53. Memorandum From the Deputy Director of the Office of Middle American Affairs (Stewart) to the Acting Assistant Secretary of State for Inter-American Affairs (Rubottom)1
SUBJECT
- Guatemala: Grant Economic Aid for Guatemala in FY–1958
Problem
The current NSC policy paper2 for Latin America provides that grant economic assistance may be furnished to countries in the area to meet conditions of temporary emergency affecting U.S. interests which the local government cannot solve with the resources at its command. The paper further provides that beneficiaries of such aid should be encouraged to relinquish it and to become self-reliant as soon as it is practical to do so. The immediate and most serious aspects of the emergency confronting the Castillo Armas government when it came to power in 1954 can now be considered to have ended. The Department and ICA/W have therefore maintained up to now the policy that further U.S. grant aid to Guatemala, beyond the $36 million authorized through FY–1957, is not justified. It was planned to make no request for any further aid of this kind for Guatemala in the FY–1958 MSP bill.
However, the Embassy and the USOM in Guatemala consider that further grant aid is needed if U.S. objectives are to be realized. Recent reports by study groups sent to Guatemala by the U.S. Congress have praised the progress U.S. aid programs have made possible there, and have in effect endorsed additional grant economic assistance for Guatemala. Furthermore, members of the House Foreign Affairs Committee have informally indicated they intend to earmark $12 million in grant aid for Guatemala in FY–1958 in spite of the position of the Executive Branch. The Department is thus faced with the likelihood of substantial aid for Guatemala being made available next fiscal year. Most recently, the Guatemalans have officially requested $15 million in such aid, chiefly on the basis that it would prevent a return to communism in Guatemala.
[Page 136]Discussion
The U.S. objectives in Guatemala may be summarized as follows: 1) support the anti-communist government; 2) promote political stability by means of programs to accelerate development, realizable economic well-being and a higher standard of living generally; and 3) provide positive, visual proof that life in Guatemala under a democratic government is preferable to life under a communist-dominated government. During the past two and a half years, in spite of conscientious effort by the Guatemalans and the substantial U.S. aid, the Castillo government has so far achieved only partial success in visibly bettering the lot of the average Guatemalan.
It is difficult, if not impossible, to justify further grant aid to Guatemala on economic grounds. Economic conditions are currently good, in comparison with some other areas of Latin America, and Guatemala enjoys a favorable credit rating with lending institutions that could provide funds for long-term economic development. However, the Embassy and USOM consider that in FY–1958 Guatemala will approach its safe borrowing limit and yet will find itself short of funds required to carry on essential programs in the fields of communication, agricultural production, education and health.
Politically, further grant aid can be justified, taking into consideration our objectives and the constructive manner in which the assistance so far provided has been used. The development programs begun with U.S. aid are not finished and the benefits it is envisaged they will provide have not yet become apparent to the Guatemalan people. It is possible that terminating our grant aid this fiscal year might endanger the stability of the Castillo Armas Government were serious financial problems to develop which might prevent completion of some of these programs or make impossible initiation of others. The Guatemalans maintain they have a tradition of “no foreign loans”, and that the contracting abroad of further obligations beyond the current $18.2 million IBRD loan would arouse popular resentment and pose a serious internal political problem for the regime.
Some U.S. observers have maintained that we have a moral commitment to the Castillo Government to continue assistance until essential development programs are completed. Certainly it is in line with our objectives in Guatemala to do all we can to assure the success of the Castillo Government, to minimize the possibility of any return to communism, and to protect ourselves from charges that should the latter occur it did so because we failed to continue economic aid. If we are to be realistic, we must appreciate the fact that Guatemala’s record as the only country in the world so far to [Page 137] have rid itself of a communist-dominated regime weighs heavily with the U.S. public and Congress. If conditions appreciably worsened in Guatemala, no amount of explaining by the Department could justify our failure to provide a comparatively small amount of aid to that country while we continue to do so to countries that are at best neutrals in the Cold War. Finally, there is the incontrovertible fact that the uses to which our aid has been put, and even the meager results achieved up to now, compare favorably with some of the results our aid programs have achieved elsewhere.
There is no question that we are in a difficult position, both in view of NSC policy and of the known attitude of other hemisphere countries toward our continuing economic aid to Guatemala. However, we believe that a request for $7.5 million for FY–1958, as recommended by the Embassy and the USOM, could be justified on political grounds. We believe a sound case could be made for it on the basis that the emergency which existed in far more serious form in Guatemala has not yet been totally eliminated, and because of the necessity to give the Castillo Government every chance to create lasting conditions in Guatemala that are in line with U.S. objectives. Castillo apparently does have a good chance of being able to demonstrate that life is better under a democratic form of government than under communism, but it is not yet certain he will be able to do so. While doubt still exists, we should not risk failure of our objectives by terminating grant aid in FY–1957.
Recommendation
That ARA take the position that our objectives in Guatemala have not yet been achieved, and that for political reasons it seems desirable to continue some grant aid in FY–1958. That you authorize us to discuss, within the Department and with ICA, means of including $7.5 million in defense support aid for Guatemala in the forthcoming MSP budget presentation to Congress.
- Source: Department of State, Guatemala Files: Lot 60 D 647, ICA–Grant Aid. Secret.↩
- NSC 5613/1; see vol. vi, Document 16.↩