Category: History

Why the Communists are Winning as of 1976...
by William D. Pawley & Richard R. Tryon

Watch the problems unfolding with a man having a health problem.

Chapter Nine



Since early 1947, several months prior to the Rio Conference, I had been contemplating resigning as ambassador to Brazil, for reasons of health. But I met with resistance from General Eisenhower on the grounds that George Marshall, newly sworn in as Secretary of State, might have other ideas. Ike wrote to me:
“Dear Bill:Your letter arrived at a moment when Gen. Marshall happened to be in my office. I instantly decided to show it to him because I felt that your frank and direct exposition of your views should be communicated to him and I know of no other way in which I could obtain information on which I could offer you even a shadow of advice.
“Gen. Marshall told me that he was acquainted with you personally and asked my impressions as gained from your letter. This gave me a good opportunity to tell him that it was my conviction that you were in the State Department merely because of the belief that you could serve your country and that you happened to be in such a position financially that you could afford to sacrifice something in order to render such service ...
“As you can understand, Gen. Marshall must concentrate very seriously on the problems that will confront him at Moscow and I seriously doubt that he can turn his personal attention to Latin America for some months to come, except, of course, in a most cursory way. On the other hand, he has for a number of years been conversant with the military aspects of Pan Americanism and I assume he will be anxious to do anything that will promote solidarity among us all.
“My advice - which I assure you is worth very little is that you sit tight for a moment. This feeling largely grows out of complete confidence in the capacity and ability of Gen. Marshall. When he can get around to the various phases of his job he’ll develop logical and decisive answers. Later, and certainly not before Gen. Marshall can return from Moscow, I would, in your place, communicate directly with him, concerning plans for your immediate future.
Mamie joins me in warmest regards to you and Edna. Above all else, take care of your health.
Cordially, Ike.”

After the Rio Conference, Edna and I flew to the States for a rest and spent Christmas at “Belvoir.” In January I reported to the State Department to start preparing for the Inter-American Conference scheduled to take place in Bogota, Colombia, in early 1948, which was to concern itself with the economic recovery of Latin America. As Ambassador to Brazil, I was to be a delegate to that conference.
In February, medical considerations made it apparent that I would not be able to resume my Ambassadorial duties after the Bogota Conference was over, and I therefore submitted my resignation to the President. My feeling was that, so long as my health remained a question mark, I should accept only specific public assignments, which could be accomplished within a comparatively brief period. I had touched on such missions, during the Rio Conference, in wide ranging discussions with Gen. Marshall, such as negotiations to secure military installations, particularly bases, in Spain.
Mr. Truman accepted my resignation “with reluctance” to take effect March 30, 1948, contingent on “the termination of your duties in connection with the Bogota Conference.” The truth is that I was reluctant about going to Bogota as an American delegate. For many reasons, I feared that the Conference was fore doomed, and I hated to participate in a fiasco right on the heels of our huge success at the Rio Conference on hemispheric security.
First, the Latin Americans would be overly optimistic if they expected the United States to come up with a massive blood transfusion of dollar assistance. We had none to offer, in the current mood of Congress, which had just committed several billions to launch the Marshall Plan for Europe.
Secondly, what had been gained at Rio could be nullified by the disappointment and resentment of our Latin friends, should our delegates show up nearly empty handed. I had so advised Mr. Truman, recommending that he either postpone or cancel the conference. I met with the President and Secretary of State Marshall at the White House.
“Bill, I can’t possibly postpone the Bogota Conference now,” Truman stated flatly. “We’re just going to have to find some way to show up reasonably well prepared and not entirely out of pocket. What I’m hoping for is that you can remain in Washington to organize this thing for me.”
“But Mr. President,” I replied, “in Willard Thorp you have an excellent Assistant Secretary of State for Economic Affairs. Organizing the conference is his job. And he may not appreciate my coming in and taking over.”
“I’m sure, Bill, you can handle that problem diplomatically, “ Truman answered.
Dutifully, I went to see Thorp, explaining that the President had asked me to help out with the Bogota arrangements. He granted my request to look over the records, which revealed among other thing that most of the Latin American countries had shown an interest in the creation of an Inter-American Bank.
My logical next step was to touch base with my old friend John McCloy, President of the International Bank for Reconstruction and Development, one of the two major new lending agencies that had evolved from the Bretton Woods Agreement. I assumed that Jack would be sympathetic to any proposal that would help Latin American countries to make the transition from an artificial wartime boom to a rude awakening to postwar economic realities, for they were facing a genuine crisis.
To my astonishment, McCloy was not very familiar with Latin America. “Bill,” he said, “we are considering several applications.”
“You haven’t approved any?”
“Not yet.”
I next contacted William McChesney Martin, another good friend who for a number of years had been President of the Export-Import Bank, which had loaned hundreds of millions of dollars to Latin American countries. Martin considered that the loans were economically sound and good business for the United States. All had been punctually repaid.
“I’m sorry, Bill,” he apologized, “but I’m up to here in loans already committed directly or indirectly to the Marshall Plan. There’s nothing left for Latin America.”


Having come up empty with my original approach, I reviewed my premises for strengthening Latin American countries against the threat of Communist expansion in the Western Hemisphere. They still came out the same:
One, Latin America had undeveloped natural resources which would have made our pioneers envious.
Two, the same elements which brought a miraculous standard of living to America, namely, private capital investment both at home and from abroad, plus abstinence from short-sighted, discriminatory, confiscatory and socialistic policies, could do the same for the Southern colossus.
Three, Latins must recognize that the wartime honeymoon, economically, was over; European competitors were coming back into a market wherein the supply was increasing and prices were falling for Latin American exports in relation to the goods which they must import.
Furthermore, like the rest of the world, Latin America was caught up in the enormous pent-up demand to restock the shelves, so to speak, that had been stripped bare by wartime austerity and depreciation and obsolescence. They badly needed the dollars with which to modernize their equipment and start afresh, with the help also of the newer technologies. And it was high time for them to rid themselves of “hothouse” industries, complete with inexperienced managements, worn-out equipment, untrained labor and other high cost factors - handicaps under which they could not possible any longer be competitive.
There was a fourth factor: Inflation. Latin America was losing $100 million a month in hard currency reserves and the equivalent. At this rate, she would run out of gold and hard currency reserves in three years.
Five, some middle ground would have to be found between a grandiose plan proposed by Colombia in November 1947 for a $5 billion, 30 year loan, and the notion that “fallout” from the Marshall Plan for Europe would take care of Latin America, too.
I had released a policy statement which was attributed to an unnamed “high official who will play an important role in the U.S. delegation to the Bogota Conference.” I stated that a substantial flow of foreign capital into Latin America was “badly needed” and that the United States would cooperate in seeking to facilitate a “large investment of American private capital with American managerial skill to help develop Latin America.”
I added that this presupposed a healthy economic atmosphere, “treatment of foreign capital on an equal basis with national capital” and “payment of adequate compensation to foreign firms in cases of expropriation and nationalization.” I further added that the rise of the United States to undisputed world economic leadership had been rapidly accelerated by our traditional policy of encouraging and protecting private foreign investors in our country’s growth.
The following day, I sent telegrams to fifteen of the most prominent leaders of industry and finance in the county which read:
“Having been asked by Secretary of State Marshall to assist him in the economic preparatory work for the Bogota Conference, I am organizing a meeting for discussion of basic issues on Wednesday, February 11, at 10 A.M., Room 2109, Department of State. This meeting is of fundamental importance and benefit. Your views and advice would be tremendously helpful. Your presence and participation would be greatly appreciated.”
After the meeting, I asked each participant to write me his views on two questions. Should the Bogota Conference be held on schedule or postponed? What should be done to meet Latin American credit and development needs?
A substantial majority answered that we’d be better off postponing the Conference than arriving at Bogota with less money to offer than would be expected. Thus, William F. Machold of Drexel and Company replied:
“While it would be bad psychology to again postpone the Bogota Conference, nevertheless its present timing is exceptionally poor. Therefore, as the lesser of two evils, I think that, in the event the United States is not in a position to present a constructive program for financing Latin American development, it would be desirable to postpone the Conference..”
William Lattimore Gray, Senior Vice President, First National Bank of Boston, thought further postponement would be “unfortunate.” W.E. Knox of Westinghouse Electric International Company said that he had “felt for a long time that, in our lending financial assistance to foreign countries, we were using the wealth created by private enterprise to further statism abroad.”
Joe Rovensky of Chase Nation Bank, a man of great wisdom and vast financial experience in Latin America, and a close friend thought that it would be a “calamity” for us to “go to this Conference without an important financial plan for the Americas.” Other banking experts expressed similar views.


I reported back to the President my conclusion that I should hold a press conference at which I would discuss the question of a new Pan-American bank, without committing his Administration pro or con.
Our official position was based on the theory that European beneficiaries of the Marshall Plan would be importing $15 billion dollars worth of food, fertilizer, timber, cotton, non-ferrous metals, hides, and other raw materials from American nations other than the United States during the four year period 1948-1951.
On December 19, 1947, President Truman had revised these estimates upward to a request to Congress for spending authorization of up to $8 billion for “offshore” procurement (imports from outside Europe) for the European Recovery Program (Marshall Plan), of which Latin America could expect a slice of $2.6 billion.
I doubted that Latin American could come within hailing distance of such rosy production goals. Argentina, for example, thanks to Peron’s incompetent economic policies and to his Government’s grain monopoly, was experiencing a drastic decline in its output of bread and fodder grains. Exporting nine million tons to Europe was not in the cards.
Furthermore, I was sure that nothing would be resolved by castigation of Latin America for economic ineptitude. A practical solution was needed.
In explaining to reporters at my press conference that some seventeen countries had expressed interest in a Pan-American Bank, I stressed that this was only one of the ideas which we should consider carefully at the forthcoming Bogota Conference. Nevertheless, I found myself in scalding hot water the next morning, when the newspapers highlighted the Pan-American Bank proposal.
The water was also hot at the White House. John McCloy phoned the President that I had “cut the rug out from under his feet.” He said:
“I’ll have to resign, Mr. President, if twenty Latin American Republics are withdrawn from my bank and served by a new one. There wouldn’t be much point in my remaining.”
“Jack, before you do anything else,” Truman told him, “please come and see me tomorrow afternoon at three-thirty.”
Next on the White House phone was Bill Martin.
“Bill Pawley’s a good friend of mine,” he said, “and I’d like to go along with him. But I think we’ve got all the banks we need.”
Truman asked him to attend the scheduled meeting with McCloy, then extended the same invitation to Under Secretary of State Bob Lovett, Willard L. Thorp and me. He suggested that we three arrived half-an-hour earlier, to brief him before the others arrived.
We complied, providing Truman with background information on what we thought the World Bank should do and what he might ask Bill Martin and me to do to provide funds with which we could go to the conference.
When the two bankers arriver, the President first smoothed McCloy’s rumpled feathers, then suggested that he visit about ten of the principal Latin American Republics immediately, familiarize himself with their problems face to face, and hopefully grant a few sound loans. He then asked McCloy to attend the Bogota Conference and deliver one of the chief addresses. Mollified, McCloy agreed.
Knowing that Bill Martin and his Export-Import Bank would be amenable to Latin American loans if they were given the funds, Truman directed Martin and me to work with Congress to have half a billion dollars added to Martin’s lending authority, ear-marked exclusively for Latin America. It was understood that mention of a new bank would be taboo, at the Conference.
Martin and I, accordingly, went to Congress, sought out the key people in both Houses, asked them for additional lending authority for Martin, and received fast action. The $500 million was quickly approved.
The realistic and economically sound recommendations of the bankers and other business leaders with whom I had conferred were not likely to set well with the ideological prejudices of the dominant political groups in many Latin American countries. However, I did have high hopes for the creation of an Organization of American States.
From the start, the Soviet Union viewed with alarm our preparations for a conference aimed at increasing the prosperity of Latin America and decreasing the prospects of Communist penetration. The Soviets initiated secret plans for arson, terror and blood shed to foil our dreams of advancing hemispheric unity at Bogota, working as usual through other organizations and countries.
Despite the fact that the CIA had just taken over from the FBI, and was still unseasoned in Latin America, it had established excellent contacts with Colombian security agencies and other sources of information. Startling reports of Communist plans to sow terrorist violence and wreck the Conference had begun building up rapidly. The reports were sent to the American Embassy to be forward to Marshall and his security staff in Washington.
On January 2, 1948, The CIA reported from Bogota that a “vigorous anti-imperialist campaign had been prepared for the Pan-American Conference by the Communist Party and will be launched shortly before the conference convenes in March.” On January 23, the CIA reported that the Communist leader in charge of these disruptive proceedings had urged that “this should be known as a Communist activity.”
On January 29, the CIA filed a far more significant dispatch which stated that arms were being stockpiled for an insurrection with the aid and complicity of the Soviet diplomatic mission. It added that Dr. Jorge Eliecer Gaitan, the national leader of the Liberal Party of Colombia, was receiving Soviet funds, which he believed came from his Colombian supporters.
“The leading Columbian Communist, who has been given the task of overthrowing the (Ospina) Perez (Conservative) Government, boasts that he can count on planes and artillery when necessary,” the report states. “In Bogota, this group had allegedly stored arms and explosives in seventeen houses.”
By late March, our CIA agents in Bogota were able to inform Washington that a special Communist Party Committee had been set up to disrupt the Pan-American Conference, and that a “program of agitation and molestation” would be directed again the United States, Chilean, Argentine, and Brazilian delegates. The purpose was to make the “imperialist delegations” go home “with an impression of failure and loss of prestige.”
A key figure in the preparations to disrupt the Conference was Romulo Betancourt, who had seized power in neighboring Venezuela by coup d’eat. His Democratic Action Party ruled in Caracas and fomented left wing revolutions elsewhere in South America. Betancourt wanted an alliance of left wing revolutions elsewhere in South America. Betancourt wanted an alliance of left wing governments to dominate the Caribbean. To this end, he worked with the Communists, the Caribbean Legion, the Red trade union movement of Mexico’s Lombardo Toledano and the semi-Marxist Arevalo regime in Guatemala.


The effective date of my resignation as Ambassador to Brazil was approaching, and around the middle of March, Edna and I departed for Rio to take leave of our post, before going on to Bogota.
Arriving in Rio, Edna and I combined goodbyes, characteristically warm and emotionally charged, with our good Brazilian friends, with the more mundane arrangements for the shipment of our furniture and belongings to the United States. We sent most of these effects by steamer, and fortuitously as it later developed, carried with us our plane tickets to Bogota, besides hunting gear, an assortment of foods and beverages suitable for entertainment at the Conference.
Before my departures, Brazilian Foreign Minister, Dr. Raul Fernandes, conferred upon me the Grand Order of the Southern Cross.
Two more letters were especially gratifying to me. The first was a letter to President Truman, which he passed on to me, from Ralph E. Motley, President of the American Chamber of Commerce for Brazil. Motley wrote:
“In losing our good friend, Ambassador, and Honorary President of this Chamber, we feel we are losing one of the finest, most capable and hardest-working men ever to represent his country abroad, the kind of Ambassador businessmen all over the world have been dreaming of, and the best envoy our country has ever had in Brazil.”
The letter closed with the request that my successor be “as close as possible to Bill Pawley specifications.”
The President replied:
“I read with a lot of interest your fine letter abut Bill Pawley. I think just as highly of him as you do, and I am just as sorry to see him leave Rio de Janeiro as you are. However, Bill is having some trouble with his health and I think he is tired of living out of the United States. I don’t blame him much because this country is still a good place to live in, in spite of all the conversation to the contrary. I sincerely hope we can get an ambassador who will fill Bill’s shoes -- that will be a hard job.
“Sincerely yours, Harry S. Truman.”
I left Brazil proud that I had participated in the historic Rio de Janeiro Treaty.
My keenest regret was that I had been unsuccessful in helping to create an integrated petroleum industry, based on foreign capital. This could have transformed Brazil, a nation with unlimited potential, into one of the more dynamic and expanding of the world’s economies.
But Edna and I agreed that the rewards had been as rich as they had been unforgettable. Equally exciting days and opportunities, in which I was to come to closer grips with our arch enemy, lay close ahead.
Our delegation was of high caliber: Secretary of State George C. Marshall, Secretary of Commerce Averell Harriman; Assistant Secretary of State for Inter-American Affairs Norman Armour, Ambassador to Venezuela Walter Donnelly, and Ambassador to Colombia Willard L. Beaulac. These and I were the delegates.
The terrorists stationed bomb throwers at two different points on Marshall’s route from the airport to the center of the city. If the first attempt failed, they could try again a few minutes later. Ominously, American flags on Marshall’s route had been torn down the night prior to his arrival.
The Marshall party arrived at Techo Airport March 29, 1948, the days before the sessions wee to begin. Providentially, security had been placed on the capable hands of the Chief of National Security, Alberto Nino, and not in those of the Bogota police. Marshall’s party was driven by a circuitous route and arrived at its destination unscathed.
Fresh evidence that violence was brewing in Bogota struck us in the face. I had previous intimations of potential trouble, but I was scarcely prepared for the role that I would soon play as a reluctant witness to an insurrectionary attempt that would hold all of Colombia in its grip for days of a reign of terror. It was probably the most savage and bloody riot in the history of Latin America.

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