U.S. Department of State

By an exchange of notes signed at Guatemala City, January 7 and 8, 1952, and entered into force on the latter date, Guatemala agreed to the application of sections 511 (b) and 515 of the Mutual Security Act of 1951 to the technical cooperation programs operated in Guatemala by the United States. The notes were transmitted to the Department of State under cover of despatch 820, dated February 13, 1952, not printed. (Ibid., 814.00 TA/2-1352) For text of the notes, see United States Treaties and Other International Agreements (UST), volume 3 (part 4), page 4728, or Department of State Treaties and Other International Acts Series (TIAS) No. 2634; for text of the Mutual Security Act (Public Law 165), approved October 10, 1951, see 65 Stat. 373.

Washington, February 5, 1952:

/1/Source: National Archives and Records Administration, RG 59, Central File 814.2612/2-552. Secret.

SUBJECT
Roadbuilding Equipment for Guatemala

PARTICIPANTS

/2/Albert F. Nufer, Director, Office of Middle American Affairs.

/3/Ernest V. Siracusa, Officer in Charge, Central America and Panama Affairs.

/4/John W. Evans, Deputy Director, Office of International Materials Policy.

/5/George M. Pollard, Chief, Machinery and Manufactured Products Branch, Manufactured Products Staff.

/6/George Wythe, Director, American Republics Division, Office of International Trade, Bureau of Foreign and Domestic Commerce.

/7/William A. Rafferty, Chief, Mexico-Central American Section, American Republics Division, Office of International Trade, Bureau of Foreign and Domestic Commerce.

/8/Mark Merrell, Assistant Director, Projects and Technical Data Division, Office of International Trade, Bureau of Foreign and Domestic Commerce.

/9/Carroll W. Dunning, Director, Producer's Equipment Division, Office of International Trade, Bureau of Foreign and Domestic Commerce.

/10/William C. Brister, Chief, Latin American Branch, Foreign Division, Policy Coordination Bureau.

/11/Eleanor Lansing Dulles, detailed to the National Production Authority from the Department of State.

/12/Thomas H. MacDonald, Commissioner, Bureau of Public Roads, Department of Commerce.

/13/John L. Harrison, Assistant to the Chief, Inter-American Regional Office.

Mr. Clark (MID) began the discussion by stating that information had been received from our Embassy in Guatemala that the Guatemalan Government desired to purchase a large quantity of roadbuilding equipment in the United States and was expected to send a special agent or mission to Washington to assist the Guatemalan Embassy in arranging for the purchase of this equipment. In view of the special situation in Guatemala and our policy with regard to providing assistance to that country, it had been deemed advisable to call a meeting of those with whom the Guatemalans would probably come into contact in their efforts to obtain the desired equipment in order to formulate a common policy as to how they should be handled.

As all those present were aware, our policy toward Guatemala, stated briefly, was to refrain from extending priority assistance for materials and equipment in short supply; also to cut back on quotas and allocations as much as possible without, however, exposing ourselves to charges that we were violating any of our Inter-American commitments. It was necessary, therefore, to be selective and relatively cautious in the application of this policy in order to avoid the possibility that Guatemala could document a case in the Organization of American States or elsewhere that we were engaging in economic warfare in violation of our commitments.

The reason for this meeting, then, was to prepare for the arrival of the Guatemalan mission. Obviously, it was highly important that we all had the same understanding with regard to strategy and tactics and that we all pursued the same line when talking to the Guatemalans.

It was our view, Mr. Clark said, that our objective should be to see to it that Guatemala obtained as little of this equipment as possible. We should be careful, however, not to reveal this fact to the Guatemalans. We should receive them with the utmost courtesy and conduct ourselves in such a way as to give the impression that we were trying to be as helpful as possible. We should stress and restress the tight supply situation as the basis for inability to issue licenses or provide priority assistance. At no time during conversations should reference be made to the political situation in Guatemala or to United States-Guatemala relations. If the Guatemalans suspect or conclude among themselves that we are not being fully cooperative, we will have succeeded entirely in our purpose. However, we should never by our actions give them proof that we are not being cooperative.

Some of the equipment which the Guatemalans would be seeking would not, of course, be in short supply. We would no doubt have to license this equipment and this fact could be pointed to as evidence that there was no embargo on shipments to Guatamala.

/14/Alfredo Chocano Becerra, Counselor, Guatemalan Embassy.

A general discussion ensued and it was ultimately decided that Mr. Merrell should follow normal procedure and explain fully to Chocano the advantages and disadvantages of obtaining a project license. He would, during the conversation, express grave doubts that the National Production Authority would give the project as a whole priority status and would refer to the two cases of roadbuilding projects in Peru and Turkey which had been turned down by the NPA. He would mention that in all probability the project would need the strong support of the State Department to obtain consideration from the NPA and inquire whether Chocano had discussed the matter with the State Department. He would suggest that perhaps it would be best to put the project on an individual licensing basis and offer to make arrangements for Chocano to see Mr. Dunning, Chief of the Licensing Branch of the Office of International Trade. In his turn, Mr. Dunning would explain licensing procedures and stress the fact that much of the equipment which Guatemala needed was in extremely short supply.

It was emphasized several times during the discussion that the Guatemalans should be treated on the surface in the same way as the representatives of any other country trying to obtain materials and equipment in this country.

Mr. Dunning mentioned that his section has been holding up licenses for several months on a number of orders and that the pressure by U.S. suppliers for his section to issue the licenses was increasingly sharp. He mentioned in particular an order of jeeps by the H. J. Nichol Company and a number of road scrapers. Mr. Dunning said that these items were not in short supply, were on the docks waiting for shipment and there was no proper basis for continuing to hold them up unless we were to classify Guatemala as a security risk. It was agreed that under these circumstances licenses would have to be issued for at least a part of these orders.

It was the consensus of opinion that the key to the success of the Guatemalan mission was whether or not it was able to obtain heavy tread tractors. Without them much of the other equipment the mission might succeed in getting would be useless. There was general agreement that tractors of this kind could not be obtained without priority assistance.

When the meeting adjourned, general agreement had been reached that all parties would follow the course outlined above when approached by Guatemalan officials.

NIE-62

Washington, March 11, 1952.

/1/Source: Department of State, INR-NIE Files. Secret. A cover sheet, dissemination notice, and title sheet are not printed. National Intelligence Estimates (NIE's) were high-level interdepartmental reports presenting authoritative appraisals of vital foreign policy problems. NIE's were drafted by officers from those agencies represented on the Intelligence Advisory Committee (IAC), discussed and revised by interdepartmental working groups coordinated by the Office of National Intelligence Estimates of the Central Intelligence Agency (CIA), approved by the IAC, and circulated under the aegis of the CIA to the President, appropriate officers of cabinet level, and the National Security Council. The Department of State provided all political and some economic sections of NIE's.

/2/ A note on the title sheet reads as follows: "The intelligence organizations of the Department of State, the Army, the Navy, the Air Force, and the Joint Staff participated with the Central Intelligence Agency in the preparation of this estimate. All members of the Intelligence Advisory Committee concurred in this estimate on 6 March 1952. See, however, footnotes to paragraphs 7 and 27."

The Problem

To analyze the present political situation in Guatemala and possible developments during 1952.

Conclusions

1. The Communists already exercise in Guatemala a political influence far out of proportion to their small numerical strength. This influence will probably continue to grow during 1952. The political situation in Guatemala adversely affects US interests and constitutes a potential threat to US security.

/3/ For documentation relating to the Guatemalan revolution of 1944 and recognition of a new regime by the United States, see Foreign Relations, 1944, vol. VII, pp. 1132 ff.

3. The political alliance between the Administration and the Communists is likely to continue. The opposition to Communism in Guatemala is potentially powerful, but at present it lacks leadership and organization. So far Communist-inspired Administration propaganda has succeeded in stigmatizing all criticism of Communism as opposition to the Administration and to the principles of the still popular Revolution of 1944

4. Future political developments will depend in large measure on the outcome of the conflict between Guatemala and the United Fruit Company. This conflict is a natural consequence of the Revolution of 1944, but has been exacerbated by the Communists for their own purposes.

/4/Jacobo Arbenz Guzm?n, President of Guatemala.

/5/International Railways of Central America (IRCA).

6. If the Company should withdraw from Guatemala a worsening economic situation would probably result. It is unlikely, however, that the economic consequences during 1952 would be such as to threaten political stability unless there were a coincident and unrelated decline in coffee production, prices, or markets.

*The Special Assistant, Intelligence, Department of State, would substitute the following paragraph: "Any deterioration in the economic and political situation would probably at first tend to increase the Administration's dependence on and favor toward organized labor, with a consequent increase in Communist influence. However, an economic crisis might force the Government to turn against the Communists in order to save its political position. On the other hand, it is unlikely that the Communists could come directly to power during 1952, even though the incapacitation of President Arbenz would bring a pro-Communist as his legal successor." [Footnote in the source text.]

8. In present circumstances the Army is loyal to President Arbenz, although increasingly disturbed by the growth of Communist influence. If it appeared that the Communists were about to come to power in Guatemala, the Army would probably prevent that development.

9. In the longer view, continued Communist influence and action in Guatemala will gradually reduce the capabilities of the potentially powerful anti-Communist forces to produce a change. The Communists will also attempt to subvert or neutralize the Army in order to reduce its capability to prevent them from eventually taking full control of the Government.

Discussion

10. The present political situation in Guatemala is the outgrowth of the Revolution of 1944. That Revolution was something more than a routine military coup. From it there has developed a strong national movement to free Guatemala from the military dictatorship, social backwardness, and "economic colonialism" which had been the pattern of the past. These aspirations command the emotional loyalty of most politically conscious Guatemalans and the administration of President Arbenz derives corresponding strength from its claim to leadership of the continuing national Revolution.

/6/Col. Francisco Javier Arana.

/7/Juan Jos? Ar?valo Bermejo, President of Guatemala, 1945-1951.

/8/Colonel Arana was assassinated in Guatemala on July 18, 1949.

12. By 1951 the toleration of Communist activity which had characterized the early years of the Ar?valo Administration had developed into an effective working alliance between Ar?valo and the Communists. Arbenz, to attain the Presidency, made with the Communists commitments of mutual support which importantly affect the present situation. He did not, however, surrender himself completely to Communist control.

13. The Communist Party of Guatemala has no more than 500 members, of whom perhaps one-third are militants. The Party, however, has recently reorganized and is actively recruiting, especially in Guatemala City, on the government-owned coffee plantations, and among United Fruit Company workers. It is in open communication with international Communism, chiefly through the Communist-controlled international labor organizations, the Latin American CTAL and the world-wide WFTU.

14. The Communists have achieved their present influence in Guatemala, not as a political party, but through the coordinated activity of individual Communists in the leftist political parties and labor unions which emerged from the Revolution of 1944. The extension of their influence has been facilitated by the applicability of Marxist clich?s to the "anti-colonial" and social aims of the Guatemalan Revolution.

15. With the assistance of the Government, Communist and Communist-influenced labor leaders have been the most successful organizers of Guatemalan labor, especially among the United Fruit Company and government plantation workers. Their formation of the General Confederation of Guatemalan Workers in 1951 and Government pressure for labor unity have facilitated the extension of their control over all organized labor. They have been less successful in converting to political Communism the mass of labor, which is illiterate and politically inert. In the important railway workers' and teachers' unions there is opposition to association with Communism.

16. Through their control of organized labor and their influence within the pro-Administration political parties the Communists have been successful in gaining influential positions within the Government: in Congress, the National Electoral Board, the Institute of Social Security, the labor courts, the propaganda office, and the official press and radio. Their influence is extended by the presence of an indefinite number of Communist sympathizers in similar positions. The Communists do not fully control the Administration, however. Over their protests President Arbenz has recently dismissed a pro-Communist Minister of Education and appointed a non-Communist Minister of Communications.

17. If President Arbenz should become incapacitated his legal successor would be Julio Estrada de la Hoz, the President of Congress, an ardent nationalist. . . . In this event, however, the Army would probably seize power itself in order to prevent the Communists from gaining direct control of the Government.

18. Various elements in Guatemala, including many loyal adherents of the Revolution of 1944, view with misgiving the rapid growth of Communist influence in that country. The principal elements of this latent anti-Communist potential are:

a. The Catholic hierarchy, implacably opposed to Communism. While its influence has been considerable, the Church has been handicapped by the small number of priests and by a lack of a constructive social program.

b. Guatemalan landholding and business interests. These interests, which are now enjoying prosperity, resent increasing taxes and labor costs, but so far have not been subjected to direct attack, as have corresponding foreign interests. They may shortsightedly hope for advantage at the expense of these foreign interests.

c. The strong railway workers' union, which has repudiated its adherence to the Communist-controlled Confederation and has ousted its former leaders.

d. A large proportion of university students and an important segment of leadership in the teachers' union.

e. The Army, which has shown some concern over the growth of Communist influence. The Army command is loyal to President Arbenz and to the Revolution of 1944, but is probably prepared to prevent a Communist accession to power.

19. So far, Communist-inspired Administration propaganda has been successful in stigmatizing all criticism of the Administration as opposition to the principles of the Revolution of 1944. So long as it remains possible to discredit opposition to Communism by identifying it with opposition to the Revolution of 1944 and with support of foreign "colonialism," it is unlikely that a coherent, sustained, and effective opposition to Communism will develop. Moreover, political dissatisfaction in Guatemala has been strong enough to unify the pro-Administration parties, and to prevent members of these parties from openly opposing the Communists. For the period of this estimate, therefore, it is likely that the alliance between the Administration and the Communists will continue, and that the potentially powerful opposition to Communism will remain ineffective.

20. The United Fruit Company, which conducts extensive operations in nine Latin American countries, dominates Guatemalan banana production. The Company controls the only effective system of internal transportation, the International Railways of Central America. Through its merchant fleet the Company has a virtual monopoly of Guatemalan overseas shipping. It owns or leases large tracts of land in Guatemala and is second only to the Government as an employer of Guatemalan labor.

21. The important position of the United Fruit Company in their economy has long been resented by Guatemalan nationalists, regardless of the fact that the wages and workers' benefits provided by the Company were superior to any others in the country. When the Revolutionists of 1944 undertook to "liberate" Guatemala from "economic colonialism" they had the Company specifically in mind. The Government can therefore count on the support of Guatemalan national sentiment in its conflict with the Company.

22. The present crisis had its origin in the virtual destruction of the Company's principal Guatemalan plantation by wind storms in September 1951. In view of previous Communist-inspired labor troubles, the Company unsuccessfully demanded Government assurances against future increased labor costs before it would undertake to rehabilitate the plantation. Meanwhile the Company suspended some 4,000 out of the 7,000 workers at that plantation. With Government support, the Communist-led union demanded that these workers be reinstated with pay for the period of suspension and the labor court ruled in favor of the union. The Company refused to comply with the court's decision and in consequence certain of its properties have been attached to satisfy the workers' claim for back pay. The scheduled sale of these properties has been postponed, however, in circumstances which suggest the possibility of a compromise settlement of the dispute.

23. The Communists have an obvious ulterior purpose in forcing the issue with the Company. The Government, however, probably does not desire to drive the Company from Guatemala at this time, preferring that it remain in the country on the Government's terms. The Company's employees also have an interest in the continuation of its operations. For its part, the Company has an interest in preserving its investment in Guatemala.

24. Future developments will depend in large measure on the outcome of the struggle between the United Fruit Company and the Guatemalan Government.

25. If the Company should submit to Guatemalan demands the political position of the Arbenz Administration would be greatly strengthened. The result, even if it were a compromise agreement, would be presented as a national triumph over "colonialism" and would arouse popular enthusiasm. At the same time the Company would continue its operations, paying taxes and wages. The Government and the unions, under Communist influence and supported by national sentiment, would probably proceed to exert increasing pressure against other US interests in Guatemala, notably the Railway.

26. If the Company were to abandon its investment in Guatemala there would also be a moment of national triumph, but it would soon be tempered by realization of the economic consequences of a cessation of the Company's operations. It is unlikely, however, that these consequences during 1952 would be severe enough to threaten the stability of the regime unless there were a coincident and unrelated decline in coffee production, prices, or markets.

/*/The Special Assistant, Intelligence, Department of State, would substitute the following paragraph: "Any deterioration in the economic and political situation would probably at first tend to increase the Administration's dependence on and favor toward organized labor, with a consequent increase in Communist influence. However, an economic crisis might force the Government to turn against the Communists in order to save its political position. On the other hand, it is unlikely that the Communists could come directly to power during 1952, even though the incapacitation of President Arbenz would bring a pro-Communist as his legal successor." [Footnote in the source text.]

28. If during 1952 it did appear that the Communists were about to come to power by any means, the anti-Communist forces in Guatemala would probably move to prevent that development. In particular, the Army command would probably withdraw its support from the Administration and seize power itself.

29. In the longer view, continued Communist influence and action in Guatemala will gradually reduce the capabilities of the potentially powerful anti-Communist forces to produce a change. The Communists will also attempt to subvert or neutralize the Army in order to reduce its capability to prevent them from eventually taking full control of the Government.

Washington, September 5, 1952.

/1/ Source: National Archives and Records Administration, RG 59, Central File, 714.56/9-552. Confidential; Official-Informal.

/2/Not found in Department of State files.

/3/Col. Vernon P. Martin.

/4/Apparent reference to the Mutual Defense Assistance Act (Public Law 329), approved Oct. 6, 1949; for text, see 63 Stat. 714.

/5/ For text of the Inter-American Treaty of Reciprocal Assistance (Rio Treaty), opened for signature at Rio de Janeiro, Sept. 2, 1947, and entered into force for the United States, Dec. 3, 1948, see TIAS No. 1838, or 62 Stat. (pt. 2) 1681.

/6/Charles D. Martin, Munitions Division, Office of Security and Consular Affairs.

/7/In the referenced memorandum of telephone conversation by Mr. Siracusa, not printed, Mr. Martin was noted to have stated that export licenses for the sale abroad of aircraft could be denied if the seller was unable to provide proper serial numbers, or if it was determined that the aircraft in question had been sold with a "scrap warranty". (National Archives and Records Administration, RG 59, Central File 714.5622/8-1952)

/8/Col. Felipe Antonio Giron, Chief, Guatemalan Air Force.

/9/Not identified.

/10/Department of State files indicate that no F-51 fighter planes were sold to the Arbenz government.

Sincerely yours,

Edward W. Clark

Guatemala City, September 25, 1952.

/1/Source: National Archives and Records Administration, RG 59, Central Files, 611.14/9-2552. Confidential.

PARTICIPANTS
His Excellency Se?or Jacobo Arbenz Guzm?n, Constitutional President of the Republic of Guatemala, and
Mr. Rudolf E. Schoenfeld, American Ambassador.

/2/Reference is to the agreements relating to the establishment in Guatemala of agricultural and rubber research programs by the Department of Agriculture. Through the Department of Agriculture's Office of Foreign Agricultural Relations (OFAR), the United States maintained the Guatemalan Instituto Agropecuario Nacional which engaged in agricultural research and experimentation. The program was established pursuant to a memorandum of understanding and an exchange of notes signed at Guatemala City, July 15, 1944, supplemented and amended by a memorandum of understanding signed at Guatemala City, Mar. 10, 1945; for text of the agreement, see 58 Stat. (pt. 2) 1429 and 59 Stat. (pt. 2) 1471. The Guatemalan Government terminated the agreement on Aug. 4, 1950. The rubber research program was established in June 1941 through an informal letter of agreement which expired on June 30, 1951. Although both programs continued to operate without agreements, the negotiation of new agreements for existing cooperative programs was required under the provisions of the Mutual Security Act of 1951 . In despatch 601, from Guatemala City, dated Jan. 12, 1953, not printed, Ambassador Schoenfeld reported on the status of negotiations for new agreements. (National Archives and Records Administration, RG 59, Central File 714.5 MSP/1-1253) Additional pertinent documentation is ibid., files 814.00 TA and 814.20 for the years 1953 and 1954.

/3/Ambassador Schoenfeld was in Washington for consultations at the Department of State from late September until early December; he returned to Guatemala on Dec. 4.

President Arbenz said he was eager to complete the construction of the Guatemalan Section of the Pan American Highway. He hoped that when I was in Washington I would do what I could to further that project. He expressed the opinion that the road was not only desirable for Guatemala but also for the unity of the hemisphere.

I told him I had no doubt that the American authorities desire to complete the Highway as early as practicable. As regarded the Guatemalan Section, three practical considerations were involved: (1) a covering agreement; (2) a Congressional appropriation; and (3) priorities in relation to available funds.

As he knew, there had been- difficulty about a US-Guatemalan Agreement. Guatemala had had reservations about accepting certain of the standard specifications. President Arbenz said he was confident an agreement could be arrived at.

As regarded (2), the U.S. Congress was not in session at this time. It would not convene until 1953. After it met it was still difficult to forecast when it would get round to making such an appropriation.

I went on to say that I thought in frankness I ought to add that public opinion also had an influence on the matter. As he knew, American public opinion with regard to Guatemala left much to be desired. The U.S. Congress was very sensitive to public opinion. It was a real factor.

President Arbenz said he thought the American press had painted a false picture of Guatemala. It gave the impression that the Guatemalan Government was Communist. As I knew, it was not Communist.

I said I doubted whether people in the United States regarded the Guatemalan Government as a Communist Government. But they did feel that the Communists were unduly influential. They saw Communists holding key positions in various agencies and institutions and many evidences of Communist activity. They concluded that this denoted a serious degree of Communist infiltration in the country and a tolerance for it.

I thought it a mistake to think this was merely an idea of the press. For example, Mr. Serafino Romualdi, an official of the American Federation of Labor, had publicly stated a few days ago that Communism had been losing ground throughout Latin America except in Guatemala. This came from an independent labor leader.

President Arbenz said that the Guatemalan people had had only a short experience with democracy. They had emerged only a few years ago from a long series of dictatorships. They were finding their way. As a practical matter, it had been the local experience that when attempts were made to suppress any political movement, it tended to grow. I said I recognized the risks of mere suppression. The art of governing, it seemed to me, consisted in finding means of coping with disruptive elements.

I knew it was claimed that there were few Communists in Guatemala. As a matter of fact, Communists were usually a minority everywhere. But the Communists had made a study of the key positions and always directed their efforts toward getting control of them. Their influence was consequently often far out of proportion to their numbers. Moreover, from my own experience, I knew how dangerous it was to underestimate them.

I went on to say that I was aware of the natural sensitivity to any interference in any country's internal affairs. The problem of Communism in Guatemala was of course an internal problem. It was his problem. But it also had an international aspect.

/4/Manuel Noriega Morales

President Arbenz smilingly assented but expressed doubts as to the accuracy of the estimate of Communism in Guatemala. I went on to say that there was a feeling in the United States that the Guatemalan authorities, perhaps as a result of less direct experience with Communism, tended to underestimate the danger. I also thought it was desirable not to overlook the factor which public opinion abroad represented, even if he doubted its accuracy. Sometimes it was necessary to bear in mind La Rochefoucald's maxim that the appearance of truth sometimes did more harm than truth itself.

President Arbenz was patently interested and attentive but gave no hint that he planned to take any action.

When I took my leave, he wished me a happy trip and said he would look forward to seeing me on my return.

Rudolf E. Schoenfeld

Washington, October 3, 1952.

/1/Source: National Archives and Records Administration, RG 59, Central File 714.00/10-352. Top Secret. Concurred in by Special Assistant to the Deputy Under Secretary of State Nolting, Deputy Director of the Office of Regional American Affairs Jamison, Director of the Office of Middle American Affairs Rubottom, and Director of the Office of South American Affairs Atwood; the memorandum was initialed by Secretary Acheson.

SUBJECT
Possible Military Action Against Guatemala

/2/ Reference is to the Seventh Session of the General Assembly, which opened on Oct. 4, 1952.

/3/Dated July 21, 1952, not printed.

/4/Neil Mara.

/5/Reference is to the inauguration of H?ctor Bienvenista Trujillo Molina, who was elected unopposed as President of the Dominican Republic on May 16,1952; he succeeded his brother, Generalissimo Rafael Leonidas Trujillo Molina.

/6/ Dated Sept. 11, 1952, not printed.

/7/ Dated Sept. 26 and 29, respectively, neither printed.

/8/Telegram 122, from Caracas, dated Sept. 21, 1952, not printed; a copy is also in National Archives and Records Administration, RG 59, Central File 713.0019-2152.

/9/The report under reference, dated Sept. 16, 1952, is not printed.

5. From these official sources, it has been adduced that: (1) A military plan against Guatemala has already been formulated; (2) only a leader is required to put the plan in action; (3) it is hoped to carry out the plan this year, and (4) all elements concerned would like to have a "green light" from the U.S. and tangible support in arms.

/10/Romulo Betancourt.

/11/In a memorandum of a conversation at the Department of State between Mr. Siracusa, Mr. Clark, and Col. Roberto Barrios Pena, a retired Guatemalan army officer and opponent of President Arbenz, dated May 27, 1952, Colonel Pena is reported in part to have forecast an upheaval in Guatemala against the Arbenz government and to have inquired what the United States would do when it occurred. The memorandum, by Mr. Siracusa, reads in part as follows: "he was informed that the United States could only view possible internal struggles in Guatemala as purely domestic issues involving Guatemala alone and that it, therefore, would maintain, in such events, its traditional policy of non-interference and non-intervention." (National Archives and Records Administration, RG 59, Central File 714 00/5-2752)

/12/Jos? Antonio Rem?n was elected President of Panama on May 11, 1952, and installed in office on Oct. 1.

/13/Anastasio Somoza Debayle.

Washington, October 6, 1952.

/1/Source: National Archives and Records Administration, RG 59, Central File 611.14/10-652. Restricted.

SUBJECT
Courtesy Call of New Guatemalan Ambassador

PARTICIPANTS
The Ambassador of Guatemala to the United States, Senor Don Guillermo Toriello Garrido
ARA-Mr. Miller
MID-Mr. Clark

Ambassador Toriello paid his first courtesy call on Mr. Miller this afternoon. He expressed his great pleasure at having the honor to represent his Government in Washington and said that he looked forward to his mission with great anticipation in the sincere hope that his efforts would strengthen further the close bonds of friendship which already existed between the United States and Guatemala. Mr. Miller responded by welcoming the Ambassador to Washington and assuring him that he and other officials of the Department were. here to assist him in every possible way during his stay here as Ambassador.

/2/Memoranda of these conversations, by Mr. Siracusa, dated Sept. 11, 1952, and by Mr. Clark, dated Sept. 30, 1952, respectively, are attached to ibid., 611.14/10-352; they are not printed.

/3/ Not printed.

/4/Ambassador Toriello presented his credentials-to President Truman on Sept. 24, 1952; the text of the Ambassador's remarks and of the President's reply is contained in Department of State press release 751, dated Sept. 24.

/5/In a memorandum to Assistant Secretary Miller, dated Oct. 3, 1952, Mr. Clark stated that MID recommended that an effort be made to conclude a basic highway agreement with Guatemala, because this would provide an opportunity for the United States to obtain certain commitments from Guatemala required by the Inter-American Highway Act (Public Law 375), approved Dec. 26, 1941; for text, see 55 Stat. 860. However, continued Mr. Clark, "our policy of withholding funds for actual work in Guatemala should remain unchanged until such time as there are fundamental changes in the internal situation in Guatemala." (National Archives and Records Administration, RG 59, Central File 611.14/10-352)

Ambassador Toriello then brought up the matter of the difficulties encountered by the Guatemalan Government in endeavoring to obtain roadbuilding equipment for the Atlantic Highway. He said that some machinery was available, but especially in the category of heavy tractors they had only been able to obtain second-hand reconstructed tractors at exorbitant prices. He said that these heavy tractors and certain other heavy equipment were the key to getting ahead with the work. He concluded by expressing the hope that the Department of State could lend its good offices to assisting the Guatemalan Government in obtaining the needed equipment.

Mr. Miller responded by explaining the system of defense priorities made necessary by the defense effort. He said that the OIT had primary jurisdiction in this field and that it was at all times hard pressed to meet the heavy demands of the military and priority civilian needs related to the defense effort. Mr. Miller pointed out that just at the time the general supply situation seemed to be improving the steel strike occurred with resultant setback to the industrial output of the country. Mr. Miller said, however, that the Department would be glad to look into the matter further with the OIT and see what might be done.

Before he departed, Ambassador Toriello left with Mr. Miller for study and consideration by the Department a draft of the proposed change in wording to which he had previously referred.

Washington, October 14, 1952.

/1/Source: National Archives and Records Administration, RG 59, Central File 414.119/10-1452. Secret.

SUBJECT
Export Control Policy Toward Guatemala

/2/Jack D. Neal, Deputy Director, Office of Middle American Affairs.

/3/Bernard J. Cahill, Assistant for Foreign Requirements, American Republics Division, Office of International Trade, Bureau of Foreign and Domestic Commerce.

/4/Program Officer, Strategic Controls Division, Office of International Trade, Bureau of Foreign and Domestic Commerce.

Mr. Edward Clark said that the meeting had been called to review the situation as respects our current export control policy toward Guatemala. He noted that the Department of Commerce had recently raised the question of whether it was advisable to continue the present policy in view of changing circumstances in the supply situation and recalled that in informal discussions between officials of the Department of State and the Department of Commerce it had been agreed to postpone any final decision pending the opportunity to discuss the matter with Ambassador Schoenfeld. Ambassador Schoenfeld had been advised informally before he had left Guatemala for Washington of the views of the Department of Commerce in this regard in order to enable him to have the opportunity of reviewing the matter with his staff prior to discussion in the Department.

Speaking for the Department of Commerce, Mr. Wythe outlined Commerce's position substantially as follows. The supply situation in general was rapidly improving as a result of which there were less and less items over which the Department of Commerce could appropriately exercise licensing control. In view of this easing supply situation it was becoming more and more difficult to turn down or even delay the issuance of export licenses. The pressure from U.S. exporters was mounting and, since they were fully informed as to the supply situation, it was impossible to deny or delay licensing without openly admitting that we were engaging in a restrictive policy as regards exports to Guatemala. Finally, U.S. exporters were complaining that competition from Europe was increasing rapidly, thus threatening U.S. markets in Guatemala and elsewhere in Latin America.

In view of the supply situation and pressure from U.S. exporters there were now few items over which any effective control could be exercised by OIT. The policy of refraining from granting priority assistance could, of course, be continued and some pressure could be brought in the case of materials under quantitative quota restriction. In this category were such commodities as steel, copper and copper sulphate and sulphur. However, in view of the limited control that OIT could now exercise over exports to Guatemala, the Department of Commerce wondered whether it was worthwhile to continue the present policy.

/5/Apparent reference to the occasion when Ambassador Toriello presented his credentials; no other memorandum of a conversation between President Truman and the Ambassador during late September or early October was found in the National Archives and Records Administration, RG 59, Central Files.

/6/Apparent reference to Ambassador Toriello's courtesy call on Assistant Secretary Miller on Oct. 6; the memorandum of their conversation is Document 7.

The Ambassador said that he understood the difficult position Commerce found itself in, especially from the point of view of pressure from U.S. exporters, and said that of course careful attention should be paid to the trade situation to make sure that our policies did not result in a loss of the Guatemalan market for U.S. business through competition from Europe or elsewhere. However, he thought it would be advisable and desirable for certain political reasons, as well as for the effect it is producing on the thinking of Guatemalan officials, for this Government to continue our present policy even though our area of effectiveness was being sharply reduced by the supply situation.

The question was raised as to whether exceptions should be made in our policy in the case of materials over which there were still quantitative quota restrictions to accommodate U.S. companies such as the United Fruit Company. Specifically, it was stated that the United Fruit Company had requested an increased amount over and above the present quota level of copper sulphate used for spraying banana trees. Ambassador Schoenfeld expressed the view that our policy should not be implemented in such a way as to penalize the operations of U.S. companies. This view met with general concurrence.

After some further discussion it was agreed that the present policy of controls over exports to Guatemala, in so far as the supply situation permitted, should be continued. Specifically, it was agreed that 1) no priority assistance would be granted to Guatemala under prevailing circumstances; 2) quotas on materials under quantitative quota restrictions would continue to be cut back; and 3) as regards the export of materials not under quantitative restrictions the Department of Commerce would continue to consult the Department of State and the Embassy whenever there were any unusual items which might provide leverage. In particular, all applications for export to the Guatemalan Government or agencies thereof would be subjected to special scrutiny and brought to the attention of the Department and the Embassy.

Washington, November 12, 1952.

/1/Source: National Archives and Records Administration, RG 59, Central Files, Miller Files: Lot 53 D 26, "Guatemala." Confidential.

SUBJECT
U.S. Policy Toward Guatemala, Especially as it Relates to a Decision Affecting the Negotiation of an Inter-American Highway Agreement

PARTICIPANTS
ARA--Mr. Miller
ARA--Mr. Mann
MID--Rubottom
MID--Mr. Clark
Ambassador Rudolf Schoenfeld

/2/Not found in Department of State files.

The memorandum referred to was read by those present. After some discussion it was agreed that the time was inappropriate to make a final decision on general policy because of the impending changeover in Administration. Such a decision should more properly be left for the incoming Administration.

/3/In a memorandum to Mr. Rubottom and Mr. Clark, dated Nov. 17, 1952, Assistant Secretary Miller stated that the best course to follow in connection with a highway agreement with Guatemala was to defer any major decision until after the new administration took office in order not to prejudice the situation, and that our general policy should be "to avoid taking decisions that constitute a deviation from previous lines of approach." (National Archives and Records Administration, RG 59, Miller Files: Lot 53 D 26, "Guatemala")

New York, November 17, 1952

/1/Source: National Archives and Records Administration, RG 59, Central Files, 611.14/11-1752. Confidential. Secretary Acheson was in New York as Chairman of the U.S. Delegation to the Seventh Session of the General Assembly of the United Nations, which opened on Oct. 14, 1952. Information on the source text indicates that this memorandum was typed on Nov. 19.

SUBJECT
U.S.-Guatemalan Relations

PARTICIPANTS
Ambassador Guillermo Toriello, Guatemalan Delegation

The Secretary

Ambassador Toriello of Guatemala called on me at his request. He said that he wished to speak with me alone and accordingly Mr. Wells withdrew.

The Ambassador then said that he had undertaken his present mission because of his great admiration for the US and his distress that relations between his country and ours were not good. He had been authorized by the President to do all within his power to change the existing situation and restore friendly and cordial relations. He also felt that I was a person who understood the necessity for good relations in the hemisphere and that he could count upon my personal good will. He therefore wished to mention to me a series of things which led him to believe that something was wrong between our countries and to ask what he could do to put it right. He mentioned the Highway Agreement which he was most anxious to conclude before the new Congress met so that everything would be in readiness for the appropriation procedure. However, although they had accepted almost all the suggestions made by the Department, there was one matter on which they had been turned down, though it seemed to be a very trivial one. He attributed significance to this rejection. The point at issue was whether American Government vehicles should be exempted from tax, or whether the agreement would be sufficient if they would be treated exactly the same as Guatemalan vehicles, which he said were not at present subject to tax and undoubtedly never would be. The reason for their desire to use this language was that our language would have to go to the Congress, whereas their language would not. He thought therefore that we were turning this down for broader reasons than the language concerned.

He also stated that when the members of the UN Delegation from Guatemala landed in New Orleans, although they were bearers of diplomatic passports, they were put at the end of the line and were not dealt with until all Americans had been put through. He had explained to his delegation that this was merely the ignorance of the local official and that he did not attribute any studied attitude on the part of this Government to be responsible for it. However, it worried him as it might, in his mind, be an indication of our disapproval.

He also mentioned what he called the violent propaganda against his country which he saw in all American magazines and newspapers and which he thought was activated by a special interest in our country.

In short, he wanted to know what was wrong and what he could do to put it right.

I told him that I knew nothing about the incident in New Orleans and was quite sure that his interpretation was the correct one, but that I would look into it because clearly bearers of diplomatic passports were entitled to all courtesies in our country. Insofar as the Highway Agreement was concerned, I pointed out the disadvantage of treating different governments differently in agreements on this point, and the trouble which would arise. However, I said I would inquire into the matter and discuss it with the Departmental officers concerned.

In regard to the last matter he mentioned, I told him that I thought we should discuss the matter frankly and that there was a clear difference of view. He thought that the articles about Guatemala were maliciously inspired and were untrue. I thought that these articles were a reflection of a situation which existed in Guatemala; whether they were factual or not was beyond my knowledge, but I was quite sure that they were not inspired for propaganda or malicious purposes. The question therefore was what was the situation in Guatemala and what was the Government doing about it. There was trouble of some sort. I should like to hear from him whether he thought that was correct and if so, what the Government was doing about it. He told me that Mr. Wells could tell me about his own background and his family's background, that he was inalterably opposed to Communism in any form whatever; and that he would leave the Government the moment the Government did not believe that it shared the American view. He added that he did share the same view. He spoke about the experience of his youth growing up under a dictatorship and said that we who were accustomed to liberty did not know how fragile it was in Central America and that while his Government could easily become a dictatorship, it was determined not to do so. Therefore, it was not approaching the communist question from the point of view of suppression because that would easily lead to dictatorship. The Government, by a reform policy, was attempting to remove the evils which gave communism a base and, by careful work in the trade unions and in agricultural groups, it was attempting to discredit the communists so that they would be removed from positions by those who had put them where they were. He believed that the dangerous communists were the imported ones, who were spreading propaganda to many of what he called the "local boys". He said that they were very young, uninformed and often misled, but he did not believe that they were indoctrinated communists. However, they were being carefully watched and he said that the circle was being drawn closer and closer around them and that they would not be permitted to exercise any dangerous influence. After some further talk along this line, I said that I wished to discuss the matter with Ambassador Schoenfeld whom I hoped was still in this country and that possibly next week Ambassador Toriello, Ambassador Schoenfeld and I might go into this whole matter and compare notes in the frankest possible way as to what the Government in Guatemala could do or what it was now doing.

He grasped this suggestion with enthusiasm and I told him Mr. Wells would be in touch with him on all the questions he had raised with me.

New York, December 1, 1952.

/1/ Source: National Archives and Records Administration, RG 59, Central File 611.14/12-852. Confidential. Information on the source text indicates that this memorandum was typed on Dec. 2.

SUBJECT
Talk with Guatemalan Ambassador Guillermo Toriello Regarding Matters Affecting United States-Guatemalan Relations

PARTICIPANTS
The Secretary
Amb. Guillermo Toriello--Guatemalan Delegation
Amb. Rudolph E. Schoenfeld--United States Ambassador to Guatemala
Milton K. Wells--United States Delegation

/2/Secretary Acheson's memorandum of conversation with Ambassador Toriello, dated Nov. 17, 1952, is Document 10.

Amb. Toriello devoted most of his part of the conversation toward a general justification of Guatemala's attitude toward Communist influences in that country. Despite frequent efforts of the Secretary and Amb. Schoenfeld to steer the conversation into more specific and more constructive channels, Toriello kept adverting to generalities. With considerable repetition, he described his Government's basic policy as one conditioned by a sincere desire to maintain democratic procedures and to avoid dictatorship. His Government believes that the best way to combat Communism is to improve the maladjusted social and economic conditions which produce unrest among the underprivileged classes. This approach, he argued, is fraught with less danger than a repressive policy which would drive Communism underground. He belittled the power and influence of the Communist leaders. He said their activities are known to the Government and that they would be placed under immediate restraint should war occur. He personally shared the belief that they can be controlled best in the open and that in any case they are discrediting themselves with the rank and file. Regarding the labor unions, he did not believe the workers shared the ideological views of their leaders and were interested only in better pay and better living standards.

During the course of the conversation, however, Amb. Toriello did make a number of interesting comments on several specific situations as recorded in the following paragraphs.

Toriello praised the personality and qualifications of the new Foreign Minister, Dr. Raul Osegueda, whose friendly attitude and sincere desire to work for the best possible relations with the United States would facilitate his own mission. This gave him much satisfaction since he could now confidently count upon the support of his Foreign Office as well as President Arbenz to this end. Osegueda had asked the Ambassador to convey his respects and greetings to the Secretary, and to Ambassador Schoenfeld whom he looked forward to seeing in Guatemala. The Foreign Minister had expressed a desire to attend the forthcoming inaugural ceremonies if invitations are to be extended to other governments to be represented by special delegations. The Secretary stated he would inquire into our policy in this regard and advise the Ambassador as to whether we plan to invite special delegations. Both the Secretary and Ambassador Schoenfeld reciprocated the Foreign Minister's greetings.

The conversation turned to the pro-Communist slant of the official newspaper Diario de Centro America, which, as Amb. Schoenfeld commented, had an unfortunate effect upon public opinion in the United States. Toriello stated he could assure us of a future change in that journal's policy. He explained that the Diario de Centro America includes two sections, the gazette portion which prints official decrees and announcements, and the news or informative section. The problem may be solved, he said, by eliminating the informative section, converting the Diario into a truly official gazette.

Amb. Schoenfeld inquired whether any steps were contemplated to remedy a similar situation with respect to the Government broadcasting station TGW. Toriello assured him that the policy of TGW would also be changed. One explanation of the frequent attacks on the United States heard in the past over this Government station, he apologized, was that unfriendly elements abused the radio time which they had rented from TGW for unofficial programs. He described how he himself once had taken up the telephone to stop a TGW program . . . slandering the Government of neighboring Honduras.

/3/Jos? Manuel Fortuny Arana.

/4/Victor Manuel Guti?rrez Garbin

. . . He predicted that Fortuny might be defeated; not because the Government opposed him, but for the same reasons that Humberto Gonzalez Suarez failed to become Mayor of Guatemala City-that is, because the relatively intelligent electorate in the city and the influence of the Church brought about his defeat at the polls.

Once or twice during the conversation, Toriello urged us not to be taken in by the denunciations of the Government by the opposition. By innuendo, he seemed to allege that our estimate of the situation had been unduly influenced by wild stories and rumors circulated by the subversive opposition, disguised and cloaked by anti-communism. The anti-communist movement in Guatemala is dangerous, he argued, since it does conveniently serve as a cloak for the irreconcilable opposition. Alluding again to the alleged "grand conspiracy against Guatemala" with which Guatemalan spokesmen so frequently charge the United States press and "foreign interests" Toriello said the situation was aggravated by the fact that Guatemala does not have diplomatic relations with Franco Spain, Peru, Venezuela and others. These countries, he said, add their bit to the campaign against Guatemala. In this connection, he commented that he hoped that Guatemala would establish normal relations with Venezuela before the Tenth Conference of Inter-American States meets in Caracas.

/5/ In a letter to Mr. Clark, dated Dec. 3, 1952, not printed, Mr. Wells noted a few minor omissions from this memorandum of conversation (National Archives and Records Administration, RG 59, Central File 714.00/12-352)

Washington, 12 December 1952.

/1/Source: National Archives and Records Administration, RG 59, Central File 714.00/12-1252. Top Secret.

SUBJECT
Central America--Guatemala

1. The following recent reports concerning the Central American situation are submitted for your information and consideration. The sources of these reports have proved reliable before and they conform to the pattern established by other sources. However some of the information cannot, for obvious reasons, be checked satisfactorily.

a. The Guatemalan Government has recently stepped-up substantially its support of Communist and anti-American activities in other Central American countries as follows:

It is reliably reported that in northern Honduras there are more than 40 Communist cells in existence, organized under Guatemalan sponsorship.

In September 1952 the Guatemalan Government gave Presidential Candidate Figueres of Costa Rica $300,000 cash, according to the same informant.

b. The Guatemalan Government has been purchasing arms which are not going to the Guatemalan army but which it is believed are being distributed to the secret forces described below.

c. Deputies to the Guatemalan National Congress are to be elected 16-18 January. Indications are that communists will dominate the Congress after the elections because of their infiltration of all legal political parties. The new Deputies who take office in March will make appointments to all judgeships in the Supreme and lower courts of the country.

d. The principal revolutionary group has been building its organization since March 1952. We are informed that this group has decided to strike not later than 1 February 1953 with whatever means they have at their disposal. They are convinced that if the government of Guatemala succeeds in its present plan to control both Congress and the courts the chances of eventually overthrowing that government will be very considerably reduced.

e. The government of Guatemala is reacting defensively to the threat of revolution. It expects any invasion to start from across the Salvadoran frontier, and believes its best chances for defense are to fall back on Quetzaltenango. Because the government no longer fully trusts the Army, it has begun the development of a secret force of 1500 non-military personnel, broken down into three separate organizations: (1) the Caribbean Legion (200) . . . ; (2) a secret Communist organization (500); (3) a group composed of Cubans and Spanish Republicans.

f. The Costa Rican elections are scheduled for July 1953. Figueres, supported by the Guatemalan Government, is reported to control 105 of the 106 employees in the Registro Civil where all voters must register. A continuance of financial support from Guatemala reinforces his already strong position. According to recent reports, Betancourt (the exiled leader of the Venezuelan Accion Democratica leftist party) was still being given shelter and support by Figueres. (OCI notes that Figueres appears to be so strong politically at this time that there is no reason to believe that withdrawal of financial support by Guatemala, or the overthrow of the Guatemalan Government, would seriously affect Figueres candidacy one way or the other.)

g. A reliable source . . . indicates that his country is so concerned with the increasing domination of communists in Guatemala and the extension of their activities to other Central American countries, that El Salvador is considering a move against Guatemala in late December or early January. We have not ascertained whether an overt move or covert support of Guatemalan anti-Communists is planned. Our source indicates that the principal restraint upon such action is doubt as to whether the US would view it with favor.

2. We have heretofore advised you of the existence of a substantial revolutionary group planning to overthrow a presently Communist infiltrated Guatemalan Government. In accordance with State Department instructions, we have given no overt or covert assistance to this group.

Walter B. Smith

On February 26, 1953, President Arbenz signed an order issued by the Guatemalan National Agrarian Council calling for the expropriation, under provisions of the Agrarian Reform Law of June 17, 1952, of approximately 234,000 acres of United Fruit Company property near Tiquisate on the Pacific side of Guatemala, and offering the company government bonds as compensation. The company appealed the expropriation order to the Guatemalan Supreme Court, requesting an injunction against its implementation; the court denied the appeal on March 18, 1953. A translation of the text of the Agrarian Reform Law was transmitted to the Department of State under cover of despatch 1299, from Guatemala, dated June 19, 1952, not printed. (National Archives and Records Administration, RG 59, Central File 814.20/6-1952)

On March 25, 1953, Assistant Secretary of State for Inter-American Affairs Cabot handed an aide-m?moire concerning the expropriation, drafted by Mr. Mann and Mr. Leddy and dated March 25, to Guatemalan Ambassador Toriello at the Department of State. The aide-m?moire indicated that the United States Government did not consider deferred payment in the form of agrarian bonds as constituting prompt and effective compensation to the company, that the amount of compensation offered was inadequate under well-established principles of international law, and that the views of the Guatemalan Government were invited concerning the continued operation of the company in Guatemala. (Ibid., 814.20/3-2553)

In Guatemalan Embassy note no. 596, dated June 26., 1953 and delivered to the Department of State on that date, not printed, the Guatemalan Government set forth its position concerning the expropriation of UFCO lands. The note stated in part that the expropriated lands were unproductive and vacant and of no benefit to the company, the expropriation was an exercise of Guatemalan national sovereignty and therefore not subject to international discussion, and that full protection was afforded all foreign-owned property in Guatemala. (Ibid., 814.20/6-2653)

In an aide-m?moire, dated August 27, 1953 and handed to Ambassador Toriello on August 28, the Department of State set forth the legal basis for the UFCO's claim for compensation from the Guatemalan Government, and requested that direct negotiations concerning the issue be undertaken either between representatives of the Guatemalan Government and the company or between the two Governments. (814.20/8-2753) For text of the aide-m?moire and additional information, see the Department of State Bulletin, September 14, 1953, pages 357-360.

In an aide-m?moire, dated February 5, 1954 and handed to Guatemalan Charge Alfredo Chocano at the Department of State on the same date, not printed, the Department renewed its request for direct negotiations, and suggested international arbitration as an alternate means of settlement. (National Archives and Records Administration, RG 59, Central File 814.20/2-554) Department of State files indicate that the Guatemalan Government acknowledged the Department's communications of August 27, 1953 and February 5, 1954.

On February 24, 1954, the Guatemalan Government announced final expropriation of an additional 172,532 acres of UFCO property located near Bananera on the Caribbean slope of Guatemala, again stating its intention to pay compensation in the form of long-term agrarian bonds.

On April 20, 1954, in a memorandum of the same date handed to Charg? Chocano at the Department of State, not printed, the United States presented a formal claim against the Guatemalan Government, on behalf of UFCO, for the seizure of the company's lands at Tiquisate. (814.20/4-2054) For additional information, see the Department's press release 206, dated April 20, 1954, in the Department of State Bulletin, May 3, 1954, pages 678-679.

Washington, March 25, 1953.

/1/Source: National Archives and Records Administration, RG 59, Central File 611.14/3-2553. Confidential. Fisher was the Guatemalan desk officer.

SUBJECT
Relations with Guatemala

PARTICIPANTS
Ambassador Guillermo Toriello Garrido of Guatemala
ARA--Mr. Cabot
MID--Mr. Fisher

/2/Spruille Braden, Ambassador in Argentina from May to August 1945 and Assistant Secretary of State for American Republic Affairs, 1945-1947.

Dr. Toriello brought up the matter of the Aviateca application for a permit to fly to the U.S., which he said had been delayed by the Department for a very long time. Mr. Fisher said the application was under study and that it would probably go forward to the Civil Aeronautics Board soon.

Dr. Toriello mentioned the matter of pending license applications for arms, specifically tank parts. Mr. Fisher said the application is under study, and that certain findings had to be made regarding availability, etc. Mr. Cabot said that, nevertheless, we had to be sure about the orientation of the people who were going to get the arms. He emphasized that the U.S. Government is very seriously concerned over the infiltration of Communists in the Guatemalan Government, and said that he felt all the other problems pertaining to our relations with Guatemala were subsidiary to this central issue and could be settled without undue difficulty once the matter of Communism was cleared up.

Dr. Toriello thought we overestimated the importance of Communism and restated at length, and in various ways, his theme that the charges of Communism in Guatemala were false and were made by people opposed to the social-economic reforms being made by the present Administration.

Mr. Cabot again emphasized that this Government was not desirous of impeding social-economic reform in any country, nor in giving credence to false statements about Guatemala, but that the U.S. was definitely concerned over the evident infiltration of a dangerous foreign influence into the Guatemalan Government.

/3/Alfonso Solorzano.

/4/For information on this subject, see Document 13.

/5/Reference is to the Department of State's aide-m?moire, dated Mar. 25, 1953; see Document 13.

Dr. Toriello said he would bring a prompt reply but added that the Government's intention was not to drive the company out of the country but to subject the company to the provisions of its laws. He gave the story of his own expropriation, concluding that payment of the declared tax valuation was just payment. He said the Agrarian Law included provisions for the rental of nationalized lands, which could be used to meet the company's needs for lands. He went on to discuss what he called the bad behavior of the company in the past, and mentioned the recent imposition by the railroad of a 15 cent per quintal tax on cargo moved from its pier at San Jose to the immediately adjacent highway terminal facilities, just as the Government finished paving the road paralleling the railroad to the capital. He said the tax was withdrawn shortly afterwards. He said the Fruit Company paid $75 per car to ship its bananas on the railroad, while Guatemalans were charged $575 per car, and that the Government therefore had to build the Atlantic Highway to provide fair competition.

/6/Reference is to Guatemalan Embassy note no. 1661 , dated Dec. 22, 1952, not printed. (National Archives and Records Administration, RG 59, Central File 820.2612/2-2252)

/7/Between Apr. 6 and May 3, 1953, Assistant Secretary Cabot conducted a fact-finding tour through Central and South America. Documentation relating to his trip is ibid., 110. 15 CA.

The conversation between Mr. Cabot and Dr. Toriello, which was friendly and frank, lasted a little over one hour.

Mr. Cabot handed Dr. Toriello an Aide-M?moire on the subject of the expropriation of United Fruit Company properties.

NIE-84

Washington, May 19, 1953.

/1/Source: Department of State, INR-NIE Files. Secret. A cover sheet and dissemination notice are not printed.

/2/A note on the cover sheet reads as follows:

"The following member organizations of the Intelligence Advisory Committee participated with the Central Intelligence Agency in the preparation of this estimate: The intelligence organizations of the Departments of State, the Army, the Navy, the Air Force, and the Joint Staff.

"The Intelligence Advisory Committee concurred in this estimate on 12 May 1953. The AEC and FBI abstained, the subject being outside of their jurisdiction."

The Problem

To estimate the current political situation in Guatemala and probable future developments.

Conclusions

1. The current political situation in Guatemala is adverse to US interests. The Guatemalan Communists exercise a political influence far out of proportion to their small numerical strength. Their influence will probably continue to grow as long as President Arbenz remains in power.

2. Communist influence in Guatemala is based on militant advocacy of social reforms and nationalistic policies identified with the Guatemalan Revolution of 1944. It is exercised through the personal influence of individual Communists with the President and within the pro-Administration political parties, through infiltration of the bureaucracy, through control of labor organizations, and through leadership of the agrarian reform movement. The Communists' present objective is not open and direct control of Guatemala. Rather, they seek to neutralize Guatemala as an ally of the United States and to convert its Government into an effective, though indirectly controlled, instrument of Communism.

3. President Arbenz still exercises personal control of the Administration and of the Army and the Police. It is still possible for him to break his ties with the Communists and to moderate the policies of his Administration, but it is highly unlikely that he will do so.

4. Implementation of the Agrarian Reform Law of 1952 will be the principal objective of the Arbenz Administration during 1953. It is to be expected that the large Guatemalan landholders and the United Fruit Company will be victimized in the process.

5. The implementation of Agrarian Reform has intensified a sense of insecurity which has had a depressing effect on business activity in Guatemala. However, its direct effect on agricultural production is likely to be negligible, at least for several years. As long as coffee prices hold up the general economy of Guatemala will not be vitally affected.

6. The net internal political effect of the implementation of the Agrarian Reform Law will probably be to strengthen the Arbenz Administration and to increase Communist influence and capabilities. Neither the landholders nor the Fruit Company can expect any sympathy in Guatemalan public opinion. Redistribution of their land will be used to mobilize the hitherto inert peasantry in support of the Administration.

7. The most effective opposition to the Arbenz Administration is found in Guatemala City. The urban elements which constitute this opposition are strongly anti-Communist, but they are also strongly nationalistic. In general they could not be expected to make common cause with the landholders and the Fruit Company or to welcome foreign intervention in Guatemalan internal affairs, although some of them might be disposed to accept foreign assistance in overthrowing Arbenz. There is no likelihood that this urban opposition could alter the course of the Government by political action. It could not succeed in a revolutionary attempt opposed by the Army.

8. The Army is the only organized element in Guatemala capable of rapidly and decisively altering the political situation. Although a quick change of attitude is always possible, there is no present reason to doubt the continued loyalty of the Army high command and of most of the Army to Arbenz. The Army under its present leaders could not be expected to take revolutionary action unless they became convinced that their personal security and well-being were threatened by Communist infiltration and domination of the Government, or unless the policies of the Government were to result in extreme social disorder and economic collapse.

9. So long as it remains united, the Guatemalan Army can defeat any force which the Governments of El Salvador, Honduras, and Nicaragua could deploy against it. These Governments are fearful that the trend in Guatemala will lead to Communist subversion and social upheaval in their territories. They are probably giving serious consideration to the possibility of effecting a political change in Guatemala through clandestine support of revolutionary action there. It is highly unlikely, however, that they would or could mount an open military intervention in Guatemala.

10. Guatemala will probably continue to assist Communist subversive activities in the Caribbean area, but will probably avoid involvement in filibustering operations like those of the Caribbean Legion in 1948-1951. To counterbalance its isolation in Central America it will seek political support elsewhere, particularly in the United Nations. If actually invaded it would seek to invoke the Rio Treaty as well as the UN Charter.

11. Guatemala has frequently taken occasion to demonstrate its independence of US leadership and in general has been less cooperative than could be desired, particularly in Hemispheric affairs. Moreover, the regime has systematically been hostile toward US private economic interests in Guatemala. Detriment to Hemisphere solidarity would not deter Guatemala from any course of action suggested by its own interests.

Discussion

12. The present political situation in Guatemala is the outgrowth of the Revolution of 1944. That Revolution was something more than a routine military coup. From it there developed a strong national movement to free Guatemala from the military dictatorship, social backwardness, and "economic colonialism" which had been the pattern of the past. These aspirations have inspired the loyalty and conformed with the self-interest of most politically conscious Guatemalans. The Arbenz Administration still derives some strength from its claim to leadership of the continuing national revolution.

13. In the name of the Revolution of 1944 the successive administrations of Ar?valo (1945-1951) and Arbenz have pursued increasingly radical and nationalistic policies. Their persecution of foreign economic interests in Guatemala, especially the United Fruit Company, and their demands for the "restitution" of Belize (British Honduras) have had the support or acquiescence of almost all Guatemalans. Their promotion of labor organizations and agrarian reform has tended to neutralize political opposition by creating mass support for the present regime. Any objection to the trend of developments in Guatemala has been stigmatized as resistance to the Revolution of 1944 by "feudal" and "imperialistic" interests.

14. The toleration of Communist activity which characterized the early years of the Ar?valo Administration has developed into an effective working alliance between Arbenz and the Communists. The pursuit of leftist and nationalistic policies has been greatly accelerated under the Arbenz Administration. His first year in office was highlighted by active Government support for the formation of a national labor confederation and by a joint Labor-Government attack on the United Fruit Company. That attack failed, but the alliance of the Government with Communist-led organized labor was firmly established in the course of the struggle.

15. The point of reference for consideration of the present political tensions in Guatemala is the Agrarian Reform Law enacted in mid1952. This Law provides for the expropriation of large tracts of unused land and their distribution to farm workers. Although presented as a long-overdue measure of social and economic reform, the Law has strong political motivation and significance. Communists and fellow travelers played a leading part in its enactment; they honeycomb the National Agrarian Department established to administer it. The Communists have incited disorderly peasant seizures of privately owned lands. The Law is being administered in such a way as to destroy the political effectiveness of the large landholders and to mobilize the hitherto politically inert peasantry in support of the regime.

16. The recent congressional electoral campaign has further emphasized Arbenz' political alliance with the Communists. Pressure from the President's office forced some reluctant Administration supporters to accept the newly reorganized and legalized Communist Party (called the Guatemalan Labor Party, or PGT) into the Electoral Front, the pro-Administration coalition. The Electoral Front swept the country, except Guatemala City, where its ticket was decisively defeated by a strong anti-Communist vote. The over-all result of the election was a reduction of Opposition strength in Congress from eleven to five of the 56 seats. Although Communist Party representation remained at four, the Congressional membership includes several additional crypto-Communists and a majority may be considered sympathetic toward the Communist Party line so long as Arbenz favors it.

17. A further increase in political tension has resulted from a Supreme Court decision favorable to a Guatemalan landholder who had appealed for protection from arbitrary execution of the Agrarian Reform Law. At the instigation of Arbenz, the Guatemalan Congress immediately unseated the justices who favored this decision and replaced them with others more reliable from its point of view. This action provoked an intense but transitory reaction on the part of professional and other elements in Guatemala City already anti-Administration in sentiment.

18. President Arbenz has a middle-class background, as have most of his political associates. At least initially, his involvement with Revolutionary forces was probably as much a matter of simple political expediency and opportunism as of personal inclination. By now, however, he has become emotionally committed to the social and nationalistic objectives of the Revolution of 1944, especially to Agrarian Reform. Although probably not himself a Communist, he has found Communist leaders among his most ardent and useful supporters and values accordingly his political alliance with them. Inasmuch as Arbenz has thus far kept personal control of the considerable powers of the Guatemalan Presidency, it is still possible for him to break with the Communists and to moderate the policies of his Administration. He has shown no inclination to do so, however. As the situation in Guatemala develops the political alternatives open to him are steadily reduced.

19. The Guatemala Labor (Communist) Party is estimated to have no more than 1,000 members, of whom perhaps less than one-half are militants. The Party is in open communication with international Communism through the Communist-controlled international labor organizations (the Latin American CTAL and the world-wide WFTU) and through visits made to the Soviet Bloc by individual Communists and front group delegations.

20. The Communists have achieved their present political influence in Guatemala, not as a political party competing with others, but through personal influence with the President and through the coordinated activity with individual communists within the leftist political parties and labor unions which emerged from the Revolution of 1944. This Communist infiltration of other parties and organization has been facilitated by the coincidence of avowed Communist social and "anti-imperialist" objectives with those of the Revolution. The recent legalization of the Party and its acceptance into the pro-Administration Electoral Front has not altered its basic strategy of seeking power through infiltration rather than through open political competition. Its immediate objective is not a "People's Democracy" under open and direct Communist control, but rather to neutralize Guatemala as an ally of the United States and to convert the Government into an effective, though indirectly controlled, instrument of Communism.

21. With the assistance of the Government, Communist, and Communist-influenced labor leaders have been the most successful organizers of Guatemalan labor. Their formation of the General Confederation of Guatemalan Workers (CGTG) and Government pressure for labor unity have facilitated the extension of their control over all organized labor. In the important railway workers' and teachers' unions, however, there has been some rank-and-file opposition to association with Communism. In 1952, moreover, rank-and-file defection from Communist leadership was an important factor in breaking a major strike against the United Fruit Company. The basic weakness of Guatemalan Communist labor leadership is that it is imposed from above through top control of the machinery of labor organization and cannot be sure of rank-and-file support in all circumstances.

22. Implementation of the Agrarian Reform Law has opened a new field of Communist organizational activity. The Communists are seeking to mobilize the hitherto inert mass of rural workers through the CGTG and the National Confederation of Guatemalan Peasants (CNCG), in which they exercise a strong influence.

23. Through their leadership in organized labor and their influence with the President and within the pro-Administration political parties, the Communists have gained many positions of influence within the Government: in Congress (where they dominate the Special Committees on Agrarian Reform and Labor Code Revision), in the National Electoral Board, the National Agrarian Department, the Institute of Social Security, the Labor Courts, the Ministry of Education, and the Presidential Secretariat of Propaganda, and in the official and pro-Administration press and radio. Their influence is extended by an indefinite number of Communist sympathizers in similar positions. At the same time, no Communist holds any position of Cabinet rank and the Communists appear to have made little or no effort as yet to gain control over the Police or the Army.

24. Various elements in Guatemala, including many loyal adherents of the Revolution of 1944, view with increasing concern the rapid growth of Communist influence in that country. These elements, however, have shown little capacity to organize for effective counteraction. In general, each has tended to react only as its own peculiar interests were directly affected and all have been deterred by the success of Administration propaganda in stigmatizing any criticism as opposition to the principles of the Revolution of 1944 and support of "feudalism" and "foreign economic imperialism."

*The United Fruit Company, the International Railways of Central America, and Empresas Electricas (the principal electric light and power company). [Footnote in the source text.]

26. The Catholic hierarchy in Guatemala is implacably opposed to Communism, but the Church has been excluded from an active role in national affairs since the late Nineteenth Century. Moreover, the Church is handicapped by the meagerness of its resources, the small number of priests in proportion to population, the fact that most priests are aliens subject to deportation, and the lack of a program capable of competing with the Communist-led labor movement or with Agrarian Reform.

27. Urban opposition to Communism (largely confined to Guatemala City) is composed of: (a) commercial and manufacturing interests; (b) certain professional groups; (c) university students; (d) moderate labor elements; and (e) the market women of Guatemala City. This urban opposition is strongly anti-Communist, but it is also strongly nationalistic. In particular, it resents the predominance of US private economic interests in Guatemalan life. So far the Arbenz Administration has treated Guatemalan urban economic interests with consideration, has supported them against foreign competition, and has made no sustained effort to break their strong political position in Guatemala City. :.

28. The political effectiveness of the urban opposition has been hindered by the multiplicity of its elements and by conflicts of interest among them, as well as by their continuing loyalty to the stated objectives of the Revolution of 1944. Nevertheless, the opposition won the mayoral election in Guatemala City in December 1951 and even more decisively defeated the Electoral Front there in the January 1953 congressional election. The unwillingness of urban opposition groups to be identified with the landholders will remain an obstacle to the unification of all anti-Communist elements in Guatemala.

29. The Army (6,000 men) is the only organized element in Guatemala capable of rapidly and decisively altering the political situation. The two regiments (1,600 men) stationed in the capital city are an elite force trained under the supervision of the US Army Mission and better equipped than other units of the Guatemalan Army. The Guardia Civil (3,500 men) neither is dispersed in small detachments-it could neither defeat an Army coup nor itself overthrow the Government without Army support. All officers in the Guardia Civil are Army officers.

30. Since the Revolution of 1944 the Army and the Police have refrained from active participation in politics while supporting the constitutionally established administrations of Ar?valo and Arbenz. The present Army leaders owe their personal advancement to the Revolution, and particularly to Colonel Arbenz, who was a military leader in the Revolution and Minister of Defense under Ar?valo before himself becoming President. There is no reason to question their personal loyalty to Arbenz. Any possible disaffection in the Army would be likely to occur at the junior officer level. Arbenz has sought to enhance morale through pay increases, additional allowances, quarters for many field grade officers, promotions every three years, duty-free commissary privileges, and appointments to desirable government positions. Especially generous treatment has been provided for the officers of the two regiments stationed at Guatemala City, while less reliable officers have been assigned to isolated posts in the hinterland. The military units outside of Guatemala City have little potential for effective revolutionary action because of their dispersion and isolation, the inferiority of their equipment and training, and the watchful supervision of trusted area commanders. The rank-and-file of the Army is conscripted and is susceptible to the same political appeals which the regime addresses to the mass of the population. There is little or no Communist penetration or influence in the Army.

31. Guatemalan foreign policies reflect the nationalistic and "democratic" attitudes associated with the Revolution of 1944. Although they have not been systematically antagonistic toward the United States, Guatemala has frequently taken occasion to demonstrate its independence of US leadership and in general has been less cooperative than could be desired, particularly in Hemispheric affairs. Moreover, the regime has systematically been hostile toward US private economic interests in Guatemala (the United Fruit Company, the International Railways of Central America, and Empresas Electrica). In keeping with its attitude toward "colonialism," it has given tacit support to Puerto Rican nationalism. It has complicated its adherence to the Rio Treaty with reservations relating to its claim to Belize (British Honduras). It has subscribed to the principle of inter-American military cooperation, but narrowly interprets that commitment. It voted for the UN "Uniting for Peace" resolution, but has declared that it would not implement it. These attitudes are not unique in Latin America, but Guatemalan propaganda in relation to them has a strong anti-US slant. Detriment to Hemisphere solidarity has not deterred and would not deter Guatemala from any course of action suggested by its own interests.

32. Since 1944 Guatemala has supported the "democratic" elements of other Caribbean countries in their struggles against "dictatorship" and has provided material assistance to "democratic" exiles from such countries. During 1948-1950 Guatemala supported the filibustering operations of the "Caribbean Legion" against the Dominican Republic and Costa Rica. Since 1950 the Legion has ceased to be operational, largely because of the withdrawal of Guatemalan support for such operations. However, Guatemalan official propaganda, with its heavy emphasis on conflict between democracy and dictatorship and between national independence and "economic imperialism," is a disturbing factor in the Caribbean area. Moreover, the Guatemalan Government, at the least, tolerates and indirectly assists clandestine Communist subversive activities in other countries. The Guatemalan Communist Party absorbs Caribbean exiles into its local organization, particularly into its labor and front groups, and through them it maintains contact with disaffected elements in other countries, thus enhancing its capabilities as a focal point for subversive activity throughout the Caribbean area.

/3/On Apr. 4, 1953, Guatemala formally withdrew from ODECA. Foreign Ministers representing the remaining member countries (Costa Rica, El Salvador, Honduras, and Nicaragua), met at San Jose, Costa Rica, on Apr. 16, and resolved to invite Guatemala to reconsider its decision. They met again in an extraordinary session at Managua, Nicaragua, July 11-12, where they adopted resolutions condemning Communist infiltration into the countries of Central America ("Resolution of Managua"), and declaring that no action would be taken to block Guatemala's reentry into ODECA, if Guatemala expressed a desire to rejoin the organization. A translation of the text of the Resolution of Managua was transmitted to the Department of State under cover of despatch 29, dated July 21, 1953 (National Archives and Records Administration, RG 59, Central File 713.00/ 7-2153). Additional documentation relating to ODECA is ibid., 713.00.

34. Simultaneously with its withdrawal from ODECA Guatemala complained to the United Nations regarding this alleged foreign interference. It is notable that Guatemala bypassed the Organization of American States in addressing this complaint to the UN. It probably calculated that its charge that US private interests (i.e., the United Fruit Company and its affiliates) were responsible for a "vast conspiracy" to subvert the existing regime would enlist the support of the Soviet and Arab-Asian Blocs in addition to that of such Latin American countries as Argentina, Bolivia, Chile, and Mexico.

35. El Salvador has shown extreme sensitivity regarding the danger of an extension of Communist influence from Guatemala into El Salvador and other neighboring states; there are persistent reports that El Salvador is giving serious consideration to joint military action with Honduras and Nicaragua against Guatemala. Other Caribbean countries, particularly the Dominican Republic, Colombia, and Venezuela, have also shown concern regarding the development of Guatemala as a center of subversive influence and even of subversive operations. Probable Future Developments

36. Implementation of the Agrarian Reform Law of 1952 will be the principal objective of the Arbenz Administration during 1953. In the process the large Guatemalan landholders and the United Fruit Company will certainly be victimized. The net internal political effect of Agrarian Reform will probably be to strengthen the Arbenz Administration. Neither the landholders nor the Fruit Company can expect sympathy from Guatemalan public opinion. Redistribution of their land will be used to mobilize the hitherto inert mass of rural workers in support of the Administration. Agrarian Reform will also afford the Communists. an opportunity to extend their influence by organizing the peasants as they have organized other workers.

37. Agrarian Reform has already intensified a sense of insecurity which has had a depressing effect on business activity in Guatemala. As regards agricultural production its immediate effects are likely to be negligible: as presently implemented it will do little more than increase the number of subsistence farms. In the longer run it may seriously curtail the production of the Fruit Company plantations. As long as coffee prices hold up, however, the general economy of Guatemala is not likely to be vitally effected.

38. The dissatisfaction of important urban elements will probably increase, but effective political unity among these elements is not likely to be achieved. The political union of rural and urban interests in opposition to the Arbenz Administration is even less likely. No group or foreseeable combination of groups is likely to be able to bring about any significant moderation of the Administration's policy by political action. No revolutionary attempt opposed by the Army can be expected to succeed.

39. The Army could effect a rapid and decisive change in the Guatemalan political situation if it were to take concerted action. Although a quick change of attitude is always possible, there is no present reason to doubt the continued loyalty of the Army high command and of most of the Army to President Arbenz. The Army could not be expected to take revolutionary action unless its leaders became convinced that their personal security and well-being were threatened by Communist infiltration and domination of the Government, or unless the policies of the Government were to result in extreme social disorder and economic collapse.

/*/Arbenz' legitimate term in office will expire on March 15, 1957. Whether he will reach the end of his term, whether he would then retire, and what the character of his successor might be cannot now be estimated. [Footnote in the source text.]

41. The Governments of El Salvador, Honduras, and Nicaragua will continue to seek means to oppose the Communistic tendencies of Guatemala, and will give serious consideration to the possibility of effecting a political change in Guatemala through clandestine support of revolutionary activities. It is highly unlikely, however, that they would undertake an open military intervention in Guatemala or actually could organize an effective operation of that character in view of the limited strength of their armed forces, the proportion of that strength required for the maintenance of their own internal security, the fact that their forces are ill-equipped and untrained for field operations, the (for them) probably insuperable logistical obstacles to an open invasion of Guatemala, and the internal and international political difficulties which would ensue. Moreover, foreign military intervention would tend to cause all factions in Guatemala to unite to repel the invasion. So long as it remains united, the Guatemalan Army could defeat any force which El Salvador, Honduras, and Nicaragua were capable of deploying against it. In the event of such an invasion Guatemala could present a clear case of foreign intervention to the Organization of American States.

42. The Guatemalan Government will probably continue to assist Communist subversive activities in the Caribbean area, but will probably avoid involvement in military operations like those of the Caribbean Legion in 1948-1951. To counterbalance its isolation in Central America it will continue to seek political support elsewhere, particularly in the United Nations. If Latin American attitudes, as revealed at the UN, justify such a course, it will probably raise the same issue of foreign interference in the Organization of American States. It would certainly seek to invoke the Rio Treaty as well as the UN Charter if it were to be invaded by its neighbors.

43. Guatemala's tolerance of Communism and hospitality toward exiles makes it available as a convenient haven for Communist fugitives from the United States.

Washington, May 21, 1953.

/1/Source: National Archives and Records Administration, RG 59, Central File 611.14/5-2153. Secret.

SUBJECT
Relations with Guatemala

I. Communist Infiltration

1. The trend toward increased communist strength is uninterrupted. A gigantic May Day celebration was used as a Commie display of strength, and the Communist labor leader Gutierrez made a rabid speech threatening the opposition with destruction. President Arbenz attended this rally, also made a speech (denying that Guatemala is Communistic) and warmly embraced Gutierrez. The Administration seized upon the ill-planned and abortive uprising at Salam? on March 29 to make a prolonged tirade on the "vast international conspiracy against Guatemala" and to intimidate the anti-communist opposition, jailing most of the active leaders it could lay hands on.

2. Nothing is yet known to verify the alleged asylum in Guatemala of the two bail jumping U.S. Communists, Winston and Green, who were convicted with eleven other top Communists of Smith Act violation. When the charge was made by the INS correspondent, Stanley Ross, last March (on information given him by Trujillo), Foreign Minister Osegueda announced an investigation would be made, but nothing further has been reported, either on the investigation or verifying that Winston and Green are in Guatemala. (The Subcommittee inquired about this report in March.)

3. The Guatemalan Congress stood in silence in memory of Joseph Stalin, the only government body in the Western Hemisphere to do so. The Guatemalan labor federation is angling to affiliate with WFTU and CTAL. The official and semi-official press continues pro-communist.

II. International Relations

1. Guatemala on April 1 withdrew from the ODECA charging threat to its sovereignty from the attitude of the four other members, and also complained to the United Nations. Among its charges is a re-hash of old stuff about former Ambassador Patterson and Spruille Braden. Salvador and Nicaragua replied to the Guatemalan charges directly and sent copies to the UN. We decided to ignore the charges, as Guatemala, at least in the UN, was engaged solely in a propaganda maneuver.

2. ODECA continued on at San Jose in a special meeting on April 16, without Guatemala, but the door was left open for Guatemala to come in at any time. The next formal meeting of ODECA is scheduled to be held in Nicaragua but the date is not yet fixed. There is no sign that Guatemala will reconsider its decision to leave ODECA.

III. American Interests Under Attack

1. The United Fruit Company remains a prime target of the leftist Government coalition. The seizure of three-fourths of the Fruit Company's land on the Pacific side, under the Agrarian Law, has been finalized. We have notified the Guatemalan Ambassador that we will wish to discuss this in the normal representation of American interests, in order that prompt, adequate and effective compensation may be made. No reply has been received. The Fruit Company will ask the Department to present a claim for the value of its seized holdings but it has not yet referred this claim to the Department for action.

2. International Railways of Central America is also under recurring attack. An embargo was placed on its property about two months ago on a tax claim of $3.5 million but was later withdrawn, since the tax case is before the courts.

3. The Electric Light and Power Company, a wholly owned American and Foreign Power subsidiary, is under threat from two sources: first, hydroelectric power development by the Guatemalan Government which would take water from the river supplying two of the company's plants; and second, revision of its concession contracts as a result of action by a Congressional committee dominated by Communists. This American company has notified the Department that in spite of all its efforts to come to an agreement with the Guatemalan Government it regards its future outlook as very pessimistic.

IV. Our Policy

1. For three years we have steadfastly maintained a policy of withholding favors from the Guatemalan Government and we will continue to do so as long as its toleration and encouragement of Communism continue. At the same time, we have not given in to various pressures for direct intervention, which would be in violation of our fundamental Latin American policy and solemn treaty commitments. At present, we encourage Central American nations to stand up to Guatemalan infiltration, with the ultimate purpose of bringing the Guatemalan situation before the OAS.

2. As an important prop to anti-communist Central American nations, we are presently seeking authorization from the Pentagon to include El Salvador, Honduras and Nicaragua in hemispheric defense plans, so that military assistance pacts may be negotiated with them, which would give them arms and material support and at the same time might bring home to the Guatemalan military the further disadvantages of non-cooperation with the U.S. Both Nicaragua and El Salvador are definitely interested, and Honduras might possibly be interested if the other two signed first.

We are also negotiating military mission agreements with Nicaragua and El Salvador, and facilitating the latter to purchase arms in the U.S. 3. We believe that the Guatemalan situation requires most delicate and patient handling and that the dangers to our interests from inadvisable action should be fully weighed against any immediate lure to dispose of the problem abruptly.

/1/ Source: National Archives and Records Administration, RG 59, S/P-NSC Files: Lot 61 D 167. Top Secret. This paper, drafted for submission to the National Security Council, was forwarded under cover of a memorandum by Raymond G. Leddy to Robert R. Bowie, dated Aug. 19, 1953, not printed, requesting clearance by the Policy Planning Staff. The paper was returned to Mr. Leddy for revision on Aug. 31, 1953, and a revised draft was submitted to the Policy Planning Staff in mid-October. In late October, it was returned to ARA for additional revisions, and resubmitted to PPS in early November. On Jan. 12, 1954, it was returned to Deputy Assistant Secretary Woodward. None of the revised drafts were found in the files, nor was any indication that the paper was forwarded to the NSC. (Ibid.)

/2/ The source text contains no indication of a drafting date; the date supplied is that of the covering memorandum.

NSC GUATEMALA

General Considerations

1. In Guatemala Communism has achieved its strongest position in Latin America, and is now well advanced on a program which threatens important American commercial enterprises in that country and may affect the stability of neighboring governments. Continuation of the present trend in Guatemala would ultimately endanger the unity of the Western Hemisphere against Soviet aggression, and the security of our strategic position in the Caribbean, including the Panama Canal.

2. Communist strength is derived from control of positions of influence and power in the labor movement, in the pro-Government political parties, and in the Government itself which, though not Communist, tolerates and encourages Communist support as useful to its own social reform program. The Communists have succeeded in identifying themselves with a nationalistic, leftist revolutionary movement that began with the overthrowing of a military dictatorship in 1944, and they have crippled their opponents by ranging the full strength of the Government's coalition against them. The Guatemalan Army, in which ultimate power resides, has displayed indifference toward growth of Communist influence.

3. The immediate Communist objective is the elimination of American economic interests, represented in Guatemala by the United Fruit Company, the International Railways of Central America, and the Guatemalan Electric Company. The loss of these enterprises would be damaging to American interests and prestige throughout Central America, and a severe setback to programs for economic development in the hemisphere through private capital investment.

4. The underlying Communist objectives in Guatemala are to prevent collaboration of that country with the United States in event of future international crisis, and to disrupt hemisphere solidarity and weaken the United States position. The Communists are not seeking open and direct control of the Guatemalan Government, at the present time, but are working to convert it into an indirectly controlled instrument of Communism.

5. Communist success in Guatemala thus far does not constitute a direct military or economic threat to the United States; but the uninterrupted trend in its favor is of serious concern to our interests and future security and requires determined study of means to reverse it.

Objectives

6. The objectives of the United States with respect to Guatemala are:

a. Prompt and effective collaboration of Guatemala with the United States in event of war or major international emergency.

b. Reversal by the Guatemalan Government of its tolerant policy toward Communist influence in the country and its present uncooperative attitude toward the United States.

c. Prevention of the spread of Communist influence from Guatemala to other countries in the hemisphere.

d. Establishment in Guatemala of favorable conditions for the conduct of business by United States interests on mutually advantageous terms.

/3/Apparent reference to the Inter-American Common Defense Scheme, dated Oct. 27, 1950, and the General Military Plan for the Defense of the American Continent, dated Nov. 15, 1951. Regarding the former, see Secretary of Defense Marshall's letter to Secretary Acheson, Dec. 16, 1950, Foreign Relations, 1950, vol. I, p. 679; regarding the latter, see the editorial note, ibid., 1951, vol.II, p. 1028.

COURSES OF ACTION

7. The United States should seek to increase to the maximum the likelihood of prompt and effective collaboration by Guatemala in event of war or major international emergency by:

a. Conserving the underlying good will built up in Guatemala (as elsewhere) by our policies of non-intervention, respect for juridical equality and abnegation of a position of privilege.

We should therefore reject any action which by having the appearance of unilateral intervention in Guatemala would cause the Guatemalan people to turn against the U.S. and decline to offer their cooperation in time of emergency.

b. Pursuing the further objectives and courses of action outlined in paragraphs 8, 9, 10, and 11 below.

8. The United States should bring pressure on the Guatemalan Government to take effective action against Communist influence in the country and abandon its unfriendly attitude toward the United States by:

a. Impressing upon the Guatemalan Government at every opportunity the serious concern with which the United States views Communist influence in Guatemala, making it clear that this is the only important obstacle to cordial relations with this country. Correct diplomatic relations should be maintained with Guatemala to afford means of getting our views directly to the Government.

b. Withholding all further loans, grants and other favors from the Guatemalan Government, including U.S. cooperation in completion of the Inter-American Highway section in Guatemala.

Alternative course: Withholding of further loans, grants and other favors from the Guatemalan Government, with the possible exception of U.S. cooperation in completion of the Inter-American Highway section in Guatemala.

c. Limiting United States technical assistance in Guatemala to the present minimum operation, maintaining it only on an interim basis pending improvement in conditions in order to keep contact with influential non-Communist elements in and out of the Government.

/4/On Apr. 23, 1954, the United States and Nicaragua signed at Managua a Military Defense Agreement, which entered into force on the same date; for text, see 5 UST 453, or TIAS No. 2940. See the editorial note in Foreign Relations, 1952-1954, vol. IV, p. 1378.

/5/ Of 1949.

/6/Reference is to the "Resolution of Managua" adopted by ODECA at its meeting of July 11-12, 1953; for additional information, see footnote 4, Document 15.

g. Developing and keeping under constant review the factual record of specific evidence of Communist influence in the Government and official toleration or encouragement of international Communist activities, including attempts to subvert other American governments, in order to ensure the best possible presentation of the case for collective action through the OAS against Communists in Guatemala should it appear likely that such a move will obtain sufficient support from the other American Republics or should the Guatemalan situation be brought up in the OAS by some other government.

h. Arousing Latin American public opinion against Communist progress in Guatemala through a covert information program.

/7/For text of the referenced resolution, see Proceedings of the Fourth Meeting of Consultation of Ministers of Foreign Affairs, pp. 243-244.

j. Lending assistance wherever prudent to the Catholic Church in its fight against Communism in Guatemala.

k. Assisting United States labor organizations to develop relations with Guatemalan non-Communist labor leaders and encouraging the growth of a non-Communist labor movement.

9. The United States should seek to prevent the spread of Communist influence from Guatemala to other countries in the hemisphere by:

a. Consulting with other Latin American governments, pursuant to existing agreements, on measures to control international movement of Communist agents.

b. Implementing any collective action undertaken through the OAS. (See paragraph 8(g) above.)

c. Strengthening Guatemala's militarily weak Central American neighbors by entering into grant aid agreements with Nicaragua and other Central American governments whose eligibility may be established, and by making arms and materials available to them under Section 408(e) of the Mutual Defense Assistance Act.

10. The United States should seek establishment in Guatemala of favorable conditions for the conduct of business by United States interests on mutually advantageous terms by:

a. Continuing correct diplomatic relations with Guatemala insofar as possible, so that matters concerning protection of United States interests in Guatemala may be dealt with directly between the two Governments as occasion demands.

b. Impressing upon the Guatemalan Government the need for reasonable treatment of foreign capital in order to further the orderly economic development of the country.

c. Encouraging the three principal United States firms in Guatemala to make modifications, at the appropriate time, in their contracts with the Guatemalan Government which would be acceptable to both sides and which would eliminate some of the grounds for misunderstanding and resultant popular resentment against the companies.

d. Encouraging the principal United States companies in Guatemala to continue development of improved labor relations and public relations policies.

e. Making clear and reasonable diplomatic representations whenever United States interests in Guatemala are deprived of substantial rights to which they are entitled under international law.

11. The United States should seek establishment of conditions favorable to Guatemalan participation in hemisphere defense plans by: a. Maintaining our Military and Air Force Missions in Guatemala as long as local conditions permit, in order to maintain friendly contact with non-Communist elements in the officer corps, pre-empt the function of military adviser to the Guatemalan armed forces, and maintain the present degree of standardization of arms and training insofar as possible; also by the presence of these missions to keep the door open to a more complete standardization if and when conditions are such that authorizations for arms exports from the U.S. can be renewed.

b. Seeking to retain the good will of the officer corps, particularly through the present period when arms exports from the U.S. are not authorized, by conveying to them an understanding of the reason for such action on our part and by every other means reasonable under the special circumstances of present relations between our two countries.

STAFF STUDY

General Considerations

1. Guatemala is the northernmost and third largest of the five small republics between Mexico and Panama. It is roughly 1,000 miles south of New Orleans and 750 miles northwest of the Panama Canal. Over half of its 2,900,000 people are Indians who participate only to a limited extent in the money economy and political life of the nation. Guatemala is predominantly an agricultural country, and although well endowed by nature for producing a variety of crops, its economy is still heavily dependent on coffee.

2. In terms of its own resources and manpower, the contribution that Guatemala can make toward United States security is slight. Although useful sources of a few strategic materials might eventually be developed, present production of such products is of negligible importance to this country. In the event of war, Guatemala, as in the last conflict, could provide the United States with the site for an air base at Guatemala City, but the greater range of modern aircraft may have considerably diminished its present or future usefulness to us. The International Railways of Central America, though of possible value as a trans-isthmian route in event of destruction of the Panama Canal, is a narrow gauge (36") line of limited capacity, easily sabotaged, and has only open roadsteads at the Pacific termini.

3. Guatemala could endanger United States security, however, were it to give refuge or aid to enemy saboteurs and propagandists, or were it to allow use of its airfields, ports and other facilities and resources by an enemy power. Sabotage to airfields and military installations would be of importance only in relation to the degree to which these are built up and used by United States forces in event of war. Sabotage against the railroads and other United States-owned commercial interests would injure the Guatemalan economy far out of proportion to the adverse effect on the United States war potential. Since Guatemala would be incapable of resisting a strong attacker, denial of Guatemalan facilities and resources to an aggressive enemy power would necessarily fall to the United States. Should the Guatemalan Government assume a hostile attitude in an emergency, the United States could secure the airport and other strategic points against its forces with a battalion or two of well-trained troops.

4. Guatemala is of special importance to the United States primarily for having provided the leading example of Communist penetration in the American Republics. This situation tests our ability to combat the eruption and spread of Communist influence in Latin America without causing serious harm to our hemisphere relations. It may be assumed that fundamental Communist objectives in Guatemala include the following: (a) to prevent collaboration between that country and the United States in time of future emergency, (b) to encourage the growth of Communism elsewhere in Latin America, and (c) to provoke the United States into action which would be contrary to our Inter-American commitments and which would injure hemispheric solidarity.

5. The principal subsidiary problem facing the United States in Guatemala concerns treatment of private United States interests. Influenced by extreme nationalists and Communists, the Guatemalan Government has begun expropriation of substantial United States owned assets in the country, having for several years followed a policy of increasing hostility and harassment toward the principal American companies operating there. These are the United Fruit Company; the International Railways of Central America, (partially owned by the former); the Empresa Electrica de Guatemala, (owned by a subsidiary of the Electric Bond and Share Company); and Pan American Airways. All but the last named have large capital investments in Guatemala. The crippling or expulsion of these American enterprises would adversely affect the position of United States commercial interests elsewhere in the hemisphere, and would produce a number of subsidiary but troublesome local problems, such as securing just compensation for property seized.

6. Communist influence in Guatemala grew up in the aftermath of the Revolution of 1944, which brought an end to the latest of the country's many military dictatorships and replaced it with a liberal minded administration which promised quick change. Initial popular enthusiasm for the 1944 revolutionary movement attested to the depth of discontent with the political repression, social backwardness and "economic colonialism" which had been the pattern of the past.

7. The Administrations of President Ar?valo (1945-51) and President Arbenz (1951- ), in frustration at the frictions caused by their own ignorant tampering with the national social and economic structure, have attempted to shift responsibility for Guatemala's difficulties to forces outside its borders. Exploiting nationalist sentiment to the utmost, they have insisted that Guatemala is the victim of a conspiracy directed by the United Fruit Company which is determined to prevent the betterment of the Guatemalan people.

8. Communists ably supported Ar?valo and Arbenz in their attacks on "economic imperialists" and in their efforts to legislate sudden reform. The Communists identified themselves with every aspiration of the revolutionary administrations. Toleration of Communist activity which characterized the early years of the Ar?valo administration developed into an effective working alliance between the Communists and Arbenz.

9. Key to present political tensions in Guatemala is the Agrarian Reform Law, enacted in mid-1952 and described by President Arbenz as the most important measure of the Revolution. This law provides for the expropriation of large tracts of unused land and their distribution to the peasants. Although presented as a long-overdue measure of social and economic reform, the law has strong political motivation and significance. Its drastic provisions are designed to produce social upheaval rather than to execute any economic plan. Communists and fellow travelers instantly seized the opportunity afforded them by the Administration's proposal to institute agrarian reform. They played a leading part in the preparation and enactment of the agrarian law. They have infiltrated the National Agrarian Department established to administer it, and have incited disorderly peasant seizures of privately owned lands. The Agrarian Reform Law is being used to attack the United Fruit Company, to destroy the political effectiveness of the large landholders, and to mobilize the hitherto politically inert peasantry in support of the regime.

10. Militant Communists in Guatemala are estimated at a few hundred. Of these perhaps two or three dozen are dangerous leaders or agitators. Almost without exception they are indigenous to the area and are Mexico-trained rather than Moscow-trained, although some have visited the Soviet orbit and may have received brief instruction there.

11. The Communists have achieved their present political influence in Guatemala, not as a political party competing with others, but through personal influence with the President and through the coordinated activity of individual Communists within the leftist political parties and labor unions which emerged from the Revolution of 1944.

12. With the assistance of the Government, Communist and Communist-influenced labor leaders have been the most successful organizers of Guatemalan labor. Their formation of the General Confederation of Guatemalan Workers (CGTG) and Government pressure for labor unity have facilitated the extension of their control over all organized labor. The Communists are seeking to mobilize the mass of rural workers through the CGTG and the National Confederation of Guatemalan Peasants (CNCG), in which they exercise a strong influence. The basic weakness of Guatemalan Communist labor leadership is that it is imposed from above through top control of the machinery or labor organization and cannot be sure of rank and file support.

13. Through their leadership in organized labor and their influence with the President and within the pro-Administration political parties, the Communists have gained many positions of influence within the Government: In Congress (where they dominate the Special Committees on Agrarian Reform and Labor Code Revision), in the National Electoral Board, the National Agrarian Department, the Institute of Social Security, the Labor Courts, the Ministry of Education, and the Presidential Secretariat of Propaganda, and in the official and pro-Administration press and radio. Their influence is extended by an indefinite number of Communist sympathizers in similar positions. At the same time, no Communist holds any position of Cabinet rank and the Communists appear to have made little or no effort as yet to infiltrate the Police or Army.

14. Opposition to the Arbenz regime is disorganized and ineffective. There is no likelihood it could alter the course of the Government by political action. It could not succeed in a revolutionary attempt opposed by the Army.

15. The Governments of El Salvador, Honduras, and Nicaragua are fearful that the trend in Guatemala will lead to Communist subversion and social upheaval in their territories. They are probably giving serious consideration to clandestine support of revolutionary action in Guatemala. It is highly unlikely, however, that they would or could mount an open military intervention against Guatemala. The Guatemalan Army could probably defeat any force which they could deploy against it.

16. The Army is the only organized element in Guatemala capable of rapidly and decisively altering the political situation. There is no reason to doubt that President Arbenz still has the loyalty of the Army, which has taken its lead from him and thus far refused to concern itself over the growth of Communist influence in political life.

17. It is possible that President Arbenz thinks of the Communists in Guatemala only as reformers and useful allies rather than as Soviet agents. Since he has no support of consequence from any propertied interests other than those created by the Revolution, he is probably unwilling to repudiate the Communists and risk the loss of much of his organized political backing. Therefore, even though Arbenz still exercises personal control of the Administration, the Army and the Police, and could break his ties with the Communists and moderate the policies of the Government, it is not likely that he will voluntarily do so under present conditions.

18. In addition, Arbenz and other Government leaders, as officials of a small country near the United States who feel some resentment against it for one reason or another, may tend to find satisfaction in deliberately affronting the United States by showing friendliness to Communist leaders and in observing the attention aroused by their attitude. In any event, Guatemala's protestations of friendship with the United States have thus far been given against a background of official Guatemalan encouragement to Communist activity.

19. On the other hand, there are certain factors which would impel most Guatemalans, possibly including President Arbenz and other non-Communist Government officials, to identify Guatemala's ultimate interests with those of the United States rather than the USSR and to desire to cooperate with the United 'States in controlling enemy saboteurs and propagandists in event of war or major international crisis. These factors are: (1) Guatemala's western cultural and political orientation; (2) Guatemala's proximity to and economic dependence on the United States; and (3) the fact that the United States has built up in the American Republics, especially in the Caribbean area, a great reservoir of fundamental good will through our policies of nonintervention, respect for juridical equality and abnegation of a position of privilege.

20. Notwithstanding the disturbing amount of Communist influence in Guatemala, its Government still votes with the free world on most of the substantive issues between it and the Soviet bloc. There are certain other small signs of its continued willingness to remain in our camp, such as the fact that our Military and Air Missions are still operating in Guatemala.

21. Nevertheless, any likelihood of voluntary cooperation by the Arbenz Government with the United States in a future crisis would vanish (a) if the Communists in the Administration should overpower it completely, or (b) if President Arbenz should meanwhile conclude that all means of reaching an understanding with the United States were closed, and commit himself to a policy of frank hostility toward this country.

22. Our present position in Guatemala is progressively deteriorating. Politically, Communist strength grows, while opposition forces are disintegrating; economically, American enterprises suffer continuous whittling away of their properties and contractual rights, while our remonstrances are rejected. Ultimate Communist control of the country and elimination of American economic interests is the logical outcome, and unless the trend is reversed, is merely a question of time. In seeking means to reverse this trend, we must consider:

a. A policy of non-action would be suicidal, since the Communist movement, under Moscow tutelage, will not falter nor abandon its goals.

b. Ineffective defense of American enterprises will be followed by similar attacks on these same companies in neighboring countries, and subsequently on other U.S.-owned industries in other Latin American countries.

c. A solution of the Guatemalan problem by means repugnant to the rest of Latin America might cost more than it would be worth, as it could create a larger problem with the hemisphere than we would have ended with one country.

d. Any solution will depend on our action, since other American republics have neither the capacity nor decision to act.

Alternate Lines of Policy

23. The United States could follow one of four general lines of policy with respect to Guatemala:

a. Policy of direct intervention. Militarily, Guatemala would be defenseless against direct United States action. Imposition of unilateral economic sanctions, if mechanism to enforce them were made available, would at least cause a drastic and no doubt painful shift in the flow of Guatemala's trade, since the United States takes 85 percent of Guatemala's exports and supplies 60 percent of its imports. However, the use of direct military or economic sanctions on Guatemala would violate solemn United States commitments and under present circumstances would endanger the entire fund of good will the United States has built up in the other American Republics through its policies of non-intervention, respect for juridical equality, and abnegation of a position of privilege. Loss of this good will would be a disaster to the United States far outweighing the advantage of any success gained in Guatemala.

b. Policy of covert intervention. Our secret stimulation and material support of the overthrow of the Arbenz Government would subject us to serious hazards. Experience has shown that no such operation could be carried on secretly without great risk of its leadership and backers being fully known. Were it to become evident that the United States has tried a Czechoslovakia in reverse in Guatemala, the effects on our relations in this hemisphere, and probably in the world at large, could be as disastrous as those produced by open intervention.

c. A policy of inaction. The United States could allow events to take their course in Guatemala in the hope that the problem will solve itself, possibly along the lines of the Mexican Revolution, which also had Communist backing for land "reform" and foreign expropriation. This is obviously a false hope in the existing context of world affairs, and disregards both the importance of Communist penetration and the certainty that the United States must aggressively lead the fight against it wherever it appears in the hemisphere.

d. Policy of firm persuasion. As long as the Government of Guatemala cooperates with the Communists we should decline to cooperate with it. The United States should adopt courses of action which will oblige the Guatemalan Government to see for itself that its persistence in favoring the Communists will lead the country to ruin; and which will induce it to recognize the advantages of cooperating with the United States. In exploiting all the possibilities of this policy we should endeavor in all appropriate ways to bring the pressure of Latin American public opinion to bear upon the Guatemalan Government and people; we should encourage ODECA in its moves aimed at the Communists in Guatemala; and, if and when it occurs that a case has been developed which will command support from a majority of the OAS, we should initiate or support OAS action against Guatemala. , If direct unilateral action should become necessary in a future emergency, the Arbenz regime could easily and quickly be overthrown possibly with less Latin American opposition than we would encounter under present conditions, and very possibly with Latin American support. Meanwhile, we must recognize realistically that our present policy of firm persuasion, though avoiding an outright break with the Guatemalan Government, has not deterred it from its stated course.

24. Although Arbenz is sensitive to pressure exerted by the United States, he will resist it without regard to practical consequences wherever he believes he can gain political advantage by so doing. This makes execution of our policies a delicate and dangerous matter.

25. We have frankly discussed the Communist problem with high Guatemalan officials in Washington and in Guatemala. They have brushed aside our views on Communist influence in the country as exaggerated. They have described the Communist issue as a false one fabricated by the United Fruit Company. We must continue, however, in the effort to dispel the illusions of anyone in the Guatemalan Government who believes the Government's official version.

26. We have for some time withheld virtually all cooperative assistance from Guatemala. The exceptions have been a reduced Technical Assistance Mission (engaged in three small projects begun during World War II) which we have desired to maintain at a minimum level as a toe-hold pending improvement in political conditions; and our military and Air Force Training Missions, which we have desired to keep friendly United States contact with the politically important officer corps.

27. The withholding of other favors has proven effective in demonstrating to the Guatemalan Government the seriousness with which we view its cooperation with Communism, and the policy should be continued. However, consideration should be given the alternatives of withholding or granting our cooperative assistance in completion of the Guatemalan sector of the Inter-American Highway.

28. Guatemala has formally offered to enter into an agreement with the United States for the continued cooperative construction of its sector of the Inter-American Highway, making all of the assurances required by law for the expenditure of United States funds. We have already made such agreements with El Salvador, Nicaragua, Costa Rica, and Panama. On the one hand, our refusal to resume cooperation with Guatemala on the Highway will constitute the most forceful measure available to us under the policy of withholding favors, as it is the one most urgently desired by Guatemala. On the other hand, it would be in our interests to conclude a cooperative agreement with Guatemala for construction of the Highway, for the following reasons:

(1) It is the only means of insuring that the as-yet-unconstructed 25-mile gap immediately adjacent to Mexico will not become a serious bottleneck for the entire Central American portion of the Highway. Guatemala will sooner or later attempt to build this section itself if we fail to enter into the agreement, and will probably exercise its consequent freedom to place on it the special tolls or other restrictions which would be expressly forbidden under the terms of the agreement.

(2) It would open Guatemala and the rest of Central America to Inter-American Highway traffic which is now unable to pass beyond the Mexico-Guatemala border because of the gap on the Guatemalan side. This would stimulate extensive tourist travel and commercial movement on the Highway between the United States and Guatemala and would to that extent increase beneficial United States influence in Guatemala.

/8/On May 20, 1954, the United States and Honduras signed at Tegucigalpa a Military Assistance Agreement, which entered into force on the same date; for text, see 5 UST 843, or TIAS No. 2975. See Mr. Murphy's letter to Assistant Secretary of Defense Hensel, Aug. 10, 1954, in Foreign Relations, 1952-1954, vol. IV, pp. 1311-1312.

30. Pending the conclusion of Military Defense Assistance Pacts which would enable the United States to give military grant-aid to El Salvador, Nicaragua, and Honduras, we should make arms and materials available to them by direct purchase under Sec. 408(e) of the Military Defense Assistance Act, in order to help strengthen those militarily weak governments against Communist subversion and pressure from Guatemala.

31. The United States should continue to refuse to sell arms and materials to Guatemala under Sec. 408(e) of the Military Defense Assistance Act, and to continue to deny export licenses for other arms and materials sought in this country for the Guatemalan Armed Forces. This policy should be enforced so long as they are loyal to the Communist-influenced central authority and hence likely to employ their weapons against anti-Communists. It is recognized that the withholding of arms will necessarily impede the functions of the United States Military and Air Force Missions in Guatemala. We should consider occasional approval of export licenses for materials other than military arms and ammunition should it appear in specific cases to be in our interest to do so.

32. An arraignment of Communist penetration in Guatemala and from Guatemala to other American Republics should be prepared for use in the event that OAS action appears feasible and practicable. The United States should assist by developing a factual case record of specific evidence of (1) Communist influence in the Government; (2) encouragement or toleration by the Government of Communist elements who are acting or appear to be acting under Kremlin directives, and (3) encouragement or toleration by the Government of attempts at subversion of any other American Government. This case record should be kept under constant review in order to determine whether or when its nature is such that its presentation in the OAS would gain sufficient support from the other American Republics to assure that collective inter-American action will be taken to achieve the elimination or marked diminution of Communist influence in Guatemala.

33. Many of the difficulties encountered by United States commercial interests in Guatemala are the direct work of Communists, but certain problems would remain even after elimination of their influence. Deep-rooted nationalist feeling will remain an obstacle to the solution of some of the principal ones. We should encourage the United Fruit Company, the IRCA, and the Empresa Electrica to negotiate with the Guatemalan Government, whenever that Government is disposed to enter such negotiations in good faith, with a view to revising their concession contracts in such a way as to diminish nationalist prejudices against the companies and at the same time obtain from the Government satisfactory assurances of reasonable treatment of the companies.