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SRG Meeting - Latin America/Caribbean 8/17/71 [1 of 3]
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SRG Meeting - Latin America/Caribbean 8/17/71 [1 of 3]
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WITHDRAWAL SHEET (PRESIDENTIAL LIBRARIES)
FORM OF
DOCUMENT
CORRESPONDENTS OR TITLE
DATE
RESTRICTION
1. PAPER
SECTION FRom PAPER ON THE CARIBBEAN (3pp.)
[8/71]
A
2. PAPER
ANNEX To PAPER ON THE CARIBBEAN (4pp.)
[8/71]
A
3. PAPER
ANNEX To PAPER ON THE CARIBBEAN (14pp.)
[8/71]
A
FILE LOCATION
I FILES Box H-59 FOLDER \
RESTRICTION CODES
(A) Closed by applicable Executive order governing access to national security information.
(B) Closed by statute or by the agency which originated the document.
(C) Closed in accordance with restrictions contained in the donor's deed of gift.
NATIONAL ARCHIVES AND RECORDS ADMINISTRATION
NA 14029 (1-98)
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
NATIONAL SECURITY COUNCIL
WASHINGTON, D.C. 20506
SECRET/LIMDIS
August 18, 1971
MEMORANDUM FOR
The Under Secretary of State
The Deputy Secretary of Defense
The Chairman, Joint Chiefs of Staff
The Director of Central Intelligence
SUBJECT:
US Policy in the Caribbean
At the Senior Review Group meeting held on 17 August 1971, to consider
the response to NSSM 117, it was agreed that the NSC Interdepartmental
Group for Inter-American Affairs should prepare a brief supplementary
paper addressing, on a country-by-country (or appropriate grouping)
basis, the political and security aspects of US relations with the countries
and dependencies in the Caribbean. The paper should, inter alia, identify
as specifically as possible likely political developments and trends in
those countries in the next three in five years which could significantly
affect US interests. It should identify options open to the United States,
and specific actions which should be taken to protect and further US
interests.
The paper should be submitted no later than September 3, 1971.
A.
Henry A. Kissinger
CC:
Assistant to the President for
International Economic Affairs
Assistant Secretary of the Treasury
for International Affairs
DECLASSIFIED/RELEASED ON 4/23/02
by NARA on the recommendation of the NSC
SECRET/LIMDIS
under provisions of E.O. 12958
RS
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
33406
UNITED STATES INFORMATION AGENCY
WASHINGTON
DIRECTOR
October 6, 1971
MEMORANDUM FOR: The Honorable
Henry A. Kissinger
The White House
Unless you have an objection, I plan to attend the
Senior Review Group meeting Thursday at 3:00
dealing with Latin America and the Caribbean.
77
Frank Shakespeare
DECLASSIFIED/RELEASED ON 4/23/02
by NARA on the recommendation of the NSC
under provisions of E.O. 12958
RS
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
DOC
RECD
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1000100618
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SUBJECT: Somme to the SRG Muty IS SENSITIVE Oct7
on Jetm America
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ACTION
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MEMO FOR HAK
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X
CY
-
ADVANCE CYS TO HAKHAIG
FOR
MEMO FOR PRES.
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-
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(
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(
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LATIN AMERICA
X
refer TO STATE
(
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UNITED NATIONS
ANY ACTION NECESSARY
(
X
)
ECONOMIC
CONCURRENCE
(
)
SCIENTIFIC
DUE DATE:
LR PLANNING
1006
COMMENTS: (Including Special Instructions)
PROGRAM ANALYSIS
NSC PLANNING
X
CONGRESSIONAL
DATE
FROM
TO
S
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CY TO
INTERNAL/INTERIM ROUTING
MICROFILM DATA
CROSS REF WITH
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DO
INIT
DISPOSITION
JOINED BY LOG
COPIES: (AS MARKED ABOVE)
DATE
SPECIAL FILE RQMT:
SA,
HP,
HM
ORIG)
NSC
SPECIAL DISPOSITION COMMENTS:
TO )
PAF
WHC
SUSPENSE CY ATTACHED: YES
NO
SUBF
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified. * GPO: 1971-412-412
DOC
RECD
LOG NBR
INITIAL ACTION OFF
MO DA
MO DA HR
NSC CORRESPONDENCE PROFILE
33406
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TO: PRES
FROM: ELIOT
U
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kissinger
ROGERS, W
LOU
X
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DOC SOURCE/CLASS/DESCRIPTION
HAIG
SHAKESPEARE LAIRD, M
C
EYES ONLY
LIMDIS
S
CODE WORD
RES DATA
SUBJECT:
on Jatm Annica
Soming to the SRG TS musty SENSITIVE Oct7
REFERENCE: S/S
OTHER
NOT XEROXED
APP'TS: PRES
HAK
TALKER
MEMCON
DATE REQ.
INTERNAL ROUTING AND DISTRIBUTION
ACTION REQUIRED
ACTION
INFO
REC
MEMO FOR HAK
(
)
CY
ADVANCE CYS TO HAK/HAIG
FOR
MEMO FOR PRES.
(
)
STAFF SECRETARY
REPLY FOR
SIGNATURE
(
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(
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SECRETARIAT DISTRIBUTION/ACTION
SUB-SAHARAN AFRICA
MEMO
TO
(
)
NR EAST/NORTH AFRICA
RECOMMENDATIONS
(
)
EUROPE/CANADA
JOINT MEMO
(
)
LATIN AMERICA
X
REFER TO STATE
(
)
UNITED NATIONS
ANY ACTION NECESSARY
(
)
ECONOMIC
CONCURRENCE
(
)
SCIENTIFIC
DUE DATE:
LR PLANNING
1006
COMMENTS: (Including Special Instructions)
PROGRAM ANALYSIS
NSC PLANNING
X
CONGRESSIONAL
DATE
FROM
TO
S
ACTION REQUIRED
CY TO
12/1
OBE Has NSC/S
INTERNAL/INTERIM ROUTING
MICROFILM DATA
CROSS REF WITH
NOTIFY
DATE
SEE LOG
DISPATCH: LETTER/MEMO
DO
INIT
DISPOSITION
JOINED BY LOG
COPIES: (AS MARKED ABOVE)
SPECIAL FILE RQMT:
SA,
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DEC061971
DATE
ORIG)
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SPECIAL DISPOSITION COMMENTS:
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PAF
WHC
SUSPENSE CY ATTACHED: YES
NO
SUBF
* GPO: 1971-412-412
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
31355
MEMORANDUM
NATIONAL SECURITY council
@
August 10, 1971
MEMORANDUM FOR:
GENERAL HAIG
FROM:
Jeanne W. Davis
SUBJECT:
Attendance at SRG Meeting on Latin America,
Friday, August 13, 4:00 p.m.
In June, when this meeting was first scheduled, you approved inviting
AID, Treasury, OPIC, and, if they asked, USIA. You disapproved
Commerce and Agriculture on the basis of Arnie Nachmanoff's belief
that neither would have much to contribute.
We have invited the four agencies you previously approved. (USIA
subsequently asked to attend.) Commerce, however, has again asked
to send a representative. Arnie Nachmanoff now believes it would not
be good tactics to try to exclude Commerce. Although he still thinks
they would have little to offer, he believes that Secretary Stans is
ready to press hard for Commerce representation, as he did at the
recent SRG meeting on expropriation. Commerce apparently is
particularly concerned about some aspects of the NSSM 117 study on
the Caribbean, which has been added to the agenda of Friday's meeting.
Nachmanoff also recommends that we invite Mr. Peterson of CIEP to
attend, since a number of economic topics of interest to him may be
discussed.
Could we have your guidance:
Yes
No
Commerce
CIEP
DECLASSIFIED/RELEASED ON 4/23/02
by NARA on the recommendation of the RS NSC
under provisions of E.O. 12958
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
DOC
RECD
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10
31355
10
8
14
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FROM: ELIOT
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HAIG kissinger x
ROGERS, W
laird, M
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RES DATA
SUBJECT:
LA
Commerce L ciep Attendance at TS SRG Mg sensitive on by 13 re
REFERENCE: S/S
OTHER
NOT XEROXED
APP'TS: PRES
HAK
TALKER
MEMCON
DATE REQ.
INTERNAL ROUTING AND DISTRIBUTION
ACTION REQUIRED
ACTION
INFO
REC
MEMO FOR HAK
CY
(
)
ADVANCE CYS TO HAK/HAIG
X
MEMO FOR PRES.
(
-
STAFF SECRETARY
REPLY FOR
SIGNATURE
(
)
FAR EAST
FOR DISTRIBUTION/DISPATCH
(
-
SECRETARIAT DISTRIBUTION/ACTION
SUB-SAHARaN AFRICA
MEMO
TO
(
-
NR EAST/NORTH AFRICA
RECOMMENDATIONS
)
)
EUROPE/CANADA
JOINT MEMO
X
(
-
LATIN AMERICA
REFER TO STATE
(
)
UNITED NATIONS
ANY ACTION necessary
X
(
)
ECONOMIC
CONCURRENCE
(
)
SCIENTIFIC
due DATE:
LR PLANNING
COMMENTS: (Including Special Instructions)
PROGRAM ANALYSIS
NSC PLANNING
X
CONGRESSIONAL
DATE
FROM
TO
S
ACTION
CY TO
8/10
Devis
Hxis
X
Decisi REQUIRED (45%) Pypan
INTERNAL/INTERIM ROUTING
8/12
His A provid Reca
MICROFILM DATA
CROSS REF WITH
NOTIFY
DATE
X
SEE LOG
DISPATCH: LETTER/MEMO
DO
Email
INIT
DISPOSITION
JOINED BY LOG
COPIES: (AS MARKED above)
AUG131971
SPECIAL FILE RQMT:
SA,
HP,
HM
ORIG)
NSC
SPECIAL DISPOSITION COMMENTS:
TO )
PAF
R
SUSPENSE CY ATTACHED:
YES
NO
SUBF WHC X
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
* GPO: 1971-412-412
This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
29676
wa
MEMORANDUM
NATIONAL SECURITY COUNCIL
ACTION
SECRET
June 18, 1971
MEMORANDUM FOR:
FROM:
Arnold Nachmanoff Kor
DR. KISSINGER
SUBJECT:
Grant MAP Materiel Program in Latin
America in FY 1971
One of the issues scheduled for the now postponed SRG meeting on Latin
America has some time urgency since it must be resolved before the end
of the fiscal year. The issue is whether or not we will have a Grant MAP
Materiel Program for Latin America in FY 1971.
In April, the IG/ARA unanimously voted to approve a Grant MAP Materiel
Program for six Latin American countries. This was consistent with the
President's desire to increase influence with the Latin American military.
However, subsequently criticism on the Hill of the President's decision to
waive the $75 million military sales ceiling for Latin America led Under
Secretary Irwin to reverse the IG decision, except for the case of Bolivia
(and only then after the urgent cables from Ambassador Siracusa).
In order to keep the issue in the NSC system, Meyer sent a notice to IG Mem-
bers indicating that he would reverse his position and indicated that IG prin-
cipals could appeal to the NSC Under Secretaries Committee. Because of the
time pressure, I proposed that you raise this in the SRG meeting on Latin
America, where a similar issue for FY 1972 would be discussed. With the
SRG meeting postponed, I now suggest that you call Irwin and tell him that you
do not agree with this decision. The FY 1971 MAP money has already been
appropriated and is available for use in Latin America. We do not think it is
necessary to cave to Congressional criticism on this issue. Our intention to
carry out a Grant MAP Materiel Program in Latin America was made known
to the Congress when we sought the appropriation. You may wish to indicate
that the President feels strongly about being helpful to the military in friendly
Latin American countries.
RECOMMENDATION:
That you call Under Secretary Irwin soon and suggest that we go forward
with a Grant MAP Materiel Program in FY 1971 for the six Latin American
countries.
Approve Me
Called
Disapprove
DECLASSIFIED/RELEASED ON 4/23/82
Attachment:
IG Memo 7 June 1971
by NARA on the recommendation of RS the NSC
under provisions of E.O. 12958
Reproduced at the Richard Nixon SECRET Presidential Library DECLASSIFIED
This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
SECRET
NSC-IG/ARA Information Memo #164
June 7, 1971
INTERDEPARTMENTAL GROUP FOR INTER-AMERICAN
AFFAIRS
SUBJECT: FY 71 Grant MAP Materiel
Following a review of the provisional 1971 grant MAP
materiel allocations for eleven countries made in 1969
by the IG/ARA in the course of the FY 71 CASP cycle,
the IG/ARA agreed on April 15, 1971 that FY 71 funds
for Latin America should be apportioned at agreed
levels among six countries (Dominican Republic,
Guatemala, Panama, Uruguay, Paraguay, and Bolivia).
Upon reconsideration of this decision, the Executive
Chairman of the IG/ARA has now determined that, with
the exception of Bolivia, no FY 71 grant MAP materiel
allocations will be made. It is understood that
IG/ARA principals who wish to contest the Executive
Chairman's decision may raise their positions before
the Under Secretary's Committee.
Donald B. Easum
Staff Director
DECLASSIFIED/RELEASED ON 4/23/02
by NARA on the recommendation of the NSC
IG/ARA:DBE:agr
under provisions of E.O. 12958
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
DOC
RECD
LOG NBR
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618
6
ii
09
29676
LOG IN/OUT ONLY
TO: PRES
FROM: ELIOT
U
NO FORN
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KISSINGER x
rogers, W
lou
buo
EXDIS
DOC SOURCE/CLASS/DESCRIPTION
HAIG
LAIRD, M
C
EYES ONLY
LIMDIS
NXCHMANOFF
S x
CODE WORD
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TS
SENSITIVE
SUBJECT: Grant Map Material Pripa for Late Amin is by 71
REFERENCE: S/S
OTHER
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APP'TS: PRES
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TALKER
MEMCON
DATE REQ.
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ACTION REQUIRED
ACTION
INFO
REC
MEMO FOR HAK
CY
(
)
ADVANCE CYS TO HAK/HAIG
for
MEMO FOR PRES.
(
)
STAFF SECRETARY
REPLY FOR
SIGNATURE
-
)
FAR EAST
FOR DISTRIBUTION/DISPATCH
-
)
SECRETARIAT DISTRIBUTION/ACTION
AFRICA
MEMO
TO
(
)
NR EAST/NORTH AFRICA
RECOMMENDATIONS
(
)
EUROPE/CANADA
JOINT MEMO
(
)
LATIN AMERICA
x
REFER TO STATE
(
)
UNITED NATIONS
ANY ACTION NECESSARY
(
)
ECONOMIC
CONCURRENCE
(
)
SCIENTIFIC
DUE DATE:
LR PLANNING
COMMENTS: (Including Special Instructions)
PROGRAM ANALYSIS
NSC PLANNING
CONGRESSIONAL
DATE
FROM
TO
S
ACTION REQUIRED
CY TO
6/18
NxcH
Hir
X
Decision
JUN 21 1971
INTERNAL/INTERIM ROUTING
6/21
Hon
NACH
5
HAK appid recom.
riscls
Farther Action ? ( 4/23)
6/21
nack
ho further action
MICROFILM DATA
CROSS REF WITH
NOTIFY
DATE
SEE LOG
DISPATCH: LETTER/MEMO
DO
INIT
DISPOSITION
JOINED BY LOG
COPIES: (AS MARKED ABOVE)
DATE
SPECIAL FILE RQMT:
SA,
HP,
HM
ORIG)
NSC
SPECIAL DISPOSITION COMMENTS:
TO ) )
PAF
WHC
SUSPENSE CY ATTACHED:
YES
NO
SUBF
* GPO: 1971-412-412
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
29378
MEMORANDUM
NATIONAL SECURITY COUNCIL
ACTION
June 14, 1971
MEMORANDUM FOR GENERAL HAIG
FROM:
Jeanne W. Davis PMD
SUBJECT: ACDA Attendance at SRG Meeting on Latin America
(NSSM 108)
ACDA (Phil Farley) has now asked to attend the SRG meeting on
Latin America on Thursday, June 17. This is already a very
large meeting, with representatives from AID, Treasury, USIA
and OPIC added to the regular membership. You will remember
you turned down attendance bids from Commerce and Agriculture
at the time you approved those above.
Arnie Nachmanoff notes that ACDA's interest is confined to a
recommendation in the Security/Military section of the paper
(the last of seven) that ACDA, in cooperation with the IG/ARA,
conduct a study of the feasibility of a possible arms limitation
initiative. Arnie doubts that it will be considered in any detail
at the SRG and questions the necessity of adding ACDA to the
already swollen attendance.
ACDA apparently feel strongly about this, and Gerry Smith may
make an issue of it with Mr. Kissinger if they are refused.
Approve ACDA Attendance
Disapprove
Clearance: Mr. Nachmanoff an
DECLASSIFIED/RELEASED ON 4/23/02
by NARA on the recommendation of the NSC
under provisions of E.O. 12958
RS
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
MEMORANDUM
NATIONAL SECURITY COUNCIL
Q
ACTION 29378
June 11, 1971
MEMORANDUM FOR GENERAL HAIG
FROM:
Rr
Jeanne W. Davis
dor
SUBJECT:
Attendance at SRG Meeting on Latin America
(NSSM 108)
AID, Treasury, Commerce, Agriculture, and OPIC (Overseas
Private Investment Corporation) have asked to send repre-
sentatives to the SRG meeting on Latin America (NSSM 108).
USIA is also expected to want to attend, but has not yet asked.
Arnie Nachmanoff favors inviting AID, OPIC and Treasury,
and has no objection to USIA if they ask. However, he thinks
that Agriculture and Commerce would have little to contribute
to this meeting.
Yes
No
AID
Treasury
OPIC
Commerce
Agriculture
USIA, if they ask
DECLASSIFIED/RELEASED ON 4/23/02
by NARA on the recommendation or the NSC
under provisions of E.O. 12958 RS
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
DOC
RECD
LOG NBR
INITIAL ACTION OFF
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FROM: ELIOT
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NO FORN
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#
KISSINGER
ROGERS, W
LOU
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EXDIS
HAIG
X
DOC SOURCE/CLASS/DESCRIPTION
laird, M
C
EYES ONLY
LIMDIS
Davis
S
CODE WORD
RES DATA
TS
sensitive
subject:
Attendance at SRG Meeting on Latin America (NSSM 108)
REFERENCE: S/S
OTHER
NOT XEROXED
APP'TS: PRES
HAK
TALKER
MEMCON
DATE REQ.
INTERNAL ROUTING AND DISTRIBUTION
ACTION REQUIRED
ACTION
INFO
REC
MEMO FOR HAK
(
)
CY
ADVANCE CYS TO HAK/HAIG
FOR
MEMO FOR PRES.
(
)
STAFF SECRETARY
REPLY FOR
SIGNATURE
(
)
FAR EAST
FOR DISTRIBUTION/DISPATCH
(
)
SECRETARIAT DISTRIBUTION/ACTION
SUB-SAHARAN AFRICA
MEMO
TO
(
)
NR EAST/NORTH AFRICA
RECOMMENDATIONS
-
)
EUROPE/CANADA
JOINT MEMO
-
)
LATIN AMERICA
x
REFER TO STATE
(
-
UNITED NATIONS
ANY ACTION necessary
(
)
ECONOMIC
CONCURRENCE
(
)
SCIENTIFIC
DUE DATE:
LR PLANNING
COMMENTS: (Including Special Instructions)
PROGRAM ANALYSIS
NSC PLANNING
x
CONGRESSIONAL
DATE
FROM
TO
S
CY TO
0611
NACH
HAIE
X
Decision ACTION REQUIRED (0614)
JUN 14 1971
INTERNAL/INTERIM ROUTING
06/14
HAIG
DAVIS
Haig Decision Diadel
S
Namh agmeees (0615
6/14/71
Davis
Gothrie
DAVIS
Notified Treasury, OPK
6/14
HAIG
X
Decision / hddl DAVIS Men. (1/15)
415
His disapproved Recom
MICROFILM DATA
CROSS REF WITH
NOTIFY
DATE
SEE LOG
DISPATCH: LETTER/MEMO
DO
INIT Email
DISPOSITION
JOINED BY LOG
COPIES: (AS MARKED ABOVE)
JUN17197 17197
SPECIAL FILE RQMT:
SA,
HP,
HM
it
ORIG)
NSC m
special DISPOSITION COMMENTS:
TO )
PAF
SUSPENSE CY ATTACHED:
YES
NO
WH,C SUBR
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
* GPO: 1971-412-412
This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
29418
UNITED STATES INFORMATION AGENCY
WASHINGTON
director
June 11, 1971
MEMORANDUM FOR: The Honorable
Henry A. Kissinger
Latin America
The White House
alima
The Review Group meetings scheduled for June 18
and June 28 are on subjects that are of concern to USIA.
Unless you disapprove, I plan to attend both of these
meetings.
There are several matters I would like to discuss
with you and would appreciate the opportunity of having
breakfast with you on a convenient morning.
JJ Frank Shakespeare
00
2
Ы
wirted to LA writing 6/17
will cousider clive closso me to
warting twice of 6/29
DECLASSIFIED/RELEASED ON 4/23/02
by NARA on the recommendation of the RS NSC
under provisions of E.O. 12958
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
Frank Shakespeare
UNITED STATES INFORMATION AGENCY
OFFICE OF THE DIRECTOR
WASHINGTON, D.C. 20547
BY MESSENGER
The Honorable
Henry A. Kissinger
The White House
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
DOC
RECD
LOG NBR
INITIAL ACTION OFF
MO DA
MO DA HR
NSC CURRESPONDENCE PROFILE
6
11
6
14
10
29418
LOG IN/OUT ONLY
TO: PRES
FROM: ELIOT
U
X
NO FORN
NODIS
KISSINGER X
rogers, W
LOU
BUO
EXDIS
DOC SOURCE/CLASS/DESCRIPTION
HAIG
laird, M
C
eyes ONLY
LIMDIS
SHAKESPEARL, F
S
CODE WORD
RES DATA
TS
SENSITIVE
SUBJECT: Request for Attendance Approval for USIA at the
June 18 to 28 Review Groups Mgs
REFERENCE: S/S
OTHER
NOT XEROXED
APP'TS: PRES
HAK
TALKER
MEMCON
DATE REQ.
INTERNAL ROUTING AND DISTRIBUTION
ACTION REQUIRED
ACTION
INFO
REC
CY
MEMO FOR HAK HAIG
X
(
)
ADVANCE CYS TO HAK/HAIG
FOR
memo FOR PRES.
(
)
STAFF SECRETARY
X
REPLY FOR
SIGNATURE
(
)
FAR EAST
FOR DISTRIBUTION/DISPATCH
(
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SECRETARIAT DISTRIBUTION/ACTION
SUb-sAharan AFRICA
MEMO
TO
(
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NR EAST/NORTH AFRICA
RECOMMENDATIONS
(
)
EUROPE/CANADA
JOINT MEMO
(
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LATIN AMERICA
REFER TO STATE
(
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UNITED NATIONS
ANY ACTION NECESSARY
(
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(
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SCIENTIFIC
LR PLANNING
COMMENTS: Special Instructions)
due DATE: (Including 6/15
PROGRAM ANALYSIS
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* GPO: 1971-412-412
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MEMORANDUM
NATIONAL SECURITY COUNCIL
August 11, 1971
MEMORANDUM FOR:
GENERAL HAIG
FOR
FROM:
Jeanne W. Davis
SUBJECT:
Budget Attendance at SRG on Latin America,
Friday, August 13
Budget has now joined the list of agencies asking to attend this
meeting. They want to send Kenneth Dam. Arnie Nachmanoff
recommends that we approve his attendance. Could we have your
guidance:
OMB Lole aball he wants
may attend
OMB may not attend
Lpw
fultz
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under provisions of E.O. 12958 Rs
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17 Any. 1971
MEMORANDUM
NATIONAL SECURITY COUNCIL
ACTION
SECRET
11 August 1971
M EMORANDUM FOR:
DR. KISSINGER
FROM:
ARNOLD NACHMANOFF an
SUBJECT:
SRG Meeting on NSSM 117 - The Caribbean
The SRG is scheduled to take up NSSM 117 (review of US policy in the
Caribbean area) right after its review of NSSM 108 (Latin America) on
Friday afternoon, August 13. Although it is a lengthy document, the
Study presents few issues which require SRG discussion. An Analytical
Summary of the paper is tabbed, and the paper itself contains an Overview
section which you may wish to review.
The basic thrust of the paper is:
-- That our interests in the Caribbean are more direct and intense
than they are in other parts of Latin America. This results from
the region's geographic position (proximity to the US, astride
access routes to the Panama Canal), our requirements for access
to strategic materials, particularly bauxite and oil, and our require-
ments for military facilities (mostly for anti-submarine warfare and
scientific or navigational purpose).
-- Our interests will be increasingly challenged or threatened in the
next few years by rising nationalism (economic, racial and anti-US),
by the growth of Soviet military presence in the region, by the pros-
pect of British disengagement, and by the general instability result-
ing from frustration with the slow pace of economic and social
progress.
The Study proposes a series of recommendations for limiting or responding
to these threats to our interests. These are summarized on pages 3-8
of the Analytical Summary. Most of the recommendations concerning
nationalism, British disengagement, Soviet military activity and US bases
are non-controversial and probably can be approved with little or no dis-
cussion. With regard to British disengagement, one question you may
wish to raise is whether it would be tactically useful to make a high-level
(possibly Presidential) approach to the British to encourage their continued
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- 2 -
presence in the Caribbean as long as possible. With regard to Soviet mili-
tary activity, the IG endorses the recommendation it made in NSSM 108 that
we study the need for increased surveillance and increased ASW capability
in the Caribbean. In light of the gaps we had in tracking Soviet submarines
in the Caribbean during the past year, I suggest that you strongly endorse
such a study. With regard to US bases, there is no imme diate threat, but
the IG recommends that we be prepared if necessary to make base rights
payments. This is one you may wish to flag for Treasury and OMB.
There are two general issues which should be discussed by the SRG. The
first is the question of bauxite, which is summarized on pages 5-7 of
the Analytical Summa ry.
BAUXITE: Guyana's Prime Minister Burnham's nationalization of DEMBA,
a Canadian subsidiary, and his apparent intention to nationalize Reynolds
(US owned) has raised concern that Jamaica -where US bauxite investments
approach $1 billion, with about one-half guaranteed by OPIC--will follow
Burnham's example. It is clearly inot in our interest to see Burnham
successfully organize an efficient state bauxite enterprise if we want to deter
further nationalization by Jamaica. On the other hand, we don't want Burnham
to fail so badly that he would be replaced by more extremist elements such as
Cheddi Jagan, a Marxist clearly tied to Moscow. The issue then is how to
balance between deterring further bauxite nationalization in Jamaica (and
Surinam) and pushing Guyana into Marxistshands.
The NSSM 117 Study divides the issue into a number of options and recommen-
dations towards Guyana, towards Jamaica, towards the companies, etc. The
course recommended by the IG is essentially a middle option. I do not think
it is necessary for the SRG to discuss this in any detail because (a) there ar e no
serious agency differences, and (b) the problem is no longer an immediate
one, since Burnham agreed to a compensation settlement with DEMBA and has
indicated that he will not move against Reynolds before 1972 at the earliest.
Hence, I suggest that the SRG endorse the general approach recommended by
the IG (which in fact is the one being pursued at the present time) and turn
this issue over to the new CIEP mechanism which will be charged with handling
expropriation problems.
TRADE: (summarized on pages 7-8 of the Analytical Summary). In view
of the importance of our interests in the Caribbean and heavy dependence of
the region on external trade, the Study recommends that we try to find ways
to strengthen the trading capacity of the Caribbean countries. The recom-
mendations are essentially innocuous, but--as with most trade issues these
days--subject to considerable inter-agency disagreement.
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- 3 -
I suggest that you:
-- avoid a bureaucratic debate on the merits of the specific
recommendations;
-- seek agreement on the broad proposition that we ought to try to
do something for the Caribbean countries in the way of economic
benefits;
-- propose that a Working Group be established to study the possi-
bilities of providing additional economic help to the region.
Your talking points ((tabbed) proceed along the lines suggested above.
CC: Bob Hormats
Col. Kennedy
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HAK TALKING POINTS
NSSM 117
TO OPEN THE MEETING
-- We are now going to take up a more specific aspect of our Latin
American policy, the Caribbean.
-- If I understand it correctly, the NSSM 117 paper suggests that our
interests in the Caribbean are more direct and intense than they are
in other parts of Latin America because of the region's geographic
position, our requirements for access to strategic materials (particu-
larly bauxite and oil) and our requirements for military facilities.
-- The paper suggests that there is an increasing threat or challenge to
our interests resulting from rising nationalism (both racial and
economic), the growth of Soviet military presence in the region, the
prospect of British disengagement, and general instability resulting
from frustration with the pace of development.
-- Is this a fair assessment? [Ask State and CIA]
TO DISCUSS THE ISSUES
-- The paper proposes a series of recommendations for limiting these
threats to our interests. These are grouped under six headings-
Nationalism, Private Investment, Disengagement, Soviet Military
Activities, US Bases, Economic Problems. Frankly, I think we can
skim through most of these and concentrate on those issues which require
some action.
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- 2 -
1. Nationalism: -- Are there any problems or disagreements with
recommendations?
(The paper recommends increasing our USIA programs in the
English-speaking Caribbean. USIA may point out that budget
cuts may force a reduction of its programs in the area. If so,
you may wish to suggest that USIA and OMB see if some relief
can be given, ) since it would be helpful to expand USIA programs
in the area?)
2. British Disengagement: -- The paper stresses the value of a con-
tinued British role in the area for as long as possible. Is there any
disagreement that we should try to prolong our "free ride" as long
as possible?
-- Would a high-level approach to the British on this point be useful?
3. Soviet Military Activities: -- The question of Soviet naval and air
deployments in the Caribbean is essentially a matter of US-Soviet
relations. However, the paper does raise a question of whether we
need to increase submarine surveillance and ASW in the area.
-- Rrecall that our tracking record on subs in this area has not been
outstanding. [Ask DOD and JCS] Can we move quickly on the
study that is proposed?
4. US Bases: -- Are there any problems here? I note the recommen-
dation that we be prepared to make "base rights" payments if necessary.
[To Treasury and OMB] I trust we will have all the cash we need when
the Bahamans follow in Malta's footsteps?
SECRET
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- 3 -
5. Bauxite: -- The problem here is that Guyana's nationalization
action casts a shadow over US investments in Jamaica and Surinam,
though it would not necessarily limit our access to bauxite.
-- The real issue seems to be how do we discourage Jamaica from
following Guyana's example without taking measures which lead
to a communist (Cheddi Jagan) government in Guyana. [Ask Irwin
for his comments]
-- Since the time pressure is off--with the Demba settlement in
Guyana- shouldn't CIEP's new expropriation mechanism look at
this issue? I doubt that we would want to consider this issue
apart from our broader expropriation problem in any case. [Ask
Peterson to comment]
-- Is there general agreement that in the meantime, we should pur-
sue the course recommended by the IG?
(We think there will be agreement.)
6. Economic Issues (Trade and Aid): -- The study suggests that in
in view of the importance of our interests in the Caribbean and the
heavy dependence of the region on external trade, we should try to
find ways to cooperate to strengthen the trading capacity of the
Caribbean countries. Although there are quite a few recommendations,
most of them involve further study or some other waffle.
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- 4 -
-- Nevertheless, I understand there are objections to some of the
proposals which have been made.
(Treasury objects to reducing the duty on rum, of and Commerce
believes we should not even consider the option/studying modifi-
cation of our textile policy to see if some additional benefits
could be given to the Caribbean.)
-- I do not think it would be useful for this group to debate the merits
of these specific proposals.
-- Can we agree on the broad proposition that - in view of our
interests. we ought to try to do something for the Caribbean
countries in the way of economic benefits. (This might encom-
pass both trade and aid). If so, could we establish a special
working group to study specific possibilities and come up with
some actions we can take or, if necessary, recommendations for
the President.
(You may wish to ask Peterson if he would like to handle this
under CIEP.)
[You may wish to conclude the meeting by noting that the SRG has approved
most of the recommendations in the study, and that there do not seem to be
any issues which require Presidential decision at this time. ]
SECRET
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ANALYTICAL SUMMARY
NSSM 117: U.S. Policy in the Caribbean Area
Introduction and Terms of Reference
NSSM 117 directed the preparation of a comprehensive review of U.S.
policies and programs in the Caribbean area. It called for identification
of U.S. interests, and recommendations on how best to advance or protect
these interests in light of such factors as:
-- pressure against foreign bauxite interests in the area;
-- the U.K.'s intention to disengage;
the interest of some Caribbean governments in regularizing
relations with Cuba;
the growth of black nationalism in the region;
-- increased Soviet military activities.
The scope of the NSSM 117 Study is confined to the non-U.S. Caribbean
islands excluding Cuba (and, for the most part, Haiti), plus British
Honduras, Guyana, and Surinam. The primary focus is on the English-
speaking territories.
The paper begins with an overview [which you may want to look at]
followed by sections on U.S. interests, the current policy environment,
U.S. involvement in the area, major policy issues, and recommendations
for U.S. policy. Nine annexes provide statistical and descriptive back-up
material.
This paper summarizes the study, with our views indicated in brackets.
U.S. Interests
The paper considers the NSSM 108 statement of interests "generally valid"
as regards the Caribbean. [You may want to refer to the NSSM 108
Summary. ] Of particular importance, given the area's proximity to the
U.S., are:
SECRET
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SECRET
8 2 -
denying the region as an area from which a strategic attack could
be launched against the U.S. (considered "very important" in
NSSM 108);
-- continued access to naval and air bases and facilities, and denial
to hostile powers of Caribbean bases which would enhance their
non-strategic capabilities.
Other NSSM 108-derived interests of direct relevance in the Caribbean
include: maintenance of access to the Panama Canal and continued access
to bauxite and petroleum resources.
In general, our high degree of exposure in the Caribbean (trade, tourism,
investment), our historic involvement there, and close proximity to the
area combine to magnify the importance of our broader hemispheric
interests. [We share this judgment and would add that the same factors
tend to magnify the threats to our interests.
The paper argues that until recently our attention has been concentrated
heavily in the independent Latin Caribbean, and that we need to "give
more careful consideration" to our more important interests in the newly
and nearly independent British, Dutch, and French areas. Among the
specifically Caribbean objectives deriving from our interests are:
-- to avoid the emergence of a series of non-viable independent
mini-states with reference especially to the (British) Associated
States and the Netherlands Antilles;
-- to encourage economic regionalism among the Commonwealth
Caribbean countries;
-- to keep the U.K., France, and the Netherlands involved in the
security and economic spheres as long as possible and to encourage
them to work for an orderly transition to independence;
-- to encourage increased Canadian involvement in the area;
-- to encourage the fullest possible participation of the non-Latin
areas in the Inter-American system;
-- to prevent Cuban subversion directed at its Caribbean neighbors.
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- 3 -
Major Issues and Recommendations
[Although all the issues cited in the Study are important, we think you may
want to concentrate the discussion on two issues which pose or soon will
pose policy choices and could cause inter-agency differences: the potential
threat to U.S. bauxite investments and the overall economic problems of
the area.
A. Nationalism
The growth of racial and economic nationalism poses a major problem
in advancing and protecting U.S. interests, starting with investment
but potentially affecting our entire position in the region. The problem
is compounded in the Caribbean by our relatively high visibility; the
narrow economic potential of many areas; and the black power dimen-
sion, with its linkages to the U.S. domestic scene, which could pose
a long-run challenge to existing governments, institutions, and values.
Recommendations:
(in addition to the NSSM 108 recommendations on
dealing with anti-U.S. nationalism, and on U.S.
Government protection and encouragement of
investment)
-- Increased public and private educational and cultural exchanges
with Caribbean countries.
-- Increased USIA programming for the English-speaking
Caribbean. [This could come up at the meeting since USIA
budget cuts may actually lead to the closing of some posts. ]
-- In the event of internal disorders resulting in requests for U.S.
military assistance, limit such aid to small arms and ammo
and riot control equipment for recognized constitutional
governments.
-- Encourage maximum British and Canadian presence in order
to hold down U.S. visibility and spread the security and
economic aid burden.
-- Support economic and social progress (see F below).
B. British Disengagement
The Heath government has indicated its intention to disengage from the
Caribbean area, though they have set no fixed timetable for withdrawal
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- 4 -
and have indicated their willingness to cooperate with us in the
planning. Embassy London has indicated that we have about one year
and a half to align U.S. -U.K. plans. The Bahamas and British
Honduras could well be independent in two years.
Though the issues differ in the various countries under British control,
the basic issue is that the British presence has given us a "free ride, "
and that certain aspects of the U.K. role could be economically and,
especially, politically costly for the U.S. to assume. The U.K.
probably calculates that we would, in our own self-interest, assume
responsibility for the external security of the islands after their
withdrawal.
Recommendations:
-- Give priority to urging the U.K. to remain in the Caribbean as
long as possible, particularly in the Associated States. To
this end, we should meet with the British soon to get a
clarification of their intentions. [It may be worth considering
a high-level approach to the British on this question.
-- Clearly indicate to the U.K., in the case of the Bahamas, our
prefer ence for independence later rather than sooner, while
stating that we will place no obstacles to independence. [This
represents a rejection of the alternative of offering the
Bahamas some form of association with the U.S. on the grounds
of our extremely close ties and large interests there. We
concur with the IG/ARA's recommendation.]
-- Be prepared to provide economic and security assistance as
necessary should the U.K. withdraw.
-- Postpone discussions on U.S. bases in the Bahamas until after
independence.
C. Soviet Military Activities
(Cuba is not discussed in the paper.) In the last two years, Soviet
naval activities in the Caribbean have increased and probably will
evolve in a manner similar to that in the Mediterranean and Indian
Ocean. The greatest potential threat to U.S. security from the
Caribbean would come from a Soviet strategic offensive capability in
the area. The availability of Caribbean patrol stations for SSBNs
would increase Soviet on-target time within range of our strategic
forces. The paper judges it "unlikely" that the USSR would seek such
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- 5 -
a capability "if it involved the risk of a direct confrontation with the
U.S. 11 In addition, a Soviet attack submarine and surface combatant
capability in the area poses a potential threat to our sea lines of
communication and access to Caribbean defense facilities.
Recommendations:
-- As recommended in the NSSM 108 Study, we should study the
need for increased sub surveillance and ASW capability in the
Caribbean. [We fully concur that such a study should be
undertaken. ]
-- Pursue diplomatic efforts to inform regional governments of
Soviet activities and to prevent Soviet bunkering.
-- Increase, as needed, U.S. port visits to offset Soviet visits.
D. U.S. Bases
The Study foresees no serious obstacles to continued access to our
base facilities in the next few years, though Bahamian independence
will probably mean renegotiation of existing U.S.-U.K. arrangements.
Our bases in the area, except for two being phased out this year,
remain important to us.
Recommendations:
-- Consider sympathetically and on their merits proposals for
changes in current arrangements, including, if necessary,
making "base rights" payments.
-- Study further the desirability of bilateral defense commitments,
particularly in the case of the Bahamas, where this could
facilitate retention of important installations.
E. Bauxite
Our bauxite problem is an intricate one involving the interrelations
of 6 companies, 3 producing countries (Guyana, Jamaica, Surinam),
and the U.S. and Canada. Guyana's action in expropriating the
Guyanese subsidiary of Alcan created major uncertainties regarding
our private investment in Caribbean bauxite. Caribbean bauxite is
essential to our economy (nearly 90% of our bauxite/alumina comes
from the Caribbean) and involves private investments in excess of
$1 billion and OPIC guarantees of over $450 million.
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The problem became less immediate with the conclusion of a compen-
sation agreement in July and Prime Minister Burnham's assurance
that negotiations with Reynolds are not contemplated before 1972.
Nevertheless, the take-over could have spill-over effects in other
producing countries (we have far more important investments in
Jamaica and Surinam) given the climate of growing economic nation-
alism and pressure for greater local equity participation in the
industry. An additional complicating factor is that though we do not
wish Burnham's action to fully succeed, we would be at least equally
concerned at a collapse of his government leading to a take=over by
Marxist Cheddi Jagan.
Recommendations:
[The paper breaks down its recommendations into diplomatic efforts
vis-a-vis the individual producing countries and efforts with U.S.
companies involved in the area. In our view, since the immediate
pressure is off, this problem should be dealt with in the context of
whatever mechanism is established by the CIEP following the
NSSM 131 Study. This seems an ideal case for a broad approach
keyed to our private investment interests throughout the region;
nevertheless, there are no inter-agency differences over the steps
outlined below, and we have no problems with them. ]
-- Vis-a-vis Guyana, stress our general position on nationaliza-
tion and compensation and the problems expropriation raises
for GOG-USG relations in order to deter unilateral action
against Reynolds. In our relations with the GOG, we should
neither create difficulties for Burnham nor assist him with
the problems he may face in digesting Demba, the Alcan
subsidiary he has taken over. Continue moderate economic
aid in non-bauxite areas.
-- Vis-a-vis Jamaica, use our good offices to indicate our position
on nationalization, while avoiding direct USG involvement in
the substantive issues between U.S. companies and the GOJ,
unless circumstances should so warrant in future.
-- Vis-a-vis Surinam, continue representations on U.S. private
investment questions and consult closely with Alcoa repre-
sentatives to ensure mutual understanding of local political
developments.
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-- Vis-a-vis the companies, hold periodic inter-agency meetings
with company principals to probe differences of view among
them and provide realistic briefings on what role they can
expect the USG to play. In addition, we should encourage
companies to take new steps -- including additional local
expenditures and local minority equity participation -- to
protect their long-term interests.
F. Economic Issues
The Study notes that the Caribbean area "relies overwhelmingly" on
external, primarily U.S., trade, investment, and aid. It judges
[and we agree] that, without some means of broadening development
prospects beyond the present confines of tourism and minerals
extraction, there is a serious prospect of frustration and economic
nationalism leading to "greater conflict between the policies of the
U.S. and the Caribbean states. " The issue, therefore, is what the
U.S. can do to be responsive to Caribbean development needs.
Recommendations:
[The Study assesses our problems and options separately for the
fields of trade and aid, and presents a range of specific recommenda-
tions on such matters as sugar, textile, and rum imports, multilateral
lending, etc. As a practical matter, in view of domestic pressures
deriving from the economic situation, we have little flexibility to meet
Caribbean needs except through the mechanism of Supporting Assistance.
We therefore suggest that you concentrate at the meeting on this
technique which could provide the Executive flexibility needed to advance
our important interests in the area. One way to focus attention on this
problem would be to ask a working group to grapple specifically with
means to upgrade our aid efforts in this region.
-- Concerning trade, the Study notes that there is uncertainty
about the status of Commonwealth Caribbean exports after
1975, when the Commonwealth Preferences System will be
phased out. Until that time, these exports will receive
preferential access to the U.K. market and reverse preferences
will remain in effect, thereby casting doubt on the eligibility=of
these countries for our own generalized system of preferences.
The IG/ARA recommends that we do not exclude any LDC on
account of reverse preferences until after 1975. (This issue
is, in effect, OBE and is currently before the CIEP.)
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The IG/ARA also recommends that we reduce on an MFN basis
the import tariff on rum to a level comparable to that levied on
whiskey and gin (Treasury non-concurs); that we continue to
make a special effort for an adequate sugar quota to meet the
needs of the Dominican Republic; that we study means of
providing Caribbean countries greater access to the U.S.
cotton textile and fruit and vegetable markets; and that we
consider the impact of increasing above $100 the duty-free
import ceiling for returning U.S. tourists. [Commerce
non-concurs concerning textiles and may bring up the issue at
the meeting. These trade issues are innocuous and probably
not worth arguing over. We suggest you concentrate on getting
a working group set up to examine a range of possibilities for
providing additional U.S. help to the area. ]
-- Concerning Aid, the study notes that U.S. bilateral aid had
been concentrated in the Dominican Republic, Guyana, and,
to a lesser extent, Jamaica and Haiti; but we have had almost
no assistance presence elsewhere in the region (Trinidad,
Barbados, and the U.K. Associated States) apart from regional
and multilateral channels.
It therefore recommends that:
-- We provide bilateral aid for specific projects when
important U.S. interests can thereby be enhanced and
no alternative aid source is available.
-- We utilize Supporting Assistance when appropriate to
strengthen or protect important political/security
interests. [This is probably the only means of
gaining the flexibility we need. ]
-- We urge the U.K. to continue the maximum possible
aid effort in the region with a priority on budgetary
and technical assistance to its dependencies.
-- We encourage maximum involvement of the various
multilateral assistance sources in all eligible countries
of the region.
-- We continue to provide support for regional economic
and educational institutions, and channel increased aid
through such bodies to the U.K.'s low income
dependencies.
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REVIEW OF U.S. POLICY IN THE CARIBBEAN AREA
Response to NSSM-117
Prepared by National Security Council
Interdepartmental Group for
Inter-American Affairs (NSC-IG/ARA)
Table of Contents
Page
I.
Overview
1
II.
Introduction.
14
III.
U.S. Interests
A. Historical
15
B. Current Interests.
17
IV.
Situation, Trends and Policy Environment
A. The Current Situation
20
B. Trends
21
C. Current Policy Environment.
22
V.
Present U.S. Involvement in Area
A. Political-Psychological
25
B. Security.
26
C. Trade.
29
D. Investment
30
E. Development Assistance
30
F. Immigration.
31
VI.
Major Policy Problems
A. Nationalism, Black Radicalism and Anti-
Americanism.
32
B. British Disengagement from the Caribbean
1. British Presence and Intentions.
: .
35
2. British Alternatives
36
3. Implications for the U.S
37
C. Increase in Soviet Military Activities.
. .
42
D. U.S. Caribbean Base Requirements.
45
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Group 3
Downgraded at 12-year intervals;
not automatically declassified.
DECLASSIFIED/RELEASED ON 4/23/02
by NARA on the recommendation of the NSC
under provisions of E.O. 12958
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Table of Contents (Continued)
Page
VI.
E. Bauxite in the Caribbean
1. Summary of Problem
46
2. Importance of Caribbean Bauxite.
48
3. U.S. Policy Options.
51
F. How Best to Best to React to Area's Social
and Economic Problems, Needs and
Aspirations.
57
1. Nature of Future Trade Relations
59
2. Nature of U.S. Economic Assistance
Programs
65
3. Regional Integration Efforts.
:
68
VII.
Recommendations,
70
VIII. Annexes
Annex A - NSSM-108 Interests (Summary)
Annex B - U.S. Bases and Installations in
Caribbean
Annex C - Intelligence Community Response to
NSSM-117, The Situation and Trends in
The Caribbean
Annex D - U.S. Trade Statistics
Annex E - U.S. Investment in Caribbean
Annex F - U.S. Immigration from Caribbean
Annex G - British Dependencies and Associated
States in Caribbean
Annex H - Bauxite Outlook in Guyana, Jamaica and
Surinam
Annex I - Barcelona Traction Company Case
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I. Overview
The U.S. has important political, security and economic
interests in the Caribbean, which are facing increasing chal-
lenges today, deriving primarily from the emergence of a more
aggressive nationalism oriented toward economic issues and
with strong racial and anti-American overtones, the growth of
the Soviet military presence there, and the prospect of a
British disengagement from the region accompanied by changes
in the preferential marketing arrangements that Great Britain
has historically offered to certain Caribbean products.
These challenges are occurring in the context of general
dissatisfaction throughout the area with the pace of social
and economic progress, only modest prospects at best for
economic growth, and serious and rising levels of unemployment
which pose a threat to the region's longer-term stability and
to the moderate, constitutional governments in the region.
At the same time, the constraints on our capacity to respond
constructively to the regional challenges in such important
sectors as trade, because of broader considerations affecting
either our world-wide or domestic policies, may well reinforce
the other destabilizing elements.
Today the bulk of our regional security installations,
private investment, trade relationships and tourist travel,
is focused in the Commonwealth Caribbean. This fact under-
scores the need for us as a government to give more careful
consideration to our relationships with these newly-independent
countries, and to ensure that our important interests relating
to them are given adequate weight in the consideration of U.S.
policies which will affect them.
Our hemispheric interests, as defined in NSSM-108, are
generally valid as regards the Caribbean. The area's prox-
imity to the U.S. accentuates the importance of our interest
in denying the region as an area from which a hostile stra-
tegic attack could be launched against the U.S. The Carib-
bean is the source of most of our imports of bauxite, and
through it must pass Venezuela's petroleum exports to us,
with much of it refined en route in the Netherlands Antilles
and Trinidad. The Caribbean is also the access route to the
Panama Canal.
In addition to the above, specific U.S. regional objec-
tives include: keeping the British, Dutch and French involved
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in the area as long as possible; avoiding the emergence of a
series of non-viable mini-states, as the British and Dutch
disengage, over time, from the area; the encouraging and
supporting of social and economic progress; encouraging a
long-term concept of constructive economic regionalism in the
area; encouraging greater Canadian involvement in the Common-
wealth Caribbean; minimizing Cuban and other subversive
activity in the region; and encouraging full participation in
the OAS by the newly-independent areas.
The major specific problems, flowing from our hemispheric
interests and regional objectives, which we face in the
Caribbean today relate to: (a) the rising trend of national-
ism; (b) Great Britain's potential disengagement from the area;
(c) increased Soviet military activities in the area; (d) U.S.
base requirements in the 1970's; (e) the outlook for U.S.
bauxite investments; and (f) the socio-economic problems of
the region.
Our overall strategy in the Caribbean should be to pro-
tect our interests in the area, and be responsive to Caribbean
interests, in ways which avoid to the greatest possible extent
the type of over-involvement which will feed anti-American
nationalism.
A. Nationalism
1. Nature of Problem. The growing racially--and eco-
nomically--oriented nationalism most directly touches on our
investment interests at the moment, but it has the potential
to affect our broader interests. Our capacity to counter the
anti-American influences through informational, educational
and cultural programs has been limited to date by budgetary
constraints. Our own large tourist, business and media presence
in the Caribbean gives us a high and not always helpful visi-
bility, which some extremists are seeking to exploit for their
anti-American purposes. Should extremism reach the point of
posing armed challenges to existing governments we could be
faced, as we were in Trinidad in April 1970, with requests for
military assistance to help subdue extremist groups.
2. Major Recommendations. (U.S. private investment in the
area, and the U.S. Government role in encouraging and protecting
that investment, affect and are affected by, the growth of such
nationalism. This problem is being treated in both NSSM-108 and
NSSM-131.)
That we increase the level of public and private educa-
tional, cultural and labor exchanges with Caribbean countries;
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That we increase USIA programming for the English-
speaking Caribbean;
That in the case of internal political disorders
which result in requests for U.S. military assistance, we
limit such assistance to small arms and ammunition and riot
control equipment, furnished only at the request of a recog-
nized, constitutional government. Such requests would be
considered on a case by case basis;
That, as indicated in (B) below, the British be
pressed to maintain their presence as long as possible, and
also that Canadian presence be encouraged;
That the U.S. support the achievement of economic
and social progress, and thus of increased self-confidence in
the area through the type of economic actions indicated in
Section F.
B. British Disengagement
1. Nature of Problem. Although its timing remains
uncertain, Great Britain clearly intends to reduce its
political, security, and economic involvement in the Caribbean.
Independent status for the Bahamas and British Honduras may
well be realized within the next two years; the future of the
small Associated States of the Eastern Caribbean is more cloudy.
It is in our general interest to keep some British presence
in the area as long as possible, not only to avoid having to
assume the major burden for the security or economic develop-
ment of these territories, but also to diversify to the extent
possible, the targets of Caribbean nationalism. The Bahamas
is something of a special case, because of its major U.S.
security installations, because of the large U.S. citizen and
investment presence, and because it is the most economically
viable of the present dependencies. The future of British
Honduras is tied very closely to the willingness of Guatemala
to shelve its claim to British Honduras territory. We do not
intend to become a guarantor of British Honduras' security or
its economic well-being.
2. Major Recommendations
That we give priority to the maintenance of a
British presence in the Caribbean as long as possible;
That, to that end, we meet with the British in the
near future to obtain clarification of their plans and inten-
tions towards the Caribbean;
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That we press them to continue their presence in the
area as long as possible, particularly in the Associated States;
That in the case of the Bahamas, we make clear we
prefer independence later rather than sooner, but that we will
place no obstacles in the way of independence;
That we follow up our initial talks with further
efforts, the nature of which to be decided on in the light
of the first meetings;
That however, we be prepared to provide appropri-
ate economic and public safety assistance, in coordination
with others, should the British decide to withdraw from these
areas;
That we delay any bilateral discussions on U.S. base
structure in the Bahamas, until after independence if possible.
C. Soviet Military Activities
1. Nature of Problem. Soviet naval activities in the
Caribbean have increased in the last two years, with occasional
pauses between deployments, and some Soviet tankers and merchant
ships have bunkered at Trinidad and Jamaica. A Soviet attack
submarine capability in the Caribbean constitutes a threat to
our security interests. There may be an increase in bunkering
activity as well as a continued increase in the level and scope
of Soviet naval activity.
It is unlikely that the Soviets would make a determined
effort to establish a strategic offense capability in the area,
if it involved the risk of a direct confrontation with the U.S.
The Soviets would, however, probably respond to an opportunity
which would permit the introduction of these types of submarines
without incurring such a risk. The availability of Caribbean
patrol stations would permit them to increase their on-target
time within missile range of part of our deployed strategic force.
2. Major Recommendations.
That we study the need for increased sub surveillance and
ASW capability, as recommended in NSSM-108.
That we pursue diplomatic efforts to keep Caribbean govern-
ments aware of the nature of Soviet policies and practices, and
to prevent Soviet bunkering in the Caribbean.
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That we increase, as needed, the frequency of U.S. naval
port visits in the area, to offset any Soviet port visits.
D. U.S. Bases
1. Nature of Problem. Our existing bases in the area
(except for two being phased out this year) remain important
to us; however, the present base configuration could well
change as circumstances change. There are no serious obstacles
foreseen to our continued access to the bases in the next few
years, although we can anticipate a renegotiation of existing
arrangements when the Bahamas achieves independence.
2. Major Recommendations.
That we consider, sympathetically and on their
merits, any proposals for changes in current arrangements;
That we be prepared, if necessary, to make "base
rights" payments;
That we study further the advisability of bilateral
defense commitments, particularly to the Bahamas, if this would
facilitate retention of important security installations.
E. Bauxite
1. Nature of Problem. The bauxite situation in the
Caribbean is an intricate one, involving six major aluminum
companies, three major supplying countries (Jamaica, Guyana
and Surinam) and two major consuming countries (the U.S. and
Canada).
The Government of Guyana formally expropriated the
Guyanese subsidiary of the Aluminum Company of Canada on
July 15, 1971. This action was preceded by many months of
uncertainty following the breakdown in February of negotia-
tions between the two parties, culminating in last minute
talks between Alcan's board chairman, Prime Minister Burnham,
and former U.S. Supreme Court Justice Arthur Goldberg acting
in a private capacity. These talks resulted, on July 14, in
a settlement according to which the two parties agreed on
compensation of $53.8 million dollars, payable in equal annual
installments over 20 years at an effective interest rate of
4.5 per cent. Deferral of up to 30% of the annual installments
is possible provided that full payment of all installment
balances due is made at the end of each 5-year period.
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The action initiated by' Guyana has created major uncer-
tainties regarding the future of U.S. private investment in
the Caribbean bauxite industry. Involved are our relations
with several Caribbean countries (principally Jamaica, Guyana
and Surinam), a commodity essential to our economy, U.S.
private investments in excess of $1 billion, and Overseas
Private Investment Corporation (OPIC) investment guarantees
totaling more than $450 million.
With the apparent resolution of the compensation question
in Guyana and assurances by the GOG that negotiations with
Reynolds are not contemplated before 1972 at the earliest, the
problem for U.S. interests in Guyana has become less immediate.
Nonethe-less, there are possible spillover effects in the
rest of the Caribbean.
This action against a Canadian firm is a manifestation of
the economic nationalism which is affecting U.S. and other
foreign private investment interests in developing countries,
particularly in the Western Hemisphere and Africa. U.S. pri-
vate investment in the bauxite/alumina industry in the Carib-
bean has traditionally been on the basis of 100% equity owner-
ship, a pattern which was modified for the first time in 1970,
when Reynolds Metals agreed to a 50-50 joint venture arrange-
ment with the Government of Surinam to develop some new deposits.
Some elements of the aluminum industry are strongly committed
to maintenance of the principle of 100% ownership, whereas
others are more willing to consider some degree of local equity
participation, private or governmental.
All segments of the industry strongly oppose any arrange-
ments which would give local interests majority control, which
would have local equity financed solely out of future cash
flow or profits, or which would in any way imperil the principle
of the U.S. parent company's management authority. Jamaican
Prime Minister Shearer in his July 21 budget speech to Parlia-
ment stressed that his government would seek to maximize bauxite
revenues via taxes and royalties, making no reference to govern-
ment participation in the industry. Our Embassies in
Jamaica and Guyana, and our Consulate General in Surinam,
have all stated that in the long run some type of local
equity participation in the now foreign-owned bauxite industry
is inevitable in these countries in the future.
It is in our interest that, given the virtual certainty
of changes in the status quo in the foreseeable future, and
particularly those involving nationalization, such changes
take place in a manner consistent with the standards of inter-
national law and without threatening the security of U.S.
bauxite supplies.
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It is not in our interest that Prime Minister Burnham of
Guyana be fully successful in organizing an efficient trouble-
free State bauxite enterprise. Such an achievement would
increase the danger of similar action against Reynolds in
Guyana, and against the much larger U.S. bauxite investments
in Jamaica and Surinam. The latter two countries are more
dependent for prosperity than was Guyana on foreign private
investment flows, and their leaders are aware of this. None-
theless, a Burnham "success" would generate strong emotionally
nationalistic pressures to imitate him.
Conversely, it is not in our interest that Burnham's
policies result in total failure. This could lead to the
collapse of his government and his replacement by significantly
more extremist elements in his own party, or--of even greater
concern to us--by the Moscow-subservient Marxist Cheddi Jagan,
whose East Indian followers outnumber Burnham's blacks, and
whose exclusion from power has been the cornerstone of our
policy towards Guyana for several years. Jagan in power would
not only mean expropriation of Reynolds, but would make avail-
able to the USSR an especially favorable opportunity on the
South American continent.
We must, therefore, consider which courses of action on
our part will minimize Jagan's chances for power, and thereby
protect our security interests, but at the same time afford
maximum protection to our economic and strategic supply inter-
ests, most of them outside of Guyana. Neither unequivocal
support of Burnham's nationalizations nor all-out opposition to
them may be the best policy approach. Favorable resolution of
the problem calls for a careful approach which properly balances
our interests towards the countries concerned and the companies.
2. Options and Recommendations. The choices available to
us, following the negotiated settlement with ALCAN, are briefly
outlined below by country.
(a) Guyana. (Assumption: Reynolds will not face
expropriation issue before 1972, but cannot hope to maintain
status quo indefinitely) (See pp. 51-55.)
The general question of U.S. policy regarding expro-
priation is currently being considered in the response to
NSSM-131.
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In the case of Guyana, therefore, pending that
decision the IG/ARA has not laid out the choices in option
form. The IG/ARA consensus, however, tends toward the conclu-
sion that our most appropriate course of action in the present
circumstances is one which lays emphasis on continuing diplo-
matic representations focused on Reynolds. This approach would
stress the general U.S. position on nationalization and compensa-
tion, and problems that expropriation raises for the GOG vis-a-
vis the USG. Our primary objectives would be to deter any
unilateral action by the GOG to expropriate Reynolds; to
encourage the conclusion of just compensation agreements prior
to any anticipated expropriation; or to insure just compensation
for Reynolds should expropriation occur. In our general approach
to Guyana we as a government would neither create difficulties
for Burnham, nor assist him with difficulties his decisions
regarding bauxite bring upon him; and we would continue to provide
moderate economic assistance to him in non-bauxite areas.
Alternative courses could include, as warranted by
circumstances, a variety of economic pressures and sanctions
against the -GOG as a means of discouraging further expropriation.
(b) Jamaica. (See pp. 55-57)
Option 1. Active use of our good offices to make
known USG position on expropriation and to encourage and facili-
tate continuing dialogue between the Government of Jamaica and
the U.S. companies, without, at this time, becoming involved in
substantive issues between them.
Option 2. Strong representations to the GOJ with the
objectives of forestalling any demands for equity participation
and minimizing any demands for renegotiations of contracts.
Option 3. Play an active and substantive inter-
mediary role between GOJ and companies with the objective of
working out a new company-government relationship which will
satisfy government needs and provide companies with long-term
operational stability.
IG/ARA Recommendation: (a) Option 1 now and at the outset of any
future negotiations between the government and the companies;
(b) That State and Treasury consult closely on the feasibility of
utilizing current U.S.-Jamaican negotiations on double taxation
and alumina transfer pricing to protect important U.S. economic
interests in Jamaica. (Recommendation (a) does not rule out the
USG taking a more substantive role in the future, should changed
circumstances so warrant.)
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(c) Surinam. (Annex H, p. 11)
Recommendation: That we continue periodic repre-
sentations to the Government of Surinam on the question of
U.S. private investment; and that we maintain the closest
possible contact with Alcoa representatives to try to ensure
a mutuality of understanding regarding the local political
situation and outlook.
(d) The Companies.
Recommendations:
That we meet periodically on an inter-agency
basis with the company principals to review developments,
determine the extent to which there are differences of policy
approach among them, and provide realistic briefings on U.S.
policy and on what we can and cannot do to assist them.
That we encourage the companies to undertake
imaginative and forthcoming approaches, not necessarily excluding
either local minority equity participation, or additional local
expenditures whose benefits would accrue primarily to the coun-
try rather than the companies, as the best means of protecting
their long-term interests.
Options Regarding Antitrust Question
Option 1. Should the companies raise the anti-trust
question, we advise them that current circumstances do not make
it necessary to consider State Department support for any
requests for waivers of the anti-trust legislation.
Option 2. If the question is raised, we support a
company request for such a waiver.
F. Economic
The economic health of the Caribbean, which relies over-
whelmingly on external trade and capital, is heavily dependent
on U.S. actions relative to trade, investment and economic
assistance. Tourism and the minerals industry have accounted
for most of the economic growth in the area. Without a formula
which permits broader-based development and greater indigenous
involvement, the tension already evident in respect to tourism
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and the extractive industries will grow, leading to the pros-
pect of greater conflict between the policies of the U.S. and
the Caribbean states. If we expect the Caribbean states to be
responsive to our special interests, the U.S. must be reasonably
responsive to their needs, also.
I. Trade
A. Nature of Problem. The range and importance of
our interests in the Caribbean and the heavy dependence of the
region on external trade make it desirable to give special
attention to ways in which we can cooperate to strengthen the
trading capacity of Caribbean nations.
Whether such cooperation should include support for
preferential trading arrangements which discriminate against
us is one of the issues raised, and one also being dealt with
in a CIEP options paper.
In the trade field, the entry of Great Britain into
the EC may have employment and foreign exchange implications
for the Commonwealth Caribbean as the Commonwealth Preference
System is phased out. Until 1975, we understand the area will
continue to enjoy preferential access to the UK market. After
that, it is not yet clear what the situation will be. The
likely continuation for some period of certain preferential
arrangements, particularly reverse preferences, creates problems
regarding the eligibility of Commonwealth Caribbean countries
for our own generalized system of preferences.
U.S. sugar legislation is important to all the Carib-
bean, and, in particular the Dominican Republic, which has
benefited from special allocation arrangements since 1966.
Cotton textiles and rum, now excluded from the G.S.P.,
are examples of commodities produced in the area which, if
granted more liberal access to the U.S. market, could help
strengthen the economies of some of the producing countries.
More liberal access for certain fruits and vegetables, and an
increase in the present $100 limit on exemptions for returning
tourists could also benefit the economies of the region. In
all cases, however, there are strong domestic policy considera-
tions for not liberalizing current policy.
B. Options and Recommendations (See pp. 60-65)
1. Generalized Preference Legislation and the Com-
monwealth Caribbean. (The options listed below duplicate
those now under consideration by the White House.)
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Option 1. Adhere strictly to our stated position on
reverse preferences as contained in NSDM 65, i.e., to exclude
any LDC that does not give us satisfactory assurances that it
will phase out reverse preferences by 1975. Do not spell out
this condition in the draft legislation. (Supported by OMB.)
Option 2. Same as Option 1 except: Incorporate
specific language reflecting this position in the draft legis-
lation. (Supported by Agriculture, Labor, Treasury, STR, AID,
and CEA.)
Option 3. Make it clear that generalized preferences
will not be extended beyond 1975 to any LDC which continues
to grant reverse preferences, but do not exclude any LDC at
the outset on account of reverse preferences. Incorporate
specific language reflecting this position in the draft legis-
lation without any authority for special exceptions. (Sup-
ported by Commerce, Interior and State)
Option 4. Same as Option 3 except: Provide auth-
ority for the President to make special exceptions to the
1975 cutoff when he determines it to be in the national inter-
est. (Supported by Defense.)
IG/ARA Recommendation. Option 3. (Subject to decision of
CIEP on relationship of GSP legislation to those countries
which grant reverse preferences.)
2. Rum (See pp. 63-65)
Option 1. That we reduce on an MFN basis the U.S.
import tariff on rum from $1.75 per gallon to a level comparable
to that levied on whiskey and gin. (Legislation would be
required for this purpose.)
Option 2. That we include rum in the list of com-
modities in our Generalized System of Preferences.
Option 3. That we take no action on rum.
IG/ARA Recommendation: Option 1, subject to a further exami-
nation of its specific economic impact on the revenues of
Puerto Rico and the Virgin Islands. (Treasury favors Option 3)
3. Sugar (See pp. 61-62)
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Recommendation.
That, in recognition of the special importance
of sugar to the economy of the Dominican Republic, and of our
own interests in the Dominican Republic, we either provide a
basic quota adequate to the DR's needs, or we retain in the new
Sugar Act the national interest waiver provision, and continue
to utilize it to provide special allocations to the Dominican
Republic.
4. Other Items (p. 62-63, 65)
Recommendation
That, should the Administration review its
current policy on cotton textile imports, on imports of fruits
and vegetables, or on the $100 ceiling on duty free imports
for returning U.S. tourists, we study further the possibilities
of modifications which would permit countries of the Caribbean
greater access to the U.S. cotton textile and fruit and
vegetable markets; and that we study the economic impact in
the Caribbean of increasing the duty-free import ceiling.
(Commerce dissents, with respect to cotton textiles, for
reasons given on pp. 75-76.)
II. Development
A. Nature of Problem. U.S. bilateral assistance in the
Caribbean has concentrated primarily on the Dominican Republic
and Guyana. We have had small programs in Jamaica and Haiti,
but have followed the policy in the Eastern Caribbean (Trinidad,
Barbados and the Associated States) of providing assistance only
through regional and multilateral channels. While we should
continue to encourage this area to look initially to the UK,
Canada, and multilateral sources of aid, the structure and loca-
tion of our interests in the Caribbean may make it desirable
under certain circumstances to expand our bilateral assistance
in the Caribbean. The use of supporting assistance may become
appropriate in certain cases, given the nature of our political
and security interests in the area. Given our almost total
lack of assistance presence in these areas to date such an
approach is not an exception to the "low-profile" policy, nor
would it create any serious "presence" problems for us.
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Efforts at regional economic integration are focused
primarily in the Caribbean Free Trade Association (CARIFTA)
and the Caribbean Development Bank (CDB). We should continue
to support the general concept of regional integration.
CARIFTA, however, has only a limited potential for increasing
intra-area trade. Some members see it also as a device for
coordinating area policies on, and local control over, private
foreign investment. Given these two factors, our interest
in supporting CARIFTA is marginal. The CDB, on the other
hand, is the kind of constructive development institution
which we should continue to support and to urge others to
support. In the longer term, ties between CARIFTA and the
Central American Common Market could strengthen the region's
economy.
B. Major Recommendations (pp. 65-68)
1. That, in accordance with our broader assistance
policies, we encourage maximum involvement of multilateral
assistance agencies (IBRD, IDB, OAS and UN agencies) in all
eligible countries of the area, and to the fullest extent
feasible look to these agencies and the CIAP for coordination
of assistance efforts.
2. That we urge the UK to maintain at least its current
level of assistance to the area. That, in the event the UK
insists on reducing its assistance, we encourage it to main-
tain necessary budgetary and technical assistance to the
dependencies. That we encourage Canada to continue its
assistance and increase it where possible.
3. That we accord high priority to continuing the sup-
port of regional developmental or educational institutions
such as the Caribbean Development Bank and the University of
the West Indies. That we, where feasible, channel an
increased level of assistance to the Associated States or
other low income dependencies of the UK through such regional
institutions.
4. That the U.S. provide bilateral U.S. Government
assistance for specific projects when (1) there are important
U.S. interests such assistance could enhance, and (2) U.S.
interests are not adequately furthered by metropole, multi-
lateral or regional projects.
5. That the U.S. utilize Supporting Assistance as
appropriate to strengthen or defend our important politico-
security interests in the region.
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II. Introduction
For the purposes of this paper, the Caribbean area is
defined as all the non-U.S. islands of the Caribbean, in-
cluding the Bahamas but excluding Cuba; plus British Honduras,
Guyana and Surinam. Any broader definition, to include the
Caribbean basin countries from Mexico through Venezuela,
would involve unnecessary overlapping with NSSM-108, since
it would include 15 of the 24 independent republics of the
hemisphere.
The Caribbean islands constitute a geographic unity.
The fact of that unity combined with contiguity to the U.S.
lends importance to our military and strategic interests in
the area. They are also experiencing, in common with much
of the developing world, similar problems of political agita-
tion, lagging development, and serious social tension, as
discussed in the Situation and Trends section.
In other senses than these, however, the Caribbean is
characterized by a diversity significantly greater than that
found in continental Latin America. Principal languages of
the region include Spanish, French, Dutch, English, Creole,
and Papiamento. This is a reflection of the historical im-
print left on the area by the various and rival European
sea-faring powers through the centuries. Ethnically the
populations comprise Hispanic, French and Portuguese elements
from Latin Europe; English and Dutch from Northern Europe;
and African, East Indian, Javanese, Chinese and Amerindian
elements. These have mingled in varying proportions to pro-
duce a wide cultural diversity incorporating inputs from four
continents. The black, mulatto and East Indian components
have the largest numerical representation in the area's
population. Except in the Dominican Republic, the incumbent
political parties are black-dominated.
Economically, the area runs the gamut from the $75
annual per capita income in Haiti to over $1000 in the Ba-
hamas or Curacao. Political systems range from repressive
dictatorship through parliamentary democracy, British-style.
The area includes both the newest (Guyana-1970) and the oldest
(Haiti-1804) independent republics in the southern part of
the hemisphere.
The diversity is noted here because it illustrates the
problem posed by trying to define any single policy approach
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or across-the-board courses of action toward the area in
pursuit of our interests.
III. U.S. Interests
This description of U.S. interests will not attempt
to duplicate, and should be read in the context of, the
Interests section of NSSM-108 (summary attached as Annex A),
the broad outlines and general thrust of which are applicable
to the Caribbean.
A. Historical. The largest of the Caribbean countries we
are considering does not exceed 5 million population; their
combined population is barely 15 million; all of the islands
combined are not as large in land area as the State of Vir-
ginia. Their combined GNP is less than that of Colombia;
and no combination of them, without the assistance of an
extra-hemispheric power, could represent any conceivable
security threat to the U.S. Yet the Monroe Doctrine was
largely an expression of concern about the Caribbean, and
we have resorted to the extreme of military intervention in
the Caribbean on various occasions in this century. These
facts reflect both the duration over time and the intensity
of our interest in the area, but do not suggest the reasons
for it. It is an historical fact that almost since the
founding of the nation, the U.S. has fixed as an essential
element of its foreign policy and security planning that
the area of the Caribbean is of prime interest to the U.S.
and is SO recognized by the rest of the hemisphere and the
world.
Historically, our interests in the Caribbean have pri-
marily derived from security concerns, particularly after
the relative decline of the region as a trading partner.
These concerns, frequently related to the Panama Canal, have
always focused, and continue to focus, on the involvement
in the area of an extra-hemispheric power which could con-
stitute a threat to the U.S. The fact that we have avoided
through history any military involvement on the South Ameri-
can continent points up, among other things, the relatively
greater concern we have traditionally had over European
messing around in the Caribbean. In more recent years, the
unique geographic location and characteristics of the islands
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have led to the establishment of important defense and
military-scientific facilities in some of them, thus creat-
ing a security interest not directly associated with these
traditional concerns.
Whatever the objective situation may be in today's
world regarding the importance that proximity plays in
permitting a hostile foreign power to threaten effectively
our security, the historical experience has produced a
psychological reality which should not be discounted. That
is, that the general U.S. public perceives a potential secu-
rity threat emerging from certain political situations in
the Caribbean, which does not concern it nearly so greatly
when these situations occur in more distant regions. A
Marxist government in the Dominican Republic or the Bahamas,
for example, would be seen as a greater immediate threat to
U.S. security interests than is such a government in Chile.
There is, however, another aspect of our historic
interest which is particularly relevant to this policy study.
Our intense involvement has occurred only in the independent
Latin Caribbean; Haiti, Dominican Republic, and Cuba. Our
concern over the security threat to the entire area was, of
course, aroused during World War II, leading to the establish-
ment of bases and facilities throughout the Caribbean, but
always through arrangements with the metropolitan powers.
With respect to internal Caribbean developments, it can be
fairly said of the English, Dutch and French Caribbean areas
that they have been largely interest-invisible to us until
very recent years. We generally defined our area interests
in relation to the European powers concerned, and sought to
advance or protect them via these powers--a logical procedure
when dealing with colonial areas. Despite the Monroe Doc-
trine, we have historically been quite content to leave the
problems of these areas to the metropolitan powers controlling
them, even (and perhaps particularly) during periods of
fierce internal strife and rioting such as that occurring in
Jamaica and Trinidad in the 1930's.
Only in the last decade, as the former British colonies
began achieving their independence, have we been forced to
recognize the need for an articulation of our interests
vis-a-vis the ex-colonies, separate from (and possibly even
at odds with) our interests toward the ex-colonial power.
To date, we have not done this in a particularly coherent
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1. To reconcile its continuing dependence on the
British market for the export of certain primary products
(sugar, bananas and citrus) with its need to share in any
generalized system of preferences offered by the U.S.
These products, which are non-competitive except in pro-
tected markets, represent a major source of employment in
the area, and their continued export is a key to internal
stability. The countries involved believe that the require-
ment, under our proposed Generalized System of Preferences,
for phasing out these preferences is too onerous. If they
are forced to make a choice between the two alternatives,
they fear both the economic and the political consequences.
2. To strengthen CARIFTA as an intra-Caribbean free
trade association which will bring significant economic
benefits to the region and to coordinate policies regarding
foreign investments. It to date has provided only marginal
benefits, and, given the limited extent of intra-regional
trade, its potential may remain small for some time.
Just as in Latin America, much of the tension currently
existing in our relationships derives from differing percep-
tions of, and priorities assigned to, the two sets of inter-
ests which are not intrinsically in conflict with each other.
The need, therefore, is for a set of policies and programs
which will bring the perception of these U.S. and Caribbean
sets of interests into greater consonance with each other,
to the extent possible.
IV. Situation and Trends
A. The Current Situation. Although there exists a political
and cultural diversity among the countries of the Caribbean,
most of them are experiencing similar problems of political
agitation, lagging development, and serious social tension.
Organized labor, students, intellectuals, and professionals
dominate politics. The military--except for the Dominican
Republic--have little influence. Growing nationalism is
universal but is particularly evident in the English-speaking
countries where small black radical groups are contributing
to public discontent. A main target of the radicals area-
wide is foreign-owned business. Guyana's present campaign
to nationalize the important bauxite industry is being watched
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closely elsewhere, notably in Jamaica where the U.S. invest-
ment in bauxite alone is over $600 million.
Compared to other countries in the hemisphere, most of
those in the Caribbean are more affected by a broad range
of external influences. This is a result of, among other
factors, their brief experience with self-rule, their efforts
to break away from still substantial reliance on their Euro-
pean "patrons" for guidance and support, and their uncertain
drive for self-determination. As the British and Dutch dis-
engage from the region the English-speaking territories and
Dutch dependencies are facing problems of finding other
sources of assistance. Meanwhile, both the Soviet Union
and Cuba are expanding their presence in the Caribbean in
the past year or two--the former through six naval excur-
sions, the latter mainly through commercial activity--al-
though they have moved slowly and cautiously.
Economically most of the Caribbean is struggling to
increase growth in the face of heavy population demands on
sparse resources and to ameliorate the high rate of unemploy-
ment, ranging from 15-25%. Agriculture remains the mainstay
of the economies, although minerals are increasingly impor-
tant, and they are heavily dependent on U.S. and other for-
eign markets. The economies of the larger nations--for
example, the Dominican Republic, Jamaica, and Trinidad-
Tobago--have generally experienced moderate growth while
those of Haiti and the smaller islands have done poorly.
Efforts to boost trade through the Caribbean Free Trade
Association have had only limited impact thus far.
B. Trends. Pressures for more strongly nationalistic
policies are certain to increase in most of the region over
the next several years. Agitation by black radical groups
will continue to contribute to nationalistic sentiment with
foreign-owned firms becoming more and more the target of
direct action. Unless the governments make progress in find-
ing solutions to the difficult social and economic problems,
civil disorders and violence will probably erupt from time
to time with little advance notice. This could lead to
requests for U.S. emergency assistance. The expressed in-
tention of the British to disengage further complicates the
problems for the English-speaking territories. In foreign
policy these trends are likely to be reflected in a notice-
able drift toward "Third World" positions on international
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issues. At the same time Moscow and Havana seem prepared
to expand their political and economic activities as oppor-
tunities arise.
Although efforts at regional political cooperation have
proven futile, regional economic organizations show some
promise. Economic conditions in the Caribbean are unlikely
to improve significantly over the next few years, however.
In Haiti and most of the eastern Caribbean the general
economic outlook is dim. Reactions abroad to the spectre
of nationalization of industry and the continued threat of
unrest raise questions as to the ability of the region to
maintain even the recent modest gains. Most are likely to
look to the U.S. for increased economic aid. (Annex C con-
tains a more detailed discussion of the Situation and Trends.)
C - Current Policy Environment
The overall recommendations outlined in NSSM-108 for
Latin America and the analyses supporting them are also
generally valid for the Caribbean, and will not be repeated
here. There are, however, certain additional or comple-
mentary courses of action dealing more specifically with the
Caribbean, or parts of it, which should be considered. Some
of them, for example in the trade and investment areas,
involve policy issués extending beyond the Caribbean area,
on both the U.S. and the Caribbean side. Whatever decisions
are finally reached on these matters, it is important that
the consequences of the alternatives for our interests in
the Caribbean be clearly understood.
There is also an interrelationship among the various
sectors which should not be overlooked. If we are, for
example, unable to be forthcoming to the Commonwealth Carib-
bean on trade issues because of general commercial policy
considerations, this could well have an adverse impact on
our private investment interests in Jamaican bauxite. If
we choose not to increase our informational and cultural
exchange activities in the Caribbean, this will mean losing
an opportunity to counter dedicated anti-American activists
whose objectives run counter to U.S. interests in almost
every field.
Aside from Soviet military activities in the area, the
two factors of most significance to our interests that emerge
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from an examination of the current situation are: (a) the
growing strength of nationalist feeling in much of the area,
focused largely on economic issues and accenting race and
hostility to white foreigners; and (b) the extent to which
most of our current policy concerns relate primarily to the
Commonwealth Caribbean.
Nationalist and anti-American attitudes are not, of
course, unique to the Caribbean. Nonetheless, the recent
attainment of independence for many of the countries in the
area, the greater visibility, because of color differences,
of the foreign elements dominating the economies of the
countries, their relative smallness compared to most Latin
American countries, and the existence of some acute racial
problems in our own country, combine to provide a special
character and intensity to the nationalist and zenophobic
trends in many parts of the Caribbean.
When we examine the area questions which preoccupy us
today--bauxite, the reverse preference trade issue, U.S. base
rights, the "black power" phenomenon, possible British with-
drawal from the area--we find them to be matters relating almost
exclusively to the Commonwealth Caribbean. The French and Dutch
appear reasonably content at the moment with the status quo
in their Caribbean dependencies, and the dependencies them-
selves are not challenging in any serious way that status
quo. The only potentially serious near term problem--the
possible repercussions of which should not be underestimated--
we might face with the Dominican Republic would be our
inability to provide it with an adequate sugar quota level
in 1971, or under the new Sugar Act legislation to become
effective in 1972. The problems of Haiti are grave, but are
sui generis and hardly susceptible to treatment in a
Caribbean-wide policy paper.
This concentration of concerns highlights one fact to
which we have perhaps not given sufficient attention to date;
that is, that within the non-U.S. Caribbean, the bulk of U.S.
investment, trade, tourism and security installations centers
in the Commonwealth Caribbean region. That SO many of our
current concerns deal with the Commonwealth Caribbean is also
in part a reflection of the fact that this region, newly
thrust upon our consciousness, has not as yet found a secure
place for itself in the traditional hemispheric organizations
which have evolved over the decades. Nor have we as yet hit
upon any effectively coherent alternative means of dealing
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with the region, outside the traditional hemispheric frame-
work. The task of harmonizing Commonwealth ties with par-
ticipation in the OAS, and historic links to Britain with
the growing influence of and dependence upon the U.S., is
one that will only be resolved over a lengthy period. To
some degree Commonwealth Caribbean interests will be in con-
flict with those of Latin America. To the extent this is true,
it is incumbent upon us, given the extent of our own inter-
ests in the Caribbean, to seek accommodations in which con-
tinental Latin American interests do not necessarily override
those of the Caribbean.
One potential problem area appears to have eased in
recent months, Prime Minister Eric Williams of Trinidad was
among the first to propose, more than a year ago, that the
time had come to normalize relations with Cuba. More recently,
we have had indications that the Jamaican Government would
not be averse to a resumption of Cuban relations, and that
this could conceivably occur in the next year or two. Guyana,
as a non-member of the OAS, is not bound by the resolutions
of that organization regarding Cuba. As the most "third-
world" oriented of the Caribbean countries, and the only one
to date to establish relations with the USSR, it might well
be disposed to move towards relations with Cuba.
Jamaica, however, although holding little brief for the
present OAS policy on Cuba, is not likely to be willing to
risk injuring its relations with the U.S. over this issue.
Trinidad, following last year's mutiny and its subsequent
preoccupation with internal affairs, no longer appears
interested in serving as the cutting edge of the effort to
bring Castro back into the OAS sphere. Prime Minister Burnham
is well aware of the support Cuba has given in the past to his
rival Jagan, and for the short run he may be SO preoccupied
with bauxite industry nationalization and other domestic
problems that he will not want to court additional trouble
by recognizing Castro.
The main pressures today on this issue are not origi-
nating in the Caribbean, although Jamaica and Trinidad would
be unlikely to resist very strongly an OAS ground swell to
modify the present relationship. There do not appear to be
any measures uniquely appropriate to the Caribbean that can
be taken on this question. It is best dealt with via normal
diplomatic representations and such other efforts as we
would utilize elsewhere in Latin America.
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V. United States Involvement in the Caribbean
The United States, both as a government and through pri-
vate activities, is deeply involved in the Caribbean, and
the outlook is for increased interaction of U.S. and Caribbean
interests in coming years, in general political-psychological
orientation and in matters affecting our own and their secur-
ity, trade and investment, tourism, and economic-social
development.
A - Political-Psychological
The "new" Caribbean countries have not fitted easily
into our general policy framework oriented toward the Latin
American republics and the OAS. With the exception of the
Dominican Republic, and perhaps Haiti, they do not consider
themselves part of the Latin American community for obvious
reasons of language, race, culture and separate historical
experience. They were not members of the OAS (although three
now are--Jamaica, Trinidad and Barbados), and to date only
Trinidad isa signatory of the Rio Treaty. Our relation-
ships with them have tended to be ad hoc and makeshift. Our
diplomatic and AID representation has been minimal and our
USIA effort has been equally sparse, with little USIA pro-
gramming tailored to the special needs of the English-
speaking Caribbean.
On the private side, the U.S. has been making a strong
economic and cultural impact on the area, in contrast to the
thin, tenuous character of our official relationships. Ease
of travel, transport, and communications have fostered massive
American tourist movements and brisk trade; private U.S. in-
vestment has brought American management attitudes and tech-
niques to the Caribbean along with money. Caribbean workers
have migrated by the tens of thousands to the United States
in the past decade. All of these factors have added up to
strong new ties to the U.S. gradually supplanting European
cultural ties.
In the years ahead, the growing experience of some of
the new countries within the OAS framework may be an important
plus factor, strengthening their ties with the Hemisphere
and permitting the U.S. to deal with the area more effectively
within a general Latin American/OAS policy framework. But
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some, notably Guyana and British Honduras, may not gain easy
entry into the OAS (because of border problems with Venezuela
and Guatemala) while others, such as the small Leeward and
mini-states. Windward islands, may remain indefinitely in limbo as orphaned
B. Security. U.S. security involvement in the Caribbean is
readily manifest in the numerous military bases and instal-
lations we maintain there. In addition, we provide military
assistance to the Dominican Republic and Public Safety assist-
ance to several countries.
1. U.S. Bases and Installations. The United States
military base structure in the Caribbean has developed during
this century to meet a variety of security needs, and was
expanded during World War II. Following World War II, certain
facilities have been acquired to support military defense
activities and technological research.
There are at present 15 separate active military facili-
ties in 5 political areas of the region (Annex B). There
are 41 other active military facilities in 5 other political
areas of the region, including Puerto Rico, the Virgin Islands,
Bermuda, Panama Canal and Cuba. These facilities vary from
those of major importance and potentially vital to U.S. secu-
rity interests to those whose loss would be less detrimental
to such interests.
The facilities fall into two functional categories,
with some of the more important bases and facilities having
functions falling in both categories:
- Antisubmarine Warfare (ASW)
- Scientific, Technological & Navigation
Antisubmarine Warfare facilities consist of four oceano-
graphic stations (referred to as NavFacs) whose mission is
passive surveillance of the ocean areas as part of the
Atlantic Sound Surveillance System (SOSUS). This system does
not provide coverage in the Caribbean, nor does it preclude
undetected submarine penetration into the area as occurred
in 1970. Specifically, the system can detect and locate
submarines in the Atlantic and together with air and naval
facilities used by and supporting ASW forces comprises the
ASW effort.
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Scientific, Technological and Navigation. The U.S.
operates scientific and technological facilities in the
Caribbean area which are of major military importance.
Additionally, there are several Coast Guard and other navi-
gation facilities which provide significant assistance to
navigation in the area.
The Atlantic Undersea Test and Evaluation Center (AUTEC)
is a major asset to the U.S. Navy in testing and evaluating
newly developed deep sea warfare systems. Andros Island
(Bahamas) is one of the very few islands meeting the unique
physical requirements for such a facility and the Navy has
invested some $150 million in developing the Weapons Range,
Sonar Range and Acoustics Range that comprise the total
facility.
Although the Naval facilities (NavFac) are essentially
for passive underwater surveillance, they also gather scien-
tific oceanographic data.
The advent of missiles has brought with it a need for
missile ranges covering large areas, including tracking
stations and other sophisticated weapons testing facilities.
The Eastern Test Range extending from Cape Kennedy to the
Indian Ocean, has provided and continues to provide facili-
ties for the development and testing of weapons and for outer
space activities. In addition to missile tests, these
facilities are used by NASA in its space program. The
rights to use these facilities were secured under the Long
Range Proving Ground Agreements of 1950 and 1962, and U.S.
uses are limited to proving-ground activities. Except by
specific agreement with the UK, operational use for con-
tingency purposes is not presently authorized. At present
the Air Force is reducing the Eastern Test Range facilities
and will be eliminating certain stations (e.g., Eleuthera
and Trinidad). It previously closed a facility in San
Salvador.
To the U.S., these various facilities are of continuing
importance. TO the host countries, however, their impor-
tance is viewed primarily in terms of economic advantage
(i.e., local employment; foreign exchange earnings) and/or
in negative terms of national, political or social dis-
advantage (i.e., yielding of sovereign control over base
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areas and U.S. personnel; identification with "Big Power"
international aims of U.S. which may expose host government
to nationalistic criticism at home).
As current security agreements (which were negotiated
with the UK) lapse, host countries are likely to press for
greater consideration of their domestic interests. This could
lead to demands ranging from withdrawal or phase-down in
U.S. activity in some cases to such things as higher base
rental, economic assistance as a quid pro quo, higher wage
rates for local employees at installations, etc.
2. Military Assistance. Our interest in the maintenance
of basic law and order and internal security in the Caribbean
countries is now served primarily through grant military
assistance and grant Public Safety programs. However, there
have been no military credit and/or cash sales in the area
in recent years other than an emergency sale of ammunition
to Trinidad and Tobago during the 1970 mutiny (and, in fact,
most of the countries are not on the Foreign Military Sales
Act eligible list). As of FY 71, U.S. grant military assistance
was given only to the Dominican Republic (the only Caribbean
country where we have a MAAG and training personnel).
3. Public Safety Assistance. Past and present public
safety activities in the Caribbean area were designed to
serve the developmental and security interests of the U.S.
Full in-country programs (technical advice, training and
commodities) are present in the Dominican Republic, Jamaica
and Guyana. Some limited assistance has been provided to
a few of the other countries and consisted of only partici-
pant training.
Civil police assistance to the Commonwealth Caribbean
countries is furnished principally by the UK. As an indication
of magnitude of their activities, $600,000 has been recently
committed by the UK for a new police academy for the Bahamas
police force; the UK expects its total outlay to be over
$5 million during the three years 1970-1972 to assist these
countries (including British Honduras) to improve police
capabilities.
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C. Trade. Trade with the U.S. is a major component in the
trading pattern of most of the countries of the area. Total
U.S. trade with the area is $1.9 billion yearly ($1.1 billion
U.S. imports and $800 million U.S. exports, with the un-
favorable U.S. trade balance of $300 million annually attrib-
utable largely to our oil imports from Trinidad and the
Netherlands Antilles). The area is the third largest U.S.
market below the Rio Grande (after Mexico and Brazil) and
has been growing by an average of about 12% annually over
the last ten years. U.S. tourism provides an estimated
additional $400 million annually in foreign exchange to the
Caribbean. (Annex C contains detailed U.S. trade statistics.)
Total British trade with the area (exports and imports) is
between $500 and $600 million per year, Canadian trade
amounts to nearly $300 million annually, Dutch trade to $130
million, and French trade was $324 million in 1969.
A few commodities are of predominant trade importance:
sugar, bauxite and alumina, and refined petroleum. Access
to the U.S. sugar market is of greatest relative importance
to the Dominican Republic, but for all of them, access to
our market contributes significantly to their foreign ex-
change earnings and is what makes the labor-intensive sugar
culture highly profitable. For the U.S. it is clearly
advantageous to have dependable supplies of sugar readily
available in this nearby area.
The U.S. aluminum industry depends heavily upon Carib-
bean bauxite and alumina and these exports are of major
importance to the economies of several Caribbean countries.
97% of total U.S. imports of bauxite (over 13 million tons)
came from the Caribbean: Jamaica supplied 62%, Surinam 20%
with the remainder coming from the Dominican Republic,
Guyana and Haiti. While Guyana is relatively unimportant
to the U.S. as a source of metallurgical bauxite, it is a
major source of refractory bauxite. Approximately half of
the U.S. imports of alumina come from the Caribbean: 34%
from Jamaica and 14% from Surinam.
U.S. imports of petroleum products--primarily residual
fuel oil--are of major significance to the small economies
of Trinidad-Tobago and the Netherlands Antilles. U.S.
petroleum imports from Trinidad, which is both a crude pro-
ducer and a refiner of Venezuelan oil, were equal to slightly
less than 6 percent of total U.S. petroleum imports. U.S.
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imports from the Netherlands Antilles, which refines Vene-
zuelan crude, were equal to 12 percent of the total U.S.
petroleum imports.
D. Investment. Total private U.S. investment in the area
is estimated at over $2 billion or nearly 17% of U.S. invest-
ment in Latin America. U.S. investments are especially large
in the Bahamas, Jamaica and Trinidad. (Annex E has a break-
down of this investment.) The contingent financial liability
to which the U.S. Government is exposed through Investment
Guaranty Insurance in the area currently amounts to $732 million
(assuming confiscation without any compensation). For com-
parative purposes, British investment in the area is estimated
to be "at least $500 million". No statistics are available
for Canadian, Dutch or French investment.
E. Development Assistance. In FY 1970, AID development loan
and grant assistance to the entire area was only about $17
million, out of total new commitments to Latin America of
about $411 million. In addition, approximately $1.6 million
in Supporting Assistance funds were provided for humanitarian
purposes to Haiti. PL-480, Title II assistance to the area
in FY 1970 was about $10.6 million.
In the period since the mid-1960's economic assistance
has been heavily concentrated in two states--the Dominican
Republic and Guyana. Since 1965, the U.S. provided $308
million of AID and PL-480 (excluding Title I) assistance to
the Dominican Republic in addition to the U.S. sugar quota
benefits estimated at approximately $300 million accruing
from higher U.S. prices. AID commitments in recent years
have been more modest. In Guyana, where our major objective
has been to deny power to the Communist Cheddi Jagan, the
USG has provided approximately $56 million. The USG has
also provided a modest USG development assistance program
to Jamaica and in 1970 authorized a $10 million loan for
the Caribbean Development Bank serving the Commonwealth
Caribbean.
UK assistance for Caribbean countries--grants, loans
and technical assistance--averaged $25 million between 1966
and 1969. In the same period Canadian assistance averaged
$9 million yearly, but with a rising trend. Dutch aid to
Surinam and the Netherlands Antilles averaged $22 million
annually, and French aid averaged $136 million per year.
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F. Immigration. Over 200,000 immigrants have entered the
U.S. from the Caribbean countries discussed in this study
in the past decade, with a marked acceleration in the flow
in recent years. Jamaican immigrants, for example, rose from
1,780 in 1965 to 15,309 in 1970. (Selected statistics are
contained in Annex F.) In addition, several thousand Jamaican
contract laborers enter the U.S. annually for seasonal work
harvesting crops in Florida and elsewhere. Including the
smaller, non-independent areas, the total Caribbean immigra-
tion is well over 40,000 per year. While immigration restric-
tions adopted by the UK were partially responsible for the
increased migration to the U.S. in the later 1960's, the
geographic and economic attractions of the U.S. were also
important factors.
The outlook is for increasing migratory pressures in
the Caribbean, as populations continue to expand more rapidly
than economic opportunities. Thus, the numerical limitation
on immigration to the U.S. (120,000 total for independent
countries of. the Western Hemisphere) may become a source of
increasing friction in our political-psychological relations
with the area even though, on a per capita basis, immigrants
from Jamaica, Barbados and Trinidad are more numerous than
from any other countries in the world.
VI. Major Policy Problems
The major problems we face in the Caribbean today are
the following:
A. The rising trend of nationalism, focused primarily
on economic issues, with strong black power and anti-American
overtones.
B. The intention of Great Britain to reduce its present
levels of involvement in the Caribbean.
C. The increase in Soviet military activities in the
Caribbean.
D. The nature of U.S. Caribbean base requirements.
E. The future of U.S. bauxite-alumina investments in
the Caribbean.
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F. How best to react to the area's social and economic
problems, needs and aspirations.
These are considered and analyzed in the sections which
follow.
A. Nationalism, Black Radicalism and Anti-Americanism
The rise in nationalist feeling, well described in the
Situation and Trends section, is a consideration which under-
lies and influences many of the problems we will be facing
throughout the region. With its focus on such issues as
nationalization and local participation in foreign-owned
enterprises, it is currently touching in our interests
primarily in the investment sector. It has the potential,
nonetheless, for extending well beyond this particular aspect
of our Caribbean interests as it has, in fact, in the past.
The growth of nationalism in the area is also closely linked
with the rise of black radicalism or "black power", a de-
velopment which frequently takes on an anti-American charac-
ter for economic and political as well as racial reasons.
As is the case in the U.S., black power in the Caribbean is
an amorphous concept meaning different things to different
people. One major strand that runs through all the mani-
festations of black militancy in the region, however, is
a deep-seated mistrust, dating largely from colonial ex-
periences, of those traditional political, social, and
economic values inherited from predominantly white-skinned
societies. This is a factor that will make it increasingly
difficult for us to assist and influence these black socie-
ties. The difficulty will be reinforced, of course, by our
own domestic racial problems.
One of the features of the more extreme "black power"
type movements in the area is that they frequently challenge
the legitimacy of the existing governments, seeking to
identify them as tools of the white foreign establishment.
Should such efforts reach sufficient intensity, as they did
in Trinidad in 1970, civil disorders could easily erupt.
Widespread or prolonged violence, or the threat of it, would
probably force governments to seek outside help, including
requests to the U.S. for military or other internal security
assistance to counter the challenge. The issues and the
organizations involved may well be strictly internal with
no links to Cuba or Moscow. Even short of such crisis situa-
tions, area governments may approach us for certain kinds
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of public safety assistance to help them in efforts to main-
tain public order.
Although the official U.S. presence in the Commonwealth
Caribbean is not large, there is a very substantial volume
of U.S. tourists in the area at any one time. Also, because
of proximity, small size and a common language, the impact
of the U.S. media in its various forms is both very great and,
as Prime Minister Shearer has complained to us on different
occasions, not always helpful either to the area nor to the
U.S. image in the area. The American citizen abroad as
tourist does not always project the most favorable image of
America, and may on occasion contribute to anti-American or
anti-white feelings by citizens of the tourist-receiving coun-
tries. The tendency of the media to focus on the dramatic
and sensational also may contribute. to a distorted view of
the U.S. (as well as a distorted view in this country of
Caribbean realities) and provide a basis for hostile or
anti-American attitudes.
We have, through USIA and through CU and other govern-
mental and private sector educational and cultural exchange
programs, some means of countering the exaggerated national-
ism and anti-American tendencies. The use to date of these
instruments, in an area where we have such major and diversi-
fied interests susceptible to injury by hostile forces, has
been severely limited by a shortage of funds.
It has been apparent that not all governments in the
region have a clear understanding of U.S. policies toward
Africa, a region which there is some identification with
because of racial and cultural ties. To improve that under-
standing, Deputy Assistant Secretary for African Affairs
Beverly Carter has agreed, subject to the concurrence of
our Embassies, to make a briefing tour of the area within
the next few months.
The growth in economic nationalism directed at foreign
investors intensifies our problems with respect to the en-
couragement and protection of U.S. private investment in
the region. We must deal with the dual problem of furthering
understanding within the region of the importance and advan-
tages to them of private investment flows, and of encouraging
U.S. investors to take flexible and forthcoming attitudes
responsive to the legitimate needs of host governments, in
a period of rapidly changing attitudes toward the foreign
investor.
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Paradoxically enough, some of the anti-Americanism
focuses on the fact that the U.S. places limits on the
immigration or temporary visits of area residents to this
country. This is a problem in which our available remedy
is not to change our immigration laws, but to do a better
job of explaining what the facts are. As a percentage of
the area's population, particularly in the Commonwealth
Caribbean, the number of immigrant visas issued is the high-
est in the world. The same is generally true for non-
immigrant visas, despite a heavy incidence of fraud in NIV
applications which results in very high rates of refusal,
and thereby fosters some inevitable anti-American feelings
in the process. In a statistical sense at least, if there
is any discrimination in our immigration laws and regulations,
it is in favor of, rather than directed against the independent
countries of the Caribbean. Because of legal provisions
relating to their status as dependent territories, restrictions
are greater on immigration from the densely populated Associated
States. There is pending as part of an Administration omnibus
bill to amend the present Immigration and Nationality Act,
a proposal to triple the present limit of 200 per State on
immigration. If adopted, this should contribute significantly
to decreasing concerns in the Associated States.
B. British Disengagement from the Caribbean
1. British Presence and Intentions. In line with a
concerted effort to reorder and rationalize its foreign policy
interests, the Heath Government has decided to "disengage"
from the Caribbean area, where the vestiges of empire present
political and economic liabilities. The British have expressed
the view that the security of the area is of greater concern
to the U.S. than the UK and that they can spend their money
more profitably elsewhere. The basic problem we confront here
is that a premature. or hasty British withdrawal might create
a political or security vacuum which could attract extremist
elements and require greater U.S. involvement with the area
than we are currently prepared to ac ept.
Currently, the British are responsible for the external
affairs and defense of the colonies and Associated States
and have additional internal responsibilities in the smaller
colonies. The UK's public safety program provides training
and equipment to both dependencies and the independent coun-
tries of the Caribbean Commonwealth. The two-frigate naval
squadron is mainly symbolic. The British estimate that they
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spend about U.S. $25 million annually to maintain their
presence, mainly in the form of budget support and techni-
cal assistance. The dependencies, which would be the areas
most affected by a British disengagement, are the Bahamas,
British Honduras, the Associated States (located in the
Windward and Leeward islands), the British Virgin Islands
and some other small islands colonies (see Annex G for de-
tails).
The British have told us there is no fixed timetable
for their proposed withdrawal, other than that they would
like to nudge the Bahamas into independence in 1972. In
our most recent discussions, they told us that they were
not under urgent time pressure to liquidate their presence
and that they were more than willing to cooperate with us
in the planning. Their present intention is to allow the
dependencies to move toward independence at whatever pace
is possible. The British hope that the Associated States
would either form a larger political unit, or join one of
the presently independent entities, before seeking inde-
pendence themselves. Embassy London has estimated that we
have about one year and a half for aligning U.S. British
plans.
2. British Alternatives. In many ways the best solu-
tion, from the standpoint of U.S. interests, for the problem
of the dependencies would be a continuation of the status
quo (and Secretary Rogers said as much to Sir Alex Douglas-
Home at Camp David on December 18). The British dependencies
have in general been politically stable, if not economically
prosperous, and there is no strong popular sentiment in the
islands for a British withdrawal. The impetus for with-
drawal comes from Britain itself. Nonetheless, the British
are not pressing the Caribbean dependencies issue now, and,
in contrast to their position regarding the Persian Gulf,
have no fixed timetable for the area.
The British have both political and economic motives
for considering withdrawal from the Caribbean. We could
probably greatly reduce their economic motives for departure
if we were willing to subsidize their continued presence.
However, the actual cost is not great, and the economic
motive does not seem to be a particularly pressing one at
the moment. Furthermore, the political disadvantages to
them of retaining the dependencies would not be reduced by
a subsidy arrangement, and in fact might be increased as the
arrangement became public knowledge.
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The political disadvantages to the British derive mainly
from the requirement to maintain firm security obligations
to distant areas, and to risk the need to intervene with
force in domestic disputes, as in the case of Anguilla.
These risks do not seem large in absolute terms, but the
British are aware from their experience in the Anguilla
case that the political embarrassment from forcible inter-
vention can be made all the greater by the essential trivality
of the issue. In the absence of any discernible political
advantage to the British in staying in the dependencies,
even relatively small risks suffice to shape the decision.
If attempts at federation were to fail, the British
might try to make a case that each of the Associated States
(associated not with each other, but each separately with
Great Britain), is an embryo nation which could accept
and maintain independence, provided that it received moderate
economic assistance and commitments from regional powers
with respect to its external security. Problems for the
U.S. reside in the proviso; the U.S. would probably have
to be the main source of economic assistance and the principal
de facto guarantor of the external security of the islands,
without having the power which the British presently have
to take preventive measures in the internal security field
should that be necessary.
An important element in British calculations about the
future of the Caribbean dependencies is their view that the
U.S., for fundamental reasons of self-interest, would probably
feel itself obligated to assume the present British role at
least in respect of protection of the islands against ex-
ternal threats to their security. The British have most
recently expressed the hope that before the present depend-
encies achieve independence they will have established some
new relationships with the U.S. and Canada.
3. Implications for the U.S.
(a) The Bahamas. U.S. ties to the Bahamas are
closer and more numerous than to any other part of the Common-
wealth Caribbean. We are committed by the NATO Treaty to
regard an attack upon the Bahamas as if it were an attack
upon ourselves, and we have a number of important and ex-
pensive military and space installations in the islands.
The American community of permanent residents is more than
10% of the total population of the islands, a ratio many
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times larger than in any other foreign territory in the world
except perhaps Bermuda, and the same is true of the American
economic stake per capita of population and of the volume
of American visitors.
Against the background of our ties to the Bahamas, we
have considered in general terms two broad alternative forms
of a U.S. -Bahamian relationship for the period after the
British depart. The first alternative is to promote our
interests through the conduct of normal diplomatic relations
with a fully independent Bahamas. The second alternative
is to offer the Bahamas some form of association arrangement
under which a part of Bahamian sovereignty (e.g., defense
and foreign affairs) would be delegated to us. The alterna-
tives are based on differing views as to how our relations
with the Bahamas will develop over the next several years.
The arguments favoring normal diplomatic relations with
a fully independent Bahamas run as follows: The Bahamas
themselves are presently planning for eventual full independ-
ence, and there is no evidence of the widespread popular
support in the islands that would be a sine qua non for an
association arrangement. Prime Minister Pindling did broach
the subject of association with us in 1967, and sent a dele-
gation to Puerto Rico to study its operation there. He has
not adverted to the idea recently, however, and is today the
strongest advocate of independence among local politicians.
The only real differences of opinion among political leaders
relate to the timing, rather than the fact, of independence.
With a voting age of 18, and 50% of the population under 18,
it does not seem likely that any Bahamian politician could
succeed by advocating such a conservative position as as-
sociation, as opposed to independence.
While our relations with an independent Bahamas will
not be free of problems, the ones that we can foresee now
all appear reconcilable through normal diplomatic relations
between sovereign states. When the British and NATO secu-
rity commitments lapse, we shall probably have to reach new
security understandings with the Bahamas to fill the vacuum,
and we shall have to negotiate new base rights agreements,
but we see no major obstacles in these fields. Relations
between the large and economically powerful American com-
munity and the new Bahamian Government may undergo some
strain as the new government moves to consolidate its author-
ity, but we believe that U.S. educational diplomacy with the
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Bahamians and with the U.S. citizens resident there should
suffice to prevent the problem from getting out of hand.
There is evidence that the large American investment presence
there, based almost entirely on its status as a tax haven,
has already peaked following imposition of certain restric-
tions on foreigners which have raised doubts about the
permanency of the area's investment attractiveness.
A proposal for Bahamian association with the U.S. would
probably encounter U.S. domestic opposition. The Senate
in particular might be loath to take on new responsibilities.
An offer of association could awaken charges of a renewed
U.S. "interventionism" in Caribbean affairs.
Association would raise many thorny legal and consti-
tutional problems. The price that the Bahamians would
probably ask for their agreement to association (e.g.,
rights of unrestricted entry and residence in the U.S. on
the Puerto Rican model; economic assistance) might be too
high for a Congress preoccupied by the domestic needs of
our own couñtry. If we did agree to confer these benefits
on the Bahamians, other countries of the Caribbean which are
resentful of our laws on immigration might charge us with
discrimination and press for improved treatment for their
own citizens.
Apart from Congressional considerations, furthermore,
and despite the unique nature of some of our relationships
with the Bahamas, it is anachronistic in the 1970's to
handle these relationships through protectorate-type arrange-
ments, however delimited. Sensitive local politicians, under
such an arrangement, would be pressured into aggressive and
strident anti-U.S. positions to demonstrate they were not
being dictated to by us. It would also affect adversely
our relations with the independent countries of the black
Caribbean who would view it as a threatening extension of
American hegemony in the area, and revive memories of the
Platt Amendment.
The arguments favoring a U.S. offer of association are
as follows: It is conceded that widespread popular Bahamian
acceptance of association would be the sine quo non for its
realization, but the question appears still to be open as
to what the Bahamians would prefer. They evidently have
real doubts about their viability as an independent state.
The British have noted to us that the UK faces a situation
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virtually unique in its relations with a colony, in that it
is the mother country and not the colony which is pressing
for independence. Pindling's, 1967 initiative for associa-
tion with the U.S. is another evidence of Bahamian doubt
about independence. He may have dropped the idea of associa-
tion only because he got no encouragement from the U.S. to
regard it as a realistic alternative.
The proximity of the Bahamas to the U.S., our security
interest in ensuring that the islands never opt out of the
Western security and political system, and the large and
growing U.S. private presence in the islands would all oper-
ate against independent Bahamian nationhood in the conven-
tional sense. The American private presence could be
particularly troublesome to our relations.
If American influence is a serious preoccupation to a
country like Canada, it could be an obsession with a much
smaller country like the Bahamas. The Bahamians would recall
the political effects of a large private American presence
in past situations such as Texas in the 1830's and Hawaii
in the 1890's, and would not find the parallels reassuring.
But once set on a course of independence, they would probably
feel bound to differentiate themselves from us in ways that
might quickly challenge our extremely low tolerance for
significant shifts in Bahamian political orientation away
from us. The consequence could be an indefinite state of
tense and unstable relations between the two countries which
the Communist states would be tempted to exploit, and which
could profoundly affect the American image in other less
developed countries.
While there would be U.S. domestic opposition to a U.S.
offer of association in any case, it would be much reduced
if there were a clear demonstration that the Bahamians them-
selves considered it a realistic alternative to full inde-
pendence. As for an objection that we were taking on new
responsibilities, we would argue that association would
be only a political accommodation to a situation already
created by geography, the requirements of security, and the
uniquely close and constantly growing ties between the U.S.
and the Bahamas.
After considering these alternative views, we conclude
that the disadvantages to an offer of association greatly
outweigh the possible advantages, and we should determine
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now that when the British depart it will be our policy to
conduct our affairs through normal diplomatic relations
with a fully independent Bahamas.
(b) British Honduras. The prospective independ-
ence of British Honduras raises potentially serious problems
of political and economic stability. Although the dispute
with Guatemala has not been an active public issue recently,
the Guatemalan Government has continued to avow her claim
to British Honduran territory, and there is no reason to
believe she would gracefully accept British Honduran inde-
pendence without what she would consider adequate conces-
sions to Guatemala. Local political leaders in British
Honduras have long recognized this external threat, as well
as the loss of domestic political support they would suffer
from endangering the country by demanding independence too
early. The British are seeking to reach a solution with
Guatemala, but any settlement seems very difficult to achieve;
the British have refused to give a defense guarantee.
Forceful action by Guatemala, perhaps triggered by
British withdrawal, would generate strong pressure on us,
on the British and on the OAS from Jamaica, Trinidad and
Tobago, Barbados and Guyana. The Mexican Government might
choose to activate its residual claim to part of British
Honduras, and the British might also turn to us to protect
the British Hondurans' right to self-determination. Trinidad,
as a Rio Treaty signatory, could invoke Article 3 of the Rio
Treaty (which provides for individual and collective obliga-
tion to assist in meeting an armed attack by any state
against an American state). Failure of the OAS to play a
constructive and impartial role could lead to the Common-
wealth Caribbean members leaving the organization. If a
Guatemalan aggression were launched, our ties with that
government would be: severely strained and probably damaged,
and efforts peacefully to settle territorial disputes else-
where--especially Venezuelan claims to part of Guyana--
would be set back.
U.S. interests would best be served by the continuation
of British efforts to negotiate a settlement of the dispute
with Guatemala, accompanied by continued discreet U.S.
encouragement to the various parties to reach a peaceful
and viable solution. The U.S. should be as forthcoming as
possible in cooperating with the terms of any settlement
which is agreeable to all of the parties, without placing
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itself in the role of guarantor of British Honduras' secu-
rity of economic well-being.
In the event of the grant of independence without a
resolution of the dispute, we should be prepared to exert
strong diplomatic pressures against any threat of Guatemalan
aggression. Given our present relations with the British
and Guatemalan Governments, it should be possible through
preventive diplomacy to avoid the worst eventuality--a
Guatemalan invasion.
The British Honduran economy is dependent on large
financial grants from the British to make up the bulk of a
gross imbalance in its foreign trade. The U.S. has been
unwilling to unilaterally assume this burden. We have been
encouraging the British to continue. their predominant role
in the area of development financing even after a grant of
independence. The Canadian Government (which now provides
some grant assistance), the World Bank and the Caribbean
Development Bank appear to be willing to channel new or
increased funds to British Honduras. Our own technical
assistance program is now running at a level of under
$100,000 a year.
(c) Associated States. A British disengagement from
the Associated States raises different problems, since
these areas are not economically viable as individual units,
and only questionably so even if united in a Federation.
In contrast to the Bahamas, we have only a minimal economic
stake in the Associated States, and only two (but important)
military installations, on Antigua.
These small islands maintain a precarious economic
equilibrium thanks to British Government subsidies, prefer-
ential entry in the British market for their bananas and
other tropical products, and outward migration to the larger
islands and, on a small scale, to British and the U.S.
While the British would like to terminate responsibility
for these territories, some of which it has held for over
300 years, it has not yet found a feasible way to do so.
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C.
Increase in Soviet Military Activities in the Caribbean
During the 19 month period ending in March 1971,
Soviet naval visits occurred in the Caribbean with increasing
frequency and duration. Since then the pace has slackened;
but this should not imply any lessening of Soviet interest in
the area; rather it should be considered a pause between
deployments.
Six Soviet naval combatant groups have deployed to the
Caribbean since July 1969. Moreover, between April and
December 1970, Soviet TU-95 BEAR D naval reconnaissance air-
craft flew four separate missions to Cuba. In addition to
these visits to Cuba and naval exercises nearby, a few Soviet
naval vessels have made port calls at Martinique and Barbados,
and other Soviet vessels have put in at other ports. Two Soviet
scientific and research vessels were bunkered at Trinidad in
late February 1971. Eleven Soviet tankers which have carried
petroleum to Cuba are known to have bunkered at Trinidad
between January 1970 and February 1971; and Soviet merchant
ships in the Cuban trade have bunkered at Jamaica.
A Soviet attack submarine capability in the Caribbean
constitutes a threat to United States security interests in
the area. Although the Caribbean is not estimated to be a
first priority area for such craft in case of general war, attack
submarines would threaten our sea lines of communication with
Latin America and through the Panama Canal. They would also pose
the possible denial to the United States of access to certain
naval bases and facilities in the area and a capability to
interdict the flow of strategic materials from Latin America to
the United States.
Soviet cruise missile-armed surface combatants and sub-
marines, although not currently deploying to the area in
significant numbers or on set schedules, have intermittently
operated in the Caribbean and when present constitute an
additional threat to sea lines of communications in the
area. Moreover, these units when armed with 250 nm missiles
and deployed in the Caribbean at the outbreak of hostilities
could be employed against some land targets in the area and
in the coastal regions of the south-east continental United
States.
The greatest potential threat to United States national
security emanating from the Caribbean area would consist of
a Soviet capability to launch strategic weapons against the
continental United States from submarines or land bases. Such
a capability would significantly affect the level and complexity
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of the nuclear balance, introduce new control uncertainties,
and increase the cost of defense. Operating from patrol stations
in Caribbean waters, Soviet submarines would be within missile
range of a portion of our deployed strategic force, thereby
inceasing Soviet flexibility and further reducing warning time.
With support facilities in the area, on-target time would
obviously be increased.
Aside from security aspects, these Soviet military
activities will have certain political and psychological
side-effects in the area. Some countries may become accustomed
to the Soviet military presence, accepting it as a "new
normal" state of affairs and accommodating to it in various
ways, e.g. establishment or enlargement of cultural, dip-
lomatic and trade relationships, acceptance of Soviet port
visits, provision of bunkering services. In contrast, other
countries may feel increasing concern over Soviet activities
(e.g. the Dominican Republic and Haiti), seeing new potential
threats to their own security or domestic stability. Our
Caribbean Chiefs of Mission at the January Mission Chief
Conference in Panama, however, reported that there appeared
to be no serious concern on this score on the part of the
Caribbean governments.
Our attitude toward Soviet activities in the Caribbean
will be largely determined by our over-all posture vis-a-vis
the Soviet Union on the broader world stage. We have a
special concern over potential use of Cuba as a hostile Soviet
base area, but this is not within the purview of this paper.
As to possible Soviet efforts to seek facilities elsewhere in
the area, we do not expect over the next few years that any
other Caribbean country will allow the Soviets to establish
an overt military base or other major military presence. Con-
versely, it is believed unlikely that the Soviet Union would
consider the potential advantages of new bases or facilities
(elsewhere than Cuba) as justifying the risks involved.
Bunkering, and any similar non-permanent accommodations
or facilities, may be a different proposition, however. To
the extent Soviet tankers and naval vessels can bunker in
non-Cuban ports (and thus burn non-Soviet transported fuel),
there would be important savings in Soviet tanker utilization.
The Soviets would have to weigh this benefit against the cost
to them in scarce hard currency resources. Additionally,
availability of such bunkering facilities might lead to an
increase in the duration of Soviet naval visits in the area.
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Having weighed the advantages to be gained against the
cost and risks involved, the USSR will almost certainly
continue in its present efforts to establish and maintain
a continuous naval presence in the Caribbean. An analysis
of the frequency and duration of the deployments to date
shows that while the interval between deployments has
declined, the duration of each deployment has increased.
Thus, it appears that a Soviet presence in the Caribbean will
evolve in a manner similar to that noted previously in the
Mediterranean and Indian Ocean. The size and composition of
this force will be tailored to the specific plans and require-
ments associated with Soviet objectives in the Caribbean.
For the near term, these objectives are believed to be oriented
primarily towards promoting Soviet political interests in
Latin America, rather than the creation of a naval force
capable of challenging U.S. military power. The speed with
which a naval presence is established is a function of many
factors, not the least of which is the reaction and concern
demonstrated by the U.S.
The level and scope of Soviet naval activity in the
Western Hemisphere can be expected to increase. Within the
next 12-18 months, this will probably result in a continuous
but limited presence focused in the Caribbean. In subsequent
years, the size of this presence, influenced by the general
trend in Soviet worldwide maritime expansion, will probably
show a further increase.
Within the next several years, the Soviets will probably
also deploy limited numbers of naval reconnaissance and ASW
aircraft to Cuba. The Soviets have already established a
precedent of deploying long-range aircraft into Cuba with
apparently little or no reaction by the U.S. Soviet Naval
Aviation TU-195 BEAR D reconnaissance aircraft would be a
valuable adjunct to. any naval force in the Caribbean. The
deployment of MAY ASW aircraft or the introduction of BEAR
ASW aircraft into Cuba would substantially increase Soviet
ASW capabilities in the Western Atlantic.
It is highly unlikely that the Soviets would risk a
direct confrontation with the U.S. by making a deliberate
effort to establish a strategic offensive capability in the
area. A land-based capability is not considered likely to
materialize in at least the next several years. The capa-
bility to project ballistic missile submarines into the
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Caribbean remains, and the Soviets would probably respond to
an opportunity which would permit the introduction of these
submarines without provoking a' direct confrontation with the
U.S.
On occasion the Soviet military presence in the area may
provide a convenient opportunity for some Third World rhetoric.
Such leaders as Guyana's Burnham or Trinidad's Williams might
allude to Soviet presence in speeches or invite short visits
to give credibility to their Third World credentials.
D.
U.S. Base Requirements in the Caribbean
In examining potential problems under this heading
several questions arise. First, "Do we need what we now
have 15 separate active military. facilities?" Second,
"Do we need more facilities than we have now?" Third, "Is
there any challenge to the continued use of these facilities?"
With the exception of two of the military facilities
which will be phased out in 1971, all of the facilities we
now have in the area are important to us at this time for
various reasons, according to their differing functions. How-
ever, changing assessments of Soviet capabilities or intentions,
changing perceptions of our own defense posture and needs, and
technological advancements may dictate corresponding changes
in our current arrays of facilities in the area, e.g., to phase
down or even terminate some activities (as the Eastern Test
Range facility on San Salvador island has been closed), or to
expand activities at other facilities, or even establish new
ones.
As to challenges to our continued use of facilities we
now have, we see no serious obstacle in this direction over
the next few years. However, we have had indications already
from the Government of the Bahamas that it would like to
undertake preliminary talks with us prior to independence
regarding the U.S. UK Defense Areas Agreement governing U.S.
military facilities in the Bahamas. The implication is that
the Government of the Bahamas following independence, might
wish to make some changes in existing arrangements, but the
nature of such changes, if any, cannot be foreseen with any
precision at this time. In Trinidad, we have been carrying
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on discussions with Prime Minister Williams' government on
residual problems related to the phase out of the ETR track-
ing station (to be closed as of October 1, 1971), and certain
details related to the operation of an OMEGA navigation
station there. The "challenges" we have faced in Trinidad
have been manageable utilizing normal diplomatic methods.
The "challenges" we foresee arising in the pre-Independence
period in the Bahamas (which we not estimate will continue
until about 1973) similarly appear manageable through normal
diplomatic methods. The gravity of these challenges, and the
efficacy of normal diplomatic means to cope with them, are
subject to reassessment in the event of an unforeseen radical-
ization of host governments along nationalistic, neutralist
or racist lines, but these potentially adverse developments
do not appear probable over the next two or three year period.
E. Bauxite in the Caribbean
1. Summary of Problem. Following three months of
inconclusive negotiations with the company, Guyana on March 1
passed a bauxite nationalization law to permit it to take over
the local subsidiary (DEMBA) of the Aluminum Co. of Canada
(ALCAN). ALCAN is a Canadian corporation with about 46% U.S.
ownership. The actual takeover occurred on July 15, but was
immediately preceded by intensive high level negotations
which produced an agreement on compensation for the expropri-
ated assets. Under the agreement, the Government of Guyana
will pay $53.8 million in equal installments over 20 years,
with interest of 6 percent. Interest payments are subject to
a 25 percent withholding tax. Up to 30% of payments due in
any given year (up to 40% in the first year) may be deferred,
but full payment of all such outstanding deferments must be
made at the end of the fifth, tenth, fifteenth and twentieth
years.
The compensation is recognized as an obligation of the
Government of Guyana, and is to be covered by notes in two
series; one covering the fixed portion of the debt and the
second, any deferred portion. The notes are non-negotiable
until 1977.
The precedent established in the ALCAN case may set the
pattern for similar action against Reynolds Metals' $31.5
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million* investment in Guyana. Guyanese officials including
Burnham, however, have offered assurances that action against
Reynolds will not occur before 1972. OPIC holds a $16.3
million investment guarantee covering the Reynolds investment.
Moreover, the Guyanese action may trigger demands for
increased local control and ownership of over $1 billion of
U.S. investment in bauxite and alumina located elsewhere in
the Caribbean. Of this, almost $650 million is in Jamaica
and is covered by more than $430 million in OPIC insurance
against expropriation. The outlook for Jamaica and other
Caribbean countries will depend in part upon the ability of
Guyana to successfully operate the nationalized properties and
market the output of bauxite and alumina.
Burnham is encountering a host of problems as a result of
his own poor planning and, notwithstanding the compensation
agreement, the prospects for a trouble-free operation are dim.
To the extent that they remain so, it will tend to alleviate
pressures for expropriation elsewhere in the region. With
respect to Guyana's internal politics, however, total failure
of the nationalization scheme could pose serious bilateral
problems for us. Already Burnham's Marxist rival (Cheddi Jagan)
is trying to capitalize on the government's troubles which he
depicts as resulting from inept leadership, poor planning and
the failure to take over the entire bauxite industry (i.e.,
the U.S. -owned Reynolds holdings). In fact, Jagan has hinted
darkly of U.S.-Burnham collusion to save Reynolds from ALCAN's
fate. In an atmosphere of growing labor unease and diminish-
ing public confidence in the government's ability to success-
fully operate DEMBA, Burnham might move impulsively against
Reynolds and adopt anti-U.S. positions in order to reassert his
"progressive" credentials. The likelihood of this would be
increased if he felt the USG were applying economic pressures
on him. Even less attractive alternatives include Burnham's
replacement by more extremist elements in his own party, or
a Jagan return to power. In the latter event, Jagan would
certainly nationalize Reynolds, and seek to align Guyana openly
with USSR.
*"gross value" figures (total investment without regard to
either appreciation or depreciation) are used throughout
this paper for bauxite investments. Figures are confidential
and were furnished by the companies to the Office of Emergency
Preparedness.
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In Jamaica, neither the government nor the opposition is
anxious to follow Burnham's lead, although both see some
local equity participation in the bauxite industry as inevi-
table, and are searching for an acceptable formula. Both
Jamaican party leaders fear that a Burnham "success" could
create irresistible pressures on them to seek a similar
arrangement.
In Surinam, there is no pressure at present for expro-
priation. Government leaders there have been critical of
Burnham's actions. For a more detailed discussion of the
situation and outlook in Guyana, Jamaica and Surinam, see
Annex H.
2. Importance of Caribbean Bauxite.
(a) Bauxite imports are vital to U.S. We currently
import nearly 90% of our bauxite/alumina from the Caribbean,
nearly half from Jamaica alone and an additional 20% from
Surinam, on a content basis. Our Caribbean bauxite/alumina
suppliers (in rank order) are Jamaica, Surinam, Dominican
Republic, Guyana and Haiti.
Major expansion of bauxite/alumina capacity in Australia,
and bauxite capacity in Guinea, and to a lesser extent in
Brazil and elsewhere, will substantially increase alternative
sources of bauxite/alumina supply by 1973-74. These expan-
sions reflect to a large degree a projected increase in
world demand for aluminum. Substitutions for U.S. imports
of metallurgical grade bauxite from Guyana (about 3% of total
U.S. imports) should not be difficult. Canada, which imports
nearly half (on an alumina content basis) its bauxite/alumina
from Guyana will face more of a problem, but Alcan apparently
believes imports could be supplied from alternative sources
with little difficulty given a two-year transitional period.
Larger scale substitution for existing Caribbean bauxite/
alumina production (particularly any large part of Jamaican
production), would take several years and major additional
capital investment. Moreover, transportation costs (port-
to-port) from Australia at present are much higher.
The developing situation, even assuming the worst out-
come (nationalization of the Jamaican bauxite industry without
any agreement on compensation) would not necessarily threaten
U.S. access to adequate supplies of bauxite/alumina. Given
the lack of alternative buyers for its ten million ton output,
Jamaica needs our market as much as we need its bauxite,
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even though it might be able to sell a small part of its
output elsewhere. The combination of stockpile availabili-
ties, medium-term alternative sources for the U.S., and, in
particular, Jamaica's relative lack of other buyers makes
the access problem not a critical one. What could be affected,
in the worst outcome situation, is terms. Jamaica might
capitalize on the transportation cost differential and certain
technical considerations to seek a higher price for the product
it sells. Even short of nationalization, its demands on the
companies could compel them to consider a price increase for
aluminum.
U.S. industries depend upon Caribbean producers for
calcined bauxite, a special type used for refractories,
abrasives, and chemicals. Guyana and, to a lesser extent,
Surinam, together enjoy practically a world monopoly in the
production of refractory grades. If necessary, substitutions
of other materials (alumina, kyanite or synthetic mullite)
could be made for refractory purposes, but at a higher cost
or loss of efficiency. Available information suggests that
such substitutions would have only a marginal effect on the
cost of steel or cement. Industries producing these mate-
rials are primary users of bricks made from refractory grade
bauxite. At present, calcined bauxite is in short supply
and alternative sources are not likely to be in large-scale
production before 1974.
U.S. strategic interests are important, but do not appear
to be threatened. Although a preliminary review of require-
ments for refractory bauxite indicates a potential growing
deficit, this would not seriously impair industrial activity.
Strategic needs for aluminum would not be threatened unless
Jamaica and other Caribbean sources generally denied or
greatly reduced U.S. access to bauxite and to alumina and
aluminum. This contingency seems unlikely. Total annual
mobilization requirements for bauxite are calculated to be
14.5 million dry tons, of which 48 percent depends on imports
from Jamaica and 26 percent on imports from other Caribbean
areas. The U.S. also depends on imports of 17 percent of its
alumina requirements from the Caribbean area. Direct military
requirements for aluminum would not be in question because
they constitute only about 23 percent of total mobilization
requirements, and would be seen to by the priority system
already in effect under the Defense Production Act. The
other 77 percent would be required, even in war, for trans-
portation equipment, construction materials, food containers,
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etc. The Caribbean area is considered available as a source
of supply during all three years of the war emergency planned
for, unlike other overseas area, which are not considered
available during the first year of a war. Under present
stockpile procedures, which are being reexamined in an inter-
agency study in NSC channels, supply from these Caribbean
sources is evaluated in terms of the following reliability
percentages: Jamaica 100 percent; Guyana, Surinam, and the
Dominican Republic, 75 percent; and Haiti 50 percent.
(b) U.S. bauxite investments in Caribbean exceed
$1 billion. Five U.S. corporations, Alcoa, Reynolds, Kaiser,
Revere and Anaconda--are involved in bauxite/alumina produc-
tion in the Caribbean. Combined total investment of these
companies is estimated at over $1 billion, $650 million of
which is in Jamaica. OPIC investment guarantees presently
cover $447.7 million but could reach $544.3 million under
existing agreements. The Aluminum Company of Canada, Ltd.
(Alcan) also has substantial Caribbean interests. Although
a Canadian firm, Alcan's top management is American and 46%
of the company's shares (figure confidential) are held by
U.S. investors.
(c) Status of U.S. inventories. U.S. consumption in
1970 of metallurgical and calcined bauxite, including refrac-
tory grade, was estimated at 16 million long dry tons. U.S.
industry purchased from GSA some of the metallurgical grade
bauxite which is excess to that required by the strategic
objective. There is no excess of refractory grade bauxite
in the USG stockpile and negligible commercial stocks.
Including these quantities of ore under contract but as
yet not removed from GSA storage sites, commercial stocks
of metallurgical grade equate to about five months current
consumption. USG inventories hold an additional 3.9 million
tons of metallurgical grade ore which is excess to that needed
to meet the objective. With Congressional approval, this
could be made available to meet non-wartime requirements.
Should all imports of metallurgical grades be stopped and
the U.S. industry forced to rely exclusively on the stockpile,
differences between Jamaican and Surinam bauxite would require
the industry to make technical production adjustments. Stock-
pile supplies not in excess of the strategic objective can,
of course, be made available for the purpose of the "common
defense" during peacetime; this criterion excludes other eco-
nomic reasons. In a wartime situation, security of access
to foreign bauxite supplies would become more critical.
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U.S. Bauxite Stockpiles*
Excess to
Type
Strategic Objective
Inventory
Inventory
Metallurgical
10.3 million
14.2 million
3.9 million
Refractory
173,000
173,000
None
*All figures in long dry tons.
3. U.S. Policy Options. (Because of the intricate
nature and the special importance of the bauxite problem,
which involves relations with Canada as well as with three
major Caribbean bauxite-producing nations and five major
North American aluminum companies, a more detailed con-
sideration of the options available to us is presented on
this problem than for several of the others.)
a. Guyana. NOTE - These options are subject to
revision in the light of decisions to
be made on NSSM-131.
(Assumption: Reynolds will not face expropriation
issue before 1972, but cannot hope to maintain the status
quo indefinitely.)
Option 1. Diplomatic representations stressing general
U.S. position re nationalization and compensation and problems
that expropriation raises for GOG vis-a-vis USG. The primary
objective would be to avoid any unilateral action by the GOG
that would lead to expropriation of Reynolds; and secondarily
to insure just compensation for Reynolds in the event of
nationalization. This option would recognize the likelihood
of an ultimate change in ownership patterns in Guyana, and
would place priority on closely coordinating our actions with
Reynolds and making private diplomatic representations to
Burnham and the GOG when it appeared the GOG was taking any
action inimical to our interests. We would hope expropria-
tion could be avoided via negotiations, and we would encourage
Reynolds to negotiate in good faith. However, we would not
encourage the company to accept terms that would constitute
an unfavorable precedent for future changes in Jamaica, even
if the alternative was expropriation and the OPIC guarantee
had to be paid.
We would take a strong stand with the GOG on assuring
prompt and adequate compensation for an American company as
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a principle of international law and in order to limit claims
against OPIC.
Pro - Might help delay. expropriation of Reynolds in
Guyana and lead to better settlement terms in event of
expropriation; might limit, although not necessarily avoid,
claims against OPIC; could help assure access to calcined
bauxite for at least an interim period; problems with the GOG
would be less than under Option 2.
Con -- May be interpreted by Jamaicans and others as
showing lack of strong U.S. concern over expropriation
route; may bring criticism from some U.S. bauxite companies
as inadequate protection of their interests; existing settle-
ment with ALCAN might be limiting factor on terms.
Option 2. Hard line approach on expropriation. This
option would be predicated on the assumptions that an
aggressive approach would help deter expropriation of Reynolds,
but that, even if it did not, it would discourage similar
actions elsewhere. It would place primary emphasis on dis-
couraging emulation of GOG pattern, even at the risk of under-
mining Burnham's position vis-a-vis Jagan and limiting U.S.
access to calcined bauxite. Under this policy the USG might
use its influence to discourage U.S. firms from buying bauxite
from Guyana or in any way cooperating with Guyana. Moreover,
the USG might use its influence with foreign governments to
limit foreign purchases and foreign assistance to the bauxite
industry. It could also involve the use of public high-level
statements critical of expropriation, designed to discourage
nationalization of Reynolds.
Pro - Helps bring about economic difficulties for
Burnham thus protecting position of U.S. bauxite companies
in Jamaica and the rest of the Caribbean and reducing the
possibility of OPIC having to pay claims in Jamaica; policy
probably would be strongly supported by U.S. bauxite com-
panies.
Con - Would precipitate action against Reynolds and incur
likelihood of OPIC having to pay Reynolds' claim in Guyana;
would adversely affect over-all U.S. relations with Guyana
and possibly cause Guyana to look to Bloc countries for
assistance; could push Burnham toward extremist policies;
might strengthen Jagan's position; would lead to charges of
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economic imperialism by Guyana and others; U.S. would lose
access to Guyana's calcined bauxite, which would bring strong
protest from U.S. refractory industry; barring the unlikely
assistance of ALCAN to him, Burnham, who has already run into
lots of problems, will have serious difficulties in any event
for some time.
Contingent Options. (Assumes ALCAN has already been
expropriated and Reynolds is also facing negotiation or expro-
priation; the options are listed as contingent and are not
necessarily mutually exclusive, because we cannot now be sure
of the circumstances which might prevail at the time Reynolds
would be called in. Therefore, no recommendations are made
concerning these options, other than that they be carefully
reexamined when the situation arises.)
1 (a) Use our good offices to encourage both parties to
achieve a negotiated settlement that would keep Reynolds
operating in Guyana. This option would accept a changed
ownership pattern with probably at least majority ownership
for the GOG; the possibility of better compensation arrange-
ments than offered to ALCAN; could include a proposal for
expansion. It could involve our attempting to influence
both the GOG and Reynolds toward this end, without assurance
of success.
Pro - If successful, would assure access to calcined
bauxite; would avoid payment of claim against OPIC; could
help maintain favorable relations with Burnham. Would not
necessarily be prejudicial to U.S. interests in Jamaica,
particularly if Guyana were having difficulties assimilating
DEMBA.
Con - Could be used by Jamaicans and other countries
as a precedent for demanding equity from bauxite companies;
would probably be opposed by other U.S. bauxite companies;
agreement on terms acceptable to Reynolds may not be possible;
if agreement reached, could strengthen Burnham's position of
leadership in the Caribbean.
2 (a) Strong representation to the GOG stressing general
U.S. position re nationalization and compensation. While
seeking to avoid expropriation, the primary objective of this
option would be that of assuring just compensation for Reynolds.
It would be a concerted effort on this single issue. This
policy would have to recognize that Guyana could only make
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compensation from future cash flow from bauxite/alumina
operations thus accepting the principle of deferred compensa-
tion. The emphasis would be on a fair evaluation of assets
and an acceptable formula for future payments. It might
involve our urging Guyana to submit the compensation issue
for international arbitration or judgment under the Convention
for Settlement of International Investment Disputes, of which
Guyana is a signatory.
Pro - Could lead to better settlement terms for Reynolds
in event of expropriation than would be available without
representations; might limit, although not necessarily avoid
claims against OPIC; would probably be acceptable position
as far as other U.S. bauxite companies are concerned.
Con - Would not assure continued access to calcined
bauxite: risks of having to pay OPIC claims would be greater
than under Option 1 (a) runs likelihood of getting less ade-
quate compensation than under 1 (a).
3 (a) Hardline Approach if Reynolds is Expropriated
Without Prompt, Adequate and Effective Compensation. This
approach, like Option 2 above, would emphasize sanctions
against Guyana. It would include measures to compound
Burnham's difficulties in running bauxite industry, and
could include formal application of economic sanctions such
as the suspension of assistance and sugar quota upon expira-
tion of the six-month waiting period contemplated by statute.
Pros and Cons - Many of the pros and cons of Option 2
above would be applicable, but relations with Canada would
not be an issue as a U.S. company would be involved. Al-
though we would not be concerned about precipitating action
against Reynolds, which would be a fait accompli, this option
would imply willingness to sacrifice compensation for Reynolds
in Guyana--and corresponding loss to the U.S. Treasury under
the OPIC guaranty--to protect larger investments in Jamaica
and elsewhere. Application of formal economic sanctions,
however, would require a finding by the President that Reynolds
had exhausted all adequate legal remedies in Guyana and that
GOG was not prepared to take other appropriate steps such
as submitting the dispute to arbitration. Moreover, formal
application of sanctions would aggravate the political costs
foreseen under Option 2 above and would expose USG to charges
in the UN of economic coercion in violation of the UNGA reso-
lution on non-intervention and the Declaration on Friendly
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Relations between States. Further, application of sanctions
to Guyana while deferring such application against Peru (and
possibly Chile) would expose U.S. to charges of racial dis-
crimination with potentially wide repercussions. This charge
would be even more serious if Reynolds and OPIC reject in
Guyana terms that U.S. investors and OPIC have accepted in
Chile or elsewhere.
b. Jamaica.
Whichever of the three options outlined below is followed,
there are various courses of action open to the USG which can
contribute to a favorable climate for U.S. -Jamaican relations,
provided the GOJ pursues a moderate course with respect to
U.S. bauxite investments. These include one or more of the
following:
(a) Taking a forthcoming position, to the extent that
our own laws permit, on the question of alumina pricing for
tax purposes.
(b) Adopting a flexible trade posture toward Jamaica
on such issues as special preferences granted by the UK
and Jamaica's possible need to retain reverse preferences.
(c) Providing economic assistance to combat basic
socioeconomic problems in Jamaica.
(d) Encourage companies to be more forthcoming and
imaginative in efforts to protect their investments in
Jamaica, not excluding efforts or approaches that could
involve either local equity participation or substantial
additional expenditures whose benefits would accrue pri-
marily to Jamaica rather than the company.
Item (a) is currently under discussion between Jamaican
and U.S. Treasury officials; item (b) is related to broader
considerations of general U.S. trade policy and is the subject
of a recommendation elsewhere in the paper; item (c) is in
the process of being implemented, on a modest scale, via
recommendations in the Bernbaum report; item (d) would repre-
sent an effort to anticipate future problems by some timely
company actions, but requires considerations of how far the
USG can or should go in influencing company policy or deci-
sions.
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Option 1. Actively use good offices of USG to encourage
and facilitate continuing dialogue between the Government of
Jamaica and the U.S. companies but do not become involved in
substantive issues. Given the growing pressure for greater
participation in ownership and the drive to increase returns
to the Jamaican economy, the results of this approach will
depend in large part upon the willingness of both the com-
panies and the Government of Jamaica to evolve a new relation-
ship. Company initiative in this regard may obviate having
to respond in the future to tougher demands from the Jamaicans,
which could create a more difficult bargaining situation.
Pro - Avoids putting USG in a position in the middle
on controversial issues; facilitates continuing good relation-
ships with GOJ; gives us flexibility to influence both
parties; insures that final outcome represents choice of
both parties. If successful, would protect access to bauxite,
deter nationalization and avoid payment of OPIC claims; allows
for subsequent more direct involvement of USG if this should
come to be considered advisable.
Con - May represent inadequate use of USG leverage to
discourage nationalization or encourage forthcoming company
position; could subject us to criticism from companies for
not supporting their positions.
Option 2. Make representations to the Government of
Jamaica with the objective of forestalling any demands for
ownership and minimizing any demands for renegotiation of
contracts.
Pro - Would have strong support of U.S. companies; if
successful, could arrest trend towards nationalization of
extractive industries and avoid claims against OPIC.
Con - Fails to recognize current realities (Embassy
states some equity participation is inevitable) and may
stiffen positions on both sides rather than facilitating
compromise; would adversely affect political relations with
GOJ.
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Option 3. Play an active and substantive intermediary
role between GOJ and companies with the objective of working
out a new company-government relationship which will satisfy
government needs and provide companies with long-term
operational stability.
Pro - Is best way to ensure eventual settlement is
consistent with overall U.S. interests including access to
bauxite and avoidance of OPIC claims; would permit USG to
deal effectively with intransigent or dogmatic positions
on either side.
Con - May assume more than is justified about USG
capability to achieve such a solution; if solution back-
fires, USG is stuck with responsibility for it. Neither
side has requested such a USG role and in any event it is
premature to consider such a U.S. role in present circum-
stances.
F. How Best to React to the Area's Social and Economic
Problems, Needs and Aspirations.
The U.S. military installations and economic interests
(including primary bauxite reserves and investments, as well
as petroleum refining installations) are heavily concentrated
in the Commonwealth Caribbean, although Surinam is an impor-
tant and expanding source of bauxite and the Netherlands
Antilles have extensive oil refining facilities that provide
about one-fourth of the U.S. east coast's import requirement
of residual fuel oil.
The potential British disengagement from the area con-
fronts us with the reality that it is predominately U.S.,
rather than British, interests that are at stake in the
Commonwealth Caribbean. At the same time, the economic
health of the Caribbean is heavily dependent upon U.S.
actions relative to trade, investment and economic assistance.
The Caribbean states, to a much greater extent than many
Latin American countries, rely overwhelmingly upon external
trade and capital. Traditionally their narrow economies
have been based on labor intensive agricultural export
trade with the metropolitan powers. Although the stage of
development varies widely among the several Caribbean states,
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in many of them it has only been within very recent years
that significant modern sectors related to tourism, the
minerals industries, and in some countries import substitu-
tion manufacturing, have been superimposed upon the tradi-
tional economies. These new industries are to a large
degree externally dominated by North American companies
which have sharply increased their investments in the area
during the past decade. On the other hand, much of the
traditional export agriculture in the Commonweallth Carib-
bean is tied to UK interests operating in sugar and other
commodities.
Tourism and the minerals industries have accounted for
most of the economic growth in the area. The growth of
tourism has also made more obvious the disparity between
the opulence of the prdominantly white North American tour-
ist and the poverty of the predominantly black population
and often has led to the purchase of scarce lands by
foreigners. The importance of the bauxite industry to the
economies in Jamaica, Surinam and Guyana and the oil indus-
try in Trinidad and Tobago make these industries logical
targets for nationalists who emphasize the exploitation
of limited and expendable national resources by foreign,
largely U.S. companies. Without a formula that permits
broader-based development and greater indigenous involve-
ment, it seems likely that the tension already evident in
respect to tourism and the extractive industries will con-
tinue to grow, leading to the prospect of greater conflict
between the policies of the U.S. and the Caribbean states.
There will be increasing pressure for local participa-
tion in foreign-owned economic enterprises, particularly
but not exclusively in the extractive industry, which will
require a constructive response both from American investors
and the USG to avoid damage to legitimate American invest-
ment interests and access on reasonable terms to needed
raw materials. Moreover, a conflict over policy in one area
such as trade can be expected to have a spillover effect on
other interests such as investment or even base rights.
A U.S. commitment to development of the area is as
essential to our bilateral political and economic relation-
ships in the Caribbean as it is anywhere else in the hemi-
sphere. We cannot expect to have healthy relationships
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with the Caribbean states unless the U.S. is prepared to
take a positive stance in trade, assistance and commercial
policies. As elsewhere, such a stance will not guarantee
stability or even friendly governments. Nor will it assure
the security of U.S. investments without accommodation to
national aspirations. However, we cannot afford to adopt a
policy of benign neglect toward the Caribbean in the 1970's
any more than we can afford a policy of intervention. If
we are to expect the leaders and people of these states to
be responsive to our special interests, the U.S. must be
willing to be reasonably responsive to their needs and
aspirations.
1. The Nature of Future U.S. Trade Relations with the
Caribbean. The range and importance of our interests in the
Caribbean and the heavy dependence of the region on external
trade make it incumbent upon us to give special attention to
ways in which we can cooperate to strengthen the trading
capacity of Caribbean nations.
Trade decisions that will be taken over the next year
will significantly affect the future structure and growth
of the Commonwealth Caribbean economies and may be a decisive
factor affecting future political stability in the area. Of
major importance to the Commonwealth Caribbean states are
the negotiations between the UK and the European Economic
Community. At the same time, U.S. decisions concerning
participation of the Commonwealth Caribbean in our proposed
Generalized System of Preferences the amount of their partici-
pation under the U.S. sugar quota and arrangements governing
specific commodities such as rum and textiles will affect
the ability of Commonwealth Caribbean states to broaden their
markets and diversify their economies.
The potential entry of the UK into the European Eco-
nomic Community presents the Commonwealth Caribbean with a
serious problem affecting future employment and foreign ex-
change earnings. It is expected that the Commonwealth Pref-
erence System in general will be phased out. At present all
Commonwealth Caribbean countries benefit from special prefer-
ences granted by the UK for their major agricultural exports,
in particular sugar, bananas and citrus fruits. The share
of these commodities of the total exports of these states
represent about 80% in the case of the Windward Islands,
70% for Barbados, 60% for the Leewards, 30% for British
Honduras, 20% for Jamaica, 16% for Guyana and 10% for Trini-
dad and Tobago. However, the significance of the UK market
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for these crops goes beyond foreign exchange earnings.
Their production by labor intensive methods provides more
than proportional employment opportunities in a situation
of generally serious endemic unemployment. Moreover the
Commonwealth Caribbean countries are by and large high-cost
producers of sugar, bananas and citrus fruit, and depend
heavily upon the sheltered UK market for their earnings
from the export of these products.
The UK is asking the Community to make special pro-
vision for imports of sugar from Commonwealth countries,
notably in the Caribbean, and to give Caribbean Common-
wealth countries the same three options granted African
Commonwealth countries: (a) accession to the Community's
present Yaounde Convention on preferential arrangements
for former African colonies of EC members; (b) commercial
agreements, or (c) association with the Community. The
Community may insist on reverse tariff preferences in
return. U.S. interests in the Caribbean would be best
served if there were reasonable accommodation, permitting
the Commonwealth Caribbean states to export their agricul-
tural commodities to the Community, at more or less existing
levels, without reverse preferences.
a. Participation of the Commonwealth Caribbean
in the U.S. Generalized System of Preferences. The Common-
wealth Caribbean countries are anxious to participate in the
system of generalized tariff preferences which the U.S.
plans to extend to the LDC's, even though relatively few
of the items included in our preference list would be of
immediate benefit to them. They are aware that one of the
aims of this system is to promote the gradual phase-out of
the reverse tariff preferences granted by some developing
countries to certain developed countries.
Faced with a choice between losing preferential access
to the Community-market or foregoing participation in our
G.S.P., they may choose to opt for preferential access
to the Community to avoid serious unemployment and economic
dislocations.
Four alternatives are currently under consideration by
an inter-agency working group, for the purpose of agreeing
on definitive wording for the Administration's draft bill
on generalized preferences to be submitted shortly to Con-
gress.
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Option 1. Adhere strictly to our stated position on
reverse preferences as contained in NSDM 65, i.e. to exclude
any LDC that does not give us satisfactory assurances that
it will phase out reverse preferences by 1975. Do not spell
out this condition in the draft legislation. (Supported by
OMB.)
Option 2. Same as Option 1 except: Incorporate spe-
cific language reflecting this position in the draft legisla-
tion. (Supported by Agriculture, Labor, Treasury, STR, AID,
and CEA.)
Option 3. Make it clear that generalized preferences
will not be extended beyond 1975 to any LDC which continues
to grant reverse preferences, but do not exclude any LDC at
the outset on account of reverse preferences. Incorporate
specific language reflecting this position in the draft
legislation without any authority for special exceptions.
(Supported by Commerce, Interior, and State.)
Option-4. Same as Option 3 except: Provide authority
for the President to make special exceptions to the 1975
cutoff when he determines it to be in the national interest.
(Supported by Defense.)
Agencies represented in IG/ARA have taken differing
positions on these alternatives; a decision will presumably
have been taken before the final review of this paper. If
the choice eventually offered to the Commonwealth Caribbean
is found by them to be too restrictive to permit their par-
ticipation in our G.S.P., this will have adverse consequences,
more political and psychological than economic, in our rela-
tionships with the area. It will be taken by the area, unless
we can provide offsetting advantages elsewhere, as a further
indication that Caribbean concerns have a relatively low
order of priority for the U.S. This can in turn influence
their own decisions in areas of important U.S. interests such
as investments.
b. The U.S. Sugar Quota. The present outlook for
U.S. sugar legislation is that the new Sugar Act will be
extended for not more than three years. The Commonwealth
sugar arrangement, under which Commonwealth Caribbean sugar
has a preferential market in the UK (though at lower prices
than in the U.S. market) expires in 1974. Britain's entry
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into the Common Market could affect its ability, or will-
ingness to continue such arrangements after 1974. Given
the major nature of our interests in the Caribbean, it could
be in our interest to provide some offset in the U.S. market
to any serious decline in Caribbean exports to Britain.
Since, under the present outlook, our new legislation will
expire either before or simultaneously with the British
arrangements, there is no need to confront the issue at
this time. It is in our interests that the new legislation
retain the present basic quota for the British West Indies,
British Honduras, and the Bahamas, and permit their pari
passu sharing with other Western Hemisphere suppliers in any
supplementary allocations.
The Dominican Republic is more dependent, in both the
foreign exchange and employment sense, on its U.S. sugar
quota, than any other country of the Hemisphere. It has
been the sole beneficiary, for some years, of a special
allocation of tonnage, based on a Presidential determina-
tion that such an allocation is in the U.S. national inter-
est. It is important to our own interests as well as those
of the Dominican Republic that such Presidential waiver
authority be retained in the new sugar legislation, or that
it otherwise be enabled to continue receiving a total quota
approximating that of recent years.
C. Modifications of Present Trade Arrangements
with Respect to Specific Commodities. Aside from whatever
benefits the Caribbean countries are likely to derive from
participation in our generalized preferences and from a
possible growth in their sugar exports to the U.S., there
are a number of other commodities which are excluded from
the G.S.P. If these were granted more liberal access to
the U.S. market, the foreign exchange earnings of these
countries would be improved, their economic situation
strengthened, and their dependence on traditional exports
reduced.
In favor of a more forthcoming U.S. attitude it can be
argued that the domestic U.S. impact of any concessions,
given the magnitudes involved, is likely to be rather limited,
while the benefits to the recipients could be quite substan-
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Two such commodities are textiles and rum.
Textile imports are now regulated under the terms of
the Long Term Agreement on Cotton Textiles. Textile import
policy is a matter of major domestic concern, and it is not
within the competence or jurisdiction of IG/ARA to make
judgments or recommendations on overall textile policy. The
Caribbean area, which suffers from severe unemployment, could
benefit economically from an expansion of labor-intensive,
low-skill industries such as textiles. This is a fact which
should be taken into account, at such time as the Administra-
tion undertakes any review of its current arrangements govern-
ing textile imports.
More liberal access to the U.S. market for Caribbean rum
would also be helpful. Rum imports now suffer from discrim-
inatory tariff treatment vis-a-vis whiskey and gin. This has
resulted from the fact that the tariff rate on the latter
commodities has been more extensively reduced over the course
of several trade negotiations than the duty on rum. In the
latter case, there has been the desire to protect rum producers
in Puerto Rico and the Virgin Islands (on whose exports to the
mainland no duties are levied), and the fact that other rum-
producing countries were unable to provide sufficient rec-
iprocity to obtain a concession on rum.
It can be expected that the Governments of Puerto Rico
and Virgin Islands, which supply 96% of the rum consumed in
the U.S., would strongly oppose any reduction in the duty on
rum. In 1969, about 4.9 million gallons, valued at $21.7
million, came from Puerto Rico and 1.4 million gallons, valued
at $1.6 million, from the Virgin Islands.
Of more importance than receipts from rum exports, how-
ever, is the rebate of revenue to these Governments from
special funds accruing from the U.S. excise tax of $10.50 per
gallon on all rum from these areas sold in the United States.
In 1969, these funds amounted to about $50 million for Puerto
Rico and $15 million for the Virgin Islands, or about 5 percent
and 16 percent, respectively, of the total revenue of these
Governments.
It was because of these circumstances that rum was with-
drawn from the list of U.S. offers in the Kennedy Round and
that it was placed in the most sensitive category among the
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group of products requested by Latin America for inclusion
in the U.S. generalized scheme of preferences (CSP) last fall.
This category was reviewed and turned down by White House
decision at that time.
In the context of our total Caribbean policy, however,
it might be appropriate to reconsider the rum question. It
should be noted, though, that inasmuch as the President has
no authority to lower tariffs at this time any action would
require new legislation. Under these circumstances two
alternative courses of action might be considered: 1) directly
reduce the rum duty to a level comparable to that levied on
gin and whiskey, or 2) reconsider the possibility of including
rum in the G.S.P.
With respect to the first option, special legislation
could be requested to give the President authority to reduce
the duty on rum, presently $1.75 a gallon, to a level com-
parable to that levied on whiskey and gin, i.e., about $.50
a gallon. This concession would still provide some protection
for the Puerto Rican rum industry but would improve the earn-
ings of other exporters and broaden their market in the U.S.
Under the MFN provision this concession would also benefit
the French Caribbean dependencies of Guadeloupe and Martinique
(which are treated as part of Metropolitan France).
This alternative would also permit a show of U.S. interest
in and responsiveness to Caribbean trade problems in the event
that the conditions for joining the Generalized System of
Preferences are such that the Commonwealth Caribbean countries
decide not to join it. On the other hand, it would be diffi-
cult to obtain authority from the Congress to give any con-
cession, particularly on a sensitive product, for which there
would be no direct reciprocity.
The second alternative would be to include rum in the
list of products governed by the proposed U.S. scheme of
generalized preferences. If this were done the duty on rum
would go down to zero which would actually provide a pref-
erential advantage for rum in relation to gin and whiskey.
In addition to all of the Caribbean countries, some other
Latin American countries would stand to benefit from such a
step. However, this alternative would result in a more
serious disruption for the industry in Puerto Rico and the
Virgin Islands.
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While rum was among the list of sensitive products
turned down for inclusion in the GSP last fall, it is our
understanding that the products were considered as a group
rather than individually. Inclusion under the GSP would
also be a unilateral concession, but it would be temporary
and it would be relatively easier to obtain the requisite
Congressional authority given the fact that rum would be
just one of many products to be included under the scheme.
Moreover, legislation for generalized preferences will shortly
be ready for submission to Congress and thus action on rum
might be obtained sooner under this alternative. On the other
hand, if it did not prove possible to include rum under the
GSP, consideration could still be given to the possibility
of requesting appropriate authority under special legislation.
Other areas worthy of further study are the possibilities
of increasing access in the U.S. market for certain Caribbean
fruits and vegetables, and of increasing the duty free import
ceiling for U.S. tourists returning from the Caribbean area.
2. The Nature of U.S. Economic Assistance Activities in
the 1970's. Our economic assistance programs of the 1965-70
period reflected the following policies:
(i) Our bilateral economic assistance has been concen-
trated in those countries--specifically the Dominican Repub-
lic and Guyana- where the USG has involved itself because of
a perceived threat of a Communist takeover.
(ii) We have sought to avoid a proliferation of bilateral
AID programs in the Commonwealth states and have encouraged
the UK to continue as a major source of assistance.
(iii) We have, where possible, channeled assistance
through multilateral and regional institutions.
(iv) We have continued a small humanitarian assistance
program in Haiti primarily through multilateral and private
agency channels.
Consistent with the findings of NSSM-108 a firm U.S.
commitment to social and economic progress is necessary to
support our many important U.S. interests in the Caribbean.
As documented in this study, our primary interests in the
area are not concentrated in the Dominican Republic and Guyana.
While we have special reasons for continuing assistance to
these two countries, such assistance should be provided in
accordance with our current policy of placing increasing
reliance upon multilateral assistance channels and reducing
our bilateral profile. By the same token, we need to
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acknowledge our special interests in various Commonwealth
Caribbean states and assure that our assistance policies do
not discriminate against them.
Given the concentration of USG security and economic
interests in the Commonwealth Caribbean, the intended British
disengagement from the area, and the potential for growth of
radical nationalist groups, should the USG adopt more forth-
coming policy on economic assistance to the Commonwealth
Caribbean States?
Ameliorating the deep-seated social and economic problems
confronting the Caribbean states (high unemployment, a rapidly
growing labor force, a stagnant agriculture, and capital-
intensive investment) will require maximizing opportunities
for productive employment, strengthening development oriented
training and financial institutions, and expanding social and
economic infrastructure. As in most dual economies, there is
a wide disparity in wage rates and a shortage of skilled
personnel. Because of the proximity to North America, the
common language and lenient immigration quotas, there is a
serious skills drain from the Commonwealth Caribbean. In the
case of the Dominican Republic and Haiti there are major
institutional impediments to broad-based development.
Successful diversification and processing of agricultural
products will require a more concerted effort in agricultural
research, extension and in some cases infrastructure develop-
ment. Virtually all the states have a shortage of skilled
manpower to satisfy domestic economic and social needs and
compete in a world economy. To develop and retain such man-
power will require substantially improved training programs
both within and outside the formal education systems. Many
governments have recognized that high population density of
the area requires adoption of family planning programs, but
successful implementation will necessitate further efforts.
To accomplish the foregoing will at best be difficult, given
the nature of the problems and the limitations of the admin-
istrative capabilities of many of the governments. However,
several countries such as Jamaica and Barbados have shown a
willingness to seek solutions to deep-seated problems. All
these programs will require significant self-help efforts
but they will also require reasonable levels of external
capital and technical assistance.
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Leaders of these countries recognizing their social
and economic problems, increasingly look to the U.S. for
assistance. In the case of Jamaica where our interests are
substantial, and contacts have been made at the highest level
of government, the U.S. has responded with a survey by a
Development Commission and is planning an expanded bilateral
aid program. In the case of other states such as Trinidad
and Barbados, we have to date conscientiously discouraged
requests for bilateral assistance.
Will some bilateral U.S. aid activity create too much of
an official U.S. presence and involve us too heavily in the
internal affairs of these small Caribbean nations at a time
when nationalism is on the increase? A bilateral presence and
involvement of the magnitude of our aid program in the Dominican
Republic and even Guyana in the last half of the 1960's is
inappropriate for the 1970's. However, in most of the Common-
wealth Caribbean countries the U.S. presence has been limited
almost exclusively to tourists, businessmen, and Peace Corps
volunteers. The official U.S. bilateral aid presence in many
countries has been non-existent to the point of creating an
image of a lack of U.S. concern about major local problems and
an official preoccupation with "Latin" America. This attitude
was clearly reflected in Prime Minister Shearer's request for
a separate Commonwealth Caribbean policy.
Providing bilateral assistance to the independent states
of the Commonwealth Caribbean need not create a presence
problem or be an irritant in our relations if we do not es-
tablish bilateral missions, avoid a dominant role in the host
country's decision making process, and limit restrictive
covenants. Basically our foreign policy interests will be
best served if lending agencies are prepared to respond to
requests to assist critical unemployment, agricultural, and
education problems, but in a manner consistent with local
efforts and initiatives. We should be willing to participate
in an appropriate manner along with other donors in support-
ing these countries in their own efforts to strengthen their
institutional framework and achieve development with dignity.
We have three general choices with respect to our
assistance policy in the Caribbean. The first is: to con-
tinue the bilateral programs we now have (Dominican Republic,
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Guyana and Jamaica) ; to provide additional assistance through
multilateral and regional institutions; and to encourage the
UK and Canada to continue their current levels of assistance
in the area. This is consistent with our current policies
and avoids proliferation of bilateral assistance efforts. It
does not, however, permit us to be responsive to request from
Barbados, Trinidad or the Associated States, and may not assure
an adequate flow of capital and technical resources.
A second choice would be to include the now-excluded
independent Caribbean countries in our bilateral programs
while encouraging the international agencies, the UK and
Canada to continue to provide the bulk of the assistance.
Under this choice, we would provide bilateral assistance to
any Caribbean nation which meets the criteria currently being
applied to any other nations in the hemisphere. The Associated
States and other UK dependencies would be assisted by the U.S.,
but only through regional projects.
This approach would enable the governments in the area
to undertake expanded programs to combat socio-economic prob-
lems; would demonstrate increased U.S. interest in the area
problems, and would get around the difficulty of seeming to
endorse the more radical Government of Guyana while refusing
to assist bilaterally more moderate governments elsewhere. It
would also, of course, increase the number of AID recipient
countries.
Finally, we could also include bilateral aid to the
Associated States in our approach to the area. Such inclusion
would recognize their underdeveloped state relative to their
independent neighbors; on the other hand, it might encourage
the UK to relax its assistance and might discourage the
Associated States from looking for regional solutions to their
problems.
3. Regional Integration Efforts. Efforts at political
integration in the Caribbean are not likely to prosper for
many years to come, and little or nothing is currently being
done in this area.
The essentially competitive nature of the area's econo-
mies also places limits on the potential for economic
integration; however, the Caribbean Free Trade Association
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(CARIFTA) was founded in 1968 by all of the independent
Commonwealth Caribbean countries plus the Associated States,
and British Honduras has since become a member. It seems
umlikely that the Dominican Republic or Haiti will seek to
join CARIFTA.
Some expansion of trade has occurred under CARIFTA,
primarily benefiting the larger states, such as Jamaica and
Trinidad. (Even so, Jamaica's intra-CARIFTA trade amounts to
only 3.5% of its total trade.) These larger members have
encouraged development of import substitution industries that
are now exporting to the smaller islands. Since many of the
new industries are initially, at least, high-cost, the smaller
islands are deriving little benefit from the CARIFTA trade,
and are suffering a loss of tariff revenues.
The CARIFTA Secretariat, as well as Guyana, see CARIFTA
as playing an important coordinating role on matters such as
maximizing return to local economies from foreign investment
and increasing control over such investment. The Caribbean
nations could undoubtedly strengthen their bargaining posi-
tion vis-a-vis foreign investors were they to coordinate
their efforts. Given the limited advantage CARIFTA offers to
the smaller states, the potential policy conflict relative to
our own private investment interests and the lack of any
request for or interest in U.S. assistance from CARIFTA, there
does not appear to be any useful way in which the U.S. could
support CARIFTA.
The Caribbean Development Bank (CDB), although still a
very young organization (it made its first loan this year)
is a more promising institution. It has sound management,
under Sir Arthur Lewis, and appears freer from political
influence than CARIFTA. Its efforts are directed at produc-
tive, rather than social infrastructure, investments. It is
designed inter alia to assist the smaller islands' efforts to
improve production and exporting capacity, which means in the
first instance, improvements and greater specialization in
their agricultural production. The Bank is the kind of con-
structive development institution which we should continue
to support and encourage other bilateral and multilateral
agencies to support.
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A broadening of economic relations between the Caribbean
countries and the countries of the North Coast of South
America and Central America can be expected over time. We
have considered the possibilities of closer economic coop-
eration and concluded that over the near term the Caribbean
countries can not expect to achieve significant benefits by
tying CARIFTA more closely to Latin American trade associations,
although there may be an advantage to extending membership of
the Caribbean Development Bank to Colombia and Venezuela as
well as non-member Caribbean states such as the Dominican Re-
public and Haiti. U.S. interests during the next decade are
not likely to be critically affected by such moves; it behooves
the U.S. to let these relationships develop naturally without
our involvement.
VIII. Recommendations
A.
Anti-U.S. Nationalism.
1. That we endorse for the Caribbean region the recom-
mendations of NSSM-108 (pp. 22-23) on dealing with anti-U.S.
nationalism in Latin America. (Treasury reserves its position
pending approval of NSSM-108.)
2. That we increase the level of U.S. Government educa-
tional and cultural exchanges between the U.S. and the English-
speaking Caribbean; and that, through CU, we encourage private
organizations to do the same.
3. That we increase the amount of USIA programming focused
specifically on the English-speaking Caribbean.
4. That in the case of internal political disorders
which result in requests for U.S. military assistance, we
limit such assistance to small arms and ammunition, and riot
control equipment furnished only at the request of a recog-
nized, constitutional government. Requests from such coun-
yries would be considered on a case-by-case basis.
5. That, as indicated in B. below, the British be pressed
to maintain their presence as long as possible, and also that
Canadian presence be encouraged.
6. That the U.S. support the achievement of economic and
social progress, and thus of increased self-confidence in the
area through the type of economic actions indicated in Section F.
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B.
British Disengagement.
1. That we accept as a priority goal the maintenance
of a British presence in the Caribbean as long as possible.
2. That, as a first step towards this goal, we meet with
the British in the near future, at the Assistant Secretary
level, to obtain a clearer definition of their intentions and
plans towards the Caribbean, and to put forth our own views,
along the following lines:
(a) Bahamas. Regarding the timing of independence, make
known our preference for a later rather than an earlier date;
make clear our preference not to begin discussions on U.S. base
structure in the Bahamas until after independence, although
allowing for the possibility of preliminary talks whenever a
definite independence timetable is established; leave open
for the present the U.S. position on whether an independent
Bahamas should have a bilateral security arrangement with the
U.S.; and encourage OAS membership and Rio Treaty adherence
for an independent Bahamas.
(b) British Honduras. Continue discreet encouragement
to the parties involved to reach a peaceful and viable solu-
tion to the territorial dispute. Urge the British, if neces-
sary, to resist any pressure to grant independence before the
dispute is settled. Continue to make clear that we will not
assume responsibility for British Honduras' security or
economic welfare. If Guatemala's claim is settled, encourage
and support British Honduras' membership in the OAS after
independence.
(c) Associated States. Urge the British to retain
present involvement until some viable political alternative
to their present status emerges; should the British decide,
nonetheless, to phase out economic and technical assistance;
coordinate with them, the Canadians, and the multilateral
agencies in seeking possible alternatives, including some U.S.
help through regional bodies.
(d) Internal Security. Strongly urge the British to
continue their present public safety activities in the region
beyond 1972, where such assistance is requested by the local
government. In those situations where the U.S. has special
interests at stake and the British are unable or unwilling to
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provide necessary requested assistance, the U.S. should
basis. consider providing public safety assistance on a selective
3. That we follow up on the initial talks with further
efforts to retain British presence, both via concessions and
pressures, as appropriate.
C. Soviet Presence.
(NSSM-108 recommended the examination of possible need
for increased submarine surveillance and ASW capability.
Those recommendations are supplemented by the following.)
1. That we pursue diplomatic and informational efforts
to foster continuing awareness by other Caribbean governments
of the nature of Communist societies and Soviet international
policies and practices.
2. That we continue diplomatic efforts with appropriate
Caribbean countries to prevent bunkering of Soviet tankers
vessels). carrying petroleum to Cuba (and/or bunkering of Soviet naval
3. That we increase frequency of visits of U.S. naval
units (and/or other appropriate displays of U.S. military
interest) as needed to offset any Soviet port visits or other
Soviet military displays.
4. That, if diplomatic efforts fail, we study the possi-
bility of economic alternatives to countries presently engaged
in bunkering or otherwise providing assistance to Soviet Union.
D. Bases.
1. That we be prepared to give a sympathetic hearing to
the reasonable desires of other governments for changes in
current base arrangements and consider their requests on their
merits. That in the Bahamas, we be prepared to engage in
informal, preliminary discussions with appropriate officials--
preferably after independence but, if pressed, after the next
fixed. Bahamian elections, provided a date for independence has been
2. That, in order to enhance our negotiating posture on
bases when the time comes, we make special efforts to facilitate
mutually arise. satisfactory solutions to bilateral problems as they
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3. That we be prepared, as necessary, to make "base
rights" payments if the foregoing courses of action need to
be supplemented.
4. That we undertake further study of the advisability
of extending or encouraging bilateral defense commitments to
Bahamas and other present dependencies where we have important
defense installations, in event that such commitments would
help us to retain important installations which we might other-
wise lose.
E. Bauxite.
1. The Companies. That we meet periodically (approxi-
mately every six months) at the Under Secretary level to
review developments with the company principals, determine the
extent to which there are differences of policy approach among
them, and provide realistic briefings on U.S. policy and on
what we can and cannot do to assist them. That on these
occasions, we encourage them in undertaking imaginative and
forthcoming approaches, not excluding either local equity
participation, or additional local expenditures whose benefits
would accrue primarily to the country rather than the companies,
as the best means of protecting their long-term interests.
2. Guyana. That we seek to delay as long as possible GOG
efforts to obtain equity participation in Reynolds' investment.
That, if such effort is nonetheless made, we focus our major
attention upon protecting Reynolds' interests by endeavoring,
to the extent possible, to obtain a negotiated settlement
consistent with our Caribbean-wide interests; but in the
absence of such, insuring that Reynolds obtain just compensation
for any expropriated assets. That we not create difficulties
for Burnham, but do not help him with difficulties his decisions
regarding bauxite bring upon him. (Option 1) (Subject to
decisions on NSSM-131, this should be regarded as a general
conclusion, rather than a recommendation.)
3. Jamaica. That our involvement both now and at the
outset of any future negotiations between the GOJ and the
bauxite industry be in the form of active good offices, rather
than one of substantive participation in the terms of a settle-
ment. (Option 1)
4. Surinam. That we continue periodic representations
to the Government of Surinam on the question of U.S.
private investment; and that we maintain the closest pos-
ible contact with Alcoa representatives to try to ensure
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a mutuality of understanding regarding the local political
situation and outlook.
F.
Economic.
1. That, in accordance with our broader assistance
policies, we encourage maximum involvement of multilateral
assistance agencies (IBRD, IDB, OAS and UN agencies) in all
eligible countries of the area, and to the fullest. extent
feasible look to these agencies and the CIAP for coordination.
of assistance efforts.
2. That we urge the UK to maintain at least its current
level of assistance to the area. That, in the event the UK
insists on reducing its assistance, we encourage it to main-
tain necessary budgetary and technical assistance to the
dependencies. That we encourage Canada to continue its
assistance and increase it where possible.
3. That we accord high priority to continuing the support
of regional developmental or educational institutions such
as the Caribbean Development Bank and the University of the
West Indies. That we, where feasible, channel an increased
level of assistance to the Associated States or other low
income dependencies of the UK through such regional institu-
tions.
4. That the U.S. provide bilateral U.S. Government
assistance for specific projects when (1) there are important
U.S. interests such assistance could enhance, and (2) U.S.
interests are not adequately furthered by metropole, multi-
lateral or regional projects.
5. That the U.S. utilize Supporting Assistance as appro-
priate to strengthen or defend our important politico-security
interests in the region.
6. That we make it possible, in our forthcoming general-
ized preference legislation to allow the Commonwealth Carib-
bean countries to participate in the G.S.P. from the outset,
without requiring agreement in advance to phase out reverse
preferences (but not expanding them either); but with the
understanding that we shall not continue to grant preferences
after 1975 to those countries extending reverse preferences
beyond that date. (Treasury reserves its position on this
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recommendation and notes that a White House review and presi-
dential decisions on a CIEP options paper for our generalized
preferences scheme will decide this issue.)
7. That we reduce the U.S. import tariff on rum, from
the present level of $1.75 per gallon, to a level comparable
to that levied on whiskey and gin (about $.50 per gallon). If
this is not possible, that we include rum under the G.S.P.
scheme. (Treasury dissents) (This recommendation is subject
to further examination of its impact on the revenues of Puerto
Rico and the Virgin Islands.)
8. That, in recognition of the special importance of
sugar to the economy of the Dominican Republic, and of our
own interests in the Dominican Republic, the U.S. retain in
the new Sugar Act the national interest waiver provision, and
that it continue to use it to make special quota allocations
to the Dominican Republic, as we have done since 1966.
9. That, should the Administration review its current
policy on cetton textile imports, we study further the possi-
bilities of a modification which would permit the countries
of the Caribbean greater access to the U.S. market. (Commerce
dissents. Its position is:
a. The cotton textile recommendation clearly assumes
a result that will give preferential treatment to Caribbean
countries. This would be clearly inconsistent with our
international obligations under the Long Term Cotton Textile
Arrangement (LTS).
b. Present policies permit the negotiation of cotton
textile bilateral agreements on more favorable terms to
exporting countries than individual restraint actions. In
the case of Jamaica, the only Caribbean country with which
we have individual restraint actions in effect, the State
Department recently refused to concur in a Commerce De-
partment proposal that the U.S. negotiate a cotton textile
bilateral agreement with Haiti which would permit increased
exports from Haiti to the U.S.
C. The Administration should be permitted to review
its textile policy at an appropriate time while considering
the relevant domestic and international factors applicable
at that time. It should not be encumbered by policy
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recommendations beneficial to local regions of the world,
which were made at a previous time and possibly outdated
at such time as the pertinent textile policy is reviewed.
d. Similar type of clause could be included in many
regional economic trade policy reevaluations placing unneces-
sary pressure on the Administration to make ad hoc world-
wide concessions permitting an increased flow of textile
imports to the U.S.
e. Recognizing the unique position within the economy
occupied by the textile industry, an Executive Order in
effect since 1962 established the President's Cabinet
Textile Advisory Committee to supervise the administration
of the long-term arrangements regarding trade in cotton
textiles and to advise the President on problems relating
to textiles. In view of the Executive Order on textiles,
the Department of Commerce submits that the President's
Cabinet Textile Advisory Committee is the proper forum
to examine and evaluate U.S./Caribbean textile policy.)
10. That we study further the possibility of more liberal
access to the U.S. market for certain fruits and vegetables
produced in the Caribbean.
11. That we undertake a study of the economic impact in
the Caribbean countries of an increase in the present limit on
duty-free purchases for American tourists returning from the
area.
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Annexes to NSSM-117
Annex A - NSSM-108 Interests (Summary)
Annex B - U.S. Bases and Installations in Caribbean
Annex C - Intelligence Community Response to NSSM-117,
The Situation and Trends in the Caribbean
Annex D - U.S. Trade Statistics
Annex E - U.S. Investment in Caribbean
Annex F - U.S. Immigration from Caribbean
Annex G - British Colonies, Dependencies and Associated
States
Annex H - Bauxite Outlook in Guyana, Jamaica and
Surinam
Annex I - Barcelona Traction Company Case
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NSSM-117
Annex A
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UNITED STATES INTERESTS IN LATIN AMERICA AND
LATIN AMERICAN INTERESTS IN THE UNITED STATES
SUMMARY
I. United States Interests in Latin America
The United States has major objective interests in
Latin America which are listed below in rough order of
1/
priority. Some of these major interests could become vital
interests in the future; and a number of them, including one of
the most important ones, could cumulate now or in. the future in
various combinations to be a vital interest.
A. Very Important
1. Preservation of a predominance (by the combination
of numbers and importance) of independent, self-sustaining
Latin American countries favorably disposed to the United
States.
2. Denial of Latin America as an area from which a
strategic attack could be launched against the United States.
B. Important
3. Maintenance of the confidence of Latin America and
of the world in the effectiveness, maturity and responsibility
of our leadership as a great power in our relations with
Latin America, with due consideration for the "mature
partnership" concept.
4. Maintenance of access to the Panama Canal, including,
under existing circumstances, its protection and control
by the United States. 2/
5. The existence of a strong inter-American system,
including an effective collective security function.
6. Unimpeded transit for United States forces on
the high seas and in international air space in the area.
1/ A vital interest is understood to be one which directly
concerns a nation's ability to survive, or at least to survive
in its existing essential character. A major interest is at the
next level; it is one which significantly affects a nation's well-
being.
2/ ISA and JCS prefer "Protection and control of the Panama
Canal as essential to maintaining our access to its use. "
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7. Mutually beneficial economic interchange, includi
reasonably favorable trade and investment climates.
8. Denial to hostile powers of bases in Latin America
that would enhance their non-strategic military capabilities.
9. Continued access to bauxite in Jamaica and pe-.
troleum in Venezuela.
10. Protection of the large number of U.S. citizens
who live in, have economic ties with, or visit Latin America.
11. Continued access to certain naval and air bases
and facilities in the area.
Economic and social progress, freedom of communications
media, and maintenance of internal security in Latin America are
very significant, but are considered to be means of advancing
United States interests in Latin America rather than interests
in themselves.
II. Latin American Interests in the United States
Latin America's principal objective interests in its rela-
tions with the United States are:
1. Maintenance of the flow of United States capital
and technology and obtention of liberal trade and aid treat-
ment as a contribution to economic and social progress.
2. Development of offsets to the pervading United
States presence and the gaining of control of key natural
resources as means of demonstrating and maintaining inde-
pendence.
3. At the same time, avoidance of dependence on an-
other power.
4. Maintenance of an effective inter-American system,
with United States participation.
5. Maintenance of the United States security umbrella
against potential future extra-hemispheric attempts at in-
cursion.
III. Consonance or Conflict Between Interests
There is no necessary inconsonance between United States
and Latin American objective interests in relations with each
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other. However, perceived interests are different from
objective interests in both cases, and are inconsonant.
This inconsonance derives from: (a) Latin American national-
ism directed mainly against the United States, (b) different
perceptions of the external threat, (c) the different priori-
ties or weights that each side gives to its interests, and
(d) inter-interest conflicts for both.
IV. The Special Relationship
A special relationship exists between the United States
and Latin America in the generally accepted sense of United
States special responsibilities in Latin America, and in the
degree of mutuality of objective, although not perceived,
interests. This special relationship is based on factors
which make Latin America different, for the United States,
from other developing areas. Those factors are geographic
proximity, a degree of common heritage, tradition, the level
of our economic interests in Latin America, and regional
institutions and accords.
V. Policy Implications
However, United States interests in Latin America are
as important to us as they are primarily because of the
existence of a hostile superpower -- the USSR. Our current
intelligence assessment is that Latin America will remain a
relatively low priority area for the USSR, but that the USSR
will continue to engage in a broad range of activities and not
neglect promising opportunities there. Those opportunities
have arisen in the past, and will arise in the future, primarily
for three political-psychological reasons: (a) Latin America's
reactive nationalism directed against the United States; (b)
Latin America's experimentation with left extremism; and (c) --
mainly because of the effect of the first two reasons and the
Soviet Union's own low profile thus far -- Latin America's
current failure to think of the USSR as a significant threat
to it.
Latin America's reactive nationalism directed against the
United States and experimentation with extremism are the
products, in turn, of Latin America's frustration and sense of
inadequacy deriving from (a) its failure to achieve its
aspirations for economic and social progress, (b) its depen-
dence upon the United States, and (c) the confusion and
uncertainty produced by rapid change itself and by the mass of
information and welter of new concepts and value signals
flowing to it over modern communications media.
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мази
UNCLASSIFIED
NSSM 117
030221
Annex E
U.S. Investment in the Caribbean
eaer
raer
(Book Value in US $ millions at end of 1969) *
IAE,A
SS8.1
233
820,28
ers.or
Bahamas and Bermuda
188,01
$1,000
DOE.SE
100.0
Jamaica, Trinidad & Tobago,
ISO,AP
Barbados, Windwards & Leewards
750
E80.71
Dominican Republic & Haiti
198
All others
352
Total
$2,300
*NOTE:
These figures, for which a more detailed
breakdown is not available, differ from those for
bauxite investment cited in the text, which are
gross value figures, furnished by the Office of
Emergency Preparedness.
Source: Department of Commerce
UNCLASSIFIED
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under provisions of E.O. 12958 RS
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NSSM 117
UNCLASSIFIED
Annex F
US IMMIGRANT VISAS ISSUED
(1960-
))
1965
1966
1967
1968
1969
10-Yr. Total
Barbados
533
2,186
1,822
4,541
Dominican Republic
10,851
16,373
11,717
9,199
10,279
85,658
Haiti
3,763
3,937
3,824
6,981
6,407
32,306
Jamaica
1,780
2,983
11,204
19,925
15,252
54,021
Trinidad & Tobago
419
809
2,294
5,480
7,442
17,083
Source: 1969 Report of The Visa Office
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NSSM-117
Annex G
SECRET
British Colonies, Dependencies and Associated States
These British islands in the Caribbean, plus British
Honduras, have a total land area of 16,000 square miles (half
of it in British Honduras), and a population of about 870,000
(two-thirds of it in the Associated States). They consist of
colonies with varying degrees of internal self-government and
the semi-independent but politically fragmented Associated
States (associated with the UK, not with each other).
A. British Honduras
British Honduras is a colony on the Caribbean coast
of Central America south of Mexico and east of Guatemala.
Its 8,900 square miles represent over one-half the territory
of the British lands in the Caribbean. The population of
120,000 is 50 percent black or mulatto, the remainder mostly
Indian. The economy, almost completely agricultural, depends
heavily on sugar and citrus fruits. Per capita GNP is about
US $375. The colony is internally self-governing except
that the Governor retains responsibility for internal security
and the civil service. The British are also responsible for
foreign relations and defense. The local government has for
several years been eager to achieve independence but has been
frustrated by the inability to resolve the claim of Guatemala
to sovereignty over the entire territory and the refusal of
the British to agree to a defense guarantee.
B. Bahamas
The Bahamas have a land area of 5,380 square miles,
with a population of 175,000 (86 percent black) mainly con-
centrated on New Providence and Grand Bahama Islands. The
economy is mainly dependent on tourism from the U.S. Per
capita GNP is US $1500. The Bahamas are internally self-
governing and share responsibility for internal security,
external affairs, and defense with the British colonial
Governor. The Bahamian Government officially seeks inde-
pendence but is uncertain as to when it will be ready.
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Prime Minister Pindling has expressed interest in possible
"association" with the US. A number of US missile tracking
stations, the Navy's Atlantic Undersea Test and Evaluation
Center (AUTEC), and other Navy and Coast Guard stations are
located in the Bahamas.
C. Associated States
Running from north to south, the Associated States
are: (1) St. Kitts-Nevis-Anguilla, (2) Antigua and Barbuda,
(3) Dominica, (4) St. Lucia, (5) St. Vincent and the Northern
Grenadines, and (6) Grenada and the Southern Grenadines.
These six entirely self-governing and almost-independent states
are not associated with each other in any way. Their associa-
tion with Great Britain does not give the latter the right to
interfere in internal problems.
The northernmost of these states, St. Kitts-Nevis-
Anguilla, and Antigua and Barbuda, are located in what is
known geographically as the Leeward Islands (a term without
political meaning). They have a total land area of about 325
square miles and a population of some 135,000, almost all
black. The economies are agricultural with heavy dependence
on sugar exports. .Per capita GDP averages about US$240. The
governments are labor-dominated. Although Anguilla is a part
of the Associated States of St. Kitts-Nevis-Anguilla, it has
strong separatist feelings. There is a US missile test center
and an oceanographic research center in Antigua.
The other Associated States, lying to the south in the
Windward Islands geographic region, have a total land area of
about 1,000 square. miles and a population of 400,000 almost
entirely of African origin. The economies are also agricul-
tural, and highly dependent on banana exports. The GDP
averages slightly over US$200 per capita. The governments
are controlled by Labor parties.
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D. British Virgin Islands and Montserrat
With populations of 11,000 and 14,000 and land
areas of 59 and 32 square miles respectively, the British
Virgin Islands (BVI) and Montserrat are British colonies
with a high degree of self-government. The BVI enjoy a per
capita GDP of US $300, based on tourism and agricultural
exports to the US Virgin Islands. Montserrat is agricultural
with a per capita GDP of US $180.
E. Turks and Caicos
The Turks and Caicos Islands, a colony under the
Governor of the Bahamas at the east end of the Bahamas group,
have an area of 166 square miles and a population of about
7,000. Per capita GDP is unknown. We have a missile track-
ing station and navy facility at Grand Turk.
F. Cayman Islands
The Cayman Islands (a colony) south of Cuba, have
a land area of 100 square miles and a population of about
9,000. Per capita GDP is unknown.
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ANNEX H - BAUXITE OUTLOOK
A. The Situation in Guyana
1. ALCAN subsidiary nationalized. After five months
of negotiations, the Government of Guyana finally nation-
alized the Canadian-owned Demerara Bauxite Company (DEMBA)
on July 15. Guyana's largest industrial firm and the major
world producer of refractory grades of calcined bauxite,
DEMBA was an wholly-owned subsidiary of ALCAN Aluminium Ltd.
of Canada and had operated in Guyana for more than 50 years.
It supplied 27% of ALCAN's metallurgical bauxite requirements
and about 11% of its alumina.
2. Compensation terms flexible. ALCAN has accepted a
compensation settlement of $53.8 million payable over a
20-year term and with an annual, after-tax interest rate
of 4½%. The agreement permits Guyana to defer up to 40%
of the scheduled payment in the first year and up to 30% in
each subsequent year, provided that such deferrals are paid
up at the end of the fifth, tenth, fifteenth and twentieth
years. Despite Guyana's earlier insistence that compensation
be tied to the future profits of the nationalized firm,
payment of the $53.8 million will be a legal obligation of
the Government of Guyana.
3. Arthur Goldberg was mediator. Guyana announced its
intent to expropriate DEMBA last February 23, but negotiations
stalled on a variety of issues including compensation terms,
pension fund rights, and future marketing arrangements. As
prospects for a negotiated settlement grew dimmer and the
scheduled July 15 date for formal takeover approached, an
eleventh-hour meeting was held in which Prime Minister Forbes
Burnham and ALCAN's Chairman of the Board represented their
respective sides. Acting in a purely private capacity,
former Supreme Court Justice Arthur Goldberg served as
mediator and it was largely through his efforts that an
agreement was reached on July 14.
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4. The Nationalization Bill. The DEMBA takeover was
carried out under authority of a nationalization bill
passed on March 1 which empowered the GOG to expropriate
all or part of any company engaged in bauxite/alumina
production. Compensation under this bill may be paid
either (1) out of the company's future profits (a minimum
one-eighth that amount after taxes guaranteed as compensation)
and based upon "depreciated value for tax purposes" or
(2) "in such other manner as may be agreed to in writing
between the State and the Company."
5. Reynolds' future is uncertain. The DEMBA expro-
priation also affects a $31.5 million Reynolds Metals
Company subsidiary. The best current indications are that
the GOG will not proceed against Reynolds before next year
at the earliest, primarily because of the major management
problems it confronts in digesting DEMBA. At Reynolds'
request, former Supreme Court Justice Arthur Goldberg met
in February with Prime Minister Burnham. As Burnham
interprets that meeting, Reynolds might be more flexible.
and imaginative than ALCAN in reaching a settlement short
of nationalization. Moreover, Burnham told Goldberg in
July (during ALCAN-GOG discussions) that decision to act
against Reynolds would remain in "deep freeze" for some
time to come. Reynolds' holdings in Guyana are covered by
a $16.3 million OPIC investment guarantee.
6. USG Action to Date. Keying our representations
primarily to our interest in Reynolds, our Ambassador has
on various occasions during the past six months expressed
to Burnham the possible adverse consequences of expropriation
and informed him of the U.S. position on compensation.
Additionally, we have apprised him of the relevant (Hickenlooper)
clauses of the Foreign Assistance and Sugar Acts and Ambassador
King, on March 22, outlined in detail to Attorney General
(and acting Foreign Minister) Ramphal the U.S. position on
expropriation and compensation. These and other represen-
tations seem to have been a significant, though probably
not the major factor (see para 5 above), in Burnham's decision
to postpone action against Reynolds pending the outcome of
the ALCAN matter.
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7. Domestic politics in Guyana. Prime Minister
Burnham has fairly wide support in Guyana for his decision
to nationalize the ALCAN holdings. The expropriation bill
passed with only token opposition and there has been no
public indication of anything but approval. We have noted,
however, a degree of uneasiness in the private sector
(among some labor and business groups) regarding the future
implications of the move. A 14-day strike by DEMBA workers
over wage and pension fund issues ended in a shaky truce
on May 3, but a new walkout of clerical and technical workers
began three weeks later. These labor disputes are now
settled and GUYBAU, as DEMBA is now known, begins its operation
as a government enterprise in relative peace.
Burnham has long been supported by the U.S. as the only
feasible alternative to the Communist Cheddi Jagan, the
principal opposition leader who, we believe, would ally
Guyana closely with the U.S.S.R. if he were in power. Jagan's
Peoples Progressive Party concurs in DEMBA's nationalization
while at the same time urging that expropriation be extended
to Reynolds as well. Indeed, Jagan has charged that the
USG public silence on the ALCAN expropriation indicates a
Burnham "deal" with the U.S. to protect Reynolds.
There exists the possibility that Burnham may react
impulsively to Jagan's criticism, rising worker unrest and
continued difficulties with GUYBAU's future operations (see
below) by moving against Reynolds and adopting anti-U.S.
positions in an effort to reassert his independence and his
"progressive" credentials.
8. Burnham faces serious problems in operation of DEMBA.
Despite the high level of political rhetoric, the GOG probably
did not expect expropriation to result from its talks with
DEMBA and no contingency plans were made for the company's
operation, although some exploratory efforts were made
regarding foreign technicians and alternative markets.
Burnham apparently believed he could negotiate majority
ownership and control of DEMBA while retaining ALCAN's
participation in management, marketing, shipping and procure-
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ment. When nationalization became imminent (and politically
irreversible), the complexity of bauxite production and
marketing emerged as a critical problem for Burnham and
his advisers.
9. Assessment of short and long term outlook. Now
that nationalization has actually occurred, Burnham's
immediate problem is keeping GUYBAU in operation. The
company employs 4,000 workers, accounts for 37% of Guyana's
foreign exchange earnings and is the most visible symbol
of government resolve to "Guyanize" the economy. Fearful
of black power harrassment and uneasy about their future
under a government-operated company, most of DEMBA's senior
staff--including some Guyanese--have already left the
country. This expertise probably cannot be replaced in
Guyana, although the government has promoted native Guyanese
into the positions vacated.
Initially, at least, the Guyanese government confronts
other serious obstacles in its management of GUYBAU. Bauxite
production requires sizeable imports of petroleum and
caustic soda. ALCAN contracted for these materials in large
volume for use in its larger corporate system but GUYBAU
will be forced to purchase them at higher prices. Marketing
arrangements may be even more troublesome. Production costs
in Guyana have been rising in recent years and--quite apart
from the nationalization issue--ALCAN had been gradually
diminishing its dependence upon Guyana for everything except
calcined bauxite. While ALCAN has agreed to purchase GUYBAU's
total calcined output and a substantial amount of its alumina
and metallurgical grade bauxite for the balance of 1971, the
GOG is still trying to firm up alternate markets for its
production in future years. Presently the only bright spot
in the picture is calcined bauxite which accounts for about
40% of the value of Guyana's bauxite exports. This material
is in chronic undersupply in the world market and Burnham
will have no trouble finding customers for it if he can
maintain production.
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Burnham's long term goals for Guyana's economy are
ambitious far beyond the nation's resources and capabi-
lities; GUYBAU operations alone may be more than the GOG
can handle. Burnham envisions a fully integrated industry
under GOG control, an objective he regards as essential
to assure the maximum use of Guyana's total resources for
the national good. He plans to construct an aluminum
smelter to consolidate (under a central direction) the
GUYBAU and Reynolds holdings, to build a hydroelectric
project, and to substitute Guyanese cassava starch for
Canadian wheat flour presently used as a flocculent in
the GUYBAU alumina plant. Burnham also plans (this too
in the long term) the construction of a railroad network
to further integrate the bauxite industry and to open up
the "interior" regions of the country, and to produce
caustic soda domestically.
Should expropriation result in operating difficulties,
Burnham could blame ALCAN and perhaps even gain some short-
term political capital by SO doing. Nevertheless, he would
probably view his nation's problems in operating the company
as a personal, psychological defeat; in the longer run,
Jagan may be able to gain political capital if Burnham
should continue to be unable to operate the industry effect-
ively. Difficulties in operation may lead Burnham to seek
Soviet Bloc technicians and/or seek sales contracts with
Bloc countries. No such efforts are known to date, except
for one reported fruitless overture to Poland on sales.
If Burnham were to conclude that the U.S. was in any way
contributing to his problems, it would cause a deteriora-
tion in our bilateral relations.
In the longer term, it is evident that Burnham's goals
for his country's economy will be pursued at an uneven pace.
Unless he is deterred by unhappy experiences with GUYBAU,
Burnham will likely continue to see Guyana's future as
dependent upon state control of much of the private sector.
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VI. Jamaica and the rest of the Caribbean.
1. Stakes in Jamaica are much higher than in Guyana.
Nearly two-thirds of U.S. bauxite and an increasing amount
of alumina imports come from Jamaica. Alternative sources
of supply with uncommitted production capacity which could
substitute for the Jamaican production do not currently
exist, although, as noted in Section IV above, major
expansions underway in Australia and Guinea may. somewhat
reduce U.S. dependence on Jamaican supplies by 1973.
U.S. investments in the bauxite/alumina industry in
Jamaica currently total about $650 million and are being
increased. OPIC presently provides expropriation insurance
coverage totaling $431.4 million, and under existing contrac-
tual provisions, this coverage could be expanded to $528
million.
2. Importance of Bauxite to the Jamaican Economv.
As significant as Jamaican bauxite is to the U.S., the
industry is even more important to Jamaica's economy.
Bauxite and alumina are the major export products; together
they represented $142 million, or 56% of total merchandise
exports in 1969, although according to a 1970 IMF report
estimated local payments by the industry (including taxes,
royalties, wages, etc.) amounted to only about $66 million,
less than half the export value.
The industry is a major source of royalty and tax
revenue for Jamaica; the revenues from bauxite and alumina in
1970 amounted to US$38 million, about 17% of total government
revenues. These revenues are projected to increase to $48
million by 1972 and $60 million by 1973. The exact amount of
the revenues will be influenced by the transfer price on
alumina established for tax purposes. The GOJ is currently
negotiating with the U.S. Treasury to try to reach agreement
on higher transfer prices in order to maximize Jamaican
revenues. Jamaican Finance Minister Seaga met with Secretary
Connally on this issue on March 24 and every effort is being
made to reach an early agreement.
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7
A major expansion of bauxite and alumina capacity is
currently underway. In contrast to Cuyana where companies
have been reluctant to make new commitments, in part
because of higher mining costs, major new investments in
Jamaica will sharply increase alumina capacity from 1.95
million long tons at the end of 1969 to 2.9 million in
1973. This investment follows the pattern established
since 1966 of upgrading output by increasing alumina pro-
duction rather than merely expanding bauxite mining.
Jamaica views bauxite as a wasting asset that may be
depleted before the end of the century, and has long
sought to maximize the returns from bauxite by achieving
more in-country processing and seeking to the fullest
extent possible the development of an integrated industry.
Both the current government and the opposition place high
priority on the ultimate establishment of an aluminum
smelter and other related industrial activities that would
spur development. Both recognize the importance of foreign
capital to the accomplishment of their objectives. The
Jamaican approach has been to seek to achieve its goals at
the bargaining table rather than through any unilateral
action, and to date Jamaica has a good record for upholding
its agreements.
3. Jamaican Reaction to Burnham's Steps to Nationalize
DEMBA. Jamaicans are, of course, well aware of changes in
ownership patterns occurring in the extractive industries,
and interest in equity participation existed before Burnham
initiated negotiations with DEMBA.
In March of 1970, Prime Minister Shearer stated in a
public speech: "The Government and the companies from time
to time will have to discuss ways and means by which the
Government can participate more effectively in the bauxite
and alumina operations, whether by way of ownership of equity
or by some other means."
Michael Manley, Leader of the Opposition in a recent
article in Foreign Affairs states: "The key therefore, must
lie in joint ownership. It is only when control and ownership
are shared reasonably between those who supply the initial
capital and know-how on the one hand, and those who supply the
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raw material and labor on the other, that mutuality of
interest can exist." However, both Shearer and Manley have
disavowed nationalization as the way to accomplish their
goals.
Our Embassy in Jamaica considers that Jamaican equity
participation in the local bauxite/alumina industry is
inevitable, but that the time frame for such participation
is unknown. The Guyana nationalization decision has stirred
much interest in Jamaica. Although precipitous action like
the Burnham move in Guyana is privately denounced by Jamaican
leadership, certain university professors are advocating
following Guyana's lead, and the man in the street tends to
favor nationalization as do some middle level figures in the
Jamaican establishment,
The Embassy states that the positive or negative results
in Guyana of the nationalization of DEMBA will play a direct
part in determining how, when, where, what and how much
equity participation will be sought in Jamaica. The Embassy
in the past has indicated that any success on Burnham's part
in successfully producing and marketing bauxite/alumina woula
make pressures for nationalization in Jamaica almost irre-
sistable. Jamaica faces an election within the next year and
there is the danger that bauxite could become a major election
issue and that positions would be taken for solely political
and emotional reasons. To date, however, this has not
occurred and the leadership of the two parties has disavowed
any intention to make nationalization of bauxite an election
issue.
More recently Embassy reports that Prime Minister
Shearer's parliamentary address of July 21 appeared to rule
out--for the future at least--even the possibility of equity
participation. Shearer emphasized repeatedly (a) that
Jamaica was going to retain its reputation for responsible
relationships with foreign investors, (b) the necessity of
policies which would favor the inflow of foreign capital and
(c) his government's intent to increase Jamaica's revenue
take from the bauxite companies, largely through increased
alumina production. He said further that Jamaica would not
tolerate any harrassment of the bauxite companies such as
strikes or excessive wage demands.
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The Embassy has recommended that the USG use all
influence we have to keep ALCAN from making any deal to
market DEMBA bauxite, urge aluminum companies to stick
together and present a common front, and reinforce the posi-
tion of moderates in Jamaica by helping bauxite/alumina industry
make progress in the realm of good corporate citizenship.
4. USG Action to Date. In December 1970 , after receiving
advice that Prime Minister Shearer had informed the bauxite
companies that whatever happens in Guyana will have to be
duplicated in Jamaica, the Department instructed Ambassador
de Roulet to meet with Prime Minister Shearer and make the
following points:
(i) Burnham's effort is a gamble for political gains
without adequate evaluation of economic consequences.
(ii) Foreign investment is much more important factor
in Jamaican economic growth than is the case in Guyana. The
negative impact of the government taking over control on new
foreign investment and on the flourishing tourist industry
could be great in Jamaica.
(iii) We are cooperating with Jamaica's efforts to
improve the well being of its people and hope GOJ would keep
in mind the effect of any action relative to the bauxite
industry on general economic prosperity.
(iv) The constructive relationship between the GOJ
and bauxite companies was emphasized and GOJ statements that
the government intended to respect the right of contracts were
noted.
The Embassy has maintained a continuing dialogue with
leaders of the Government and the Opposition, cautioning them
against taking precipitous action with respect to the bauxite
industry. Our Embassy in Kingston has reported that the only
effective line taken in Jamaica over and over again with the
GOJ officials informally and otherwise is "Let's wait and see
what happens to Forbes (Burnham). "
The Embassy has also continued to use its good offices to
encourage good corporate citizenship such as the recently
announced industry assistance to the Government in establishing
technical training institutes.
The USG has over the past year attempted to further
strengthen its good relations with Jamaica. President Nixon
received Prime Minister Shearer for an unofficial visit last
August. As a result of that meeting, a Development Commission
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10 I I
headed by Ambassador Bernbaum went to Jamaica last December
and has recommended consideration of assistance for several
development projects. AID has authorized two of these projects
(Rural Feeder Roads $10 million and Secondary Mortgage Bank
$10 million) for negotiation in FY 1972.
The U.S. Treasury is cooperating with the GOJ to
resolve an outstanding mattèr relating to alumina transfer
pricing for tax purposes. The GOJ maintains its right to
establish alumina transfer prices, but under the terms of
its contract with ALPART the ultimate determination will
be made by the U.S. Treasury. The GOJ wants an agreed
price which will be acceptable to both governments. It
has adopted a formula relating alumina price changes to
the price of aluminum ingot pig, and has increased its
alumina price from a 1966 base of $72.00 per long ton to
$84.70 per ton for 1970. The GOJ is seeking agreement
on these prices and wants the same formula to be used
in computing prices through 1972. To this end the Jamaican
Minister of Finance met with the Secretary of the Treasury
on March 24 and was given assurance of prompt attention by
the Treasury and IRS. There have been a series of meetings
since that date to discuss the issue. There are several
implications arising from the final Treasury position on
this issue. A negative position by the U.S. may lead the
GOJ to raise its taxes unilaterally, or it may give the
Opposition Party an opportunity to discredit the present
government for failing to get fair treatment from the U.S.
A positive Treasury position may relieve the pressure on
U.S. producers or at least facilitate negotiations for a
mutually satisfactory settlement. However, Treasury agree-
ment to recognize the Jamaican right to set transfer prices for
tax purposes may establish an undesirable precedent and cause
difficulties with other mineral producers.
The GOJ has a separate and unresolved claim against the
U.S. for more than $80 million in taxes which have been paid
by the U.S. bauxite companies to the IRS but which the GOJ
claims should have been paid to Jamaica. This claim arises
from differences over the bauxite transfer prices used in
calculating the profit on inter-company sales between sub-
sidiary and parent. The Jamaican Minister of Finance met
with Mr. Samuels in October 1969 and presented a claim against
the USG for $28.6 million for the period 1957-1961. In addi
tion the GOJ claimed that information supplied by the bauxit
companies indicated an additional short-fall of $53 million in
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-- 11
connection with the years 1962-66, for which final IRS assess-
ments were not yet completed. The Minister was invited to
prepare a formal presentation for the Treasury, but this was
not provided and there have been no further attempts to
resolve this issue.
5. Surinam. The Surinam Government continues to
respect existing agreements relative to foreign investment
and Guyana's nationalization of DEMBA has not changed
attitudes of either gövernment leaders or major parliamentary
opposition. Only one U.S. aluminum company (ALCOA with
holdings valued at $250 million) presently operates in
Surinam, although Reynolds recently signed a joint venture
agreement with the GOS for a long-term future investment of
approximately $400 million. The Reynolds project will
involve bauxite mining, alumina production and--eventually--
construction of a smelter, all in West Surinam. Although the
ALCOA investment is not covered by investment guarantees
Reynolds has recently applied for such coverage on its planned
investment, but no action has yet been taken. Dutch bauxite
investments in Surinam total $150 million.
There is a generally favorable attitude in Surinam
toward bauxite companies operating there and a good relation-
ship has existed between the industry and a succession of
governments. During his recent (May 1971) visit to the
United States, Surinam's Prime Minister told us that his
government looks to private foreign investment as a main
chance for economic development, strongly opposes the nation-
alization of foreign businesses, and plans to issue a public
policy statement to this effect in the near future. He said
that the joint venture arrangement accepted by Reynolds is
responsive to the government's desire for participation in the
country's basic industry, and that such agreements will be
government policy for all future bauxite agreements.
Despite both the Prime Minister's statement and the
absence of any internal political pressures against foreign
companies, ALCOA. feels threatened by expropriation in
Surinam which Board Chairman Harper believes will occur unless
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a strong public stand is taken by the USG regarding the
DEMBA nationalization in Guyana. We regard Reynolds
willingness to undertake such a large bauxite project in
Surinam as inconsistent with ALCOA's vaguely expressed
concern with nationalization and we have, on various
occasions, attempted to reassure Mr. Harper and other
ALCOA representatives about Surinam's investment climate.
6. Haiti and Dominican Republic. There has been no
impact in these countries from the Guyana action. There
is no current threat to U.S. bauxite investments in these
countries.
B.
Company Positions
We have had discussions to date at various levels with
representatives of Reynolds, Kaiser, ALCAN and ALCOA, and
have found that because of differing interests, the companies'
positions do not completely coincide.
In discussions early last fall before negotiations were
initiated in Guyana, Reynolds suggested that we make known
to the Government of Guyana the possible adverse implications
of any expropriation. However, once it became clear that
the GOG would initiate action with ALCAN and defer negotia-
tions with it, Reynolds has preferred to maintain a low
posture and has not requested us to make representations on
their behalf beyond what we have already done. ALCAN, while
keeping us reasonably well informed, did not request USG
assistance or representations, recognizing that such action
would be the responsibility of Canada.
Mr. Harper, Chairman of the Board of ALCOA, has been
urging a strong public statement by a high-level USG official
condemning the expropriation trend in Guyana as a means of
deterring similar steps in Jamaica and Surinam. He has
expressed the opinion that the leadership of these other
countries would welcome a public USG statement to strengthen
their position vis-a-vis more radical elements. In a meeting
of company heads with Under Secretary Irwin on April 9, the
other aluminum companies, while encouraging vigorous diplo-
matic efforts to protect their interests, disagreed with
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13
Mr. Harper on the desirability of a public statement.
Reynolds specifically believed that such a statement could
adversely affect its position in Guyana.
He has also informed us that the aluminum companies
are considering a joint approach in Jamaica and have
requested John J. McCloy to attempt to resolve with the
Justice Department any anti-trust problems.
C.
Possible future cooperation among Caribbean bauxite
producing countries.
If the bauxite companies decide to pursue a common
policy in their dealings in Guyana and Jamaica, they and
the USG should be aware that this conceivably could serve
as a stimulus to closer cooperation between bauxite-
producing countries.
To date, the Caribbean bauxite-producing countries have
not found a common basis for cooperating in a united front
in negotiating with the bauxite companies. However, there
are advocates of this approach in Guyana, Jamaica and the
Caribbean Free Trade Association (CARIFTA) Secretariat. A
confidential report dated June 25, 1970, was prepared for the
CARIFTA "Consultative Committee on Ownership and Control of
Caribbean Resources. " This report recognizes the need for
foreign private capital inflows but recommends maximizing
benefits from these inflows by CARIFTA governments acting
jointly in the formation and implementation of policies
relative to foreign investment. The report recommends a
start be made immediately in the direction of local ownership
and control and suggests an arrangement under which the
Government pay for the equity acquired in mining companies
out of future profits of the company such as was done by
the Government of Zambia. The report did not recommend
nationalization but noted that 51% equity ownership was
necessary for control and observed in some cases a propor-
tion less than this was all that may be practicable.
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The Government of Jamaica publicly disassociated
itself from the CARIFTA report when the existence of
the report became known. The GOJ has not seen it in
its advantage to cooperate with Guyana and there is an
existing rivalry between Prime Minister Shearer of Jamaica
and Prime Minister Burnham of Guyana. However, the
opposition party in Jamaica has long endorsed Caribbean
regional cooperation. In his recent Foreign Affairs
article, Michael Manley, Leader of the opposition, advo-
cated regional cooperation and common economic diplomacy,
with specific reference to the bauxite industry.
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NSSM-117
Annex I
Barcelona Traction Company Case
On February 5, 1970 the International Court of Justice
ruled that under established rules of international law a state
may not extend diplomatic protection to its national who is a
shareholder in a foreign corporation that has been injured by
a third state. This ruling would not have the effect of
negating treaty rights, however, where such exist. Moreover,
it does not apply to those rare cases where the injury is to
the shareholder rather than to the corporation, and may not
apply where the corporation has ceased to exist or where. there
is a lack of genuine links between the state of incorporation
and the corporation. The decision does not expressly deal
with the two-state situation in which the corporation is a
national of the respondent state.
In the light of this decision, the Department will not
formally espouse a claim based on injury to a corporation that
is a national of a third state. We would continue to provide
unofficial good offices to bring about a settlement, but our
arguments to the state would be couched essentially in economic,
rather than legal terms. We should also be prepared, on request,
to join with the state of incorporation in making representatives
to the respondent state. If the Department's good offices do not
succeed in bringing about a settlement, we should encourage the
shareholders to seek formal intervention by the state of incorpo-
ration and support the shareholders' request for protection with
the state of incorporation.
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NSSM 117
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Nachmanoff
NATIONAL SECURITY COUNCIL
WASHINGTON, D.C. 20506
SECRET
February 16, 1971
National Security Study Memorandum
117
TO:
The Secretary of State
The Secretary of Defense
Chairman, Joint Chiefs of Staff
The Director of Central Intelligence
SUBJECT:
Review of U. S. Policy in the Caribbean Area
The President has directed that a comprehensive review of U. S.
policies and programs in the Caribbean be undertaken. The study
should take into account, but not necessarily be constrained by,
studies prepared in response to NSSM 108. It should identify U. S.
interests in the area and consider inter alia the implications of the
following factors and developments for those interests:
- pressure being exerted on the foreign bauxite interests in
Guyana and its effect on U. S. bauxite investments in
Jamaica;
-- the intention of the British Government to reduce its obliga-
tions and costs in the Caribbean;
-- the interest of some Caribbean governments in regularizing
trade and / diplomatic relations with Cuba;
-- the growth of black power or black nationalism in the area;
-- increased Soviet military activities in the region.
The study should include recommendations or options, as appropriate,
for U. S. policies and programs in the Caribb an area to advance or
protect U. S. interests.
DECLASSIFIED/RELEASED ON 4/23/02
by NARA on the recommendation of the NSC
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under provisions of E.O. 12958
RS
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The President has directed that the NSC Interdepartmental Group for
Inter-American Affairs conduct the study, which should be submitted
to the Senior Review Group by April 15, 1971.
Henry A. Kissinger
cc: Administrator, Agency for International
Development
Director, United States Information Agency
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