95. Memorandum From Park F. Wollam of the Office of Middle American Affairs to the Assistant Secretary of State for Inter-American Affairs (Holland)1

SUBJECT

  • Refusal of Nicaraguan Request for P.L. 480 Purchases of Surplus Commodities2

In view of the protest by Ambassador Sevilla Sacasa, this memorandum is submitted to amplify the brief discussion of the problem at the MID/P staff meeting with Mr. Holland on April 26. This is not the official record of the proceedings, but is a personal and general interpretation of what occurred. Minutes of the proceedings will be available later.

In January, 1956, the Nicaraguans requested permission to purchase quantities of white corn and red beans from CCC stocks. Through normal channels it was found that the CCC had no stocks of these commodities. The Nicaraguans were informed of this by note and it was suggested that they purchase through ordinary commercial channels. El Salvador had been given a similar informal reply to the same request.

Following this action, the Nicaraguan Minister of Economy3 was in Washington. The Nicaraguans claim that he was invited by someone at the Department of Agriculture to submit a request for the corn and beans under the P.L. 480 Title I Program. While there were no stocks available, the Nicaraguans were told that some com and beans could be declared surplus and that they could purchase other commodities at the same time.

The Nicaraguan Embassy submitted notes requesting corn, beans, butter, lard, wheat flour and powdered milk on February 20 and 21. The Nicaraguans and State received the impression that the sale of surpluses was the desirable aspect of this request and that there would be no difficulty with P.L. 480 requirements.

At the first meeting of the Inter-Agency Committee on Surplus Disposal,4 however, various questions were raised concerning the [Page 201] necessity for the program, the question of usual marketings, Nicaraguan over-expansion in cotton, and the need for additional development funds resulting from local currency sales. Action was postponed pending receipt of more information from Nicaragua, which was somewhat delayed because of the Easter vacation period affecting the Ministry of Economy. It was obvious that the majority of the IAC members considered the program to be of very marginal utility unless there were urgent overriding policy consideration.

The program was turned down at the Inter-Agency meeting on April 17 for technical reasons as follows:

1.

Problem of usual marketings and displacement of normal commercial channels: It was pointed out from the Minister of Economy’s own statements that Nicaragua intended to make the corn and bean purchases regardless of whether or not a P.L. 480 program was concluded, and that the Government made no distinction between imports through usual commercial channels and purchases required under a P.L. 480 agreement.

After analyzing usual purchases of the other commodities requested, it was obvious that the amounts asked for under P.L. 480 would largely displace the usual commercial marketings of the United States, Canada and perhaps those of other friendly nations.

2.
Expansion of cotton production in Nicaragua: A number of the committee members felt that a primary reason for the possible necessity of the special aid was the unlimited expansion in Nicaraguan cotton production under the umbrella of U.S. price support. The money-making cotton production had displaced corn and bean crops. It was felt that P.L. 480 aid would probably slow Nicaraguan re-conversion to its normal self-sufficient status in corn and bean crops. They did not feel that there could be any assurances that Nicaragua would take steps to control cotton production even if P.L. 480 sales were allowed.
3.

Financial condition of Nicaragua: The principal reason for the Nicaraguan request is an anticipated shortage of dollars during the next two or three years because of anticipated decreases in dollar revenues from coffee and cotton. The Inter-Agency Committee did not feel that this in itself was justification for the program, especially in view of the announced intention of making dollar purchases anyway.

It was pointed out that the Nicaraguans had very proudly announced at various times that they were number one in credit payments for Latin America. There have been favorable dollar balances of payments every year including 1955. (The last Nicaraguan estimate was $169,900 although early 1955 estimates were about a half million.) It was also pointed out on the basis of information from the Ministry of Economy that the Nicaraguan government has had budget surpluses and that government revenues were reaching new highs. Despite possible difficulties from reduced coffee and cotton income in 1956–57, the government was planning an increased [Page 202] budget for 1956–57 on the grounds that any possible deficits could be met from previous surpluses. On the basis of this information the IAC could not see an emergency situation that would justify displacement of normal commercial marketings, although it was pointed out that perhaps help at this time would prevent future difficulties that might require more aid.

4.
Use of funds available from local currency sales: The attitude was taken by ICA that while useful programs could be found for the loan of local currencies, Nicaragua was not a country in which it was felt that extra soft loans were necessary for policy considerations or economic development purposes.
5.
Possible P.L. 480 Programs in other similar circumstances: State took the attitude that if Nicaragua were successful in obtaining P.L. 480 aid, it could reasonably be expected that other Latin American nations would wish similar programs under the same general (possibly marginal) conditions, since several countries could be faced with shortages of dollars. It was necessary, therefore, to establish a clear-cut policy with the action toward Nicaragua. The IAC presumably thought that there was no justification for setting a precedent for displacement of normal marketings in Nicaragua or elsewhere without a real emergency or over-riding policy considerations.

Comment:

While the Nicaraguans apparently take this refusal as a discriminatory action (especially in an election year) it should be pointed out that the refusal was based directly on the provisions of the law covering P.L. 480 loans. It is thought that President Somoza might be especially sensitive on the subject during an election year since he stresses the mutual friendship between Nicaragua and the United States as a strong point in his electioneering, and he is usually anxious to have demonstrable tokens of U.S. affection.

The IAC pointed out that should conditions change, the Nicaraguan request could be reconsidered. The most regrettable aspect of this situation in my mind was that the Nicaraguans were invited (or at least so they claim) to make this request, after they had been already informed that no surplus white corn or red beans were available, and that a decision was delayed. Both Nicaragua and State were under the impression that there were no obstacles in the way of the program until the first Inter-Agency meeting.

It would appear, however, that the IAC had ample justification for refusing the program on technical grounds, since there are no emergency considerations justifying displacement of normal market channels, which would be subject to severe criticism. The refusal was primarily based on the information supplied by Nicaraguan Minister of Economy who could not present a strong enough case to overcome technical difficulties presented by the law. The case of Nicaragua and of State was ably presented and actively pushed as far as possible under these circumstances by Frederick Hincke of E/IRD, [Page 203] which section has the primary action responsibility for P.L. 480 programs.

  1. Source: Department of State, Rubottom Files: Lot 59 D 573, P.L. 480, Nicaragua. Confidential. Also addressed to Lyon.
  2. For text of P.L. 480, the Agricultural Trade Development and Assistance Act of 1954, see 68 Stat. 454.
  3. Enrique Delgado.
  4. President Eisenhower established the Inter-Agency Committee on September 9, 1954, to coordinate the administration of P.L. 480. The Committee, headed by White House Special Consultant Clarence Francis, consisted of senior officials from the Departments of Agriculture, Commerce, the Treasury, and State, the International Cooperation Administration, and the Bureau of the Budget.