810.20 Defense/3–1247
The Acting Secretary of State to the Secretary of War ( Patterson )15
My Dear Mr. Secretary: In accordance with our conversation on March 12, I enclose herewith a copy of an interim report13 on financial aspects of participation by Latin American countries in the Inter-American Arms Program. This analysis considers the estimates of cost to the Latin American countries, given in your letter of January 213 and in Secretary Forrestal’s letter of February 28, in relation to the internal and international financial position of the respective countries included in your estimates.
The report consists of a summary, based on a general survey of the financial position of all the countries under consideration, and some detailed analyses of the financial position of a few selected countries. 1 should like to take the liberty of emphasizing a few of the most significant conclusions that should be drawn from this financial analysis:
- 1.
- Only five countries—Cuba, the Dominican Republic, El Salvador, Panama and Venezuela—are found to have financial resources capable of enabling them to participate without major difficulty in the program proposed by the War and Navy Departments.
- 2.
- All the other American republics in the War and Navy Departments’ plan referred to above, including Brazil and Mexico, would face major economic problems if they attempted to spend on armaments over the next ten years the amounts which the War and Navy Departments have estimated for the procurement of material only. The economic conditions of Bolivia, Chile, Costa Rica, Ecuador, Nicaragua [Page 106] and Peru are such as to make participation in the program virtually impossible for them.
- 3.
- The general economic outlook for many of these countries is unfortunately poor, so that the difficulties incident to their meeting the cost of the arms program may be expected to become more severe during the next few years.
- 4.
- The capacity of the Latin American countries to service public and private debts already owed to the United States would be seriously jeopardized by the expenditures required under the arms program.
- 5.
- Encouragement of expenditures on arms by the Latin American countries runs directly counter to our basic economic and political policies which aim to encourage an improvement in the living standards and economic welfare in those countries. The sacrifices which all of the Latin American countries would be required to make under the proposed program would drastically limit or defer their effectuation of plans for industrialization, improvement of transportation, production of strategic materials needed by the United States, and correction of presently poor conditions of public health, education and social welfare.
The economic handicaps imposed by the proposed arms program would perpetuate and aggravate conditions of economic and political instability which already constitute a serious security problem for this Government in Latin America, and which this Government now proposes to spend large amounts of money to overcome in other parts of the world. Those conditions are the soil in which the seeds of totalitarian regimes are nurtured.
Passage of a bill such as HR 6326, with its widely recognized objective of standardizing the armaments of the American republics by the transfer of United States equipment, cannot fail, in view of the above, to face this Government with two wholly undesirable consequences: we shall encourage expenditures for armaments by the other American republics which will weaken their economies and therefore their political stability, and we shall be called upon by poorer countries to subsidize the program at great cost to this Government. These consequences, in addition to other political factors previously discussed, would, I am convinced, impose a serious risk on some of our most important interests and objectives in the other American republics.
Sincerely yours,