Uruguay

After a relatively successful stabilization effort in the early 1960's, Uruguay had a series of severely unbalanced budgets and suffered acute inflation which reached an annual rate of nearly 90% in 1965. The Uruguayan Government applied a more restrictive monetary policy in 1966 and was, in part, successful in limiting public sector wage increases, with the result that the rate of inflation dropped to about 50%. The recently inaugurated new government has indicated a coordinated effort to end inflation will be a key element of its economic policy.

Senator LAUSCHE. The Uruguayan figures were simply shocking when they were presented. It is a socialistic labor government that has no concern about the general taxpayer, and no concern about classical rules of economy, but believes that it can spend and give away and get by with it. I do not want to be a party to contribute to that type of program through contributions of the American taxpayers' money. I have taken more time than I intended, but I must humbly say that I have taken less than some of the other members of this committee. [Laughter.]

The CHAIRMAN. I am sure Uruguay will appreciate your comments. [Laughter.]

If the Senator will bear with me, I have just been handed a note which says that the House Foreign Affairs Committee reported out Senate Joint Resolution 53, as amended, this morning. I call that quick action. You really have it under control.

Senator Mundt?

Senator MUNDT. Mr. Secretary, may I associate myself, first of all, with the pleasant phrases uttered by my distinguished colleague from Ohio.

Secretary RUSK. Thank you, sir.

Senator MUNDT. I, too, admire and respect you greatly and am happy to be associated with you, on some positions. [Laughter.] As a matter of fact, I have been trying my best to find some time when the distinguished Chairman of the Foreign Relations Committee and the Department of State and the Senator from South Dakota might join up on some common objective.

The CHAIRMAN. We did yesterday.

Senator MUNDT. No. I was confronted by a very unusual and formidable array I found too great to overcome yesterday.

PROCEDURAL DIFFERENCES

But I was in hopes that this might be the case today. I have read carefully your statement and the statement of the Chairman of our committee, and I find some difference of opinion. I would like to ask you, first of all, whether or not you feel there is merit in the suggestion of the Chairman of the committee that a simple resolution be resolved which would present our attitude and our opinion without going into a lot of details with which we are not at the moment completely conversant.

Secretary RUSK. Senator, we have-we will have in front of us in Punta del Este some very specific decisions and questions for the presidents of the hemisphere to consider, and I think that, as the presidents of Latin America, themselves give direction to their own governments in connection with, say, integration and questions of that

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sort, we ought to be in a position to be more precise than we could be with just a general expession of support.

I think that the introductory material in the whereas clauses here and the four operational paragraphs could be of great importance in strengthening the President's hand in accomplishing the purposes of the meeting.

Senator MUNDT. So you and the Chairman are somewhat divided on your attitude toward the type of resolution we should report out. Secretary RUSK. I think we are not divided on the objectives. We have a procedural difference of view, I suppose.

The CHAIRMAN. I would like to say, if the Senator will yield, that is right. It is a procedural matter that I object to, as I tried to make clear.

Senator MUNDT. I understand that.

The CHAIRMAN. I am not quarreling with the objectives.

Senator MUNDT. I would not think anybody would quarrel with the objectives, which are meritorious.

The CHAIRMAN. I am interested in the Congress retaining some role, slight though it may be.

MATCHING FUNDS CONCEPT IS AMBIGUOUS

Senator MUNDT. I share your philosophical position. I must say, that while I have no definite commitment in my own mind on this one, I am a little bit confused myself about some of the language.

Take Senate Joint Resolution 53, where it says: "That the United States furnish through the Inter-American Development Bank standby resources to be matched by Latin American countries."

I think there is some ambiguity as to who is going to match whom. Are we going to supply funds in stipulated amounts and ask them to match them, or are we making a commitment that if they will provide funds in the general outline of the purposes of this resolution that we will match whatever they come up with?

Secretary RUSK. I think the exact formula, first, is one that would need to be worked out in connection with the kind of institutions or the kinds of arrangements that they set up in connection with their Common Market; and what the functions of such a fund would be. It could vary rather widely. In the case of basic capital of the InterAmerican Development Bank, we put in 40 percent and they put in 60 percent. But other arrangements have different ratios.

But this is a matter on which we would expect that there would be regular consultation between the executive and the committees of the Congress as we move toward 1969 and 1970 and they prepare the steps that they have in mind taking.

Senator MUNDT. What I have in mind is that I, for one, am not very enthusiastic about open-ended agreements. I think in the statement you submitted that you did not consider this an open-ended agreement. It is a matter of $6.5 billion tops.

Secretary RUSK. I believe on this one we are talking about in the range of $1.5 billion.

Senator MUNDT. I am talking about the whole program.

Secretary RUSK. But if we look back-yes.

Senator MUNDT. A 5-year program, $1.5 billion.

[

But if you are talking about matching, where there is a type of program whereby we retain control of our purse strings, and wherein we say how much is to be provided for a particular matching purpose, that is one thing. On the other hand, if this implies that within a particular purpose, within $1.5 billion overall, the Latin American countries can determine how much they are going to provide which we, in tur must match, that is a horse of a different paint job.

Secretary RUSK. That would not be involved, sir. This would be a matter for negotiation at the time, and consultation between the governments involved and the executive and the legislature. It has not been my impression, since occupying my chair, that the Congress ever relinquished control of its purse strings.

Senator MUNDT. We do get involved in a sort of procedure, however, where we have to provide things which are in the pipeline and in the general area of understanding, and sometimes our hands are pretty well tied in these foreign aid commitments. I think the language should be understandable both to them and to us.

BASIS FOR INCREASED ASSISTANCE

I am a little bit dubious as to what is meant, where it says, "Further, the Congress supports"-this is the new language which, I think, has been agreed upon. I am reading "Further, the Congress supports an increase in assistance." The original language says, "Further, the Congress recommends that the United States provide." I do not think there is too much difference between the two phrases. But the next phrase concerns me, "Further, the Congress supports an increase in assistance."

What is the base against which we are measuring the increase? Increase from what?

Secretary RUSK. Yes. I indicated earlier that we had asked, for example, this year for fiscal year 1968, $543 million for the Alliance for Progress. We would expect to send down a budget amendment which would transfer from the general contingencies of the Government $100 million into the foreign aid proposed budget in order to increase that $543 million to $643 million, and then so that

Senator MUNDT. So $543 million is the base?

Secretary RUSK. We are taking our present budget request as the base for increased discussions.

Senator MUNDT. Increase beyond that?

Secretary RUSK. Yes.

CLARIFICATION OF APPROPRIATION REQUEST

The CHAIRMAN. Will the Senator yield for a clarification point? I raised it before. We have the President's message transmitting the proposals for foreign aid. It is document No. 55, of February 9, 1967. It reads: "For Latin America I recommend an economic aid program of $624 million."

I do not quite understand where this difference comes from. I want to raise it for the record, to see if we can have a meeting of minds of what that proposal is. In the budget was another. But the President's message being the more recent, I would think, supersedes the budget request.

Secretary RUSK. Senator, may I put in the record a comment on that? It apparently has to do with the difference between some actual appropriations and a carryover figure, new money. But let me try to clarify that distinction.

The CHAIRMAN. I am not contesting it. I would just like to clarify it. I have two different figures, and I think the record ought to be somewhat clear.

Secretary RUSK. The difference has to do with some carryover funds.

it?

The CHAIRMAN. Would you put information in the record to clarify

Secretary RUSK. I will be glad to, sir.

The CHAIRMAN. I thank you.

(The information referred to follows:)

PROPOSED FUND AVAILABILITIES TO LATIN AMERICA IN FY 1968

The President's Budget for fiscal year 1968 requests new obligational authority of $543 million for Alliance for Progress Loans and Technical Assistance. The figure of $624 million referred to in the President's Foreign Aid Message is the estimated total program for Latin America which in addition to the new obligational authority of $543 million, includes estimated Receipts and Reimburse ments and Recoveries ($50.1 million) and an estimate of $30.5 million of Supporting Assistance Funds. The following is a detailed breakdown.

Fiscal year 1968 proposed program

New obligational authority, Alliance loans---.

New obligational authority, Alliance Technical Cooperation___.

Subtotal

Reimbursement and receipts from prior year, Alliance loans.. Reimbursement and receipts from prior year, Alliance Technical cooperation

Estimated recoveries of Alliance loans (prior year) ––

Estimated recoveries of prior year, Alliance technical cooperation__.

Subtotal

Supporting assistance request__

Total, proposed program_.

U.S. ROLE IN CONCEPT OF A COMMON MARKET

Millions $443 100

543

17.5

3

27.625

4.7

50. 1

30.5

623.625

Senator MUNDT. Is this common market concept, Mr. Secretary, a concept which includes or excludes the United States?

Secretary RUSK. It would exclude the United States.

Senator MUNDT. Is what you are asking us to do with this resolution primarily to establish guidelines, as you indicated a moment ago, to help direct the thinking of the conference in terms of what you believe Congress desires, or is it to strengthen the bargaining hand of the President in the negotiations?

Secretary RUSK. Well, I think, sir

Senator MUNDT. There is a difference.

Secretary RUSK. the essence of what Congress would be saying is in the final sentence because that incorporates the preceding paragraphs. If progress is made by the Latin American countries toward the goals of economic integration and in the mobilization of domestic

efforts and resources to advance the purposes of the Alliance for Progress, the Congress is prepared to support the allocation of significant additional resources over a period of five years for these objectives.

Now, this requires the combination of two kinds of action: one, action by our friends in Latin America to do what they are now saying they do want to do and intend to do; and then action by us to give them the support that we are talking about in the general language, of the order of magnitude, that we have been discussing.

Obviously, the Congress, as well as the executive, will want to follow the developments very closely. We would ourselves, on the executive side; be interested in what progress is being made on economic integration just as you would be. All of those questions will be subject to examination when we come down in the usual way for authorization and appropriation.

EXTENT OF PRESENT U.S. COMMITMENT TO LATIN AMERICA

Senator MUNDT. Nobody, I think, is talking about bailing Uncle Sam out of Latin American problems. Suppose we did not pass this resolution and no conference were held. What is the present extent of our existing commitment down the road the next five years in Latin America?

Secretary RUSK. The Alliance for Progress will be the principal one, and I presume we would continue in any event the annual replenishment of the special operations fund of the Inter-American Development Bank.

But I think the tragic thing there, Senator, would be that we will be in danger of missing an historical moment in the hemisphere.

Senator MUNDT. I am not arguing with you. I am trying to get some mathematical comparison as to what our commitment as of now would be a vis-a-vis the $1.5 billion.

Secretary RUSK. That $1.5 billion would be additional over a period of five years. But we now have, under the Punta del Este charter, a goal of about $1.2 billion from all sources, Public Law 480, and replenishment of the Inter-American Development Bank, and AID, and so forth.

Senator MUNDT. $1.2 billion?

Secretary RUSK. Approximately, a year.

Senator MUNDT. Per year.

Secretary RUSK. Plus the private investment expectations that were added onto that-and we have just about met that in the past two years-about $1.1 billion, I think it averages. This would lift it up by the amounts indicated.

Senator MUNDT. That would move that within $2.7 billion.

Secretary RUSK. No; roughly $1.5 billion.

Senator MUNDT. We have $1.2 billion committed now.

Secretary RUSK. About $300 million a year more than we have been doing.

Senator MUNDT. What you are talking about here is increasing our commitment as against present understandings and arrangements by about $300 million per year.

Secretary RUSK. That is right; if these things are done.

Senator MUNDT. Yes.