANDUM OF VISIT BY GOVERNOR S TEVENSON AND SENATOR
BENTON AND PARTY WITH FORMER PRESIDENT GAL� PLAZA
TO THE AMERICAN SCHOOL IN QUITO
Gab o Plaza was President of Ecuador from 48 to 52 and
was the first president to complete his full four year term in some-
thin like fifty years. His father had served as President for two
terms before him. He is possibly the leading candidate in the elec-
tion scheduled for June 5th. (A PresIdent cannot run to succeed
himself in Ecuador, and Plaza did not run in :56) He was the
founder in 1940 of the American School, with the cooperation of the
American Ambassador. He is chairman of the Board of Trustees and
he took Governor Stevenson and me to visit it, together with our
associates.
The school has about 800 students, from Kindergarten
to high school f whom 60 are Americans. Its principal is Mr. Robert
Cornish with en M.A. from the -University of Iowa who has been here
for 2-1/2 years The principal of itS elementary school is Mrs Betty
Jurgensen Moscoso (married to an Ecuadorian) with a degree from a
teacher college in North Carolina, a most efficient sandy haired
robust woman who gives an impression of great internal power and
determination. The tuition is $14 a month.
In 1940, the big private school in Quito was the German
school, as it was In many cities throughout the world. The Germans
did a most extraordinary job In developing such schools, in full
knowledge of their propaganda value
(The Foreign Minist�in Bogota
told us that the German School is today the biggest school in Bogota
and that his ten year old daughter attended it.) Mr. Plaza as the
Nazi threat Intensified in 1940 set up the 1erIcan school. (The
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Memo #32
German School was closed down during the war but is now open again
and prospering,)
The American school has scholarships. Gab o Plaza later
told us that many scholarships have been given to full-blooded In-
dians who have later done phenomenally well in the United States
1")
in our universities. He told us of one Indian family with ehree
sons who received scholarships
boys are Indian peasant farmer
Q
The four grandparents of th three
The father took a law d g ee and
practices in Quito of the three sons, all of whom
the American school one secured a scholarship at P
graduated magna cum laude- he was then given $2,000
have gone through
lnceton and
for a graduate
fellowship to study philosophy at Harvard; but he decided that the
Philosophy Department at Harvard since Santayana death had gone
to pieces and he turned in his $2,000 and is now at the SOrbonne.
The second son is a top athlete, and is earning top scholarship
honors at the University of Texas The third has j St finished at
the American school and is already a concert pianist
We were told that most children some to the American School
to learn English. The principal and others explained how all of
them graduate "friendly to the United State and so remain. The
school is co-educational
Is new in Latin America. Not too long back girls and boys were
always kept strictly and widely separated. Mr. Plaza told vus that
Latin American women have only in this century been breaking out
of "purdah' and that the progress in Ecuador has been marked and
e saw the boys
about even in girls and boys This itself
with this school as a symbol of
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Memo #32
and girls of the second grade dancing together, and very cute and
amusing they were. They were doing native Ecuadorian dances, in
which the handkerchief is used to cover the girl's face and eyes,
In the manner of what Dr. Smith called the old flirtation dance."
(This kind of co4-education is ln the best tradition of the Quakers.
The school provides busses. It is now trying to get more
4.;
university scholarships in the U. S. for its bright students, along
the lines of the plan at the University of the Andes described
elsewhere. Mr. plaza
r4 vs
ea=mg2
Vii."1601.11.44114.0
of
regional educational centers at
the advanced level. He wants one university to concentrate on
medicine, another on engineering, still another center perhaps for
veterinarians. He wants such centers to draw students from all over
Latin America. He thinks these would 'break down nationalism."
pointed out the difficulty of establishing such centers except in
conjunction with top universitIes with distinguished scholars in the
natural sciences. He says he is willing to accept all the centers
in the United States
students to them.
�
=f1
L
he can get the scholarships to send the
The American School has two rivals and is very conscious of
this rivalry:
1) First there is an American Missionary school here in
quIto, with an attendance of about 125 who are all Americans about
double the American attendance of Plaza's American School Corn
ish and Mrs. Moscoso feel strongly that Americans here are not well
advised to send their children to this competitive American School
They feel that American children here should turn their backs on this
kind of solation". They feel American children do much better
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Memo #32
when they mix freely with Ecuadorian children in their schools. The
argument of course for the Missionary American School is twofold:
a) families who live here, away from the United States, want their
children to be "American" and want them exposed to all possible
American influence. (I don't happen to believe in this argument
not at all, and I am wholly on the side of Mr. Cornish); and b) the
academic standards are higher in the Mission school.
(Ambassador Ravndal testified to this last point and says
that it is so difficult to get a child into this_ Mission school
that most of his people in the Embassy aren't able to secure admis-
sion for their children; Ambassador Ravndal suggests that the 60
Americans in Plaza's American School are in part an overflow of
tit
Americans who are unable to get into the Mission School.) However
the academic standards of Plaza's school are going up and it has
been admitted to "The Southern Conference" or some other such as so
elation which grades schools in the United States
2) Although Mr. Cornish and Mrs. Moscoso are very conscious
of the competition from the Mission School, and resentful of the
narrow appeal to American students only, they treat with disdain
their second competition. This is Cardinal Spellman s effort to
embarrass them He started two American schools right next to them
They are called 'Cardinal Spellman s American Schools." One is for
boys and one is for girls and they are separate and well apart. They
opened last year. They are supported by the church here in Quito,
which in turn is helped from the United States
party of course
to undermine us." He says it hasn't hurt his school in any way.
-Plaza3 whose
1as effort was
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Memo #32
Sadly he told us how some years back, each week, his American
School had in attendance a priest, a rabbi, and a Protestant minister
They came to speak to the students and to instruct them. Cardinal
de La Torre the head of the Catholic Church here, forbade the
attendance of the priest. This made it necessary to call off the
rabbi and the Protestant clergyman. Mr. Plaza told us this story
to illustrate to us the deep seated antagonism of the church towards
schools that are secular. Dr. Smith told me later that until less
than 100 years ago Ecuador operated under a concordat with the
Vatican, closer than that of any other Latin American country, and
that the complete educational system here was wholly under the
control of the Vatican. Only in 1902, under the Presidency of Gabo
Plaza's father, was complete independence of the church. achieved.
Earlier the lands of the church had been expropriated and turned
over to hospitals, which had been one of the exclusive provinces
of the church. But only in 1902 were laws passed which permitted
civil marriage, which permItted divorces which sharply and clearly
set up all education out of control of the church and which fully
and completely separated church and state.
I am sending along a batch of material from Mrs. Moscoso
which I found at the hotel. A lot of this is in Spanish. The
books seem to be the School Yearbooks for 58 and 59. Perhaps we
can have them quickly reviewed. I suggest they be sent along to
Mitch Mitchell. More important perhaps is the 'Catalog", I do
not know the significance of the "Colegio Ameri ano De Quito"
but I assume that this is 'The American School" (and I assume this
because I see it was founded in 1940) This catalog should b
considered as a supplement to this memorandum.
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Memo #32
6-
And I am attaching the materials given us b the American
Embassy dealing with "education" which gives more background mater
tal on this school and on the Cardinal Spellman Schools. I see
from this material that the American School meets the standards
of the Southern Association of Colleges and Secondary Schools."
P.S. A$ reported in another memorandum, Mr. Cornish and Mrs.
Moscoso claim they couldn't get Britannica films because they were
too expensive. I want to explore
.es 1 C t4-
1.4.J.MS an 1,4
bought for
such schools through the operation of "Law 486", though the USIAA
or Point 4, or otherwise. I'd like to take this splendid school
as a case study for exploration of how to develop methods or
techniques by which we can get EBF films into foreign private
schools where they are desperately needed.
Dictated in Peru
Attachments
arh-
0o
0
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ECUADOR
Cat. #1659
Memo #27
March 7, 1960
MORN N AND LUNC ON W ITH FORMER PR ,S IDENT GALO PLAZA
President Plaza took us to the St Augustine Monastery and
a most memorable experience it was This is a monastery of 37 Monks
surrounding a great cloister dominated by oil paintings by famous
16th or 17th century Ecuadorian painters. These paintings deal wholly
with the life and trials of St. Augustine.
The central attraction of the monastery is a beautiful long
room where the Monks meet and have met for 300 years or thereabouts
This is known as the "Charter Room. 'f Here in this room in 1809, the
first Latin American declaration of independence from Spain was
signed by 30-odd Ecuadorians. Two of these men are great-great-great
grandfathers or thereabouts of Mr. Plaza. 22 of them were later
captured and executed by the Spaniards, including Plaza's two an-
cestors, and their bones are intermingled in a common grave beneath
a great stone in the center of the Charter Room. The room is high-
ceilinged and surrounded by beautiful hand-carved wooden walls. The
death of the 22 patriots was one year to the day after the signing
of the charter".
We drove with president Plaza to the extraordinary farm of
his two unmarried sisters Marta and Joy (1 forget the Spanish name).
We drove through several valleys. There are 16 of these great valleys
in the Sierra or highlands of Ecuador, one of the country's three
great geographical areas. We drove over old roads which were fin
ished with cobblestones put in by hand by the Indians perhaps 50 to
75 years ago-(D Smith), and perhaps far further back,. These roads
wind over the mountains and the land is fertile and the scenery
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#27 .
beautiful. It's It's easy to overlook the small brick hovels by the
roadside, inhabited by the Indians - (average per capita income in
Ecuador is $190 second lowest in Latin America).
President Plaza and Governor Stevenson sat in the front seat
of the car and I missed parts of the conversation. In one of the
valleys we passed, Mr. Plaza told us that the estate had been broken
up so that the average holdings in that particular valley were only
50 acres each. He said that koo acres would be the biggest holding.
We saw many impressive old gates to the big ruined haciendas of the
past. This break-up of the big estates has not been done by any
legislative "land reform" but strictly by economic processes. Plaza
pointed out that there were still very large land holdings on the
coast. But the haciendas in this valley had broken up by processes
of disintegration. He said it wasn't necessary any longer for pur-
poses of prestige for Ecuadorlans tohang n to lande The new profes-
sional groups do not feel they need land. But the landlord traditiOn
is still strong and many of the Indian holdings require annual pay-
ments to landlords such let us say as an annual pig on Christmas.
Thus the Indians often do not have full and valid title. He wants
to achieve this for the Indians and it is not easy.
Plaza pointed out some of the sharp differences between
Ecuador and Peru. In the latter, he says there are only about
400 families, descendants of the viceroys and old families, who own
practically all of the good land.
anti o
her
He explained that in Ecuador he
.
eaders were trying to channel the revolution," He ex-
pects that in Peru, where no such effort is being made, there may be
"an explosion." He says that in Ecuador, through developing the
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Memo #27
.3
country resources, he hopes that "extremes" will be avoided. He
spoke of the drastic medicine administered by Perot) to the Argen-
tines. He asked whether Argentine could survive Peron, preserving
Its democratic processes: it still remains to be seen. He commented
that Brazil seeks to achieve progress through inflation. He des-
cribed how the inflation constantly calls for "new salary increases,
,g4wa"....1"enr
new nr_ntinas of money,"
(Attached is the background memorandum provided by the
Embassy in Quito - on Presidential candidate Gal() Plaza Lasso.
(My dictation was broken here by dinner in Guayaquil and
please excuse repetitions henceforward
-)
As we drove along the cobblestone road, Mr. Plaza suddenly
stopped for three people advancing towards us. Out we piled to be
introduced to former President slero Ayora, now 87 years old
the President of Ecuador in the 208. He was walking down the road,
with his estate on either side, accompanied by his wife and son.
He is more than half-Indian; his wife is "pure Spanish". He is a
practicing physician, head of an important maternity hospital. He
was treated with great respect by Mr. Plaza and we later passed
villages and schools carrying his name. Plaza used him to illustrate
that the 7 or 8 million Indians in Ecuador, Bolivia, Peru "have
great potential."
Plaza and the Governor fell into a discussion of the border
argument between Peru and Ecuador. Plaza said, We should have
an armed limitation conference as soon as possible; such a conference
for all of South America will force Ecuador and Peru to settle their
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own prolAem " plaza said that Ecuador spent 36% of its budget on
arms, but Peru spent 50%. He told us that Peru still had three
separate miflisters, one for air, one for navy, and one for the army.
He thinks that internal pressures may be developing in Peru against
such high expenditures for armaments. He seems to feel that the
border dispute could probably be settled if Ecuador is given a navi-
gable port on the Amazon. He said that bettereconomic Velationship
between Peru and Ecuador would help. I gather that the coastal
areas of Peru are not fertile, as are those of Ecuador. Plaza says
it would be cheaper for Peru to import agricultural products from
Ecuador, bringing them down the ocastline, than it is for Peru to
import such material over the Andes from Brazil or otherwise. Plaza
urges the development of better trade relations between Ecuador and
He suggests that they have complimentary economies.
The rivalry between the two countries goes back to Colonial
times And the border argument id based on different interpretations
of treaties and agreements dating back to Colonial times. Thus the
church, back in the 16th century, held that the territory under dis
cussion - was Peru's. But the imperial rulings from Madrid seemed
to support Ecuador's claim. Plaza said that as long as Ecuador had
plenty of available fine and productive land facing the Pacific,
Ecuador neglected its oriente province with its land fronting the
Amazon basin: Peru, without comparable lands facing the Pacific, did
much more with its eastern Amazon land.
the best of the argument. Now racueluuL extremists
want
back for Ecuador.
This particular dispute is a very sore and cancerous spot,
and President Lopezeoes referred to It specifically when he said
And to this extent Peru has
U e aim .11464
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Memo
that it had to be cleared up before a general Latin American dis-
armament agreement could be reached.
I could write a lengthy memorandum about the visit to the
farm of the two sisters. They help illustrate the great gap here
in Ecuador, and in other Latin American count...4.es, between the rich
families of traditional power and wealth - and the masses of the
poor, most notably the Indian. Gal() Plaza's father was a self-made
man, a teacher who became a general and who fought in the armies
of El Salvador, Costa Rica and elsewhere. Indeed in the late nine-
ties he was Minister of war in Costa Rica. He was President of
Ecuador before he was 40. In his late thirties, he married a rich
girl of 21 from an old and distinguished Ecuadorian family. Her
father was so angry with her for the marriage that he never spoke
to her again
but he did not disinherit her. (I don't know whether
he could have) Mrs. Eastman, who sat next to me at the dinner
given by Ambassador Ravndal, is a daughter of a sister of Gabo
Plaza's mother. I have not made inquiries about the Plaza family,
but from her I learned they own a house in Quito, a very large farm
some 80 miles from Quito, to which Plaza constantly referred - and
indeed I was later told that the family, is so dominant in the pro-
vince in which this farm is located, with so many hundreds of Indian
families dependent on the Plaza family - that people joke about Gabo
Plaza controlled vote in this particular province. He has taught
the women on this farm to do hand embroidery, and engage in other
local handicrafts, from which some earn as much as they do from their
vagular wages on the farm
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MO #27.
The Plaza sisters' farm Is beautifully landscaped with run-
ning water and a waterfall, acres of flowers, a large high ceilin ed
house of 15 or 20 rooms, a marvelous herd of cows which contain
champion milk cows for all Ecuador, a big section of farm land de-
voted to corn,
� jp
etc. We were shown a cottage with the bedroom
of the Indian who manages the
.I. jL.ot
of cattle, and the complicated
scholarly technical books which he reads about agriculture, even
though he has not proceeded beyond the fourth grade. We were also
shown the 'Trophy Room" in this cottage full of cups and statues
of cows and trophies of all kinds.
mil
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ANNEX 5
Gab o PLAZA Lasso
Radical Liberal Party Presidential Candidate
Born in New York City February l7, 1906, the eldest of
the three sons of Leonidas PLAZA Gutierrez, Radical Liberal PresA.-
dent of Ecuador (1901-05, 1912-16), and Avelina LASSO Ascazubi,
member of an old Quito family. His brothers are Leonidas, now
Ambassador to Great Britain, and Jose Maria, Liberal vice Presi-
dential candidate in 1956. Gala received his entire education in
the United States, graduating from the University of Maryland, where
he was an outstanding football player. In 1931, Plaza returned to
Ecuador, after 12 years in the States, to assume charge of his
family's extensive ranches and plantations. He has since taken an
active interest in Ecuadorian agriculture.
He was President of the Quito City Council (equivalent to
Mayor) in 1938. From December 1938 to August 1940, during the ad-
ministration of President Aurelio MOSQUERA and Andres CORDOVA,
he served as Minister of National Defense. In 1940 he was a co-
founder of the American School of Quito and has been an active
member of its board ever since. In 1942, he was briefly imprisoned
after his brother Leonidas unsuccessfully attempted to overthrow.
President ARROW) DEL RIO.
Following the successful revolution of Jose VELASCO in
1944, Plaza was named Ambassador to the United States serving un-
til June 1946. He was a delegate to the United Nations Conference
in San Francisco and to the first UN General Assembly In 1945.
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Menlo
Plaza resigned from the Radical Liberal Party In 1939 and
rejoined it in 1959. In the intervening years he was active as an
independent liberal. In 1947 48 he served in the Ecuadoran Senate.
In 1948 he defeated the Liberal
Alberto ENRIQUEZ Gallo and the Con8ervattve candidate, Manuel
Elicio FLOR, for the presidency, receiving 115,469 votes out of
282,256 cast. In 3.952 he became the first president 8in0e�1924 to
complete a four-year term. He has since been active in United Naft-
ocialist Coalition candidate,
tions affairs, heading the UN mission to Lebanon in 1958. On
January 24, 1960, the Liberal Party nominated Plaza for a second
term as president.
Plaza is about six feet tall well-built, grey-haired; he
is married to Rosaria PALLARES Zaldumbide and they have five
4bles41Asneft-rN
He slme
ks excellent Enalish, with viturally no accent.
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GUATEMALA
Cat. #l&'#8
Memo #16
February 24, 1960
Memorandum on Visit by Governor Stevenson and Senator Benton _th
President Ydigoras of Guatemala
President Ydigoras spoke softly and I missed part of his
comments and thus asked Dr. Smith to dictate his recollections of
the interview. (I shall send this along.) I thought I would supple
ment Dr. Smith's recollections with a few of my own The President
seemed to speak with candour. He invited us to go by plane to spend
the night at Tikal which unhappily we were unable to do in spite of
our developing interest in archaeological sites throughout Mexico
and Central America. The President commented "Guatemala is a small
country, but it is not so small that you can see it all in one day!"
His remarks were livened by wit throughout.
The President was elected in 1958 at age 60 and he spent
a good part of the next two years, at least the weekends, visiting
the smaller
C
.c1 talkl
the Indians. Our former am
bassa or Mr. Mallory, accompanied him on some of these trips, he
said. (I later made inquiries and received an estimate of three or
four The President talked to the Indians about their needs notably
their need for water, housing and schools. He mentioned these three
things particularly. Then, he said to everyone's surprise in the
recent elections he won control of the Assembly. He attributes this
victory to those two years of campaigning
The President says he is trying to run a good democracy and
that this should entitle Guatemala to special consideration from the
United States He feels this factor is not sufficiently we ghed in
the balance in determination of United States policy in extending
credits and loans
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Memo #16
Of the 2,000 communists who fled the country in 1954 when
the communist dominated regime was overthrown he has permitted about
a thousand to come back into the country. He lets them trickle back
a few at a time. He ,Inks their impact will be much less than it
would be If fwhe�r all came back at once. He gives them freedom when
they, return. He spoke of a former Foreign Minister, who drew a crowd,
of 1500 at his first lecture, after ills return, something like 500 at
his second and 50 at his third. After a few more days, this man left
the country for Havana. Some of these returned exiles have abandoned
communism and are working out very constructively, indeed most of
them are.
The President spoke strongly against Castro. He used dis-
couraging adjeotives which I have forgotten.
He said laug4Ingly that all the people who had jobs in his
administration were called 'the party in power," and all those who
had,no jobs were those of the opposition"!
The President was formerly Guatemalan Ambassador to London.
He spoke of the long time which Is required to develop a democratic
position for a country like Guatemala. He wants American understand--
ing in this process.
President Ydigoras impressed Governor Stevenson and me with
his candour, his competence, his vigor and wit, and his seeming capa-
city for leadership. The fact that I do not more vividly remember
more details of the conversation is due to the fact I did not take
notes, in part because I did not hear all of and also that 36
hours have elapsed before I have had a chance to dictate.
President Ydigoras is 62 years old and in fine physical
fettle. He neither drinks nor smokes
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MEXICO
Cat. #1675
Memo #41
February 12, 1960
VISIT AT HIS OFFICE WITH PRESIDENT
LOPEZ MATEv8 OF NELL 0
Governor Stevenson and Senator Benton
Ambassador Hill took us to the President's office and then dis-
creetly withdrew as he had when we called on Foreign ra,unister Tello
in the morning.
did not get to,w, complete a record of this conversatIon at the
beginning. Dr. Smith, our interpreter, was Interpreting hastIly in
a low voice directly to Governor Stevenson and I missed some of the
early parts. The President and the Governor interchanged comments
about the President's recent trip to several South American countries,
The President listed as principal concerns of the South American
Countries, applied to the United States:
1, The lack of sufficient credits from the United States,
(He pointed out that after President Eisenhower's visit
throughout Latin America, this problem will be better
understood.)
American companies take out too much in profits and
leave in too little for investment and development.
Growing out of the visit we had had with Senator
Morse, I asked him whether this indeed was true.
told him that Senator Morse had reported to us that
this was believed to be true but that he did not
think that it was true in fact The President thinks
that it is true in fact. This caused Governor
Stevenson to comment that this charge perhaps mostly
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Memo #41
sappl I
ex
oil, for example
one or two other
tra active industries - lead copper
and mostly in Chile Venezuela and
countries.
The President pointed out that the capacity of the
Latin American countrIes to buy from us and others,
had dropped shortly after the war, and that this
greatly aggravated the need for retaining profits
from merican companies - and greatly intensified
the need for capital and cred ts
The stabilization of commodity prices. This has
been Point No 1 on Foreign Minister ellois list
The foregoing caused me to inquire whether the President, In
of the fact the economic issues were the Only ones he'd men
rid
the
replied that these were those which were funda
reo ed thought
He wsavenfbei
wea.
ii
412Milda
411.0.06wIMO
nse to a query from Governor Stevenson
about communism In South America that many "news reports" are inter-
preted by communists on the staffs of the papers Into which they have
infiltrated and thus many newspapers refleOt the Communists' v ew,m,
point
But he said he thought there were few Communists numerically
throughout the continent-' 'but they make a lot of noise."
The President said there IS criticism of the Interpretation of
news reports from one Latin American country which are filtered
through the New York offices of our wire services into another
Latin American country. He says that many think that su h news
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reports are doctored in transit. I asked him whether he thought this
was true in fact, I don't believe he replied to this directly.
repeated, 'They think it."
He brought up the fact that the U.S. Bens i
cast off arm
and to the wrong places in Latin America. He says that we've sold to
anyone who warits.to buy. My notes make me think I was wrong in
reporting the phrase "chain reaction" to Minister Tell�. At any
rate, President Lopez Mateos used It about Ecuador versus Peru versus
Chile versus the Argentine versus Brazil.
The President commented that we sold such arms 'dirt cheap."
Either he or the Governor pointed out that this whole subject is
picked up by the Communists and used by them as a method of attacking
the United States.
The Governor asked the President, "what could the hemisphere do
to control armaments?" The President feels that we must seek to
clean up the fundamental problems ..at plague us and wht h cause the
nue
ountries to buy armaments. Thus the President says that we
must clean up Trujillio. We must solve the boundary problem between
Ecuador and Peru. This last he regards as fundamental. He says the
United Staten should back up the earlier treaty between Ecuador and
Peru and bring pressure on the two countries to live up to this
treaty. But he commented sadly, II don't know what you can do about
Trujillio!"
The Governor, deeply interested In the subject of disarmament
asked whether many Latin American countries wouldn't buy from the
Iron Curtain countries If the United btat s refit
e I hem,
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Memo #41
This caused the President to reiterate the theme, must eliminate
the basic causes." The Governor suggested that there is another
cause for the purchase of armaments and this is the power of the
miliary groups in many various countries, so-mcalled military cliques
Vt
The Governor asked, "Wouldn't Brazial which wants to be a great power
buy from the Czechs if the United States refused to ell?' The
President replied that the United States would have to put the brakes
on slowly and gradually,
does not suggest an out and out embargo
because of this very threat of purchases elsewhere In effects tle's
suggesting a U.S. tightrope operation but with the end objective
to sell as few armaments as possible. (In such an operation our
military missions as described by Admiral Briggs in New York see
Holland briefing could play a key role:)
The Governor spoke ot the fact that Mexico has the smallest
percentage of its budget for armaments of any important country of
the world. He asked about Mexico as an example to the rest of the
world. He suggested more aggressive Mexican leadership looking
toward disarmament throughout Latin America He made a private
appointment with the president to discuss these or other matters with
him further. (Later the Governor reported no significant progress
on these questions in this subsequent interview.)
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Cat. #1624
Memo #5
February 15 1960
DISCUSSION WITH MINISTER OF EDUCATION OF MEXICO
DR. TORRES BODET - IN HIS OFFICE
Governor Stevenson and Senator Benton
Under Torres Bodet's leadership Mexico is engaged in a great
new 11-year 'Primary Education Plan" for which 70,000 new teachers
are required. This year 4,000 new posts have been opened up with
teachers provided, but Dr. Torres Bodet reports that this is too few.
He gave us these figures when we spent an hour or more with him at
his Ministry during which he pointed out Mexico's urgent need for new
schools and for teachers for primary education.
Torres Bodet referred to his program as a "very big and costly
one." His present budget for education is 18-1/2 percent of the fed-
eral budget for 1960. It amounts to 18,000,000 million pesos. (Check)
But for his new 11-year program he needs 400,000 000 more pesos - or
more than double on the average over the period, of his present
(Check)
Dr. Torres Bodet feels his great program is much more than an
attack on illiteracy, though he points out that the real way to learn
to read is in school
He referred to his ramous campaign of l4 years
ago when he was also Minister of Education and when he called on
ever
not read how to do so. This he said was successful
and then the enthusiasm declined. My supposition is that the enthusi-
asm declined when Mr. Torres Bodet moved 1.
his leadership was lost
Mexican who could read - to teach one other Mexican. who could
He was Foreign MI
hree years
other fIelds and when
ter in 1947 when I spent
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Cat. #1624
Memo #5
February 15, 1960
DISCUSSION WITH MINISTER OF EDUCATION OF MEXICO
DR. TORRES BODET - IN HIS OFFICE
Governor Stevenson and Senator Benton
Under Torres Bodet 's leadership, Mexico is engaged In a great
new 11-year "Primary Education plan" for which 70,000 new teachers
are required. This year 4,000 new posts have been opened up, with
teachers provided, but Dr. Torres Bodet reports that tlals is too few.
He gave us these figures when we spent an hour or more with him at
his Ministry during which he pointed out Mexico's urgent need for new
schools and for teachers for primary education.
Torres Bodet referred to his program as a "very big and costly
one." His present budget for education is 18-1/2 percent of the fed-
eral budget for 1960. It amounts to 18,000,000 million pesos. (Check)
But for his new 11-year program he needs 400,000,000 more pesos - or
more than double on the average over the period, of his present rate.
(Check)
Dr. Torres Bodet feels his great program is much more than an
attack on illiteracy, though he points out that the real way to learn
to read is in school. He referred to his famous campaign of 14 years
ago, when he was also Minister of Education and when he called on
every Mexican who could read - to teach one other Mexican, who could
not read, how to do so. This he said was successful for three years
and then the enthusiasm declined. My supposition is that the enthusi-
asm declined when Mr. Torres Bodet moved into other fields and when
his leadership was lost He was Foreign Minister in 1947 when I spent
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Memo #5
six weeks in Mexico City as Chairman of the U.S. Delegation at the
Second General UNESCO Conference, and it was then I first suggested
him to our State Department as a possible Director General of UNESCO.
(A recommendation opposed by our Mexican Ambassador Thurstone who
felt that Torres Bodet, a friend of the U.S� was too valuable as
Foreign Minister!)
The Minister's emphasis on illiteracy today has shifted. It
is now primarily in the field of primary education (six grades). He
wants to build the schools up throughout Mexico, adding a grade at a
time. In the rural areas today, there are often only three grades.
Torres Bodet says there are now four and a half million child
ren in primary school. By the end of his 11 years, he hopes to step
this up to 7,200,000. In the last 50 years, since the revolution of
1910, the fIgures have stepped up from 2,000,000 to four and a half
million. Now he hopes to add as much as another 3,000,000 in 11 years.
He says that there are 2,900 000 of the four and a half
million ch.ldren In the first grade. Only 920,000 of these go
along into the second grade - better than a 50% mortality. In re-
sponse to a question from Governor Stevenson, he said that the fathers
think a child should be able to learn to read and write in a year,
that the fathers agree that this Is important and are willing that a
child give a year to it - but not two years.
Only 300,000 children finish all six grades and these are
mostly in the cities. The big deficit of course is in the rural areas
and thus the Minister wants to put the first emphasis on the six
big step forward this year is his plan for free textbooks for the
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Memo #5
first four grades He gave us samples which have already been
printed for the first grade and I shall send these along to Mr.
Ladas and Mr, Mitchell. The second grade textbook is on the way.
By March, textbooks for all four of the first grades will have been
printed.
The Minister described the rural schoolhouse as one that will
hold 50 children, equipped for a house for the teacher. I am attach-
ing a booklet in Spanish which he gave me and which I believe will
give much more about this. In each Schoolhouse, ideally, there will
be a projector for film strips and a lamp which can be used for radio
also. There is, of course, no electrification.
One reason the Minister feels that the rural schools should
be favored is because the city children are exposed to TV and have
other advantages.
The Minister favors film strips for the primary schools
rather than motion pictures, and not only because they are cheaper.
He says the film strips are better for the 27,000 teachers who do
not have adequate diplomas - and who need to do their teaching in
conjunction with film strips. He agrees that the primary teachers
also need television and motion pictures, but the big chance is the
film strip "at the mass evel." He wants the teachers "to do the
explaining," The motion pictures, however, "are good for high
schools" in the cities where there is electrification. He speaks
warmly of the UN project which he says is"developing well techni-
cally, but has no budget." (I told the Minister of my talk at lunch
with Dr. Carrillo Rector of the University, on which I have reported
in my memorandum to Mr. Ladas.)
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Memo #5
Dr. Torres Torres Bodet continued to emphasize that the need is for
inexpensive schools, and he stressed the fact that the teachers are
more important than the buildings. This is way there will be a home
for the teacher connected with the rural school. Today, before a
Mexican doctor can get a medical certificate, he must practice for
six months or thereabouts In rural areas. (This seems to be a kind
of prolonged internship.) Doctor Torres Bodet would welcome a re-
quirement under which all Mexican teachers, after receiving their
certificates, must spend a year teaching In the rural schools. He
would pay them the same salaries as they receive in the city. He
thinks that many would decide they like the country, would discover
that the salary goes much further in the rural areas, would marry
some local girl and would settle in the country. He emphasized the
nature of the student and youth problem which now exists with more
than half
11 Mexican college and university students here in
Mexico City at the University of Mexico. This he thinks is "bad"
and he hopes that the smaller universities throughout the country
will be built up. Students who come here to the capital don't
to go back home. They even go on strike against returning home!
I asked Dr. Torres Bodet about the educational progress in
other Latin American countries. He says the little countries have
done the better job. Costa Rica is excellent; it's easy to get
around it and
ant
s had few Indians Argentina was good before Peron.
Saramenta ( ) started normal schools in the Argentine in the seven-
ties and eighties, with the help of American women teachers, and
these proved very successful. Chile again iS good; like Costa Rica
It enjoys easy communications and has few Indtans
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Memo #5
In Mexico, Mexico, the first fundamental has been due to the rugged,
almost Impassable terrain; the first objective must be roads. The
roads have to be built before education can begin.
Dr. Torres Bodet says that President Comancho under whom I
believe he served as Minister of Education, always backed his Minis
.71,)
ter of Communications when he wanted more roads. Comancho gave roads
the highest priority. Torres I3odet commented, "The road is a school
which moves."
asked how the child that might indeed have learned to read
In a year or two - In a rural school - could keep up his reading.
The Minister replied 'that little reading rooms for mass reading"
are being installed.
These hold 50 or 60 books keyed to the interest
of the community. People read out loud in the country communities.
The books may deal with agricultural Improvements.
The Governor asked, "Is there a great migration to the
cities?" Torres Bodet pointed out that in 1910, 90 percent of the
population was
.1011110114M1
a. Not I. v.-A. .4. �
Twenty years ago, 75 percent. Now only 58
percent. He said this posed very serious problems for education.
The population of Mexico City was 750,000 when Torres Bodet was a
young man. Now it's five million. It was at this point that the
Minister told us how he was pressing for his "one year of social
service for teachers" - in the rural areas. There's great opposition
to this but he hopes to achieve it
The Governor asked further whether the migration to the
cit
was having the effect of leav
the in the country
while the Mestizos become the city dwellers. Torres 4.,%/441*-
d
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Memo #5
that this was most unhappy. He told us of the remarkable work with
the Ind ans being done by Dr. Alphonso Caso, the famous anthropolo-
gist who devotes himself to the Indian people and their improvement
through his 'National Indigenous Institute." This Institute gives
courses in Spanish, provides technical assistance for the improvement
of agriculture and the arts; provides engineers to help develop
irrigation; etc.
There are four such major Institutes now functioning, but
16 more are in preparation. These are autonomous but they require
government money to operate. Although the money is funneled through
Torres Bodet's minIstry, Dr. Case operates more effectively by re-
taining his autonomy and his independence from the Minister of
Education. He needs help from many ministries.
The Minister told us that education had strong public support
in Mexico, In response to a question from me, he said that many
Mexican states had substantial appropr.c.ations for education, some of
states spending more than 50 percent of their total budget on
education.
Dr. Torres Bodet plans to send his assistant in charge of
teaching aids and television - to the United States - a Mr. Noriega.
(1 said I would be happy to welcome him if I were available but I
said that Mr. Ladas would look him up while he is here in Mexico -
and try to arrange ways in which we would be helpful The minister
said he would himself be very glad to see Mr. Ladas when he comes
here,)
I told the Minister I would like to give a dinner for him
when and as he himself comes to New York.
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Memo #5
The Min
er told us that in the UN's "very important region
al center here," for the development of teaching aids, there were
20 or 25 Brazilians on the staff and 20 or 25 Venezuelans -ft- staff
people 'drawn from the countries where the interest is greatest.
mil
cc: Mr. Maurice Mitchell
Mr. Alexis Ladas
(F).
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Cat: #1623
Memo #4
Febmaary 15, 1960
INTERVIEW AT HIS OFFICE WITH MINISTER OF FINANCE
ORTIZ MENA
GOVERNOR STEVENSON AND SENATOR BENTON
The Minister told us that MeXico was very clear in its policy
on foreign investment. He said Mexico wanted foreign capital - but
doesn't want it "to ruin our own investors" - 'doesn't want competi-
tion in fields already
ctielvntrimei 1-%l7
ft00
A.VUCA4.11.
capital, or in these
ficAlAm
only want joint ventures." He pointed out that some fields were for-
bidden by law, such as oil. He gave us his speech of last May to the
Bankers' Association listing nine points as the "outlines and limita-
tions of foreign investments." Taken from the speech, these are:
a) They should scrupulously respect the laws and Institu-
tions of the host country and submit themselves In case of conflict
to the national tribunals.
b) They should contribute to increasing the national income,
and above all, to raising production In deficit areas.
c) They should stimulate forcIgn trade diversification; aim
at equilibrium in the commercial and payments balance and at increas-
ing the international financial capacity of the country,
d) They should not compete unfavorably with existing Mexican
enterprises; nor displace national capital, or frustrate its future
development.
e) They should renounce any political motive and contribute
h all the means at their disposal to the creation of a favorable
climate for economic development and industrialization.
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Menio #4
f) They should Introduce and employ advanced techniques to
exploit productive resources more and more rationally, and thus im-
prove the living conditions of the working population.
g) They should be directed to activities which provide impe-
tus to and favor the integration of industrial development which re-
duces the dependency of the country on the production and export of
raw materials and on the import of manufactures.
h) They should play a supplementary role in financing and
In economic development.
In response to a question about the high interest rates, he
said that last December Congress had passed a law taxing profits at
90 per cent on interest returns on capital which exceeded more than
18 per cent annually. (This law seems to be widely ignored.)
The Minister said that Mexico will receive about $150 million
this year in long term capital investment from foreign investors, 75
per cent of this comes from the United States. He contended that the
free convertibility of capital here prevented large Mexican refugee
capital abroad - plus the high return on capital here.
We asked whether he felt that foreign capital tried to pull
too high a return out of the Mexican economy. He did not reply di-
rectly. He said, "In a bad moment, when a strain is on the economy
of a South American country, the drainage by foreign capital creates
criticism." He seemed to suggest that such criticism might be justi-
fied at certain times, in some areas, but by and large, he does not
feel the withdrawal in dividends in excessive. (This was one of the
criticisms mentioned by Senator Morse.
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Memo #4
He says that many South American countries are afraid of the
size of the United States companies. The Governor asked him about
the Argentine formula in relation to the oil companies. He agrees
that the formula may be good. He was not explicit.
He pointed out that the Mexican government "extended special
credit in areas of need." Such areas are given special credits and
rD
tax privileges. Examples are soda ash, fertilizer and paper.
The Governor asked whether "new merchandising techniques"
such as shopping centers, might qualify for such credits "as areas of
need." The Minister ducked again and said, "Ttlese are encouraged."
He, pointed out that $250 million is spent by Mexicans in border
cities of the United States. He admitted that niore than this I
spent by Americans in border Mexican cities. He said, buy more
goods, but the Americans spend more money!" - in border cities.
(Our technical programs here in Mexico don't seem to amount.
to much. We have an industry program but it's small,)
The meeting with the Minister yielded but little.
Dictated InvMexico City
arh
(Antonio Ortiz Mena's ,title is 'Secretary of the Treasury and
Public Credit.")
cc: Mrs. William Benton
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Cat. #1622
Memo #3
February 15, 1960
A CONVERSATION AT HIS OFFICE WITH FOREIGN MINISTER
MANUEL TELLO OF MEXICO
Governor Stevenson and Senator Benton
The Minister served six years as Mexican Ambassador to Wash-
ington before taking office as Foreign Minister in the new adminis-
tration of President Lopez Mateos. He was succeeded in Washington
by Ambassador Corello, brother of the Rector of the University.
Minister Tello told us that he thought he could summarize
the tone of South America with the one words "impatient." He is just
back from a six-country trip with President Lopez Mateos.
The Minister spoke slightingly of the resolutions at Inter-
American Conferences. He said "We pass 25 resolutions whereas we
should concentrate on three or four real points." Guided by Governor
Stevenson, he summarized the important points as follows:
1. Stabilize the prices on commodities. This is the
single most important economic problem for Latin
America. He told us how Mexico had cut back 20
percent on cotton production. We discussed in par-
ticular the problem on coffee with Brazil increas-
ing production rapidly. Mexico stands third among
coffee exporters. My recollection is it has just
passed El Salvador. I expressed skepticism that
the coffee could be stabilized unless or until pro-
duction was curtailed. I suggested that stabiliza-
tion might work with some products but might fail
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Memo #3
utterly with others. The Minister then raised the
question as to whether the Western world should not
refuse to buy Soviet tin or other Soviet exports -
when such purchases, for example, break the market
for Brazilian tin. He spoke of the efforts to se-
cure stabilization, through production agreements,
on some other product. I am almost sure it was
lead - and the failure of these efforts because
Canada and Australia would not go along. Such
agreements are of course world problems and the U.S*
is just one country whose agreement must be secured
on them.
The need for credits and financing. (Later in the
day, President Lopez Mateos put this as the number
one problem.) The Minister spoke of the large
amount of South American capital now in the United
States and in Europe. A lot of this, he said was
only earning one and two percent interest. He
would like to see it invested in the new Inter-
American Bank at five percent The Governor was
skeptical about how to prevail on these Latin Ameri-
can capitalists - so that they would so invest their
capital. The Minister suggested .that they might be
granted tax exemptions on the 5% interest. He said
they weren't paying taxes now on their refugee capital
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Memo #3
3-
and tax exemption on this money would not cost the
Latin American governments anything.
3. The M nister,suggested the importance of negotia
ting treaties on the subject of double taxation.
The Minister would like to see OAS strengthened.
He does not favor intervention under any circum-
stances though he mentioned the widespread com-
plaints that the United States is supporting dicta-
torships. He also mentioned complaints against the
United States for selling arms throughout Latin
America. The Governor spoke of Mexico's low mili-
tary budget only six percent of the total budget
in contrast to its 18 percent for education. The
Governor spoke of the desirability for Mexican lead-
ership on hemisphere disarmament The Governor
pointed out the dilemma for the United States on
the sale of armaments in the responsibility of the
countries Which want to purchase them and of course
when Ecuador spends too much on armaments this pro-
duces a demand in Peru; Peru purchases cause Chile
to buy; Chile's new armaments force the Argentine
to purchase; Argentina's activity provokes Brazil.
et cetera as a "chain reaction." The Governor spoke
of the demand by the military in many oountrie
armaments to sustain their own power and prestige,
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Memo #3
and the importance of the military politically. The
Minister said that he was not necessarily contending
that the United States was to blame in its policies
a
in the sale of armaments, but he was reporting that
the U.S. was criticized For them. He drew a sharp
distinction here.
did not feel that the interview was particularly productive
or nformattve. The Minister was very cord a � He is almost a chain
cigaret smoker. He gaVe us a long and elaborate luncheon which began
r.a4
an hour or an hour and a half standing around over cocktails and
ended about k:30. We were then taken by the famous Mexican artist
Tomayo to see his murals at the Palace Artes. Also there was an ex-
tensive exhibit of Diego Rivera 's work. The latter concentrated on
social question the former does not and has moved his studio to
ris. (1 report such things to remind Governor Stevenson and me for
any writing we do on a follow-up on this trip - on the chance we may
want to elaborate on them.)
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Ca #1621
Memo #2
February 16, 1960
ADMINISTRATIVE SET-UP OF THE UNIVERSITY OF MEXICO
The University of Mexico Is governed by a council. And on
this sits the sixteen deans of its various schools and divisions.
From each Is also chosen one professor. From each is also one elec-
tive student. The student must have an average of over 80 and be in
the last two years of the college.
To these 48 are added the 20 directors of the research In-
stitutes. To these 68 are added one librarian, or representative
of the libraries, and one representative of the employees.
What makes the problem even more complIcated is that the 16
students are entitled to bring along 16 alternates. This is because
the students graduate at varying times and thus require alternates
to take over.
Foregoing will help explain why the students are so important
politically in Mexico. The rector, Dr. Nabor Carrillo, told me he
had been rector for seven years. He said his twelve predecessors
have averaged one year and ten months. Three of them have resigned
under grave physical danger. This danger and these resignations were
provoked by the students who are very active politically.
A student is allowed to stay In the University of Mexico un-
til he fails 1Q subjects or until he fails the same subject three
times. The defenders of this policy, notably the public relations
man at the University with whomI've talked, explained that the stu-
dents come In with bad preparation and that the University of Mexico
has over 50 percent of all students of Mexico - now a total of 49,600
students, and that the University must be lenient and be generous In
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Memo #2
further defense of the very easy standards, which were bitterly
attacked by Mr. Legorreta, president of the Banco Nacional de Mexico,
and my friend, Mr. Villasenoro former president of the Bank of Mexi-
co - when I dined with them at the Rector's - the public relations
man pointed out that in Mexico only one student out of 127 gets to
a university; in the United States it's one out of three; in France
it's one out of 37.
A further mark of leniency is that the tuition is only $16 a
year. Some 6,000 students are working on jobs which the University
helps provide. Only 5 percent of the students, according to the pub-
lic relations officer, really grade as "radical leftists" or "commu-
nists." I pointed out that this was a smashing 2500 students. Of
course they are the ones that cause all the trouble, the recent bus
strike and other strikes.
This governing council elects the three trustees. These are
elected for life. They have sole responsibility for the budget and
the money. They appoint everybody concerned with money. They have
nothing to do with the curriculum or the conduct of the University -
except the money. Their authority is unquestioned. But of course,
80 or 85 percent of the total budget comes from the government. Thus
the government remains the key.
This council elects the Board of Governors, a group of 15.
This board can have no government officials or university administra-
tive officers. Each governor is elected for fifteen years and one
new governor is elected each year. The board normally consists of
three or four arch1tects two or three chemists two or three or four
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Memo #2
former rectors of the University, three or four doctors, distinguished
intellectuals or scholars, et cetera.
The above explains much more about the political problems of
a university in a Latin American country.
e
a
Dictated in Mexico City
arh
0
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Cat. #1620
Memo #1
February 15, 1960
MEMORANDUM - BRIEFING SESSION AT U.S. EMBASSY
IN MEXICO CITY
Governor Stevenson and Party
Thirty or forty men were on hand representing all top
Washington Departments The conference w attended is held weekly
and is opened with a ten minute news reel of Eisenhower's Wednesday
press conference. In response to a question from me, I was told
that this ten minute reel is shown throughout the world in Consulates,
Embassies, and so on and then loaned to clubs, homes, et cetera.
Ambassador HiI1 says that this practice here in Mexico has resulted
In pressure on President Lopez Mateos to hold open press conferences
here.
The largest Consulate in the world Is here in Mexico City,
with th.yteen branches. They have a record of 976 visas in one day.
There is 50 per cent more Consular activity in Mexico than in Canada,
the number two country. Mexico has a 2,000 mile border with the
United States which someone called 'The Spinal Column of Relations
between Mexico and the United States*"
(Not counting military personnel, this rates in personnel
as our third largest Embassy and Consulate)
Mexico is a mecca of U.S. tourists 600,000 annually spend
$600,000,000, or a reputed $1,000 apiece plus the revenue from the
border crossings
Mex
uhe be
ThIs Is by far Mexico's biggest business
Ambassador Hill reports that 50,000 U.S. citizens live in
15,000 in Mexico City. The American society here is one of
he American counity Is highly organized.
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Ambassador Hill, after eleven years in South America (for
six years an official of Grace & Company, and with two prior ambassa-
dorial posts) is appalled at the ignorance of South America in the
United States. He wants television and articles from the Governor
and me on our return - and from everybody else for that matter. He
points out that Argentina is a country In deep crisis, as are many
other countries of South America, while Mexico represents stability.
No crisis attitude applies today to Mexico. He warns us not to lump
the Latin American countries into one big bundle. We must deal with
each individually.
The Ambassador continued In his emphasis on the Importance
to us of Mexico pointing out that Brazil, in constant crisis, has
"problems which breathe down your neck daily." He bewailed the fact
that American newspapers give no attention to South American news.
He mentioned John 0 Rourke s Daily News in Washington as one of the
few exceptions
He Introduced Mr. Smith he economic expert. Mr. Smith
pointed out that in order to understand Mexico, one must achieve
understanding of It8 revolut on of 1910. This Is the key. This is
the 50th anniversary of the revolution. The two key objectives of
the revolution were one Land Reform, and two Ant
Mr. Smith said that in 19
9 President Lopez Mateos
foreign.
irst year
more land was distributed than at any time since 42. He estimates
that 50% of all tillable land Is now in communal holdings - with 70%
or more In small holdings. He points out that only 2% of all the
land of Mexico Is tillable. The country suffers from a shortage of
trrt ation and fertilizers.
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41.
o #1
The land policy growing out of the revolution has made the
peon mobile. He can move to the city. He can climb to the middle
class. This is the most significant thing which has been going on
in Mexico for the past 50 years.
Stability came to the revolution in 1934 with the election
of President Cardenas. Every President since has finished his six
year term. Cardenas expropriated the oil in 1938. Since then,
Pemex has controlled all Mexican oil. Oil to the Mexicans was a
symbol of foreign power. Traditionally back to Viceregal days and
dating back Into Spain, the extractive Industries have been the
right and perogative of the Crown. Thus to the Mexican people it
is perfectly right and natural that the Mexican Government control
the oil. Pemex is now producing 100 million barrels a year which
roughly meets domestic needs Whether this is "a successful opera-
tion", in contrast to foreign ownership, Is wholly beside the point.
It's a political question. All Mexicans agree on Pemex. There are
a few
famil
point
Independents operating here, such as Ed Pauley, the Sharp leas
et cetera but in toto they are infinitesimal from the s and
of production. There are current efforts to take them over.
The mining, however, is still three-quarters in foreign hands
There is demand for more Mexican participation, but as yet mining is
not attractive to Mexican capital
Recently an article in the U. S. News and World Report
the word "robbery" to Cardenas expropriation of oil propertie
caused a sensation here In Mexico and much trouble. The oil
applled
This
ora-
tions are being compensated for this expropriation but of course on
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Memo #1
or�
a much smaller scale than they think legitimate. There is a hard
core of Western residents here who feel bitterly about the low rate
of pay to foreign oil companies based on the 138 expropriation.
Electric power is another basic resource. There are two
big foreign companies operating here, and a few small ones, but they
do less than 50 per cent of the total. President Lopez Mateos is
adamant in his refusal to permit rates to go up. Yet higher rates
are necessary to attract more foreign capital. The President wants
to double the capacity in six years, and he wants half of this to be
done by the private companies, Lopez Mateos recently terminated the
conference with Mr. Black of the World Bank after seventeen minutea,
a conference scheduled for two yours, when Black suggested that
rates must go up if credit was to be extended for power development,
The President hopes to borrow elsewhere. This is one of the ticklish
questions overhanging the Mexican economy. The Government owned
41.01.~IP.A1~11011
WWV01.-
company is buying machinery and borrowing heavily from France,
Western Germany, Italy, and others their equipment companies -
willing to finance the Mexican Government owned company, - but the
private companies "have no plans. The attitude of the Embassy Is
critical of the private Companies. The intimation is that they have
no ideas and are not willing to recognize what they are up against
In manufacturing and other fields many foreign investors
have brought in Mexican capital to participate.
asked for specific
examples The Celenese Corporation was given me as a very good one.
Du Pont is another, and current
The total investment by all foreign companies here is esti
mated at $1 300 000 000. Three quarters of this is from the United
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States. Roughly the same percentage applies to new money coming in
But the current foreign participation over-all In capital formation,
including agriculture is only 10 per cent Mexico Is doing a phe-
nomenal job on savings and investments on its own - and It expects
to do the job by itself with foreign participation only under Its
own rules.
s rules naturally favor Mexican nationalism. State
enterprise is highly developed and many factors favor It. Marxism
permeates the economy. The School of Economics at the University
of Mexico Is Marxist oriented and its graduates have an Important
effect on attitudes throughout the economy.
The gross national product went up /2 per cent in 158
versus a 6 per cent average since the war and in contrast to a popu-
latio4
felps^2.14-_h r
:1�7 a. Twr
/2 per
ent In 1959, the gross national product
will run around $9-1/2 billion or $275 per cap ta. Of course many
areas are poverty-stricken consisting of Indiana I ving back In the
17th century.
Mr. Smith thinks that Mexico entrance this month into the
common market "is the end of Mexico's isolation." Mexico never
joined GATT. He feels that the entrance into the new common market
group Is largely emotional. More significant are Mexico's efforts
to develop trade with Western Europe. Mexico wants to reduce its
dependence on the United States. Seventy per cent of Mexico
imports now come from the united States and the United States takes
sixty per cent of Mexico imports.
Lopez Mateos took office midst rumors of deflation, financial
troubles, et cetera. During the past year drastic moves have reversed
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the trend, have attracted foreign capital, have increased exports,
decreased imports, achieved a balanced budget for 59. These moves
include holding back the capital investment program. The new Presi-
dent has laid the ground work for moving ahead in 160. The foreign
exchange reserves are up from $300 million a year ago to $480 million.
Still more foreign exchange is required. And of course there are
only three ways to get it: more exports, more tourists, more foreign
investments.
* * * *
Ambassador Hill returned to the
Jet
age of the small theatre
in which we were meeting to say that too many speeches were being
made in the United States on Export-Import Bank profits from Latin
America and on the money we earn on our $10 billion investment in
Latin America. He doesn't watt the profits emphasized. He wants an
end to such speeches. He introduced Mr. Leddyi the political affairs
officer.
Leddy called the Mexican situation "unique." He points
out that it is "seeped in history." He reiterated that the Mexican
Revolution is the guiding force in Mexican thinking. Sui generis.
The revolution was against the rich, against the foreigners and
against the church. The primary aim of the revolution originally
was to tear down and not build up.
Originally it was leaderless
Francisco Madera might have given it leadership out was assassinated.
Throughout the period 1910 to 1934 were the violent leaders, the
Pistoleros men from the ranks of the people but often with great
ability. This was a time of religious turbulence which climaxed in
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Memo
.7.
'26 when the churches were closed. (It's still against the law in
Mexico for the clerical garb to be worn on the street.) This back
ground, Mr. Leddy- thinks, helps give the United States the impression
of lawlessness in Mexico. With the election of Cardenas in '34
began the period of pacification and consolidation. The labor unions
developed (and communism grew.) Land reform was pushed. Communism
was curbed by Mexican nationalism.
Then followed Presidents Commacho, Aleman, Louis Cortenas
and Lopez Mateos each selected by the small oligarchy of power,
controlled by the party and the army. This is indeed a one party
state, though proud of its 1857 and 1917 constitutions. We should
recognize that the revolution has achieved many of its major aims,
but the social goals still lie ahead. Each of the presidents has
been in the cabinet of his predecessor and this has given his p edeuw
cessor great prestige after his retirement under Mexican law (one
term). Former President Cardenas still represents the left and is
still a great power. Former President Aleman represents the right
quite conservative and a very successful business man in his own
right.
The system of course has grave weaknesses. The political
rallies are phonies without spontaneity. There were three hundred
on hand to receive President Lopez Mateos on his recent return from
South America but these were all government employees with a day
f
and a black mark if not there. Such a system leads to corrup
tion of course the habit of making money in officemordita"
the bite or the rake off, under the table.
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Memo #
All sixty senators belong to the party. So do 153 of the
162 members of the Assembly. All 29 Governors are members of the
party; so too most mayors.
Yet there is no one in jail here for the wrong political
opinions The heavy hand of the party and the government is of
course used against opposition meetings. The lights don't work
fire alarms go off, students demonstrate, and the leaders end up
with three days behind the bars. Here is a great defect in the
body politic.
This one-party policy is of course defended on the grounds
that the party Is all Inclusive. This is the standard defense for
totalitarianism. But many of the traditions go back to the Spanish
Crown, many which contradict the political freedom of the revolution.
(Cardenas says that the agricultural reform has not been a
success and states it is a failure of administration.)
Mr. Leddy pointed out that Mexico is the last country of the
hemisphere to have been invaded by a foreign force - (the French).
He reminded us that it has not tired to exert real leadership even
in the Caribbean. He told us the story of a recent controversy with
Guatemala on fishing boats. Four other countries backed Guatemala.
My notes seem to Indicate that he thought that Mexico was In the
right on the controversy. He told the story to illustrate that
Mexico earned the diplomatic support of its Caribbean neighbors.
Mr. Leddy stated that there is no feeling of affinity in
Mexico for Cuba even though the Cuban Revolution is partly based on
the Mexican Revolution. Castro is not "viewed sympathetically here."
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Cardenas went to a Castro rally - and has been frowned upon and
there is much more background about Cardenas in connection with
Castro which seems to have reacted adversely to Cardenas:
Although Mexico does not exert positive leadership in the
Caribbean or Latin America, it is watched. Further, its stature
is growing outside the Americas. It has very good diplomats at the
U.N. Torres Bodet has helped raise Mexico's stature. The UNESCO
Conference was held here last April. Mexico's voice is heard on
disarmament.
There are three Communist parties here but they are weak.
No one of them can get 75,000 signatures for a presidential candi
date. The Communist leaders in the railroad strike here are in jail.
This doesn't mean that Lopez Mateos is anti-communist. It does show
that he will move against the Communists Tolledano now has little
power in Mexico. He's
It.
rAgb=
r figure outside the country than in
United States relations with Mexico are now the best in our
history. There are no really serious problems. True, Mexico won't
cooperate on inter-American defense. The Mexican leaders won't per-
mit bases or defenses to help SAC. True, they will give no coopera-
tion in the field of atomic energy. True, there are amall border
questions due to the shifting river. Yes, there's also an argument
about the shrimp boats. (Shortly there is to be a conference of 80
nations on q est ons pertaining to the territorial sea, and Mexico,
hoping for advantages
1 make no concessions)
Yet the relations are the best In our histor
The attitude
towards us is often one of reserve, sometimes Indeed of outright
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Memo #1
suspicion, but perhaps it is fair to say that the Mexican Revolution
can be compared to the Harvard men of another generation: Socialists
at 20, capitalists at 40, reactionaries at 60.
President Cortinas was once asked the nature of U. S.-Mexican
relations. He described them in one word, "correct."
Mr. Leddy stressed the growing cultural relations the visit
or a U.S symphony orchestra,
of
the Howard University singers,
Kiss Me Kate, which is on the way.
In conclusion we heard a good bit about the Soviet activity
in Mexico. There are 125 Soviet citizens in their Embassy here liv-
ing in a compound. The Soviet Embassy employs no one except Soviet
citizens. From here, it directs Soviet espionage throughout Latin
America.
Mikoyan on his visit made mistakes - he castigated the United
States and was answered by a Minister of the Mexican Government,
undoubtedly on the direction of President Lopez Mateos,
When the Cuban Ambassador returns from Havana, he reports
to the Soviet Embassy before he goes to his own; he is a Communist
appointed by Castro.
The Soviet Embassy here is a vast propaganda center for Latin
America. The U.S.S.R. is said to spend $ 00,000,000 annually in
propaganda in Latin America. The Soviet Embassy is helping to pro
ote eastro's influence in Mexico with Mexican youth and with stu
dents - (and the U.S. must do much more with Mexican youth) The
youth movement here is growing rapidly. There are now 50,000 students
at the University of Mexico and the tuition is only $16 a year.
* * * * *
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(b)(1)
MP
In contras
I h 125 Soviets here in the Embassy, (23 are
children!) - there are only four Mexicans in the Moscow tailbassy.
Ambassador Hill takes the view that It is we of the U.S.
who put Castro Into power. He mentions the New York Times and the
New York Evening Post specifically as participants He feels that
we have "another China on our hands only 90 miles off our shore."
He feels that "any encouragement to Castro will cut the throat of
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Memo #a
-12���
the United States." He has four suggestions, but these have been
rejected by the Department: a) don't send Ambassador Bonsai back
unless Castro ceases his attacks on us and promises in writing that
they will cease; b) discourage all travel to Cuba because a visit
to Cuba is dangerous for U.S citizens; c) set up in escrow the
premium price we pay for sugar and call upon some high level
judicial group to use this money to recompense those whose property
has been expropriated in Cuba; d) submit evidence of Communist
infiltration in Cuba to OAS. (The Caracas resolution calls for a
meeting of foreign ministers of the American Republics if Communists
take over any country.)
The Ambassador believes the charges that Raul Castro had
a decree signed on November 12th authorizing him to take over our
American installation at Guatemala Bay. We are only paying $3,000
annual rent for this installation, under contracts signed in 1903.
We do, of course, spend about $5-1/2 million In this area. Admiral
Burke says this installation is essential to our defense. (The
Ambassador expressed skepticism.)
A question is whether Panama is the next sensitive area.
There is now much discussion of Panama. The Panama election is In
May.
The truth is, of course, says the Ambassador, that there is
no democratic government In South America. Castro himself is the
leading dictator. There are those on Ambassador Hill's staff who
think that the Communists penetration in Cuba has been active, force-
ful and purposeful.
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-13
Leddy read us an interesting dispatch from Moscow on an
open meeting just held in Moscow covering a lecture by a leading
Soviet scholar. This bulletin states that the Soviets think that
South America is "the coot n%.nt or the future," that Chinese tactics
will apply, et cetera, et cetera.
There was much talk about Castro 's Argentinian ally, Guevarra,
who has the nickname ttChe.0 I shall not attempt to cover this
memo; some of it was confidential.
* * *
- Later I was told a �young m=r1 can
C 0
e down here from Fenner,
Beane, Merrill, Lynch, and with $25,000 or $300000 in capital - make
a very comfortable living - loaning the money from his home at 25
and 30 per cent and more. I am also
sa.a"..ii per
ectly safe
nAns yield
18 per cent. This helps show how the economy Is boom ng - and the
scarcity of capital:
arh
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PANAMA
Cat. #1647
Memo #3.5
2/23/60
INTERVIEW WITH PRESIDENT DE LA GUARDIA OF PANAMA
by Governor Stevenson, Senator Benton
and Ambassador Julian Harrington
During the interview the President told us that one of the
charges of the opposition was that Panama was "ruled by 40 families".
Governor Stevenson and I had been discussing this particular aspec�.
of Panamanian political life with Ambassador Harrington. He puts the
number of families at between 25 and 50. They have the wealth; they
control the politics. They are not old aristocratic
.P...wv1414c2ik
LCL.tt&aw-LA.
n
in
so many countries in Central and South America. Panama was broken
off from Colombia In the early part of the century. Many of these
families are newly rich. Although Panama is 80 percent Negro, per-
haps more they are white or Mestizo. They compete with each other
In Panama for political power. There are three major parties and all
are demanding concessions from the United States.
There is as yet no acute color problem, even though the
graduates of the University of Panama, founded in 1935 and largely
staffed by Nr
a A. Ieinmnian refugees, are largely Negroes. (The sons of
the ruling families go to the United States.) As unemployment or
lack of opportunity increases for these Negro university graduates,
discontent among them is almost certain to mount. Indeed, it would
seem probable that the time will come when there will be an explosion
in Panama. The ruling families may readily seek refuge in the Canal
Zone, under the wing of the United States government, which they are
now taunting. This opens up as a possibility for current discussion
the question of sanctuary and our threat to withdraw it as well as
other claimed rights of Panamanians
-e Canal Zone.
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Corruption has been widespread, though the President is be-
lieved personally to be honest. The government is so intertwined
with business that its approval is even required for the appointment
f the manager of the local brewery. President de la Guardia was
the manager before his election.
This memorandum should be read In conjunction with my re-
port on Colonel Holden's "briefing" in San Jose.
* *
In response to questions from Governor Stevenson, the Prest
dent said that the flag was now the big problem. He pointed out that
manifestly this big question could not be left to both Parliaments.
He referred to the current debate in the Congress. He said that the
issue was purely emotional in the two Congresses.
He wants changed the symbol of the one flag, the United
States flag, over the Canal Zone. He stated flatly that he would
reaffirm the three treaties affecting the Canal Zone, between the
United States and Panama - if we would agree to fly the Panama flag.
He seemed to suggest that he just wanted one Panama flag in one
spot. (Senator Smathers has suggested setting aside an acre for this
purpose.) He agreed with Governor Stevenson's phrase, taken by the
Governor from the first and original treaty of 1903, "as if the United
States were sovereign." - as a phrase that he would reaffirm. told
him that it seemed obvious that what lay behind the argument and
friction in the American Congress - was the fear that if agreement
was given to. the Panama flag - then there would be a long series of
new demands based on alleged sovereignty of Panama even to the
point of claim of full sovereignty over the Canal by Panama The
President again stated that he will reaffirm all prior agreements
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3
His second complaint is that there Is "divided authority"
in dealing with the United States. There are three top officers -
the Governor General of the Canal Zone (Governor Potter); the Com-
mander of U.S. Forces In the Canal Zone (General Gaither); and the
U.S. Ambassador (Julian Harrington). I laughingly told him that
this sounded just like Washington. But it doesn't seem to be any
joke to him. Ambassador Harrington later confirmed to Governor
Stevenson and me that this is Indeed a most serious problem. My con-
versation with General Potter and Harrington at the luncheon given
later that day by Ambassador Harrington persuades me that It is in-
deed. I feel we need an able and strong American representative in
the Canal Zone, in full and complete charge, and it seems to me that
the best role for this man is as an Ambassador. Very grave problems
Ile immediately ahead, In the forthcoming fiesta, when General
Gaither and General Potter again fear an Invasion of the Canal Zone
and when General Gaither is talking of a new type of tear gas and
other forms of resistance. General Gaither and General Potter say
that the left wing radicals of Panama under communist Influence,
say that all they want is "one corpse"0 T warned the two generals
strongly that the problems they were discussing had grave interna-
tional repercussions. Governor (General) Potter is just back from
his fourth (or sixth) trip to Washington since the first of the year.
He said he found no one there who had advice for him which ran
counter to current policy.
I leave Panama desperately alarmed about grave outbreaks
which will seriously embarrass the United States; and although Am-
bassador Harrington reassured me and seemed to feel much less alarmed.
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-
In view of his four and a half years experience in Panama, I can only
�
VO
hope that he's right.)
The President complains about the two sharp and distinct
communities, Panamanian and American. He says that he knows "high
officers" who have served for three years in the Canal Zone - who
have never been In Panama City. He spoke of his background in charge
of the beer industry of Panama. He said that the slogan of this beer
was "the beer that fights for freedom from misunderstanding". He
suggests that this slogan is not being lived up to by the two communi-
ties, though I gather that the enlisted men do not do badly with the
slogan in the bistros of Panama City! (The President later complained
that after the war the Canal Zone imported other beers from other
countries, when the scarcity was no longer!)
The President stated that in 1931, the relations were so close
between Panamanian leaders and U. S. leaders that it was easy to stop
the U. S. army from coming into Panama to Intervene in time of trouble
merely by joint discussions. At that time, he said, the relationship
between those who lived in the Canal Zone and those who lived in
Panama City were "fraternal and close". The Army officers belonged
to the big Union Club in the city. There was no segregation. This
has all changed. (Mrs. Harrington says one reason it's changed Is
that such marvelous clubs and facilities have been built In the Zone
for American employees and troups - so why should they come to Panama?
Another reason is the abolition of prohibition, which eliminates one
reason for wanting to visit Panama City. General Gaither claims that
the same "two community" way-of-life exists in North Carolina where
the Arm,, keeps to itself In Its own zone and also to other Army
communities n Germany and everywhere.)
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Memo #15
The Governor asked the President, "Do Panamanians have full
right of access to the Zone?" The President replied, "Yes, except
for a few reserved places, and these are okay."
Later the Governor and I chatted about the cleavage between
the two communities and we feel it is deeply regrettable. There are
many possible antidotes, out no sure ones. (One antidote is the
suggestion of Colonel Holden to eliminate segreation in the schools,
beginning by the elimination of segregation within the Canal Zone
Itself.)
We did not continue to enumerate points of difficulty and
danger so categorically. The President continued by stating that he
wanted the right to ship mangoes and other fruits and produce to the
United States. Seemingly much Panamanian produce is excluded under
regulations of the Agricultural Department. The President contended,
"The better the economy here in Panama, the less important the Canal
itself becomes to our economy and the less trouble you will have with
us about the Canal". The President's argument is that it is in the
interest of the United States to improve the Panamanian economy - that
this is our best chance to fignt communism and its fellow travellers
in Panama. And the President wants a bigger sugar quota.
The President contends that in his dealings with the United
States there is "too much red tape" holding back U.S. efforts to help
Panama's economic development program. He says he spent $250,000 on
plans for road improvement expecting a loan from the United States,
and now there is no loan. The interest rate became an issue. The Gov
ernor commented that this was tied up to the high rate of interest on
the international bond market
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-
The President spoke with a true show of friendliness towards
the United States, and the Ambassador told us he is indeed anxious
to remain a friend of the U. S., that he wants to thank us when we
are helpful. The President quoted President Eisenhower who he said,
mentioned Panama specifically on one occasion as the only nation in
South America to say that It was thankful for economic help,
Continuing with his complaint about red tape, the President
said that our regulations forced him to employ men that were not
needed. He went into a lengthy story about a $15,000 or $171000 man
he'd employed, under these regulations, who had quite - and he was
then told he had to replace this man with a $260000 man, and this was
impossible.
He congratulated Assistant Secretary Merchant, whom he said
he liked and admired for his candor. He said Merchant had told him
that the United States recognized "Panama's titular sovereignty". At
this point Ambassador Harrington spoke up and said that if President
de la Guardia "would Is-sue a statement reaffirming the rights of the
United States" - "as if the United States were sovereign" - (Back to
Governor Stevenson's original suggestion) that this could help solve
the current problem about the flag.
The Governor said that he thought that a limitation on what
was meant by "titular sovereignty" was indicated - an agreement that
there would be no hostile demonstrations, no assaults on the United
States flag, no invasion by mobs of the Canal Zone, etc. President
de la Guardia agreed.
The Governor suggested that such negotiations should be post-
poned until after the two new Presidents were inaugurated - in other
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words until after next January. The Governor said that it would take
some time to work out the many points under discussion. President
de la Guardia took issue. He said he would like these questions
settled before the elections in Panama in May. He said this might
prevent "troublesome issues" in Panama.
The Ambassador said that he felt that it would be essential
to define exactly -What was meant by "titular sovereignty".
The President assured us that he was a friend of the United
States.
He complained that we
lior Jim eb40 *rob lid
"friends and nonfriends alike".
This is a complaint we've had elsewhere.
The President said flatly that he thought that Castro was
ti crazy". He said that Castro, in the Dbeginning, had had a big emo-
tional response In Panama. Not long ago the Cuban Ambassador to
Panama distributed over 18,000 cigars - at a ball game. But the
President said that with the killings in Cuba, a reaction against
Castro had set in.
The hard core communists in Panama were estimated at 20 to
200. My notes seem to indicate that this was an estimate by the
Ambassador. Right now, things are quiet. But the President stated
that there could be trouble if the elections were close, and If the
government candidate wins.
The President commented that the communist propaganda was
against the 40 ruling families, and that he was a member of one of
them But he claimed that no one on the Supreme court was from the ko
families. He said that only one in the Cabinet was from the 40 fami-
lies. (I later gathered that this was a multi-millionaire Minister of
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Finance.) The The President said that a middle class is now forming. He
told us of multi-millionairesin Panama who were foreigners.
The President says that 27 per cent of the Panamanian budget
goes to education, the biggest percentage of any American republic.
Only 18 per cent of Panamanians are illiterate. There are 3,000
students in the University and the tuition is free.
Another complaint of the President is the feeling that the
United States has adopted "the double pay". Thus, teachers who are
Panamanians get $250 a month while American teachers get Woo He
feels that many of the classified security jobs" aren't needed as
security".
Under the 55 treaty, the Panamanian worker lost his right
to buy in the commissaries in the Canal Zone. As a result, the busi-
ness in the retail stores of Panama City went up by $18 million. The
worker was hurt by higher prices, but business benefited.
The double standard in wages used to be known as the "gold
standard" and the "silver standard". This was not only the pay dif
fimrctkn^0,'
but even the toilets were labeled "gold" and "silver as a
mark of division. Such an attitude, contends the President, creates
lack of confidence*
In response to a question about the armed invasions from Cuba,
discussed by Ambassador Willauer in Costa Rica, the President said
that there was a band of 90 which invaded Panama last May.
In response to a question from Governor Stevenson, the Pres
dent summarized the order of importance of the problems as follows,
1 The flag;
2*
f a
4E11
IG
N.a
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3 Lack of equal pay;
4. Third country purchases.
On this third point, the President says that when feasible" (see
report on Colonel Holden) means "when available". The President
suggests that the goods should be purchased from the U. S. or Panama,
when available, regardless of price. The Governor spoke up sharply
saying that this point should be clarified so that sound, economic
practices could be pursued - that the agents purchasing for the Canal
Zone should be allowed to buy wherever the goods are cheaper. The
Governor said he opposed "artificial restrictions" He said this
point of misunderstanding should be cleared up. President de la
Guardia argues that the Panamanian cattlemen during the war provided
the Zone with meat, when it couldn't be procured elsewhere. Why should
they lose their market just because the war is over and someone else
will quote a lower price? Similarly, why should his brewery lose its
market after the war because somebody else claims his beer is better
and gives a lower price? The President aggressively defends a protected
market for Panamanians.
The Governor asked whether Panamanian politicians used the
Canal too much as an excuse to jump on the United States. President
de la Guardia answered, ICerta nly".
In conclusion the President said that he'd made a speech
stating that he wanted the flag carried by a guard of honor into the
Canal Zone - and that if this is done there will be no more demonstra-
tions He also wants the United States to assure him that if we ever
give up the Canal it will go to Panama: (this reflects the fear that
the Canal may be Internationalized.)
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The President turned to me as we broke up and asked me whether
I was the publisher of the Britannica and this precipitated a chat
in which I told him I would send him a set as a memento of the meeting
and as a gift from the Governor and me.
mil
February 23, 1960
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Memo #31
3/3/60
VISIT WITH HEAD OF USIA MISSION IN LIMA
GOVERNOR STEVENSON AND SENATOR BENTON
I spent an hour and a half with Mr. William Killea head of the
USIA Mission In Lima. Also present were Miss Koth, who devotes her
full time to the Exchange program - (about 50 students per year);
Mr. Rogers, the Cultural Officer; and Mr. Wyant the Press Officer
for the Embassy. Governor Stevenson was with us for a good hour.
didn't get as much from this group as I did from Mr. Bennett
in Quito, and I am writing this memorandum primarily because I think
some of the comments may help illumine some of the reports on the
Bennett interview.
The teaching of English is also very popular here in Peru and
largely supports the binational centers. Thus the center in Cuzco
which we hope to visit, only takes an extra $1,500 to operate - over
and above its fees from English teaching, and it employs a full time
director, a Peruvian. A beautiful new seven story building is being
built for the Lima Center from "480" funds. (When I tried to get
further insight into these funds and how they operate and how they
may be available, Mr. Killea said that he had heard a most unhappy
rumor: that such funds would be deducted in the future from the regu-
lar USIA budget and would no longer be extra money which could be
spent on Important projects which the USIA or the Embassy wants to
promote.) Mr. Killea and Mr. Rogers seem to think that tapes are
an ideal way to teach English whereas filmstrips are preferable to
teach how to read and write. When someone who is illiterate can see
the picture of a familiar object his greatly helps him learn to
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recognize the word for it Miss Koth particularly complained about
the present ineffectiveness of much of the English teaching. However,
she says that In some of the Catholic schools and in some of the pri-
vate schools, the teaching is excellent. She marvels at how well
some students learn the language here in Peru. The best trained
students can readily pass the tests for entrance to American univer-
sities. These are students from the richer and more privileged homes,
which have the money to pay the tuition at the private schools.
But the brightest students with the highest marks from San Marco
University - (oldest university by charter in the hemisphere and with
tuition of only $5 a year) - often come from poorer homes and haven't
learned English well enough to pass the tests necessary for adm ssion
In the United States. These are the ones Miss Koth is most eager to
send to the United States. Miss Koth is having her last year's group
from San Marco University, who were turned down by U.S. Colleges,
spend this year studying English - and she is going to submit them
again, or many of them
The group complains about the high cost of text books However,
they have just purchased a text book with full rights In Peru for
$700 and plan to print it here. When Mr. Killea said that his objec-
tive was to put American text books universally into Peruvian schools,
Dr. Smith, who had joined the group said he thought there would be
some kickback. I said that I thought that Killea should pursue his
objective because he will never attain it. We agreed that the great
need is for scientific text books of American origin.
These people t know anything about Britannica films They
gave me the attached catalog. Mr. Killea says that he thinks this
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Is representative of the entire continent, though some of the big
countries may have a somewhat bigger catalog. He doesn't remember
any Britannica films in the catalog. None of these people had ever
heard of the Dr. White Physics series, or the Baxter Chemistry series
do not see why Britannica films could not be bought locally
for these catalogs with "480" money, in local currency, even if we
are wholly unsuccessful in selling the films to the USIA in Washing-
ton. Should we not tackle the problem at both ends - in Washington
and in the field? I was asked how many of the films were in Spanish
and I vaguely replied that I thought something like a hundred -but
that I knew it didn't cost very much to translate. Yes, we have a
whale of a lot to learn about our market overseas - and how to ex-
ploit it - including how to exploit it through the United States
government.
Many American corporations here are doing everything they can
to develop good will. A company such as W. R. Grace, which operates
banks and plantations and many other businesses here, which seems to
have achieved the popularity the United Fruit Company lacks, - (14. R.
Grace is just Installing a Peruvian as its manager here)
might well
purchase our White or Baxter series for use here in Peru. Certainly
many schools could join together to use one set of these films, just
as in the United States
John Howe will be interested that the Cultural Officers work
directly in the USIA, as do the officers on exchange of students,
even though responsibility for cultural activities and student ex-
changes remain with the State Department. In the field Mr. K ilea
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who previously served in Pakistan says the operation goes on just
exactly as it did before the USIA was separated from the Department
He has just attended a meeting in Mexico City of USIA officers from
Latin America. He says that the desire is universal to put the USIA
back into the State Department Incidentally, he quoted me verbatim
from a recent book of whichI've never heard, which he says is lib
erally sprinkled with quotations from me - including a speech I made
to the Hospital Association back in 1946 or 47.
Mr. Kiliea says that the outline of the USIA program in the
field is just about the same as it was when I developed it in the
Department The one change is television. He says the films from
the USIA catalogs get a big play here on television - five or six of
them being used daily on each of the three stations. Now this would
0
seem to be an extraordinary market for Bri annIca films. He says
the one big lack in the present program is filmstrips, that although
0
these were under my direction back in 1947 they have never
forthcomIng.He onmpla1ds1 that the teachers warm to take
up film strips, but of course I told him this had been true also in
the United States.
Dictated in Lirna
arh
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PERU
Cate #1672
Memo #40
3/3/60
SO OUS COMMENTS GROWING O OVSTTO MCCHU PICCHU
Our remarkable visit to the ruins of Micchu Picchu I shall not
attempt to describe. I shall send you some of the travel folders.
Mr. Smith is writing .a memo. Senator Hiram Bingham the discoverer
of these ruins, is a great and famous figure here dm- for his early
exploits as a young man described in detail In one of the folders.
In the Senate he's principally remembered because of the vote or
censure of him, the last such vote before McCarthy. I remembered
today the French wisecrack, "No man can call himself happy until his
st
day".
Our experiences in Cuzco and Micchu Picchu should be related
of course to the problems here in Peru of the Indians their history
and their future.
Dr. Albert A. Glesecke was rector of the University of Cuzco
from 1910 to 1923 for thirteen and a half years. He is now con
nected with the American Embassy in some kind of loose relationship
that I don't quite understand. He was assigned to us to accompany
us to Cuzco and environs.
Dr. Giesecke Is an authority on the history and background of
the Indians. He says there were six million Indians when the Span
-
lards conquered Peru In the 1530s. In the 1820s when the Spaniards
were kicked out, only two million Indians were left. On the train
from Cuzco to Micchu Picchu, he showed us great terraces going up
the high mountains which haven't been cultivated for hundreds of
years because the Spaniards forced the Indians off the land into
the mines
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Dr. Giesecke says that two-thirds or three quarters of the
tillable land on the great plantations is not being used. He wants
to tax this land heavily so the hacienda owners will be forced to sell
the lands to the Indians. He reports, as did Mr. Rogers in the Em-
bassy, and Galo Plaza in Ecuador, 'That the Indians always pay".
Governor Stevenson broke in and said, "The simple people always pay".
This of course is the business experience of Sears-Roebuck and the
Encyclopaedia Britannica.
Dr. Giesecke says that at least half of the Indians of Peru
are dependent on these big estates All of them would have the op-
portunity to achieve ownership of the land in his opinion, with the
leverage of a tax on unused land.
The problems of educating and helping the Indians are grave.
Frequently they seem much simpler to those who seek to help them --
than they turn out to be. Dr. Giesecke told us how a Point Four Pro-
gram In Cuzco doubled the potato crop In just one year. The Indians
were so overjoyed and delighted they held a fiesta for eight days
They ate all the potatoes They did not even leave enough seed
potatoes for the next year.
We were told a story about a Point Four team which moved into
an Indian village to teach the Indians to boil water -- In order to
cut down on illness and disease. After a year or two of the 200
families In the village -- only 11 had been persuaded to boil water.
We were told a story by Governor Stevenson of the problems of
a village In India In which the objective was o teach the inhabi-
tants to open up a small chimney in the corner of their huts so the
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smoke could escape, the acrid fumes be removed, and the trachoma
eliminated for children. He said the results were as anticipated,
except that the draft caused by the scientifically constructed chim.--
ney resulted in the consumption of much more dung and this called for
more cattle, and the s "natural rhythm of nature", if I re
call Governor Stevenson's phrase, was broken. The Indian natives
couldn't afford the chimneys.
We pressed Dr. Giesecke for his own program for the Indians
and it worked out something along this line:
I. Let the Indian achieve ownership of the land.
2 �
niVa5. him
^reellt for h s seeds and fe t lizer.
(See Mr. Rogers' comments at the Embassy briefing.)
3. Help him get instruments, communal instruments perhaps,
to use in the tilling and development of the land.
4. A health program.
5. And only fifth an education program Priority should
be given to a literacy program for adults. A vocational
type of educational program is needed for children.
Such a program he contends, Should be attainable within ten
years and should be pushed if communism is to be successfully cool-
batted among the Indians. Dr. Giesecke thinks 20 or 25 years is
much too long to wait,
Dr. Glesecke and Pau
our officer assigned by the Em
bassy, told us that the next Congress will be "radical". The Apra
party will dominate it f the elections are honest and If the mili-
tary doesn't intervene. This caused Governor Stevenson to ask "Who
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exactly is the ar had asked this question previously because
it's evident that the so-called "oligarchy doesn't put its sons into
the army. Yet the oligarchy controls the army, which seems to con-
sist of a small top group of officers largely from the middle class
who in one way or another are subservient to the so-called oligarchy.
One revealing comment about the army was made by Paul. He
said, White men are never drafted". The enlisted men are Indians.
This comment caused Governor Stevenson to say that the five
million Indians seemed to be innocent victims of their own arm-
And this does indeed seem to be true. When the Indian who has been
drafted comes back to his village he can become the village bully.
The Governor and I have been puzzled about the role of the
student in South American universities. We were told by Dr. Glesecke
that the Peruvian Congress has just passed a law which confirms what
has been the ipso facto situation. The students are to be given, by
law, one-third of the representation on the faculty whi.,A01
control the universities and on the university council. This is In
line with the pattern we have run. Into In Quito and Mexico.
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PERU Ca #1671
Memo #39
3/2/60
MEMORANDUM ON THE EVENING AT THE CUZCO 15 NATIONAL CENTER
This is one of the seven Di-National Centers in Peru. I
hope I sent through Ed Trueblood's memorandum about his visit to It
The Center is supported largely by fees from English classes. The
USIS covers the $1,300 deficit.
Dr. Giesecke of the Embassy, who for 10 years and more served
as Rector of the University of Cuzco, says that the Center was found-
ed by him with two Cuzco Peruvians in,1938, Of course such Centers
were .sitPr promoted by Nelson Rockefeller, by the State Department
when I was responsible for information and cultural programs and
are now backed by the MIS.
The evening was arranged in honor of Governor Stevenson and
it as impressive. I am attaching he diploma given to me and sim-
ilar ones were presented to Governor Stevenson and others of our
Inkelvb*Iur varsh vgzrn^r !.amvaanstrIn
*0, wsa� �
WNW.
1~Nme4A by a long speech, as is
usual in South America, and responded with his customary skill and
graciousness. He emphasized the leadership of the Peruvians in the
1Center which of course is-essential tcesu h ventures and the
Importance of teaching English.
The Center occupies a duplex room with a great balcony from
which a stairway goes to the lower floor
The room is surrounded
with color prints of the United States scenic beauties, beginning
half of
on4Agm. of the room Then comes a great stretch of glossy-print
at the left n the second floor and perhaps continuing
black and white photographs of all kinds, followed on the right hand
side of the room by great color reproductions of covers of Sports
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Illustrated and finally, ending up on the right, plush lush color
photographs of American scenes of concerts and indoor settings
Downstairs the Governor and I saw large photographs of hand
some athletes water skiing, etc. Both of us commented that we thought
the photographs gave an impression of the United States and its peo
pie that was too rich and luxurious, far out of the grasp of the
ordinary Peruvian:
Above all these photographs were pictures of Franklin,
Lincoln and Washington together with some Peruvian military figure
whom I did not recognize and in an isolated spot a color picture
of the Jefferson memorial In Washington.
After the speaking we were entertained by the six 'Brothers
Cardlnas, Indians wearing their panchos wno played flutes, the
guitar, the "arpa" (a strangekind of barp which resembled a bass
viol with an arrangement which somewhat resembled a harp on top)
a tiny little piano known aS a pampa piano.-and all of this inst u
mentation for the benefit of two of the brothers who sang. I particu-
larly liked the title of one of the songs The Black Girl with Blue
Eyes". Later was the dancing called cara-chuncho. (This could be
the name of the dancers!) The male dancers wore high pointed feathered
headdresses red jackets and carried spears
Later they were joined
by girls P visa gIrls and Vve men did a long monotonous rhythmic.
dance called the "ceanchis". Afterward there was drinking of the
famous and very tasty Peruvian drink known as the pisco sour. And
we were shown the classrooms
And the library, a strange mixture of
scientific and technical books with others of the most varied assort
ment The library is now and they're going to start the experiment
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of a circulating library. Mr. Edward G. Bernard, an American from
Vermont who is the operating head of the center, and who has been
here two years and expects to stay another year a young energetic
zealous and appealing man with missionary fervor - said he had been
promised an Encyclopaedia Britannica. The Governor and I wondered
whether a set of Junior would be more appropriate. Certainly some
encyclopaedia should be included in these libraries.
Mr. Bernard told us that they show movies several times a
week. These are documentaries from the USIS and because they are
short of movies they are now getting them also from the British in-
formation Service. I asked him whether he ever was provided with any
Britannica Films and he said "No." I'm indeed mystified why none of
our WIS branches seem to be supplied with any Britannica Films.
Certainly they are needed for showing at these Centers but more
particularly for the schools
Their dIatrtbuton thrseme,
eluding television distribution as described to us in Lima - would
seem to me potentially most beneficial from the standpoint of promo-
tion of EBF wholly apart from the sale of the prints
B1 National Centers," as they are emerging
from my reports on these countries are a most important part of Uni
These so-called
ted States propaganda policies am of course thinking in terms of
long range objectives and among these perhaps
is the teaching of English.
pulr
Bernard reported that he has 750
students in his ten different sections this year. Unhappily all too
many drop out He only has ten advanced students
He has other stu
dents who have become teachers after as little as two years of
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Instruction. When the Governor asked him why his students wanted to
learn English and would pay for the instruction, Mr. Bernard said
that any one of them who could learn English could go to Lima and get
a job at 5,000 soles - (this Is about $200) - which Mr. Bernard des-
cribed as a very good salary. He said that the students need English
to qualify for scholarships in the United States.
told him that I wished he could teach one of his students
enough English to qualify for the Job at the Cuzco Hotel at which we
are staying, the luxury hotel of the city. Today I could not trans-
mit English instructions for a 6:30 A:M. telephone cai,L, nor COUld
after repeated efforts make myself understood that I wanted the bot-
tied water; and only by finally appealing personally at the desk did
I arrange to have a suit of clothes pressed. Incidentally, as a
commentary on the Peruvian economy, when I tried to send a telegram
to Lima tonight which perhaps ran 100 words, the hotel manager told
me this would take two days. It took me two hours to put through a
phone call and I got the wrong party and the connection was very,
very bad when I finally located Bill Blair. I still don't know
whether he understood what I was talking about
I'm counting on Dr. Smith to cover our sightseeing in Cuzco
today, and Micchu Picchu, and our. Impressions of this fascinating
old Inca area.
mu 1
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CALL UPON P
Cats #1670
Memo #38
2/28/60
R PEDRO BELTRAN OF PERU IN LIMA
BY GOVERNOR STEVENSON ACCOMPANIED BY SENATOR BENTON
The Premier explained to us, in line with the problem or
land reform which dominates so many of our conversations in Latin
America, that there Is plenty of land in Peru and that there Is no
need to take the land of tile big hacienda owners or to conquer
land or to seize land from Ecuador. (Mr. Rogers of the Embassy
takes a contrary view; see his comments at the Embassy briefing.)
He said that the great need was for roads. He spoke of a
project in which the Indians moved to the eastern side of the Andes
and learned quickly to produce a million dollars worth of agricul-
tural produce. But this has to be transported over the mountains on
"men's backs." The cost was $300,000 of the million dollars. What
this project needs is roads.
The Premier spoke of a disease which had poisoned the cocoa
plants
He spoke of the need for a housing program and the require-
ments for capital financing. The Premier is pleased at the prospect
of balancing the 1960 budget. (See Embassy briefing.)
Tax revenues will not come In, in sufficient quantities,
during the first six months of the fiscal year; to finance the early
months of 1960, he Is going to float a bond issue so that he w 11
not have to borrow money from the Central Bank. This issue will
carry a ten percent coupon but he quickly explained that this is a
low rate of interest because the banks charge 14 percent for money
and that In Brazil money draws 30 percent interest. These will be
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=2=
the first bonds in Peru's history. The issue will be for 250,000 000
soles = one=half for six months and one=half for nine months. Thus
in the last six months of the year, the whole bond issue will be
paid off. He "thinks he balanced the budget and he is sure he
will collect the surplus after June to pay off the bonds. Peru has
had a World Bank expert in Lima who has helped him develop this
whole project He says that Argentina used to handle Its finances
along these lines, before Peron, and he thinks that Argentina is
again beginning to handle its financing this way. He urged us to
visit immediately when we reach Buenos Aires, with former Finance
Minister Francisco Pined� = Minister before Peron
The Governor asked whether the Indians of Peru are in the
money economy. The Premier replied, "In a way they are = every day
they are buying more with money = the Indians are now feeling the
need for things they have never thought of before,"
The Governor asked about the migration of the Indians to the
cities. The Premier replied 'Some are migrating, and the big cities
are extremely crowded. The way to keep the Indians in the mountains
Is to make their lives more attractive." (See Embassy briefing.)
The Premier referred when we talked of communism to the
Cuban broadcasts. He says there are three different Indian lan-
guages and he himself speaks the one that is spoken in Peru the
Quechua.
The same night at the
er dinner at his home, we met
a candidate for the presidency in 1966, an astuteremarkable lawyer
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Fernando de la Valle. When I asked him whether he spoke this lan
guage, he said that it made no difference because those who spoke
it had no vote! In Peru, one has to pass a literacy test for regis--
tration to vote�
The Premier is a most attractive man, fluent in English
with but a slight accent. He has an American wife. His home covers
half a square block surrounded by the beautiful 'Lima" balcony, a
corridor of about six or eight feet in width which projects from the
second floor and surrounds
system of insulation. The
and hap been in the family
the house. This corridor Is a marvelous
Premier's house was built 130 years ago
ever since. There are 32 rooms on the
second floor which used to provide suites for various members of the
family. Family portraits abound and we met at dinner a Miss Blackmer
an English girl of 26 or 28 who is descended from a common great
grandfather,
Council as a
given a show
and who is here under the auspices of the British
concert singer and with her own paintings which
in April. She reminds me of the grand tour for
ried English girls of about her agetraditional in English
when the girls who haven't married are sent out to cousins
will be
unman-
families
through--
out the world on a one or two year trip visiting relatives and friends
The Premier gives an appearance of quiet power, of candor and
Independence. When I asked him h
wspaper ensa"
had been in his family, he said that it was put out of business in
1930 by one of the dictatorships; that he bought It with a small
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Memo #38
group ot friends in 1934 from the family which owned it and had
reopened It. (For more on the Premier, see Embassy briefing.)
The Premier's wife worked here In our own Embassy during
t
as a. "economic analyst
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PERU Cat. #1669
Memo #37
THE LIMA SLUMS
One of the interesting experiences that Governor Stevenson
and I have had has been our visit to the slums of Lima. I reported
on such a visit in Bogota. We try to do this whenever we can. The
slums in Lima seem thp most degraded. The contrast was the sharper
because we had had lunch at the Club Nacionale, certainly one of the
most luxurious men's clubs in the world.
(I was told there are only two or three such clubs left in
all Latin America. A great big domed building facing the be=utiful
square on which the American Embassy is located, and also the Hotel
Bolivar - with great marble columns - the Club Nac ona e is the
citadel of the wealth of Lima.)
Within a five minutes' drive, one can reach the most execrable
c,
slums on the bank of the dirty river - vast stretches of one room
brick and mud huts in which people live In utter squalor, surrounded
by a few chickens and guinea pigs. There are many such slum areas
in Lima, having 20% or more of the city's population. In this partic-
ular area live about 1000 families. Their huts are built on garbage
dumps, some going back 350 years. We were first shown through the
least .squalid part by an extraordinary French priest who runs a small
wooden church with an adjoining shack serving as a kind of community
center. And then he took us to the worst section, infested by hun-
dreds of pigs, which are underfoot everywhere, burrowing for garbage.
There are about 5,000 pigs roaming through this slum - for an average
ownership of five pigs per family. Of course some families own 50
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Memo #37
pigs and some own one. I was told that the average price of a pig
is about $38.
The dirt and squalor was unbelievable, yet in one of the
huts I found 18 cases of beer; beer is believed by many to be the
curse of these communities and the drunken men who came up to talk
to us in mid-afternoon help give better understanding of why the
United States passed the 18th Amendment!
There was a lot of newspaper coverage on this visit, and
I'm getting it translated. I think this coverage, plus this report,
will be enough for Governor Stevenson's and my purposes. Thus m
not attempting to describe this experience further.
mil
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Memo #37
March 8 1960
To: John Howe
From: William Benton
This is a postscript to the memoI've just written
you about Governor Stevenson's and my visit to the slums of
Lima. These are called ibcalriadas". In the Philippines such
slums are known as "barrios". In Johannesburg, they are known
as "locations". In Hong Kong they seem to be referred to as
rentages". They are a phenomenon of many of the big cities
of the world today.
I like a comment which was made to Governor Stevenson
aud me yesterday. A man told us that his favorite statistic
about Peru is that "one per cent of the people own. 99 per cent
of the wealth and property,"
eta
arh
ed in Peru
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PERU
Cat. #1668
Memo #36
March 8, 1960
Report of a Meeting arranged for the Governor and attended by Senator
Benton on Sunday morning shortly after our arrival in Lima - attended
by various political and intellectual leaders as listed in the "Brief
in Book" prepared by the Embassy.
Dr. Sanchez was the spokesman for the group. The Governor
and I and two or three representatives of the Embassy sat on one
side of the table with the Peruvians on the other side.
Dr. Sanchez, whom I had known at UNESCO Conferences in Paris,
and who reminded me of our past association, presided, Carleton Smith
sat next to me and translated. Dr. Sanchez wanted Governor Stevenson
to understand the unanimity of the Peruvian people on the boundaries
of Peru. Former Foreign Minister, Correa led off. He explained that
he was a member of the opposition party but that all parties were in
agreement. He said that the treaty dealing with the border had been
guaranteed by the United States, Argentina,
7:1.,naf7
and chile. He
said that the area in dispute had been Peruvian for 50 years that
this area had declared itself Peruvian by "self-determination". Thus
Peru not only has the treaty behind its "rights" but also has histor-
ical background and precedence. He asked what Peru is to do if
"every time there is an election in Ecuador, this problem is tossed
at us once more by Ecuadoran politicians" -- or words to this effect
Seemingly, Gab o Plaza, candidate for President in Ecuador's current
campaign, had made a statement on this subject within the previous
24 hours which received a big play in the Lima papers
Mr. Correa spoke passionately and fervently, and when he
stopped Dr. Sanchez called on Mr. Townsend who I gather is editor or
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Memo #36
publisher of one of the key papers. (check on list) Mr. Townsend
spoke for the political group known as Apra. He spoke of the new
"vibrant Latin America". He sharply criticized the United States
for its support of "military strong men". He condemned us in par-
ticu ar for giving a decoration to former Dictator Jiminez of
Venezuela. And also to the Peruvian dictator, General Manuel Odria.
He said that South America needed a "new approach by its powerful
neighbor, the United States". He said the United States needed to
understand the necessity for South American industrial development
and the great possibilities that lie ahead of South America. He
thinks that the Governor's visit here will help achieve understanding
of these objectives.
I have hope that the Embassy list will show the background
of a Mr. Polar, who spoke next.
(1 am dictating this from
four days later OM IMP In
Micchu Picchu). He said that the United States has enjoyed extra-
ordinary development, and has achieved a very high standard of liv-
ing and now must help others. He pointed out that the United
States prosperity depends on the purchases of other countries. He
said that South America was a most natural market for the United
States. He suggested that help to South America was not in any sense
charity for the United States
He contended that an enlightened
United States policy will want to develop South America in its own
_Long range
terest. He stated that the United States should
reduce its tariffs and its quotas on Peru's products so that Peru
standard of living can go up. He asked for "softer and freer credit".
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He pointed to the urgent need for lower transportation costs. He
asked United States understanding of Peru's efforts to develop its
own industries. He urged a "fraternal partnership." He concluded
by saying that the United States should be "more for Peru." He re-
ferred to the way that the workers In Chile and Venezuela share in
profits. (1 did not Understand this point clearly - Indeed I (ndn't
understand it at all.)
Governor Stevenson changed the emphasis In his reply. He
began by stating that he had the impression that Ecuador had wanted
a settlement of the border dispute so that it would have access to
the Amazon. The Governor said rather sharply that he thought the
settlement of the border dispute should be reached promptly. The
Governor said that it was difficult in the United States for us to
help Ecuador and Peru when such large percentages of their budgets
have been spent on armaments. Why should large tax payers such as
Senator
tisitTgN M V411'511
.CPUL.StdWiJ, VN0QA.11 4.0 %OW e'.11.1, assvaay..ty wv
!VbtlWrbilarict. f
or armament?"
;.4
The Governor said he felt very strongly on the subject.
The Governor said that he knew that the criticism against
dictatorships and our support of them, was widespread. He conceded
that the United States must devote itself to the problems of tariff
and quotas. He said that he regretted that sentiment in the United
States now seems to be growing for bigger tariff protection. (See
report on Embassy briefing for impact of quotas against Peru.)
Governor Stevenson concluded by asking about the Indians.
Dr. Sanchez made an amusing observation. He said that w
In the United States called anyone an Indian who had one drop of
Indian blood", (manifestly referring to the Negroes) Dr. Sanchez
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then said that 'here in Peru, we only call anyone Indian who is full-
blooded!" Seemingly, judging by some such standard, he contended
that there are only 3 million Indians in Peru. (From the Embassy
and elsewhere we have reports that there are 5 million.) Some one
commented that in Peru an Indian teacher is the only who puts on
shoes. (Gab � Plaza. In Ecuador, had commented that an Indian stops
being an Indian when he takes off his poncho.)
Dr. Sanchez contended that the Indians in Peru are "a prob-
lem but not a threat." Dr. Sanchez then called on Mr. Franco,
(identify).
Mr. Franco said that one million, or 30 per cent of the
children in Peru are not in school He largely agreed with previous
speakers.
The Governor asked whether the progress of the economy was
satisfactory. Dr. Sanchez answered wittily a
read that." Dr. Sanchez then referred
� NO%
pecift all ave
.LcL
eft, e-s 4soni
CL sZt
11. A lgiro
����
Nril, %sr
tua.A., and the unhappy fact that he wasn't doing too well wIth it!!
He said he was an economist and he didn't know whether the economy
was doing well or not!!!!
But Dr. Sanchez thinks that the political stability s real
and that all parties want it to continue. He is hopeful on infla-
tion. He is also hopeful that there will be no more Peruvian dicta
torships
The Governor asked about the problem of financing higher
education, and referred to the fact that San Marco is the oldest
university in the hemisphere. The Governor said this was another
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subject, besides the boundary dispute with Ecuador, on which he
thought all parties should agree.
The Rector of San Marco spoke
of working on a budget of 70 million solars but he needs 140 mil-
lion. I commented that this need sounded like the need of all rec-
tors of all universities everywhere. But I gather he has a far
greater need for money than most The Rector of the University
explained that he desired to improve the university - with aobetter
library and plant et cetera. But the tuition is only $7 a year,
and there are 15,000 students and literally no money for improve-
rnents. The budget of course comes from the state.
Dr. Sanchez told us of a study of the Peruvian universities
made by a professor Gibson from the United States who "made many
mistakes." We asked about private gifts and were told flatly, 'There
are no philanthropists here." I pressed further on this subject and
(F)
Sanchez said "These are feudal times in Peru and there are no
philanth 0 stse" Dr. Smith pointed out that the rich people in
*1)
feudal times used to give money to the church. The reply was that
the gIfts today were very small to the church and even 1ess to educa
tion.
,)
he meeting broke up abruptly because the Governor had to
leave for a protocol call upon a representative of President Prado
who is traveling in Europe.
Dictated in Peru
arh
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PERU
Cat. #1667
Memo #35
March 9, 1960
PING SESSION AT THE AMERICAN EMBASSY IN LIMA
Governor Stevcnson and party
Charge d'Affaires Jack Neal presided over a group of eight
or ten of his associates. His political officer, Carl Barth led
off by briefly sketching Peruvian history. The first period was
after the change from Spanish rule; this he dated from 1824 to 1895.
The control of the country passed from one "elite group to another".
Seel/alai:L.1:y these were all military dictatorships. A large part of
f .ancing came from the rich untapped guano deposits
which financed the country and built the railroads".
(Yesterday Governor Stevenson and I were taken by yacht to
some of the guano islands which lie right off the coast. We saw the
thousands of birds at their work of conversion of anchovies into
guano. We received a complaint that too much of the guano drops
Into the ocean. - and saw the little walls now built on these barren
rocks in an effort to keep the guano from sliding off. We saw pen-
guins many of them, here only ten degrees from the equator. Guano
Is a =government monopoly,with some Lto percent of the production for
export The islands are cleaned every couple of years. There is
some argument developing that the anchovies might be more valuable
than the guano!)
The second period was 1895 to 1919. Throughout the country
was ruled b civilians.
This was a period of stability and progress.
The third period was from 1919 to 1955 when one military
dictatorship succeeded another
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Throughout all three periods Peru has been led by an
oligarchy composed of military officers, the Church, the wealthy
business - men and land owners".
During the period of dictatorship, before World War II, the
political party of Apra emerged under the leadership of Haya de la
Torre. For many years this was pretty much of an underground con-
spiratorial organization, President Bustamante's administration in
1949 was the first open and avowed effort at democracy. He Included
Apra in his "national plan", but Apra, which had grown to maturity
underground, and had lived by terroristic methods, wasn't prepared
for such responsibility and it fell apart and brought down the ad-
ministration. In 1948 it was outlawed and General Odria took over
as a dictator. He ran unopposed In 1950. He ruled until 56. He
encouraged "free enterprise" and the country prospered for a period
during his administration. But by 1956 even many members of "the
oligarchy" opposed him. In 1956 the present President, Manuel Prado
who is now in Europe as described by Time last week was elected by
a plurality of a hundred thousand. He had been president from 39
to 1145, and had spent the intervening years In Europe. He is regard-
ed by many Peruvians he and his wife as more European than Peruvian.
Prado restored democracy, lifted the ban against Apra and
restored civil rights. Odria retired to Washington and may be a
candidate in '62. (Former presidents traditionally leave the country.
The President has the power to appoint the Premier. In the
last Cabinet shift President Prado appointed as Premier and Minister
of Finance the publisher and the owner of the Lima newspaper La Prensa
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Mr. Beltran. Although Beltran has few if any friends in the Parlia-
ment (mostly lawyers and middle class) the military "were probably
in the background on his appointment". He has been doing pretty
well, we were told, with his economic program. He Aggressively sup
ports private enterprise; has out back sharply on expenditures and
hopes to achieve a balanced budget in 1960; and indeed there is so
much confidence in him that capital returned to the country after
his appointment and the upward pressure on prices has ceased.
The major problem continues always the same, said the
speaker - the millions of Indians who are largely illiterate and
who live in isolated seclusion. As yet, the communists have made
little progress with these Indians. The problem of the Indians
continues to be Peru's great problem.
Apra controls labor, and not the communists.
The communists have been most successful with the students.
They control the four student federations. The student agitation
keeps building up. There are some communist members of Congress,
but under "other names".
We were told there are 7,000 communists in Peru with perhaps
a hundred thousand sympathizers. The number of sympathizers would
go up sharply "if there was trouble" The party is not outlawed,
but it is not recognized as a political party.
The political officer concluded by telling us that no one
can now gain political control in Peru without the support of the
armed forces. The military does not like Apra and may not permit
an Apra candidate in 62 - and may not permit Apra to control labor
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after '62 62 even if it wins a victory. (We later learned that General
�rta expects to be a candidate in
We then heard from Mr. Francis Linville, the Economic Officer.
He reminded us that Peru is one of the poor countries with an income
of only $100 per capita. Sixty percent geographically lies in the
Jungle area eastward beyond the Andes mountains. This area is badly
cut off from the rest of the country. It contains only ten percent
of the population. Another Go percent lives in the mountains which
are also 'largely inaccessible". The main road over the mountains
rises to a height of 16,000 feet. The rest of the population lives
in the coastal area which is largely desert but is fertile in its 40
oases where there is water.
The government is now depending on"free enterprise" to de-
velop the country and there are no controls. This policy has been
much more successful than anything that the government itself has
done in the economic field. Indeed the per capita income was moving
ahead until 1957. The world depression in that year cost Peru Its
gold reserve and it was necessary to devalue the currency from 19
soles per dollar to 31 (Now 27.) Inflation had been running, prior
to the appointment of Beltran at ten to 15 percent a year. Because
it looked as if the economy was falling apart and the political sit-
uation also, the President felt compelled to appoint Mr. Beltran who
had been his principal critic" Beltran's predecessors, when they
needed money, borrowed
62.)
t from the Central Bank When Beltran took
over, he put a stop to this and confidence developed and gold came
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-5
back into the country. (Mr. Linville says that Peruvians do not
have big balances abroad as do the nations of many Latin American
countries.) Things are now looking up. Twenty percent of the bud-
get admittedly goes to the military, perhaps 25 percent.
Forty-five percent of Peru's imports come from the United
States, 35 to 40 percent of her exports go to the United States
United States companies have $6000000,000 invested here, mostly in
the extracting industries in copper most heavily, then in lead and
zinc and petroleum
Grace and Company is a big operator here. It was started by
an Irishman more than a century ago who had left Ireland after the
potato famine. He started selling supplies to ships, then bought
ships himself and operated them around the Cape. He finally moved
to New York and was elected Mayor of New York three times Grace
and Company has done a remarkable public relations job here and its
relations are good; its newly appointed manager is a Peruvian.
On Peru's four major exports - cotton, sugar, lead and zinc -
Peru is handicapped in dealing with the United States because of our
quotas. In response to a question from me Mr. Linville agreed that
perhaps Peru is harder hit than any other country, in relation
its size and economy, by restrictive United States import policies
(If true
this is an important point.) In the last sugar bill the
U.S. Congress cut back Peru sugar quota beneath the Administration's
recommendation. This problem comes up again before Congress this
year. The Peruvians want a bigger quota. Their position is that
they are friendly to the United States and support United States
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policies in In the U.N0 and elsewhere. Why should we take only 18 per-
cent of their sugar production - while we take 53 percent of Cuba's?
(Check:)
Mr. Linville concluded by telling us the Peruvian government
has done nothing on land reform. (When we visited Cuzco, we were
told that most of the land was in big haciendas, and that the owners
often lived in Lima, preferring careers as doctors or lawyers or
members of Congress - to living on their land.)
* * *
Mr. Rogers then talked to us. He is head of the USOM. He
spoke of the big haciendas which dominate Peruvian agriculture and
commented "There is a great pressure on the land and there is now
little land unused that is accessible.
Mr. Rogers differed sharply
with information later given us by Mr. Beltran, who contends that
there Is plenty of good available land, and that it is not necessary
to break up the big haciendas In order to supply it. Mr. Rogers
states that the Jungle area, east of the Andes, where he agrees the
government owns lots of land, is not only inaccessible but would
not be very productive. He says this land has a high rainfall and
acid soil - though parts of it would be good for grazing.
Mr. Rogers spoke of the government's technical assistance
programs which were started in Latin America by Nelson Rockefeller.
He reminded us that it was in 1949 that President Truman recommended
the extension of these programs to the rest of the world. This was
President Truman's Point Four" and the origin of this phrase.
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Mr. Rogers says his favorite statistic about Peru is that
its total budget is approximately equal to the budget of the Univer-
sity of California - $230,0000000. (This is a minimum of at least
$50,000,000 for the military and is a favorite theme of Governor
Stevenson; if we put about two and a half million dollars into tech-
nical assistance, given to Peru by American taxpayers, It is in con-
trast to 20 times this sum which the Peruvians are spending on a
needless military establishment.)
Point Four in Peru has a budget of $2,700,000. Two millions
of this is devoted to education, health and agriculture. Of the re-
maining $700,000, 300,000 goes to sending people abroad.
Mr. Rogers described the importance of agricultural ex-
changes here with a budget of 100,000,000 soles. The United States
puts in twenty million of these. .The program employs 60 American
technicians and 3,000 Peruvians.
� Mr. Rogers reiterated the fact that Peru s most pressing so-
cial problem in the Indian. He asked, "As they move from the stone
age, will they move towards the communists?" He feels that the
agricultural prograM - with good credit terms and seeds and fertili-
zers "may be the best anti". Such small credits to Indian farmers,
plus roads are the best means of reform". He told us as had
former President Galle Plaza of Ecuador, that the credit of the In-
dians is excellent - they always pay the money back. He said such
credits are excellent everywhere - even in Haiti.
Mr. Rogers told us that the key to the success of the Cor-
nell project which is described in my notes on the briefing session
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arranged by by Ken Holland, is the extension of credit, as little as
300 or 400 soles for seed and fertilizer to an Indian family. He
said it Is the overhead that ,eats up the money and creates the
losses on the lending program. He referred to the high cost of the
paper work. (Offhand, I think a study shou5 be made of this.
suspect that with machines or other modern techniques, a whale of
lot of this paper work could be eliminated.)
Mr. Rogers Is persuaded that, 'How the Indians w.11 emerge
will depend on the economic opportunities accorded them". He said,
"We are trying to drive home to the Peruvians the danger latent in
the problem with the Indians; most Peruvians wholly ignore this
danger; Beltran recognizes it".
Mr. Rogers does not think that breaking up the big estates
would help much in land reform He says that this may happen due to
po__Litical 'Pressures, but he fears that "the Indians wouldn't benefit
from it".
ILA
Governor Stevenson said he wanted to understand better the
border dispute with Ecuador.
We were told that the wars with Ecuador in '29 and 'ki were
"real wars". They started with fighting among civilians near the
border. The armed forces were massed on the borders and then began
to fight.
(Later I asked the military aide to the Vice President about
the number of casualties He said that two or three thousand were
killed in the 41 war and eight to nine thousand were wounded. There
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were naval engagements. Later the Acting Foreign Minister told
that most of the fighting occurred in the province close to the
Pacific. There are few people and there was no fighting in the in
tenor in the disputed land.)
In 1942 a boundary commission was set up under the Rio
Treaty and markers were put up along the boundaries. When the corn-
mission had only another 80 kilometers to go - also quoted as 70
kilometers and 78 kilometers and 32 kilometers there was great
controversy over the "water
There was contention that a
final kilometers were never
this settlement is all that
and with fervor and passion
discovered af-
hcs
Al
n lellnmdmi7=rm"
�
us
shed" which was to be the dividing line.
new river had been discovered. Those
settled. The Peruvians contend that
is left to the controversy. (They say,
and seemingly unanimously, as I later
ettle
Beltran's they say le
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ar.
guaranteed by treaty and that Brazil, Chile and the Argentine - and
perhaps the United States - have guaranteed the treaty and thus the
ine.
Ecuador of course contends that the water sheds determined
by an American survey were a new discovery and that the whole bound-
ary thus needs to be re-examined. Ecuador further says that the
agreement through the boundary commission was
during wartime when the United States didn't
South America. Ecuador wants an Eastern port
down the Amazon.
secured by duress
ant any trouble in
from which it can ship
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411110.
Mr. Plaza had suggested to us that if this was accorded to
Ecuador, the dispute could be settled. The Acting Foreign Minister,
upon whom we called later in the morning, showed us a map and con-
tended that Ecuador now has a port at the headwaters of one of the
tributaries of the Amazon from which it can ship through Peru to
the Amazon,
There Is also the suggestion that the dispute concerns oil
discoveries, The Acting Foreign Minister claims that oil has been
found only In territory that is definitely and traditionally Peru's.
In 1956 the United States proposed an aerial survey, in a
meeting with other guarantors.., but this was rejected.
We were told that the presdent Foreign Minister of Peru,
who is now traveling abroad with President Prado s obsessed on
this subject We were also told that if the Peruvian government
gave in on this, it probably would be knocked out of office by the
armed services.
My impressions in conversations at the dinner at Premier
Belt an s is that the administration, and even its opponents, are
very set and very arbitrary on this question.
The.economic consultant to the Premier who was at the din-
ner was so arbitrary In his Insistence on "the facts" that I told
him the story of the Thurber cartoon "All he knows are facts".
Many think that Peru does not want to settle the question. However,
if Mr. Beltran could retain power, which is doubted in many quar-
ters, there seems to be a presumption that Peru might settle.
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The argument Is most unfortunate because of the pressure it
puts on military budgets of the two countries President Lopez
Mateos in Mexico, when the Governor and I called on hint, mentioned
this as, the number one question that had to be settled before South
0
Ameinica could take a lead on disarmament - in line with Governor
Stevenson's recommendatinna,
Khrushchev not long ago chided the Indians and the Chinese
about their argument over a border territory in which nobody lived.
In most territory under dispute between Ecuador and Peru,
there are few people. And of course the United States is being
criticized because allegedly we 'don t enforce the protocol",- "the
United States � is the most powerful country and It doesn't enforce
the real protocol". This refers to the Rio Treaty. This is the
position of the Peruvians.
mul
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URUGUAY
TO: Miss Cronin
From: Senator Benton
Cat. #1706
Memo #72
March 24 1960
This little map is the map that was supposedly the road to the
cattle ranch where we were supposed to go tonight but Mrs. Benton
went and I declined. You will see the people we were supposed to
meet there in the briefing papers I am sending along.
Here's another little folder given us of stamps prepared for the
benefit of President Eisenhower 'S visit. Seemingly this is a
ceremonial of top importance.
iend of Professor Silvert who sent me the material here,
is a very good man, a Socialist and well recommended by our Public
Affairs officer here, and perhaps someone should look at this mate-
rial possibly notably the little pamphlet included on the revolution
in South America,
Our schedule in Uruguay will show why we ve had no interviews
here - and why there is very
smallest country in South America and paradoxically it's the most
prosperous and paradoxically has the highest income per capita though
it is in real trouble. The ambassador says it will either have to
e for me to report. This is the
increase its productivity or reduce its standard of living. A couple
of hundred years back one of the Governors in Buenos Aires so the
Ambassador tells s sent over about ipo horses and cattle to breed -
and turned them loose on the lush planes of what is now Uruguay.
Along about the time of our Civil War, they had multiplied to
some 25 million.. Then the settlers came In and began to mine hem"
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2-
for hides. They were treated as were our herds of western buffalo.
The herds are now at a low point of about 8 million. They should be
built up to 11 or 12 million, says the Ambassador. About 6,000
ranchers here who own ranches_ of about 1,000 acres apiece, on the
average, are cooperating under:a plan by which $7 million has been
borrowed (from the World Bank or some other international financial
Institut on). This will be used to put up fences, buy fertilizer,
develop seed for alfalfa and other
et cetera. Lots of ranchers won't
has been very little interest in a
make plenty of money selling their
think the extra money is worth the
grains, improve the breed of stock,
cooperate and up until* now there
program of this kind. The ranchers
meat to Europe - and they don't
extra effort and trouble - wholly
apart from the investment. Many figure by
Investing more money, they might Indeed do
^ewards aren't worth it. This attitude is
working a lot harder, and
more business - but the
one of the great handicaps.
All of the meat is sold easily, although the United States market
is closed because of the hoof and mouth disease
The Ambassador states that this disease doesn't
adverse effect. We didn't have an agricultural
which Is "endemic".
seem to have much
expert at lunch
today, a man like Patterson in Buenos Aires who had told us that the
eradication of this disease was one of the best ways to step up
Argentinian beef production. Here, Ambassador Woodward more or less
shrugged it off.
There is virtually no Point 4 program operating here, no techni-
cal assistance program to speak of and few if any of the activities
we've run into elsewhere. The Ambassador agrees that the University
has greatly disintegrated but seemingly it had not occurred to him
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- 3-
to help revive it. There are about 15,000 students and for some
strange reason the Ambassador thinks that those in the School of
Architecture are the worst. We saw the great handsome buildings
across which were stretched streamers denouncing President Eisenhower
during his visit.
As explained in Eddie Roddan s most wonderful summary of
Uruguayan history - (1 gave mineto Governor Stevenson, and if he.
doesn't give it back to me to send along, please ask his office for
it or a copy of it because Bill Blair sends all papers to his office
in Chicago) much of the business of Uruguay is in the hands of
government owned corporations which go back to the first World War.
For Instance we saw big enoraiou hotels which are run by the govern-
ment, and even the profits of their gambling casinos do not offset
their deficit. One we saw is open only part of the year, during the
summertime, for the Argentinian business. This faces a beautiful
broad beach, which rings the harbor of Montevideo, on which we went
swimming this morning. The Ambassador commented that it seemed to
him that. t would make more sense if these hotels were leased into
private hands, and the deficit eliminated. There is no leadership
here such as A sogarary, who is seeking to divest the Argentinian
government of some of its state owned and operated businesses
My hunch is that one of the reasons these businesses are badly
run, on their financial record, is that they are run by committees
so reported the Economic Consular of the Embassy. In 1951 fearing
dictatorship, spurred. by the illustration of Peron, the government
here was converted into a setup operated by a council of nine men
consisting of six
f the majority party and three of the minority.
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The top pp four of the majority each take the presidency on successive
years. This council completely dominates and supervises the Cabinet.
Its deliberations are often dominated - or often devoted to minor
and inconsequential matters. For instance, a full week was spent
debating whether to send the Uruguayan Symphony Orchestra to France.
This fear of centralized authority permeates the Uruguayan economy
and political structure.
There are very few Americans here in Uruguay, only 700 in the
whole country. 280 of these are
relig
ous re Latives
tr.&
co, g
than half of these are Mormons. The young Mormon missionaries learn
the language in a hurry and are very effective I know that a year
is compulsory for mission work on the part of every young Mormon.
Here I was told that it is eighteen months or two years. My general
impression is that the Mormon Church is growing very rapidly all over
the world, and this is one of the prime reasons.
One reason the Mormons do well here Is that the attitude of the
Colorados who ruled the government for 96 years until 1958, has been
liberal to the point of being atheistic. The influence of the church
here is therefore very slight. Montevideo's paper, El Dia is openly
atheistic. It won't print God with a capital G". It refuses to
call the Pope the Pope. It refers to him as Signor Roncall
The Ambassador says there are perhaps about 75 Americans in
�
business here who, with their wives and families, would constitute
at most a third of the American population. U.S. business investments
are only $32 million. The big packing houses, Swift and Armour,
turned their plants over to government controlled cooperatives
couple of .years back. The cooperatives took on the liabilities in
�
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exchange for the plants Swift and Armour claimed the plants were
worth 50 million pesos
They had accumulated debts to the bank of 12
million pesos they would have owed retirement payments of 16 or
17 million under Uruguayan law they had another 12 or 13 million
of obligations growing out of their pension fund etc The Ambassador
reported that these two firms had exerted very unhappy pressure
against the over-all conduct of U.S. relations with Uruguay demand-
ing certain 'privileges and returns when they liquidated and pressur
ing the U.S. government which was asked to alter its policies and
dealings with the Uruguayan government - to help bail them out. The
Ambassador said that fortnate17 this trade was worked out that
both sides feel they got a' bargain". Now the Ambassador is suffering
from the fact that seven senators and a few congressmen are "pressur-
ing", demanding - making demands on the Uruguayan government via the
U.S. Embassy, and through its policies, to help collect $6 or 700,000
which was contracted to southern firms for railroad ties which actually
reached the docks of southern ports but were never shipped because
the railroad cred ts ran out and the order was canceled. The
Ambassador commented
'Our policy should be run In the interests of
all our people and not for special groups". The Governor remembered
that someone had told us .that U.S. policy in South America was too
much oriented, to make Latin America safe for
The Ambassador agreed
ican business":
Overharxiing the economy here of course is the tough infla
pressure. Prides went up 4 in 59 25% in 58 in 57
'R6
5
nd te eat te
The gove n n
this year are for an increase of between 3
Is a t
ing to follow the rec
r y
ations of
�
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the World Bank in combating inflation, and has worked out a good
plan on paper but the Economic Counselor, Mr. Landau, is not optimistic
about its execution.
The government's economic policy is now geared to a decree of
December 17 which put the exchange transactions on a free basis.
Bank credit is being clamped down. Mr. Landau commented wryly, "The
government has done the right things on paper".
Governor Stevenson asked about the activities of the Soviet
Embassy here. The Ambassador told us that there are about 45 to 50
members of the staff, 12 or 14 of these are In the Economics section
and operate a special building in which they live, The Russians are
buying a lot of Uruguayan wool. They pay in cash in pounds'. About
one-third of these pounds are Bent by the Uruguayans for Soviet
petroleum
But the Uruguayans receive credit terms of 270 days. Thus
this deal is very advantageous to Uruguay. On a net basis even
more advantageous is their dealing with Red China, They sold $2
million worth of "hops" to China (whatever "hops" are!) - and buy
nothing in exchange.
These economic consulars are of course the salesmen for the
Soviet Union. One of them has been trying to persuade the distributor
here for Minneapol s oline to purchase Russian tractors and farm
machinery. This distributar telephoned the Ambassador one day -
(the Ambassador was born in Minneapolis and is a graduate of the
University of Minnesota he .s been in the foreign service since 1932
and his on y previous ambassadorial post was Costa Rica) - to ask him
whether he would like to see the proposition he had from the USSR.
He gave to the Ambassador the beautifully printed Soviet catalogs
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t the equipment is obsolete by American standards. The tractors
are made In a plant built in 1934 by the International Harvester Co
The interesting part about the Soviet proposal was this. They will
match Ame __..can or English prices and then let the distributor pay
them only 50% of the money while he keeps the other 50% to
advertising to promote the sale and distribution of Soviet
(I am reminded of the article I wrote for Sales Management
invest in
equipment.
on my
return from the USSR, predicting the future use by the Soviets of
Western advertising techniques.) I think this story illustrates the
kind of competition American firms are going to be up against as the
so-called "economic war" with the Soviet Union intensifies.
What alarms the
esador more at present is the way
* 0 tri Sb t
%oia.N.. 1.A l'+�'*�
Embassy Is flooding the country with cheap books". These are good
sound technical books. The Ambassador feels It Is greatly to the
Interest of the United States to get our books into this market the
good ones and notably the technical ones, and at low prices. (See
the memorandum I wrote after my talk with Mr. Bennett in Quito.)
The Ambassador had mentioned the funds available under P1 480.
50% of these go to the Uruguayan government as counterpart funds for
developmental projects which are approved by the U.S. government
25% under the so-called 'Cooley Amendment (Ambassador Cooley of
South Carolina -and these are known as Cooley funds
go on loan
to
American business to stimulate trade".) The final 25 are available
to the Embassy for salaries and otherwise. (Mr. White, Counselor at
the Embassy, told me that millions and millions of dollars are being
wasted by government bureaucracy's failure to approve expenditures
and also to approve expenditures legitimately accruing to Fulbright
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-
funds; the the money sits in the bank and depreciates while the men in
the field wait for Washington approval; he's even heard that the
Bureau of the Budget had ruled that Congress must approve in certain
Instances; this whole area is not clear and should be looked into by
some Senator or some Senate Committee; the Ambassador showed us a
big beautiful piece of land fronting the ocean on which the new
Chancellery, is to be built - with nothing on it but with plans under
way.)
asked why some of these 480 funds could not be given to McGraw-
Hill, let us say, for the distribution of American books. The problem
here Is that the funds seemingly, under agreement with the U.S.
government, must be used productively for the Uruguayan economy. Thus
� gather that McGraw-Hill could borrow them If it wished - to build a
printing plant or to print books - but could not get hold of them to
act as a book distributor. General Electric, International Harvester
and other big American firms are borrowing these funds and of course
in view of the rapid inflationary spiral - they are likely to pay
them back at 100 on the dollar or even less. I commented that it was
unfortunate that �the funds seemed to be loaned only to the big American
firms and not to smaller enterprises. The answer of course is that
the small enterprises aren't operating here. (I think Mr. Minow
should find out more about these funds, as well as other funds and
other pieces of legis
and pieces
CAL01.1k.Oli
.���
1,..0
which I have been reportng in bits
-and indeed should find out a way to get a full study mace
on behalf of ISti and at the same time he might as well Include the
Britannica.)
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-
The Public Pub Affairs Officer here, Mr. Harold Urist, says that
the USIS has made many studies on the distribution of Soviet books
throughout the world and that he's sure that Mr. Albert Harkness of
the USIS in Washington will give us these studies. Will John Howe
please get all the material he can? Incidentally, the USIS must have
a lot of material that will be of great interest to us in the prepara-
tion of this article. Will John Howe please get hold of it?
On the subject of printed material, the Ambassador says that he
thinks the Reader's Digest here, which is called 'Selectiones", is
the single biggest American influence with the exception of our
movies. He says that the Reader's Digest in many homes is "like a
Bible". He estimates its circulation at 50,000.
The Uruguayans, we are told, are far more sports conscious than
the Americans. Eighty-six thousand play basketball here. Baseball
was established by the Mormons. We went to the big soccer game
today, between the two top teams of the league - the Penroles and the
Nationals. The Ambassador sat next to me and told me that everybody
in the country has loyalties to one or the other of these two teams.
They play three times during the season and this fills the bowl to
the brim with 50,000 people. A very large part of their games are
with foreign teams and in 1924 one of these teams won the world's
championship. The Russians were here last year. Of course tne big
thing about the football game was the tremendous ovation given
Governor Steven on. The teams themselves when they crowded .on the
field, hardly received a bigger one. When we entered, the bowl was
jammed and the clapping began from the few people who were nearby and
were able to recognize the Governor. Then the clapping spread.
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10w-
Finally it engulfed the entire bowl - also with cheers and whistling.
This was repeated even with greater emphasis subsequently when the
loud speaker announced that Governor Stevenson was on hand and when
everybody could identify the cause.
* * * * * *
The headlines this morning report the trouble in Boliviam This
caused the Governor to report a conversation with Interior Minister
Alfredo Vitolo in the Argentine. The Minister told him that he
thought that Bolivia would be a source of Communist danger that might
match or exceed Cuba. The Minister, who is in charge of Argentina's
security police, is genuinely alarmed. Seemtngly the threat of com-
munism here in Latin America is going to get far more attention - and
most certainly the article I've prepared is not exaggerated.
The Ambassador congratulated our government for res sting the
pressures under which it must have operated during the Cuban crisis
the pressures from American business woose property
expro�
priated.
* * * * * *
On our second night in Montevideo at the buffet supper given by
Ambassador Woodward, I had a chance to visit privately and at great
length with the British Ambassador, Mr. Henderson, who was at Aspen
with me for ten days at the Great Boccs classes. Mr. Henderson
He gave me
married Walter Paepcke niece, Paula,
we could even use ifl the opening paragraph of my article for the Year-
book. He said, The world Is pushing in on Latin America'''.
The British are predominant here. There was a big British
a good phrase
which
�
community which has shrunk greatly. The British own the utilIties
VI
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which have been taken over by the Uruguayans, except gas. The British
need products which the Uruguayans export - such as wool and meat -
and must sell its products to Uruguay in order to purchase these
products.
He feels that the new government is trying hard to do the right
thing and he hopes it will succeed. Of course he says it's amazing
how well the country does in view of the general inefficiency of its
management. He describes the Uruguayans as stubborn and determined -
but they are individualists and in general on the right side. They
Just can't believe that the communist threat amounts to anything.
Thus they have no intelligence service. They don't try to get reports
on the communists. A key police officer, in a district outside of
Montevideo with which the Ambassador is familiar, has a few drinks
with Communist agents and tells them everything not because
communist but just because he likes to be important and likes
how urn
C h
he's a
to show
e knows. The Ambassador does not think that the communist
threat in Uruguay at present amounts to much, but he thinks it is
exceedingly important and very ominous that the communists use their
base here for penetration into Brazil and otherwise - but it is
impossible to persuade the Uruguayans of this. He says that from
here the Soviet embassy people have free access to Brazil and it is
in Brazil that they are concentrating their efforts. He points out
that this smal country of three million is
and with no serious problems such as Brazil
or a tough Indian population such as in
there isn't any reason why with the simples
.it can't be exceedingly prosperous, and who
the size of England
s great Negro population,
a or Peru and that
kind of good management
lv free of communism
�
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On the the whole, he's more optimistic than the group of U.S. embassy
officers with whom we lunched. He hopes that British oapital will
come into the country and British interests will be revived and
strengthened.
He told me a most amusing anecdote which bears on the "committee
management" of the government monopolies - and their general inef-
ficiency - and the Uruguayan citizens view of their inefficiency.
(He says that when a sailor in a tough quarter of the city picks up
a prostitute and takes her to a house he gives two pesos to the girl
and three pesos to the madam. This is the standard price. When the
Uruguayans feel that they are being gypped by the electricity company,
or on the price of oil, they say to each other, It's another three
and two"
(This of course refers to the fact that on the governing
political committees there are three members of the majority party
and two members of the minority - a system which was frozen into the
economy in 1951 as I understand it.)
Ambassador Henderson has been here for two and a half years and
feels it's a big step upward in his service from Luxembourg, where
he served before.
He feels he's in the frontier for the British
economic fight for survival
Ambassador Henderson said that there are 70 to 80 in the staff
the Soviet Embassy here - that the estimate of 45 to 50 given us
lunch today did not include the chauffeurs and other servants
who are often very, important in espionage. (I've heard of cases
where the chauffeurs and doormen were the real bosses!)
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Drivi g around Montevideo this morning with Ambassador Woodward,
he pointed to big apartment houses which are being built by the
Vatican. I remarked that it seemed strange to me that the Vatican
was making that kind of a financial investment in Montevideo. And
do think it is very strange. And this Is an observation that might
warrant considerable explanation - but not or .aie because
it's particularly relevant to the subject of my article.
He said that two room efficiency apartments with little verandas,
facing the ocean could be bought for as little as $10,000. This
does not seem to me a very cheap price. Indeed, it seems to, me very
expensive We passed a great half-built apartment house, and he
said that this was being completed as fast as the partments in it
were sold on a cooperative basis. About half of them had been sold
and the apartment house was about half built. I said to the Governor
that this reminded me of the subscription book business in its early
days - sell one book and get enough money on subscription to pay for
the next book, etc. The Ambassador said that the new government was
cutting back on this kind of credit - and most certainly I should
t Ink it would because it sounds like the kind of credit that speeds
inflationup
P.S.
Whiter. later corrected the Ambassador s estimate on the cost
f an apartment in the beautiful new buildings facing the ocean; he
says one can be bought for $7,500 and this is not a two room apart-
ment but a two bedroom apartment a total of four rooms.
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URUGUAY
Cat #1705
Memo #71
3/20/60
MEMORANDUM ON CHAT WITH MR. COCHRAN,
WHO HEADQUARTERS IN MEXICO CITY AND COVERS SOUTH AMERICA
FOR ERIC JOHNSTON AND THE MOTION PICTURE ASSOCIATION
In terms of the motion picture industry, Mr. Cochran explained
to me the problem that inflation poses for many American business
men in Brazil and some other Latin American countries.
Eight years ago his ten companies, the members ox MPA,
A 4 A
.L
a
business in Brazil of about $18,000,000. Their net profit in New
York was $12,000,000.. Last year they did twice as big a business
in Cruzeiros - but had only $7,000,000 net profit left in New York.
The cruzeiro decreased in value by something like 90 percent. Thus
double the business in crezelros actually involves a shrinkage in
dollars of some ko percent. Now I realize that these figures do not
add up. On the basis of the figures he gave me, there wouldn't be
$7,000,000 in gross business. The two certain figures seem to be
that the cruzeiro business has doubled and the net pro its hAirga gone
off 5/12th5. The drop In profits comes from the fact that it is
� impossible to push prices up at the theatres as fast as the cruzeiro
depreciates.
The inflation in Brazil continues. Seemingly it would pay us
in producing our new Portuguese set, to move ahead as fast as we
can and spend all the cruzeiros we can as rapidly as we can, borrow-
Ing them to the maximum extent possible, because the odds are we
will be paying back the money some years hence in much cheaper
currency.
inflation, least of all President Kubitschek who doesn't seem to be
trying
No one seems to have any Ideas on how to stop the Brazilian
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���2--
P.S. This story belongs with the report I dictated last night on
Colgatew-Palmolive-Peet in Uruguay -p and Mr. Lewin 's determination
to leave Uruguay and move to the West Indies.
cc Mr. H. E. Houghton
Mr. R. A. Conger
Mr, John Rhodes
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VENEZUELA
MISCELLANEOUS COMMENTS PICKED UP DURING
Cat. #1728
Memo #89
4/7/60
THREE DAYS IN CARACAS(APRIL 1 THROUGH APRIL 4, 960)
was told that the four most powerful men in Caracas are
President Betancourt; Secretary of Treasury Dr. Jose Antonio MAYOBRE
Cova; Minister, of Mines Dr. Juan Pablo PEREZ Alfonso; and Perez Guer-
rero, in charge of Planning. We spent a great deal of time with Perez
Guerrero, a 45 year old bachelor with a thin face and a big stomach,
and I think the smartest talking and brightest appearing man weave me
in South America. He had a great advantage with us because his English
was so good; so too .z. e his phrases. I'm sorry I did not have a
chance to take detailed notes on his conversation at dinner and else-
where. As to Cuba, he said brilliantly, "Cuba is a process which will
complete itself'. This would seem to be justification for current
United States policy, at least to me. And I rather think we have no
choice. We must be patient and wait. We must wait for the process
to complete itself. Will Castro indeed commit suicide or be assassi-
nated as so many leaders here suggest?
* * *
A popular toast in Venezuela, with long roots in folklore is
"To your health and wealth - and to a new pair of shoes - and a sweet-
heart to boot".
The landless peasants don't have shoes and seem to want them
even before Sweethearts Yes the sweetheart is definitely last.)
Built ighters get fabulous prices in Venzuela. The bull ring
seats 1,00O people. Seats sell for $30 $40 and $50.
paid as much as $25,000 for an afternoon.
A fighter Is
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The press in Venzuela was described to me as "a lightheaded
press". For example, it indicated that all is well with Latin American
relations with the United States "because of the enthusiastic crowds
greeting Ike". Thus the press is said stupidly to imply that every-
thing is for the best in the best of all possible worlds.
* * * *
We were told that the Latin American countries specialize in
diversity, and are proud of it. As an illustration, we were given
Ecuador and Peru - which, we were told, have no remote desire to
settle their border dispute - or to unify - but seem to batten on
mutual hatred.
* *
Mrs. Virginia Perez, only child of President Betancourt,
adted as our guide to the ciMy. She is a sociologist who studied
at the University of Chicago. Her husband also studied at the Uni-
versity as a political scientist. He is now serving as a full-time
nrofori
whi ebb
Caracas. The two of them have a research project for
17. p6Ny arP
as
seeking minor financing. They want to stud "the image
of the American in Venzuela to the Venzuelan and the image of the
Venzuelan to the American". They cannot get funds. Mrs. Perez says
there is no source in all Venezuela - among all of Venezuela's rich
oil millionaires - for private funds for such research.
A brilliant, attractive and good looking girl in her middle-s
twenties, she took the Governor and me to the slum areas. The dis-
parity in living standards is very great in Venezuela as elsewhere
throughout Latin America. Some 250,000 people in this city of
200,000 live in slum areas With us was a most unpopular man
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3--
r Catala, the special representative of the President to liquidate
the so-called Emergency Plan for taking care of the unemployed. Gover-
nor Stevenson laughingly called him 'the man who had cut down the
Christmas tree". Under the provisional government which preceded
Betancourt, some $10 million a month was being given away to the un-
employed, and this program is now being liquidated. Seemingly the
program helped former President Larranzabal poll more votes in Caracas
than did Betancourt. This was the only major area Betancourt lost.
This giveaway program Attracted an extra 32,000 people Into
the city of Caracas. Half of these or 16,000 have now returnt_d to
the country. Mr. Catala is trying to decentralize - and to send the
rest back. Among other reasons is the fact there isn't enough water
in Caracas. In the luxury hotels are signs asking guests to use
showers instead of bathtubs; indeed the stoppers have been removed
from the bathtubs.
The slums are not as degraded as those in Lima and Bogota.
Indeed many of the one and two room buildings are of concrete or brick
and are painted and rather well kept up. Mr. Catala told us that if
we flew over Caracas in an airplane, we would see 'the rim of misery"
which surrounds the city - the rim of the slums. Right now every
effort is being made to keep people from establishing squatters
rights" on key property which surrounds the city. These slums have
electricity but no water or sanitation. The electric companies in
Caracas, and I gather there are two of them are privately owned.
Mr. Catala thinks that the 300,000 people (his estimate) in
these slum areas do not respond to Communism as do the students and
Intellectuals. They won't go on the streets to riot.
�
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Memo #89
Mr. Catala thinks that the unemployed, which have been featured
at 250,000, are no more than 150,000. Recently the labor leaders of
the building trade said there were 30,000 of their workers unemployed
in Caracas but a rbensus just completed shows that there are only
10,000.
*
The life expectancy in Venzuela, says Mrs. Perez, has gone up
in recent years from age 26 to age 56. Malaria has been brought under
control.
�
We passed a huge library built for the University but,
according to Mrs. Perez, "It has no books". Mrs. Perez says that
the University is badly disjointed. She told us of one area, pharmacy,
where there are five professors and only 23 students. She complained
le part-time professors.
Catala told us of the heavy corruption under the Perez
Jimenez dic atorsh
In the construction of public buildings he
10 that 17/0 or 20% of the price "came off at once" as money to be
paid to the politicians. But he added, "There are many ways of steal-
ing" Through sub contracts and otherwise he figures that the total
thefts on these contracts ran up to 40%
Right now he would like to give direct governmental credits
to the construction industry so that they can absorb the unemployed.
He prefers this to a government program of building which would in
turn develop a new bureaucracy. He iS seeking methods to eliminate
the stealing. He wants competitive bidding from contractors on all
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new projects - rather than negotiated contracts which costs the former
government an extra 30% to 40%!.
We passed a very big and beautiful new building and I said
to Mrs. Perez, "Is this the University?" She replied, "It's the
Ministry of Defense - what else?"
Later we visited a most fabulous housing, real estate and
club development. It Is the officers club and is devoted wholly to
them. It has a great mile-long esplanade for parades. It is studded
with enormous arches, swimming pools, and ornamental ponds. Most
spectacular is the gigantic club house itself. All this was built by
Perez Jiminez for the officers of the army. The cost must have run
into tens of millions. Seemingly it did not keep them loyal,
* *
Politics in Venezuela seems much less divided o. Ideology
and issues - than it. is on personalities. The leaders seem to be
struggling for jobs and privileges and political leadership. I had
lunch at the Ambassador's at a-small table with the leaders of the
three leading parties or of three of the four). At the end of the
luncheon I asked them on what points they disagreed. This really
broke up the luncheon. Mr. Calders, head of the Christian Democratic
Party, gave me one specific point. He said, 'The other two parties
ill take Communist support and I won't." These three parties have
some kind of present deal under which they divide the jobs among
themselves.
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Memo #89
Mr. Perez Guerrero said that one of the most important
things to understand is the complexity of relations with the United
States. This caused the Governor to ask about basic causes of anti-
Americanism. These were summarized by Dr. Perez Guerrero:
1)
The conciliation of dictators.
2) The problem of commodity price stabilization. (The U.S.
is the country which favors free enterprise, and thus
we represent the free market and we are the symbol of
what's� wrong when commodity prices are low.
3) Credits ideally loans should go from government to
government and right now should go to many Latin Ameri-
can governments. The United States is much too inter-
ested in loans to areas where there are Communist
threats, and not enough interested in Latin America.
.4) ALL. the many psychological factors. (I happen to
think that these are of tremendous importance, but
little recognized and little discussed.)
Perez Guerrero thinks that the feeling against the
United States is superficial, that it's exaggerated; that it can be
fixed rather easily. He recommends much more attention to the ex-
change of people; much more emphasis on the building up of Latin
America educational institutions notably its universities. He
urges more exchange of professor more effort to stabilize commodity
prices which the Governor points out is not within our own power)
plus more credits
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Memo #89
Virginia Perez and her father, President Betancourt, think
that the attacks on Nixon were against him personally and not merely
against him as a symbol of the United States. We were told that his
attacks of Helen Gahagan Douglas, in his first campaign in California,
were widely known and understood. We were also told that his friend-
liness to Senator McCarthy had been widely publicized and was deeply
understood. Mrs. Perez concluded, I can't positively say that the
attack was a-personal one aimed only at Nixon, but It is a great over-
simplification to say that it wasn't". Mr. Harner, our U.S.I.A. chief
In Caracas, told me that he is persuaded that the plot was to assassi
nate Nixon, and that this went wrong because the attack on him was
triggered too soon,
Virginia Perez pointed out the friendliness in the word
"neg on With her, in the house in which Bolivar was born, we saw
the large murals featuring Bolivar Negro nurse. Virginia says that
her niother calls her father "negro" as a term of affection. Her father
�
*calls her mother "negra". Both of them call her "negrita". These
are family terms of affection.
In a large mural on the ceiling in the capital building in
Caracas is a painting of one of Bolivar 's great battles. There is a
Negro dying. He is famous in Venezuela as prt ero". Seemingly he
not known by name to anyone.
After the luncheon at the Ambassador's, Governor Stevenson
and I met with the directors of the U.S. Chamber of Commerce of Caracas
The President was John Gallagher,the head of Sears Roebuck In
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Memo
Venezuela; he has just been made vice president of Sears Roebuck in
Chicago in charge of all Sears Latin American operations. He did
most of the talking. He explained that the church is weak n Vene-
zuela; that it would be helpful to develop a cathedral- that the church
is a bulwark against communism and that the Catholic church should be
encouraged and developed. The Chamber has had "conversations with
Cardinal Spellman" and with a monsignor in Caracas The Regional
Archbishop is In Caracas, A111 this seemed very strange to me, even
coming from a man named Gallagher, and it's the first timeI've run
into such an objective by an American Chamber of Commerce - yes a
prime purpose of the American Chamber in Caracas is to build up the
Catholic church. The Chamber as a group can hardly be interested in
religion. It's a&aimt communism
100
Further,
1 br.
TheC
teaching of Spanish.
hospital
1
the Chamber wants to develop and build
sports dire tot
bey __a
to Caracas*,
he YMCA..
program of friendship emphasizing the
�motes aladies' group which works in the
has a $250�0 budget on the
others -thich I didn't h.
Gallaghe exp
going: p o ects - and
sO0i0g
the-States were not being sufficiently exposed te) our ountry bey
come ba
United State
tional House or other devices which keep Venezuelan students from
full and Intimate exposure to United States"fami ies and the American
ained that Venezuelan studen
k to Venezuelawittaout
environment He
peaker
ympa thy and undle'r t
nciing of th
uggested that he as opposed to Inter a
0 �
5ad that a part of ttie-problem
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Memo #89
0
9-
Venezuelan students more' constructively before they, leave Venezuela.
Then he said the second problem is to keep in constant touch with
them while they are in the United States.
In response to a question from me, Mr. Gallagher and the
other 15 or 20 men in the group agreed that we need a much more
aggressive USIS prograM. More broadcasts. Much more emphasis in
teaching the illiterate how to read and write. Mr. Gallagher, as
Pre
..dent of the Chamber, said, he communists send people into the
hills at one end of the spectrum, to work with the illiterate farmers,
and Into the universities at the other". He spoke of the extraordinary
propaganda barrage by the communists in Caracas. He referred to
advertising signs throughout Caracas, 'Attend the classes offered you
by the Marxist syst.em the free classes". He explained that young
Venezuelans :do not think of free enterprise in the terms in which we
understand it. He-emphasize
free enterprise.
we need spokesmen in Venezuela for
ressed that we need better organization, bigger
budgets and better leadership in the USIS. We need professionals here
"organized for the job".
Gallagher -concluded by emphasizing that he second con-
stiutlohal..governthent in Venezuela's entire history - is now in
Manifestly he thinks it &houid be a major aim of our diplo
*matte and .propaganda policies to help create a climate in Venezuela
tltutional governments over the decades
which will help establish con
ahead.
�
�
�
�
�
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VENEZUELA,
Cat. #1721
Memo #88
4/1/6o
INTERVIEW WITH FOREIGN MINISTER ARCAYA OF VENEZUELA
(in his office by Governor Stevenson and Senator Benton)
Dr, Arcaya was former President of the URD party)
The Governor opened the interview by asking the Foreign
Minister what was wrong in the way the United States wa:S handling
its relations with Latin America. The Minister replied, 'You always
talk of the empire of private enterprise". He explained that the
common people -of Venezuela and Latin America don't trust American
business. Further, they don't like it, The Foreign Minister lived
in exile on the upper west s de of New York for five years during
the Perez Jimenez dictatorship. He told us that in the United States,
we are "proud of our rich men". Indeed, he said, Your millionaires
are your most popular men". But he then explained, "Here in Latin
America rich men are suspect; we think that private enterprise is
a scheme to protect the rich'
�
The Foreign Minister emphasized that when Latin America wants
technical assistance, the riAted states always seeks to promote
investment in private enterprise. He stressed that the U
S. always
talks about private enterprise when South America may want assistance
for government projects. He repeated with emphasis, "This point is
very important". He commented that "Eisenhower speeches are those
of a traveling salesman for American business" He explained with
gestures that President Eisenhower told the congregated Ambassadors
In Rio that he had met them In Panama in '56 - but that in reality
those he'd met in Panama were the dictators and their representatives
This is how mistaken and misinformed President Eisenhower was
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The Minister then stressed a point which had been made to us
previously - that Latin American businessmen are very different
from those in the United States. The latter, he said 'Have trad
tions of public service - they have set up philanthropic foundations".
He used a most interesting phrase. He said that our blow nessmen have
developed a "sense of trust", of public responsibility. Then he
emphasized, 'This is unknown in Latin America".
�
Further to illustrate hIs
s
bovlberri
the MiMister told us *of the
town where President Betancourt was born. This has three or four
rich families, but the town has no roads, no schools. The families
�
are wholly indifferent to these needs.
This difference In attitude 'is a. major point which must be
und=rstood to comprehend misunderstandings between the United States
and Latin America". The Minister commented that Maxism Is obsolete
in the United States but by no means obsolete in Latin America.
The Minister has wit. He laughingly told us that a Marxist
had recently written a book saying that the Amer can-businessman's
"sense of rust" - was "a diabolical Invention of capitalism". He
explained that the good Marxist must always find an economic ju tifi
cation for anything!
The Minister told us how he "sat for ko days in Panama," as
an exile from Venezuela waiting for a visa to permit him to enter
the United States
He could not get one. Finally, he wired Secretary
Dulles asking for fair play
Almost immediately he had his visa
He spoke warmly of Secretary Rubottom as a good social friend,
and an honest man. But he says that the Secretary is backward" he
doesn understand.
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The Minister felt he was paying his highest possible compli-
ment to the United States when he told us, "If I were to be born
again, I would like to be born In the United States".
The most interesting part of our conversation related to
Cuba. (Governor Stevenson had said to me as we left, for the meeting
that this was the area to stress.) The Minister is positive that
Castro is not a communist. Further he is sure that his regime is
not communistic. He surprised me by stating flatly that the com-
munist party is weak in Cuba - that indeed it is much stronger in
Venezuela. The Minister said, 'The Foreign Minister of Cuba
communist like President Betancourt".
is
anti-
The Minister gave us quite a speech about the Cuban people.
They are proud.. They are "poor bargainers". They are �"childish".
They are "full of Spanish pride, like gods descended from the clouds".
The Cubans, says the Minister, are different people from other South
American countries. They were the last to have been freed from
Spain. Venezuela, Costa Rica, Colombia these have a common denomi
Because Cuba was her. last
colony, Spain sent her best people there. Thus Cuba is "more Spanish".
It is "more proud". In a personal concept and sense � it Is really
Spanish. It has a strong sense of nationalism Interestingly enough
says the Minister, the beet workers in all Latin America are Cubans.
nator
but are very different
from Cuba.
Every Cuban believes that Castro
4 el
1--hca liv_na story of David
fighting Goliath". As to Raul, his brother, he's no communist either
The Minister told us how Raul had instructed a young lad not to make
a communIst sIgn
As to the Argentinian Che Guevara president of
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Memo #88
the bank he Min
er told us how important businessmen visited his
office carrying communist books In an effort to curry favor.
Guevara asked them why they brought them along and laid them down so
ostentatiously. He assured the businessmen that he never read such
books!
With such anecdotes, the Minister bolsters his case that the
top Cubans are not communists. He bitterly resents the attacks on
Cuba in the United States press, which he deems to be wholly unfair.
He fears that similar attacks are about to be launched on Venezuela.
He told us of a story recently published in the Wall Street Journal
aaying that Venezuela is going Socialist. He fears that this iS the
beginning. The Minister emphasized the "fantastic campaign of
propaganda against Castro" by the AP and the UP. He blames the
United States and its propaganda for the current threat in Cuba
against our Naval Base. He says that our own propaganda gave this
Issue to the Cuban communists. They grabbed it. But the Minister is
not at all concerned about the threat He thinks we can forget it
The Minister goes so far as to suggest that Cuba has been
Venezuela salvation" Otherwise, he says, the U.S. propaganda
would have been aimed at Betancourt and Venezuela. It is Venezuela
which would have been called communist instead of Cuba.
We asked the Minister why Castro had suddenly rejected the
Rio treaty. To our astonishment he said that he thinks Castro was
confused about this and really meant to denounce the Caracas de lara--
tion. He doesn't feel that Castro intended to denounce the Rio treaty
at all He quoted Guevara on his recent visit to Yugoslavia. Guevara
vas asked how Cuba would line up if there* was a war between the United
States and the Soviet Union. Guevara replied that Cuba would of
course support the United States because of the Rio � Treaty..
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asked the Minister about Janio Quadros current visit to
Cuba.
Minister says that Quadros appears before crowds on speaking engage
ments and starts of_,
He shrugs Quadros off as an erratic political leader. The
'Please excuse me please know how busy I am
am very harried and m very tired. I haven't eaten the whole day.
Please excuse me if I eat a small sandwich while I talk". He then
pulls the sandwich out of his pocket
The Minister described Quadros as
eally crazy" He called
him "a rainmaker � He further suggested that he was corrupt. By
contrast, the Minister te113 Us that Castro is only 'half-crazy".
And on Castro's attitude toward Communism, the Minister con-
clude Some morning you may pick up the paper and find that Castro
has lined up all the top Communists against a wall and has assassi-
nated them". This is indeed a most revealing comment more reveal-
ing about Castro than it Is about his attitude towards Communism.
Speaking up for Venezuela, the Minister assured us that in
Venezuela there Is no racial or other social discrimination". As
to the bitter warfare which since 1948 has been waged between Liber-
als and Conservatives in Colombia, the Minister told us that the
difference between the two parties used to be summarized in a phrase
the Liberals go to Mass at six in the morning and the Conservatives
at eleven".
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