325. Action Memorandum From the Assistant Secretary of State for Inter-American Affairs (Vaky), the Assistant Secretary of State for Human Rights and Humanitarian Affairs (Derian), and the Director of the Bureau of Politico-Military Affairs (Gelb) to Deputy Secretary of State Christopher 1
Uruguay’s Request for Extension of FY 76 FMS Guaranteed Loan Commitment Period
Issue for Decision
Whether to extend the commitment period of Uruguay’s FY 76 FMS guaranteed loan agreement until September 30, 1979.
Essential Factors
Uruguay signed an FY 1976 FMS guaranteed Federal Financing Bank (FFB) loan agreement for $2.5 million on September 29, 1976, but we have never authorized any use of the loan because of the continuing unsatisfactory human rights environment in Uruguay. On September [Page 925] 30 the two-year period allotted for commitments against the loan expired; the period must therefore be extended if we wish to keep the loan available as a means of responding to potential improvements in the Uruguayan Government’s human rights performance. Authorization of an extension of the commitment period would not constitute, nor would it entail, the issuance of a new FMS loan guaranty.
No funds remain from earlier FMS loan agreements with Uruguay and we have signed no new FMS loan agreements since Section 505 of the Foreign Assistance and Related Programs Appropriation Act, 1977 (the “Koch Amendment”) forbade the extension during FY 1977 of FMS financing, grant training or grant materiel assistance to Uruguay. No such provision is currently applicable, and in any case there is no legislative bar to Uruguay’s use of funds from FMS loans approved before the “Koch Amendment” took effect. Nevertheless, we have not, as a matter of policy, approved any use of FMS loan funds available to Uruguay since the signing of the FY 1976 loan agreement.
ARA, Embassy Montevideo and PM Position
ARA, PM and Ambassador Pezzullo believe extension of the commitment period to September 30, 1979 is essential and should be approved.2 Normally, we routinely approve participating countries’ requests for extension of the commitment period on their FMS guaranteed loans; that is, the time during which the loan funds remain available for commitment against specific, approved FMS or commercial purchases of defense articles or services. Refusal to do so in this case would signal a change of policy to one of greater harshness toward Uruguay precisely when limited but important improvements have been taking place in human rights there. Our Embassy reports that there have been structural and procedural improvements in the conduct of Uruguayan security forces and in the functioning of the military justice system, together with a growing number of prisoner releases (well over 500 in 1978) and a marked decline in new detentions. Treatment of detainees, although still harsh, has improved markedly (see attached cables).3
[Page 926]Refusal of the extension would weaken the efforts of Uruguayan moderates to promote further liberalization and would strengthen the resistance of hardliners to such changes. It would also seriously undercut ongoing efforts by our Ambassador to encourage the Government of Uruguay to make further improvements in the human rights situation which would be sufficient to reduce U.S. disapproval of that Government’s practices. Our policy would become, even more than now, virtually all “stick” and no “carrot”. Furthermore, with recent budget restrictions there is practically no chance of FMS guaranteed loans in future years. The Ambassador also doubts, from his perspective and experience, that extension would elicit spontaneous criticism from Members of Congress, as is feared by some.
If this sign of openness on our part were to bring improvements in human rights performance, we would consider authorizing use of the loan to purchase non-combat equipment such as road grading machinery, equipment for the new wing of the military hospital, military surplus locomotives, etc. In no event would we authorize actual use of the loan to finance purchases of defense articles or services until the GOU took some major initiative in improving human rights. Further, we would only authorize such use after consulting HA and other interested bureaus and agencies.
HA Position
The human rights record of Uruguay continues to be very poor and has shown no significant improvement during the past year. The military government still holds 1700 acknowledged political prisoners, a significant figure for this small country.
We continue to receive reports of arbitrary arrest, torture, and disappearances. In November, government agents kidnapped four Uruguayan citizens living in Brazil and forced them to return to Uruguay.
Because of this record, we have opposed IFI loans to Uruguay, eliminated all new FMS financing and IMET programs since 1977, and refused to approve arms transfers except for minor spare parts.
If we were to approve extension, we could permit an actual drawdown only if there were substantial progress. However, extension would be for only eight months, and we have no evidence that there is any reasonable chance of such a marked reversal in GOU behavior during this period.4
There is a further problem. Even if there is substantial progress, we should move first on the economic side, not the military. This is [Page 927] particularly so, because it is the military that is responsible for the very serious continuing violations of human rights in Uruguay.
We understand ARA’s desire to send a positive, low-cost signal to Uruguay. But we believe any extension would have to be accompanied by two explanatory statements to avoid creating false expectations: (1) that an actual drawdown could be approved only if substantial improvements were to occur; and (2) even if they did, we would prefer to move on the IFI side first and only defer use of FMS credits to a later stage after additional improvements. But would not such explanations effectively vitiate the desired positive effect of extension?
All things considered, HA and S/P believe that extension would be a mistake in policy and diplomatic terms. The only positive signal that makes sense is to say that we are prepared to consider steps in the economic area, such as EXIM, OPIC, and changes in our IFI votes if substantial progress occurs.
Recommendation:
That you authorize PM to request Treasury to extend the commitment period of the Uruguayan FY 76 loan to September 30, 1979.5
- Source: National Archives, RG 59, Bureau of Human Rights and Humanitarian Affairs, HA Subject/Country Files, 1980, Lot 82D177, Box 20, Uruguay. Confidential. Sent through Benson. Drafted by Titus on February 7. Cleared by Jones, L. Watson (ACDA/WEC/ATE), William Marsh (T), T. Boreak (L/PM), and Howard McElroy (PM/SAS), in substance by T. Brown (ARA/ECA), and in draft by Steven Cohen (HA/HR), Jenonne Walker (S/P), and Richard Feinberg (S/P). Titus initialed for all the clearing officials except for Jones.↩
- In telegram 4365 from Montevideo, December 20, 1978, Pezzullo noted that approving the loan extension “is a low-cost and potentially high-benefit move from the USG point of view. In keeping with our basic human rights policy, we would be offering an inducement to the GOU to make improvements in human rights.” (National Archives, RG 59, Central Foreign Policy File, D780528-0791)↩
- Cables are not attached. In telegram 4101 from Montevideo, November 29, 1978, the Embassy reported: “Recent political arrests, coming after a long downward trend in such detentions, contrast with overall progress in the area of integrity-of-the-person. Although arrests represent a backward step, the positive trend noted previously is still dominant.” (National Archives, RG 59, Central Foreign Policy File, D780492-0547)↩
- An unknown hand highlighted this paragraph.↩
- Christopher checked and initialed the approve option on February 24 and wrote: “with conditions indicated on attached memorandum.”↩
- No classification marking. Sent through Perry. Copies were sent to Benson and Keiswetter.↩
- A reference to Document 325.↩
- Telegram 50014 to Montevideo, March 1. (National Archives, RG 59, Central Foreign Policy File, D790094-0238)↩