Foreign Relations of the United States, 1955–1957, American Republics: Central and South America, Volume VII

32. Memorandum of a Conversation, Department of State, Washington, May 31, 1955¹

Washington , May 31, 1955

SUBJECT

• Guatemala: Economic Problems—Visit of Minister of Economy Jorge Arenales

PARTICIPANTS

• Jorge Arenales, Guatemalan Minister of Economy and Labor
• Undersecretary Hoover
• Assistant Secretary Holland
• Raymond G. Leddy, Officer in Charge, Central American and Panama Affairs
• Leonard Weiss, Chief, Trade Agreements and Treaties Division

Minister Arenales called at his own request and brought up the following matters:

1) Guatemalan-United States Bilateral Trade Agreement: Guatemala seeks revision of the Agreement in order to save four or five domestic industries from extinction; the rates in the Agreement, fixed sixteen years ago, are out of line with present conditions. Import trade is swinging to Mexico, which Minister Arenales does not like because he wishes to keep Guatemala’s trade with the United States, but any specific discrimination against Mexico would be impossible, and dangerous politically in view of delicate relations with that Government and the large number of Arbenz exiles living in Mexico. The Guatemalan Government does not wish to continue violating the United States Agreement, and prefers bilateral revision, but Guatemala cannot enter GATT now, as the United States would like, because it stands to lose too much; and if bilateral revision is not possible, Guatemala would prefer to terminate the Agreement by mutual consent, avoiding the political reaction against the Castillo Government, there and here, which would likely follow unilateral denunciation. Revision of tariff schedules and customs procedures is already under study by American experts working for the Guatemalan Government, and this information would be valueless unless the Agreement is revised or if necessary terminated. Announcement of termination could state this was done in order to arrive at new arrangements under study, such as the possibility of entering GATT in the future. If the industries now affected by imports under the Agreement should close, the Government’s problems with unemployment would greatly increase; the issue is therefore a serious one for Guatemala.²

2) Political Conditions: The Castillo Government faces continued Communist opposition, now underground working to stir up the University students and the religious issue as means of creating friction. This activity is being closely watched but can become dangerous. The Government needs the continued support of the United States.

3) United States Economic Assistance: While United States aid has been notable and is appreciated, it should be done on the basis visible to the people, so that they will understand what help the United States is giving. The amount of the aid, whether it is $10 million or $500 is not as important as showing the poor people that the United States is helping Guatemala, if the Indian population is to comprehend the difference between the Soviet (which gave not a ruble) and the United States (which has contributed millions). Not all Guatemala’s needs have been met, and this may be due to mishandling by Ambassador Cruz Salazar; but this aspect is a political problem, as Cruz’ assignment in Washington and Colonel Dubois³ in New York is for a political reason. An example of aid visible to the people would be six ambulances for the Social Security hospitals, marked as a gift from the United States to the Guatemalan people and placed in towns such as Esquintla where there was Communist strength. The opening of the stretch of the Inter-American Highway (even though built entirely by Guatemala) with a ceremony attended by Senator Spessard Holland and a group of Senators and Congressmen, is the kind of public demonstration of cooperation needed to show how much the United States is doing for Guatemala.

The Undersecretary assured Minister Arenales that there is no question that we would work with him to solve Guatemala’s problem on the Trade Agreement, and the other problems mentioned would be given thorough consideration; it was fortunate that the Minister could discuss these matters directly with Assistant Secretary Holland during this visit. Mr. Hoover recalled that the United States Government did not always receive a clear statement of Guatemala’s needs and purposes in requesting assistance and the Minister could be assured that once such a statement is handed to us it would be quickly and properly acted upon. Funds already made available had not been entirely used in the current fiscal year. Minister Arenales said he would see that clear and exact presentation of Guatemala’s needs is made.

Mr. Holland pointed out that we had given the Guatemalan Government absolute freedom to select the project on which the $3 million grant in 1954 was to be used, and asked whether there was any specific project which President Castillo now had in mind, since we are prepared to reach agreement on his requests; only last week we made a transfer of corn, of a value of $750,000, to Guatemala. Minister Arenales said this corn would be of great help to the Government, and would be used to feed the people in El Peten, and that he did not wish to discuss with Mr. Hoover any specific proposal but only to emphasize Guatemala’s pressing needs and political problems, such as those on the Trade Agreement and United States aid.

As an appointment in Mr. Holland’s office had been arranged for Mr. Arenales at a later time the same afternoon, Mr. Hoover again urged the visitor to take up these matters with Mr. Holland in greater detail, assuring him of the Department’s intention that a satisfactory solution be reached.

1. Source: Department of State, Central Files, 814.00/5–3155. Confidential. Drafted by Leddy. Hoover and Holland initialed their approval of this memorandum.
2. By exchange of notes signed at Guatemala City on August 2 and September 28, the United States and Guatemala agreed to terminate by mutual consent, on October 15, the U.S.-Guatemalan reciprocal trade agreement of April 24, 1936. For the text of these notes, see 6 UST (pt. 3) 4071. For additional information on the termination of the trade agreement, see Department of State press release 578, September 30, Department of State Bulletin, October 10, 1955, pp. 577–578, and ibid., October 31, 1955, pp. 695–696.
3. Juan Mauricio Dubois, Guatemalan Consul General in New York City.