FOREIGN ASSISTANCE ACT OF 1966 TUESDAY, APRIL 5, 1966 HOUSE OF REPRESENTATIVES, Washington, D.C. The committee met in executive session at 10:25 a.m., in room 2172, Rayburn Building, Hon. Thomas E. Morgan (chairman) presiding. Chairman MORGAN. The committee will come to order. The committee meets in executive session for a continuation of hearings on the foreign aid legislation for fiscal year 1967, H.R. 12449 and H.R. 12450. Our witnesses this morning are the Honorable Lincoln Gordon, Assistant Secretary of State for Inter-American Affairs, and U.S. Coordinator, Alliance for Progress, and Mr. David Bronheim, Deputy U.S. Coordinator, Alliance for Progress, Agency for International Development. Mr. Secretary, you have a prepared statement and you may proceed, sir. STATEMENT OF HON. LINCOLN GORDON, ASSISTANT SECRETARY OF STATE FOR INTER-AMERICAN AFFAIRS, AND U.S. COORDINATOR, ALLIANCE FOR PROGRESS Mr. GORDON. Thank you, Mr. Chairman. I have a prepared statement, which has been circulated to members of the committee. If you would like I will be just as happy to file that for the record and perhaps to comment orally on the highlights of it and to supplement it with a few additional observations. Would that be satisfactory? Chairman MORGAN. Without objection, Mr. Secretary, your statement will be inserted in the record and you may proceed, sir. (The statement of Mr. Gordon is as follows:) STATEMENT OF HON. LINCOLN GORDON, ASSISTANT SECRETARY OF STATE FOR INTERAMERICAN AFFAIRS, AND U.S. COORDINATOR, ALLIANCE FOR PROGRESS Mr. Chairman, I thank you, sir, and the members of your committee for giving me this opportunity to come before you to speak on behalf of the President's proposal for AID assistance to the Alliance for Progress. I would like to summarize for you this morning the Latin American situation as we see it and the proposals for aid to Latin America in fiscal year 1967. I am accompanied this morning by Mr. David Bronheim, Deputy U.S. Coordinator for the Alliance for Progress, and will ask him to join with me in responding to your questions. As you know, I have been in my present position only for about a month. It has been a little more than a year since my predecessor last had an opportunity to go over with you the full political, economic, and social situation in Latin America. However, the committee has made several reviews of specific Latin American developments, the most recent being in February when the proposed supplemental appropriation for the Dominican Republic was discussed. In addition to these reviews, many of you have made a particular effort to keep up with the events in Latin America by visiting the countries and investigating for yourselves. I felt it was particularly beneficial to the U.S. delegations to have Congressmen Selden and Mailliard at the Rio Conference last November and Congressmen Cameron and Whalley at Buenos Aires just last week. The recent firsthand observations by at least seven other members of the committee have been most useful to me and to my colleagues. POLITICAL SITUATION On the political front, the hemisphere shows a decided trend toward greater stability and strengthening of democratic institutions as well as economic growth. There are some fragile situations, to be sure. We know of the swiftness with which adverse circumstances can develop. But the general trend is encouraging. There is a healthy trend in Latin America, encouraged by the philosophy of the Alliance for Progress toward making economic and social progress the central concern of political movements and of the new generation of political leaders. Development, stabilization, and reform are the key issues of public life. There is also increasing awareness of the necessity to build democratic institutions at the grassroots level and to create the opportunity for democracy to develop through expanded economic opportunity and increased social justice. More countries are adopting development programs built upon the determination of people to help themselves. As they work together and build schools, cooperatives, water systems, and meeting centers, people are learning the rudiments of self-government by confronting the economic and social problems of their own communities. Time and energy also is being devoted to the development of the cooperative movement and to the strengthening of labor unions. There is an increasing appreciation of the necessity for full citizen involvement in national development efforts. In Chile, Peru, Mexico, Bolivia, Venezuela, El Salvador, Nicaragua, Guatemala, and the Dominican Republic there are community action programs designed to harness the energies of the people to improve their own lives. Reviewing the political events of the past year it is clear that there is a growing determination in the hemisphere to develop and improve democratic procedures and political stability. [Security deletion.] Reform-minded constitutional governments are demonstrating that political freedom and economic development can go hand in hand. And in the few cases of de facto governments, most of them are moving their countries toward elections and a return to constitutionality. [Security deletion.] Much progress has also been made in combating Communist subversion. Venezuela, Peru, Colombia, and Central America have made progress in reducing their guerrilla problems. Elsewhere in the hemisphere, the Communists show little, if any, gain from their efforts. This is due to several factors. Public and official awareness of the danger has increased as Communist designs become more evident. The recently concluded Havana Tri-Continent Conference has done more to sharpen this awareness than any other single event. Castro's repeated failures at home and his clumsiness in external relations have lost him most of the sympathy and appeal that he once enjoyed. Conflicts within the Communist movement have weakened its effectiveness. The internal security capabilities of the Latin American countries also have steadily increased, supported by our military and police assistance programs. Continued vigilance on this front, however, is essential. We are encouraged by the success which Provisional President Hector Garcia Godoy is having in establishing a climate in the Dominican Republic propitious for elections scheduled June 1. Over the past month violence has been sharply reduced. Economic activity is picking up. Political parties are preparing for their nominating conventions. Candidates are already campaigning. In the task of preparing for elections, Garcia Godoy is receiving the full cooperation of all elements of the OAS in the Dominican Republic: the ad hoc committee, InterAmerican Peace Force, the Inter-American Commission on Human Rights, and the Technical Electoral Advisory Committee. The OAS is firmly committed to free and fair elections in the Dominican Republic and the peaceful transfer of power to the newly elected government on July 1. We fully support this OAS commitment. [Security deletion.] In Brazil, President Castello Branco is holding firmly to his objective of an early return to constitutional government and to his program of stabilization, development and reform. His successor is to be elected by the present Congress in early October, and the new Congress will be popularly elected in November. In October also there will be indirect elections for 11 State Governors (the other 11 were directly elected last October) and in November direct elections for the 22 State legislatures. [Security deletion.] In Argentina, President Illia is taking significant steps to revitalize the economy. [Security deletion.] Peru, under President Belaunde. is moving forward with programs pointing toward greater political and economic integration of its disparate regions. For the first time in 400 years, a real effort is being made to bring the Andean Indians into participation in the national life. [Security deletion.] President Leoui continues to build on the solid foundations of reform and development left by Romulo Betancourt. [Security deletion.] In the Carribean, there are two recently independent nations, and several islands and territories approaching self-government, many of which have had long and close relations with the United States. Jamaica and Trinidad and Tobago have confirmed the confidence placed in them to follow the democratic road in dealing with the many problems of nationhood. British Guiana is to become an independent Guayana next month. [Security deletion.] Barbados is also now approaching independence. [Security deletion.] Mexico is probably the most stable country in the hemisphere, and is making rapid economic progress. The Central American Common Market is bringing new hope and progress to its five member countries. [Security deletion.] In Paraguay, there has been unprecedented economic progress. [Security deletion.] PROGRESS UNDER ALLIANCE This last year has been a year of hope and achievement under the Alliance for Progress. In addition to material advances of real significance, there has been continued progress in the creation of a sound institutional base for more rapid economic development. The basic concepts of the Alliance have become the dominant philosophy in the hemisphere. Self-help, systematic mobilization of domestic resources, rational priorities for investment programs, creation of modern institutions as a base for more productive private enterprise, and reforms looking toward greater efficiency and broader social justice these are not only the commitments of governments but in increasing measure the actual practice. A little less than a month ago, on March 13, we celebrated the fifth anniversary of President Kennedy's announcement of the Alliance for Progress. On that occasion, President Johnson said: "Since becoming President, I have often restated my own, and our country's resolute commitment to the goal of a better life for all the people of the Western Hemisphere. "Today I want to issue a new call to our sister nations in the hemisphere to enlarge our truly revolutionary cause the cause of enlarging the lives of all our people. "I am determined to contribute America's resources to this spirit of changea spirit now slowly, surely, confidently growing in the Western Hemisphere." I have just returned from the Fourth Annual Meeting of the Inter-American Economic and Social Council in Buenos Aires. I spoke there with colleagues from throughout the hemisphere. There was agreement that, while progress has been encouraging, especially in the last 2 years, there is no cause for complacency. Action on land reform and tax reform, we agreed, has not proceeded quickly enough; unemployment and underemployment are desperate problems, particularly among the people flocking into the urban centers in search of better lives; ways must be found to strengthen the markets for Latin American exports of raw materials and to expand and diversify their exports generally; production of food and of manufactured goods must be increased; the population increase may nullify too much of what is being accomplished in economic development; and more rapid progress is needed in the integration movement both in the Central American Common Market and in the Latin American Free Trade Association. The Council drew up at Buenos Aires an action program of the most important things we would all like to see accomplished in the coming year in the hemisphere. For the first time, it set in motion procedures which will enable us when we meet again a year hence to review in depth the steps that have been taken during the year to carry forward this program. The program includes immediate steps to be taken to improve Latin American planning operations; accelerate agricultural modernization and tax reform, stimulate the private sector, accelerate the integration movement, and secure a better interrelationship between trade and aid. Strong recommendations were also made for action in the education and health fields. In the course of the year, the Inter-American Committee of the Alliance for Progress (CIAP) will review the progress made during its country-by-country reviews of performance. To sum up my impressions of the meeting, I can say that the Alliance for Progress has never been more alive. I request that the Buenos Aires action program of the Alliance for Progress be entered in the record, along with my statement to the Council of March 29. All of us now recognize that the full achievement of the goals of the Charter of Punta del Este will take more than the 10 years originally envsaged. Our Latin American colleagues were both heartened and challenged when President Johnson proposed through Secretary Rusk at the Rio Conference last November that the Alliance for Progress be extended on the basis of continued effective self-help actions by our partner nations and their own undertaking to join in mutual assistance commitments. The understandings reached at Rio are of great importance. There for the first time the Latin American countries formally recognized that the development efforts of each affected the development of all and the security of the entire hemisphere. Accordingly, they are now prepared to see that the obligation of self-help be recognized as a treaty commitment to the other members of the Alliance and in addition are also prepared to assume treaty commitments to help one another. We can already begin to see possibilities along this latter line. Mexico has made some significant commitments to Central America, pledging $5 million credit to the Central American Bank and the purchase of $1 million of the Bank's bonds. Venezuela has undertaken technical assistance programs with several countries, and Brazil and Argentina are sharing in multinational projects of special interest to some of their neighbors. ECONOMIC INTEGRATION Economic integration is one of the most important trends in the hemisphere. The Central American Common Market-within which trade has increased 123 percent in 2 years-is helping to illustrate the benefits that can come when Latin American countries work together. The Latin American Free Trade Association, which in 1965 more than doubled intraassociation trade over the 1959-61 volume, illustrates by its diffculties with tariff reduction and trade agreements the hard decisions that must be made if good intentions are to be converted into progress. The will is growing in Latin America to make the transformation from word to deed. The Inter-American Development Bank will soon broaden those of its activities that contribute to ecomomic integration. Following up on a CIAP suggestion that a regional fund for multinational preinvestment studies be created, the IDB has nearly completed studies preliminary to the establishment of such a fund. Many projects are waiting in the wings for which such preinvestment studies might be appropriate, notably in the fields of river basin development, transportation, and telecommunications. The United States supports the integration efforts of the nations of Latin America. We will continue to work with the IDB to assure that high priority is given to projects that promise further integration of Latin American development efforts. Such integration will not only advance economic development but will help to lessen political tensions. FISCAL YEAR 1967 AID PROGRAM In keeping with the approach to foreign aid that he instituted 2 years ago, the President has requested an overall AID program that is the bare minimum required to support U.S. policies in relation to the developing world. For the AID participation in the Alliance for Progress, this means a program of $500 million for development loans, $95 million for technical cooperation, and $33.2 million for supporting assistance in fiscal year 1967. As he did last year, the President has made it plain that should circumstances arise that require addi tional U.S. funds for the Alliance for Progress, he will submit a supplemental appropriation request to the Congress. The President has reemphasized U.S. determination that the basis for our assistance will be support to countries engaged in serious efforts to mobilize and apply their own resources to development. As the President has noted, the nations of Latin America under the Alliance for Progress have been in the forefront of the developing areas of the world in taking steps of this character. In his foreign aid message to the Congress on February 1, 1966, the President said: The pat "The keynote of the Alliance for Progress has always been self-help. tern of our assistance *** demonstrates our determination to help those who help themselves." The Congress is now considering legislation calling for a commitment of U.S. human and financial resources and food and fiber to help spur a revolution in education, attack with new intensity the problems of communicable diseases, and make available the agricultural skills and scientific advances that have made U.S. agriculture the most flourishing in the world. If hunger, illiteracy, and despair are to be eliminated, more resources, theirs and ours, must be applied to agriculture, education, and health. In Latin America, AID is already doing much in these fields, especially in the building of effective institutions that will become permanent elements of Latin American development. Among our efforts in these fields are: Through an AID contract with a group of associated midwestern universities, the National University of Colombia, and the Colombian Agricultura] Institute will expand and improve the faculties of three agricultural colleges, reorienting the teaching toward applied research and extension. U.S. professors will assist in a modernization process whose ultimate objective is to increase and diversify agricultura] production. The Ford, Kellogg, and Rockefeller Foundations and the World Bank are also contributing to or plan to contribute to this program. Contract technicians from the University of North Carolina have helped Peru establish an outstanding land-grant type college at the National Agricultural University of La Molina. Eighty percent of the faculty is now teaching on a full-time basis, a rarity in Latin America universities. The United States has loaned $4 million to help finance a $9 million expansion of the physical facilities at La Molina, enrollment in which is steadily increasing. Some 10,000 farmers are expected to benefit from AID's loan to Chile for fertilizer imports. This loan supports an important part of Chile's overall program to increase agricultural production, which includes more favorable pricing policies, agrarian reform, improved farm credit, and marketing systems. As a short-term measure to increase the productivity of Brazil's farms and provide more food for its growing population, AID has made available a $15 million loan to Brazil for fertilizer imports. Local currency derived from sale of the fertilizer is used in a selective agricultural credit program designed to increase basic foodstuff production. AID is working with the 5 Central American national universities in developing an integrated university system to service the region. Progress is being made toward the development of regional schools in sanitary engineering, veterinary medicine, and business administration. During the next year, AID is planning to grant the Pan American Health Organization $1.3 million for malaria eradication, in addition to loans made in this field to several participating coutries. AID will continue to respond favorably to requests from the nations of Latin America for assistance in population matters. In fiscal year 1965, AID provided $400,000 to the Latin American Center for Economic and Social Development in Santiago, Chile, headed by the Reverend Roger E. Vekemans, S.J., to establish a center for the study of family and population, and nearly $200,000 for research and training in family sociology to Notre Dame University. AID LENDING PROGRAM Program lending will again be a major method of providing economic assistance to Latin America by AID in fiscal year 1967. Program loans double dividends. Through letters of credit established with U.S. banks, the dollars provided exchange for imports from the United States by the private sector of the borrowing countries. The local currencies received by the borrowing governments against sale of the dollars are then invested in development activities of high priority for which domestic resources are inadequate, including the |