Created: 10/22/1954

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hoold bein"TO"Under eacha line ihOuld bend each comment numberedwith the number in Ihe "TO" column. Each oflieer ihoiild iniUI [cUeU mark muiff.tinnt) before further routine. Routing and Reifl'd Sheet should be returned lo Reflisli)




U.osition With Regard to Qdvornmont

Loan Requostod by Ouotenalo and Its Possible Effect on CIA.

1. Izao-dietaly after the full of tbe Arbenz Regime there occurred in Assistant Secretary* Jtollond'series ofduring tba courae of which there wereumber of actions vhlch this Government ahould properly take In supportister Republic which hod Just freed itselfcmmunist-domlnoted government. Among those, the grantingoan was considered favorably.



In recent mouths, while there has been soma execution of the above actions, the natter of the loan has boon consplclous by ita failure to materialise. It will be recoiled that our Station ln Ouatemala felt that the situation was so insecure as to make nacoBeery tlie granting of the relatively modest sumn the none of SKIWER. The blub finally requested by the Guateaalan Government had; the sum recommended by the Department to FOA

3- WH) Is informally advised that FQA ls by way ofoanhich if combined with some other funds already In motion could be represented as something

h. OnC ^Consultant,charge of UFC0

public relations ln New York, advised this office that he hod received nn alarming messageey source ln^iotemola to this effect:

Ambassador Armour had brought the disturbing news that the FOA would not moke0 grant. It woulderrific mistake if this State Department request failed to materialize. Because of the Arbenz crowd's looting of the Treasury, pool economic practices and the unstable coffee market, the Government ie extremely poor and has only enough funds available for current expenses, fcithout relief, the situation will deteriorate if the U. S. falls to give thia aid after all the brave words ond pronlses. The result will be not only daaaglng to our objectives ir. Guatemala but wiU reflect unfovorably throughoutUT prestige.

Thlb situation haa been aired in public art will be aeert by the attached newspaper report.

While WB haa not participated in the dlacuaalons vith regard to tbe loan, the lanresslon baa been seined, perhaps wrongly, that FOA's concern over the granting of the loan stents frca econoaic concepts, whereas it would aeem that in large part the need and purpoee of the loan ie purely political.

?. It will ba recalled that ln other areas whereituation existed, this Agenoy waa called on to resolve the mutter by covert use of POA funda. Ua should therefore perhaps beequest fron appropriate parts of the Oovernaent to do somathing in this

regard to the requesty tbecurrent position ls aa follows 1

Tbe Station haa been advised tbat ve are not Inclined to favor such action; ve have nonetheless requested more details and reeonDendatlona froa the Kr. Leddy haa been ao advised and concurs ln our current position.

ahould ba pointed out tbat the view is probably heldquarters that tha Arms Oovernment could, if lt were reallystraits,oan fron private banking In thistines the amount recommended by the State Department. WHthrough Hr. Leddy that Armas' view Is that he does not darecountry vith another foreign loan for ae he lute said: "Evenrid of tbat." In this connection, it le the opinion of WBD thatAnnas to seekoan from private bonking would beand could well raise again accusations ofn Guatemala for economic purposes. It is portineat, toour enemies were confounded by our Government's failure toin ita flocal differences with Guat'sets; thle aonvlnced ourif we bad intervened with regard to the demission of theour purposes wore altruistic and political rather thangrantingoan fron private banking could well at thismany to wonder whether the Nigger had not finally crept outthe woodpile.

Original document.

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