Declassified Documents 1969-1976
(Extracted from Foreign Relations of the United States, 1969-1976,
Volume E-10, Documents on American Republics, 1969-1972.
GUYANA
364a. Editorial Note.
The administration of President Richard M. Nixon continued the Johnson
administration's policy of covert opposition to Cheddi Jagan, the
Marxist leader of British Guyana's People's Progressive Party (PPP). The
U.S. Government had attempted, through covert means, to prevent Jagan
from coming to power since 1962 by providing covert assistance to
Jagan's political opponent, the People's National Congress (PNC, headed
by Forbes Burnham) from 1964 to 1968. After Burnham's election in 1968,
U.S. covert assistance continued.
In June 1969, the 303 Committee approved a proposal that Burnham and the
PNC be provided with $5,000 per month in covert funding for another two
years. Funding was set to begin in July 1969. After one year, the
program would be evaluated to determine if its existence was necessary.
The covert support funded a small group of paid PNC organizers,
essential sections of the PNC's central office, and dissemination of
party information. Ultimately, the U.S. Government hoped the PNC would
use the covert support to become a well-organized political party, which
could effectively compete in future national elections.
In June 1970, the 40 Committee (the successor to the 303 Committee)
decided to extend covert assistance to Burnham's political party at the
same $5,000 per month level for another year. Previous covert support
had helped the PNC build a well-funded, effective, smooth-running
political machine. However, the 40 Committee concluded that despite U.S.
funding, Burnham and the PNC had not made any significant inroads into
the East Indian community, the vast majority of which supported the PPP.
The Committee believed that continued secret funding for the PNC was
necessary to accomplish this goal.
In June 1971, the 40 Committee concluded that the covert assistance had
helped Burnham develop the PNC into an effective political entity. As
scheduled, covert assistance was terminated.
In late 1972, the 40 Committee re-visited the idea of giving covert
assistance to Burnham, but decided against it.
365. Memorandum for the 303 Committee, Washington, May 23, 1969.11.
Source: National Security Council, NSC Intelligence Files, Country
Files, Guyana, 23 May 1969-6 February 1973. Secret; Eyes Only. A
handwritten note at the bottom of the first page reads, "Approved by the
303 Committee on 17 June 1969 with a proviso re additional source of
funds (see minute)."
23 May 1969
MEMORANDUM FOR: The 303 Committee
SUBJECT: Proposal for Support to the People's National Congress Party of
Guyana
1. SUMMARY
Prime Minister Forbes Burnham of Guyana, who has previously received
covert assistance from CIA, requested that the Agency provide $10,000 a
month for two years to support his efforts to build his party, the
People's National Congress (PNC), into an effective, permanently
organized political party. Ambassador Delmar Carlson [text not
declassified] recommend approval of this request in the amount of
$5,000 per month for two years, with the understanding that Burnham be
aware that the subsidy would be reviewed at the end of the first year
and could be terminated if the PNC had not made satisfactory progress.
Burnham has been told that we are seeking policy approval for the $5,000
monthly subsidy.
Assistant Secretary Charles Meyer concurs in this proposal.
2. PROBLEM
To support Prime Minister Burnham's efforts to maintain and strengthen
the PNC as a well-organized party that can continue to serve as a
bulwark against Cheddi Jagan's accession to power in Guyana.
3. FACTORS BEARING ON THE PROBLEM
Background
The United States Government determined in 1962 that Cheddi Jagan would
not be desirable as the head of government in Guyana. CIA was instructed
to provide guidance and support to the PNC and to the small,
conservative United Force (UF) party in the 1964 election campaign.
These two parties formed a coalition after the election and took over
the government, with Forbes Burnham becoming Prime Minister. New
elections were scheduled for December 1968 and, as a result of a 303
Committee decision of 7 April 1967, CIA was again instructed to support
the PNC and the UF. In the 1968 elections the PNC used its control of
the government to pad the electoral rolls and win a slim majority of the
vote. The official results gave the PNC 30 seats in the legislative
assembly, the People's Progressive Party (Jagan's party) 19 seats and
the UF 4 seats. Leaders of the PPP and the UF attacked the elections as
being dishonest, but their charges had little effect in Guyana and
stirred almost no interest abroad.
b. Origin of the Requirement
In February 1969 Burnham asked [text not declassified] for a
subsidy of $10,000 a month for two years to help him establish the PNC
on a permanent basis. (NOTE: He had made little effort after the 1964
contest to put his party on a permanent footing.) Burnham indicated he
would use this subsidy to maintain a small corps of paid PNC organizers,
to keep open essential sections of the central party office, and to
continue party information activities as needed.
After considering Burnham's request, the Ambassador [text not
declassified] concluded that a subsidy was desirable and $5,000 per
month for two years would adequately meet the PNC's requirements. In
addition, [text not declassified] recommended it be agreed with
Burnham that the subsidy would be reviewed after one year and could be
terminated if the PNC had not made satisfactory progress toward
establishing permanent party machinery. Burnham understands that we are
seeking policy approval for this subsidy.
c. Relationship to Previous 303 Committee Actions
The Special Group granted approval for CIA to provide financial support
to the [text not declassified] in 1962 and 1963 and CIA was
instructed to support the UF and the PNC in the 1964 elections. On 7
April 1967 the 303 Committee approved a proposal to support the UF and
the PNC again for the 1968 elections. Subsequent progress reports
described in detail the successful action taken by CIA under this
decision.
d. Operational Objectives
The objective of this proposal is to support the PNC's efforts to become
a permanently established and well-organized political party that will
be able to contest the next national elections under optimum conditions.
There is no evidence to indicate that Burnham has made any significant
inroads into the East Indian electorate so far. If present population
and voting trends continue, Burnham would lose to Jagan in an honest
election. Thus one should look at this subsidy as a means of improving
the PNC's ability to turn out all possible pro-Burnham votes.
e. [text not declassified]
f. Risks Involved
There was no exposure of United States Government or CIA involvement in
the 1964 and 1968 elections. The only significant adverse publicity
arising from the 1968 elections was aired on two television programs in
Britain in December 1968 and January 1969. The telecasts revealed
discrepancies in the voting in Guyana and charged that the voting of
over-seas Guyanese in Britain (and to a far lesser extent in the United
States) was rigged. The broadcasts did not mention any involvement by
the United States Government or CIA; they had little impact and were
more than offset by the generally favorable coverage provided by most
news media.
Jagan of course has a long history of publicly accusing CIA and the
United States and British Governments of opposing him and aiding
Burnham. We can expect these charges to continue, but with little
effect.
Although the personnel involved will exercise all due caution, it is
impossible to eliminate every risk attached to a covert operation of
this type. However, given the moderate amount of the subsidy, the small
number of people involved [text not declassified]
g. Contingency Plan
We can rely on Burnham to use whatever resources are available to him,
including those in the Government of Guyana, to cover up or limit the
compromise or disclosure of this operation. [text not declassified]
4. COORDINATION
a. The American Ambassador to Guyana, Delmar Carlson, and the Assistant
Secretary of State for Inter-American Affairs, Charles Meyer, concur in
this proposal.
b. [text not declassified]
5. RECOMMENDATION
It is recommended that the 303 Committee approve a subsidy to the PNC of
$5,000 per month for two years with the understanding that at the end of
the first year the subsidy would be reviewed and could be terminated if
the PNC had not made satisfactory progress toward establishing a
permanent party mechanism.
1 Source: National Security Council, NSC Intelligence Files, Country
Files, Guyana, 23 May 1969-6 February 1973. Secret; Eyes Only. A
handwritten note at the bottom of the first page reads, "Approved by the
303 Committee on 17 June 1969 with a proviso re additional source of
funds (see minute)."
366. Memorandum From the Deputy Director of Current Intelligence
(Lehman) to the Deputy Director for Intelligence (Cushman), Washington,
June 17, 1969.11. Source: Central Intelligence Agency, Office of Current
Intelligence, Job 79-B01737A, Box 14, 303 Latin America, 1962-1969.
Secret; Eyes Only. There were two attachments, neither found, both
concerning support to anti-Jagan political parties in Guyana. The first
as dated March 17, 1967, and the second June 5, 1968.
I7 JUN 1969
MEMORANDUM FOR: Deputy Director for Intelligence
SUBJECT: Progress Report to the 303 on Guyana
1. In March of 1967 the 303 approved expenditures in the amount of [text
not declassified] to prevent Cheddi Jagan from winning the next
election in Guyana. At that time I drafted for you a memorandum to the
DCI (Attachment B) which you decided not to send.
2. The arguments in that memorandum still hold water, but the price has
gone up. As late as January of this year CIA notified the 303 that, of
the [text not declassified] was spent in FY-67 and [text not
declassified] was programmed for FY-68. However, as of late January
only‚ [text not declassified] of the FY-68 slice had been
committed. The 303 was warned only that "this figure will rise
considerably." It did. The 303 is now notified that the FY-68 funds are
exhausted and an additional [text not declassified] will be
needed for this year which ends in 13 days. Furthermore, an additional [text
not declassified] will be needed for FY-69. (The election will be
held sometime between December 1968 and March 1969).
3. It is probably too late to call the operation off, but it is getting
damned expensive. The best result we can hope for will be the
continuation of something like the present shaky coalition, maintained
in power by fraudulent means, and as paralyzed as ever by Negro-East
Indian enmity. On the other hand, if we do not put up the money we will
eventually be faced--but probably not for three or four years--with an
English speaking Communist state in this hemisphere. In fact, even with
funding at this level we may not be able to prevent such an outcome, or
at least a bloody little mess which will require forceful intervention
from outside. The question is therefore whether to spend the money in
the hope of not saddling the next administration with "another Cuba."
And in the present state of the American political psyche, by that time
no one in either party may care very much. All this said, I do not think
you should splinter any lances over this one. God, Mom, and apple pie
are not negotiable.
[signed]
RICHARD LEHMAN
Deputy Director of Current Intelligence
Attachments:
Two Memos (Same Subject)
Support to Anti-Jagan Political Parties In Guyana: Progress Report.
Dated 17 March 1967 and 5 June 1968.
1 Source: Central Intelligence Agency, Office of Current Intelligence,
Job 79-B01737A, Box 14, 303 Latin America, 1962-1969. Secret; Eyes Only.
There were two attachments, neither found, both concerning support to
anti-Jagan political parties in Guyana. The first as dated March 17,
1967, and the second June 5, 1968.
367. Memorandum From the Deputy Director for Coordination, Bureau of
Intelligence and Research (Trueheart) to the Assistant Secretary of
State for Inter-American Affairs (Meyer), Washington, June 23, 1969. 11.
Source: National Security Council, NSC Intelligence Files, Country
Files, Guyana, 23 May 1969-6 February 1973. Secret; Eyes Only.
DEPARTMENT OF STATE
Washington D.C. 20520
June 23, 1969
MEMORANDUM
TO: ARA - Mr. Charles A Meyer
FROM: INR/DDC - William C. Trueheart [WCT initialed]
SUBJECT: Minutes of the Meeting of the 303 Committee, 17 June 1969 The
minutes of the meeting of the 303 Committee, dated June 19, 1969
contained the following items:
"2. Proposal for Support to the People's National Congress Party of
Guyana
a. Mr. Broe briefed the Committee on the request from Prime Minister
Forbes Burnham for a $5,000 monthly subsidy for two years to support his
efforts to build his People's National Congress (PNC) into an effective,
permanently organized political party. He noted that Burnham had twice
before built an effective political machinery for election purposes but
had let it lapse thereafter. The Prime Minister's objective now is to
build a permanent party machinery and to make as many inroads as
possible into the Indian vote which supports Cheddi Jagan and his PPP,
although the latter is admittedly a most difficult undertaking. [text
not declassified]
b. Mr. Johnson mentioned that Prime Minister Burnham is now siphoning
off something better than $28,000 annually from sales from a flour mill
to finance his political activities. This will sooner or later become
public knowledge and will be damaging to Burnham's position. Mr. Johnson
wondered if Burnham might be persuaded to cease this practice upon
receipt of the proposed $5,000 monthly subsidy. Mr. Broe stated that
Burnham could be told that as a condition to his receipt of the $5,000
monthly subsidy he would have to stop milking the flour mill. He added
that even if Burnham agreed to this condition there was no positive
assurance he would comply with it.
c. The recommendation contained in the CIA paper dated 23 May 1969 was
approved subject to the condition being imposed upon Burnham that he
cease taking funds from the flour mill sales.
d. It was agreed that Burnham's progress in using this subsidy to build
an effective party machinery would be reviewed at the end of one year to
decide whether or not it should be continued for the second year. The
Chairman expressed the sense of the Committee that in this review
Burnham's compliance with the above condition would be an important
criterion.
[Omitted here is material unrelated to Guyana.]
1 Source: National Security Council, NSC Intelligence Files, Country
Files, Guyana, 23 May 1969-6 February 1973. Secret; Eyes Only.
368. Telegram 557 From the Embassy in Guyana to the Department of State,
May 28, 1970, 1615Z.11. Source: National Archives, Nixon Presidential
Materials, NSC Files, Box 785, Country Files, Latin America, Guyana,
Vol. 1. Secret.
TELEGRAM
Department of State
GEORGETOWN 557
R 281615Z MAY 70
FM AMEMBASSY GEORGETOWN
TO SECSTATE WASHDC 4521
GEORGETOWN 557
SUBJECT: WHITHER GUYANA UNDER BURNHAM: IMPLICATIONS FOR US.
FOR ASST SEC MEYER
SUMMARY: RECENT DEVELOPMENTS AND TRENDS IN GUYANA POSE FUNDAMENTAL
QUESTIONS FOR THE USG. IN CONSIDERING THEM, IT MUST BE REMEMBERED THAT
GUYANA IS MORE LIKELY TO FOLLOW AFRICAN EXAMPLES THAN IT IS TO ACT LIKE
A LATIN AMERICAN STATE, THAT THINGS IN GUYANA TODAY ARE OFTEN NOT WHAT
THEY SEEM, THAT THE BASIC INTERESTS OF THE US IN GUYANA ARE ESSENTIALLY
LIMITED TO DENYING IT TO INTERNATIONAL COMMUNISM, AND THAT GUYANA'S
POLITICAL LIFE FOR TWO DECADES HAS BEEN DOMINATED BY TWO PERSONALITIES
-- BURNHAM AND JAGAN -- AND WILL CONTINUE TO BE SO DOMINATED UNTIL ONE
OR THE OTHER PASSES FROM THE SCENE. JAGAN'S SUBSERVIENCE TO MOSCOW HAS
BEEN ESTABLISHED. THIS LEAVES BURNHAM. HE IS PROUD, COMPLEX, DIFFICULT,
DETERMINED, IMPULSIVE, AND SENSITIVE. HE IS AN ACCOMPLISHED POLITICIAN,
SENSITIVE TO SIGNIFICANT CURRENTS AND PRESSURES. HE IS A SOCIALIST, BUT
A NON-COMMUNIST SOCIALIST. HE HAS ATTACKED FOREIGN AID AND AID DONORS,
BUT KNOWS HE WILL CONTINUE TO NEED HELP. HE IS LEADING GUYANA INTO THE
THIRD WORLD AND LAUNCHING AN ECONOMIC REVOLUTION IN SEARCH OF ECONOMIC
INDEPENDENCE TO GO WITH POLITICAL INDEPENDENCE AND A RESTRUCTURING OF
THE ECONOMY TO GAIN CONTROL OF THE COUNTRY'S RESOURCES SO THEY CAN BE
EXPLOITED BY GUYANESE FOR GUYANESE. HIS CHOSEN INSTRUMENT IS THE
COOPERATIVE, WITH GOVERNMENT CONTROL. TO HIM, HIS REVOLUTION IS THE
ANSWER TO BLACK POWER, AND THE SACRIFICES IT DEMANDS ARE THE PRICE OF
"AVOIDING ANOTHER TRINIDAD". THERE IS A TREND TOWARD INCREASED
AUTHORITARIANISM. THE USG WILL NOT LIKE MUCH OF WHAT BURNHAM WILL DO AND
HOW HE WILL DO IT, BUT THERE IS NO FEASIBLE ALTERNATIVE TO BURNHAM. IT
MUST CONTINUE TO HELP HIM. IN THE PROCESS IT HAS AN OPPORTUNITY TO SHOW
WHETHER IT CAN SUPPORT CHANGE, WHICH IS INEVITABLE, AND IDENTIFY ITSELF
WITH A GOVERNMENT THAT IS SEEKING ITS OWN SOLUTIONS IN THE INTERESTS OF
THE MASSES OF THE PEOPLE. END SUMMARY.
1. THERE ARE FOUR THINGS TO BE KEPT IN MIND IN ASSESSING RECENT
DEVELOPMENTS IN GUYANA:
A. DESPITE ITS LARGE INDIAN POPULATION GUYANA IS, UNDER THE PRESENT PNC
GOVERNMENT, MORE AKIN TO THE BLACK COUNTRIES OF AFRICA SOUTH OF THE
SAHARA THAN IT IS TO THE LATIN COUNTRIES OF THIS HEMISPHERE. INDEPENDENT
FOR ONLY FOUR YEARS, GUYANA IS MORE LIKELY TO FOLLOW THE PATTERN OF
DEVELOPMENT OF THE NEW STATES OF AFRICA THAN IT IS TO PARALLEL THAT OF
THE LONG-ESTABLISHED INDEPENDENT COUNTRIES OF LATIN AMERICA.
B. THERE IS A CERTAIN ALICE-IN-WONDERLAND QUALITY TO LIFE IN GUYANA
TODAY. THINGS ARE OFTEN NOT WHAT THEY SEEM TO BE. THUS THE MINISTER OF
FINANCE, TWO DAYS AFTER HAVING PUBLICLY ATTACKED FOREIGN AID AS "TIED TO
POLITICAL OR EXPECTED POLITICAL ALIGNMENT TO THE DONOR COUNTRIES" AND
PARTICIPANT TRAINING AS POLITICALLY-MOTIVATED INDOCTRINATION TO MAKE THE
RECIPIENTS "SYMPATHETIC TO THE WAY OF LIFE AND THINKING OF THE DONOR
COUNTRIES", FOUND NO INCONSISTENCY IN ASKING THE USAID DIRECTOR TO
ARRANGE AN ORIENTATION TRIP FOR A SENIOR CIVIL SERVANT SO HE COULD "SEE
THOSE THINGS IN THE US YOU THINK HE SHOULD SEE." WHILE FOREIGN
ASSISTANCE AND INFLUENCE WERE BEING DENOUNCED AT ALL LEVELS OF THE
GOVERNMENT, THE MINISTER OF AGRICULTURE AS HE SIGNED DOCUMENTS FOR A
GRANT OF MORE THAN $300,000 FROM THE US COULD SMILE AND SAY "DON'T
BELIEVE EVERYTHING YOU HEAR." DESPITE THE PRIME MINISTER'S "REJECTION"
OF A $4.3 MILLION IBRD/IDA LOAN FOR MULTILATERAL SCHOOLS IN HIS SPEECH
OF APRIL 5, THE PROJECT HAS QUIETLY MOVED AHEAD AND INVITATIONS TO BID
HAVE BEEN PUBLISHED ABROAD AS WELL AS AT HOME. (THIS "REJECTION" WAS
OMITTED FROM THE EDITED VERSION OF THE SPEECH SUBSEQUENTLY PUBLISHED.)
THE PRIME MINISTER'S OFFICE TWO WEEKS AGO REQUESTED TRAINING FOR GUYANA
DEFENSE FORCE OFFICERS AT A US ARMY INTELLIGENCE SCHOOL, AND THE PRIME
MINISTER LAST WEEK RENEWED HIS LONG-STANDING REQUEST THAT THE USG
PROVIDE HIM AN ECONOMIC ADVISER AND ASKED THE AMBASSADOR TO SUPPORT A $6
MILLION LOAN FOR HIGHWAY CONSTRUCTION AROUND GEORGETOWN. MANY OTHER
EXAMPLES COULD BE CITED.
C. AS STATED IN THE CASP FOR GUYANA APPROVED IN MARCH, 1970, THE
FUNDAMENTAL US INTEREST HERE IS "TO DENY CONTROL OF THE COUNTRY TO
COMMUNISTS OR OTHER GROUPS WHICH ARE SYSTEMATICALLY HOSTILE TO THE US
AND OTHER FRIENDLY GOVERNMENTS IN THE HEMISPHERE." ASIDE FROM PEACEFUL
SETTLEMENT OF GUYANA'S DISPUTES WITH ITS NEIGHBORS, THE US HAS FEW OTHER
BASIC INTERESTS OR OBJECTIVES IN GUYANA. US COMMERCIAL INTERESTS AND
INVESTMENTS ARE RELATIVELY SMALL AND GUYANA'S INTERNATIONAL POWER AND
INFLUENCE ARE NEGLIGIBLE.
D. GUYANA'S POLITICAL LIFE HAS BEEN DOMINATED FOR TWO DECADES BY TWO
TOWERING PERSONALITIES -- BURNHAM AND JAGAN -- AND WILL CONTINUE TO BE
SO DOMINATED UNTIL ONE OR THE OTHER PASSES FROM THE SCENE. US POLICY
DECISIONS THEREFORE MUST BE BASED LARGELY ON ITS ASSESSMENT OF THE TWO
MEN AND OF HOW EACH WOULD AFFECT BASIC US INTERESTS.
CORRECTED COPY (TEXT)
2. THERE IS NO NEED HERE TO DISCUSS JAGAN AT ANY LENGTH. HIS
SUBSERVIENCE TO MOSCOW HAS BEEN ESTABLISHED. HE REPEATEDLY CALLS FOR
ECONOMIC AND POLITICAL TIES WITH THE SOVIET BLOC AND CUBA, AN END TO
WESTERN DOMINATION OF THE COUNTRY AND IMMEDIATE NATIONALIZATION OF THE
MEANS OF PRODUCTION. JAGAN IN POWER WOULD POSE A REAL AND IMMEDIATE
THREAT TO THE BASIC US INTEREST IN GUYANA AS OUTLINED ABOVE.
3. WE ARE LEFT WITH BURNHAM. HE HAS CONSOLIDATED HIS CONTROL OVER THE
GOVERNMENT AND ITS SECURITY FORCES AND RULES UNCHALLENGED AS THE
LEADER OF THE GOVERNING PARTY, THE PNC, WHICH HE HAS GREATLY
STRENGTHENED. HE IS CHARTING GUYANA'S FUTURE COURSE AND FEW DARE ADVISE
HIM OR DISAGREE. WHAT MAKES BURNHAM TICK AND WHERE HE IS HEADING ARE
THUS THE KEYS TO GUYANA'S FUTURE.
. BURNHAM THE MAN: BURNHAM IS A COMPLEX AND DIFFICULT PERSONALITY. HE IS
INTENSELY PROUD AND DOES NOT LIKE ASKING FOR ANYTHING, ESPECIALLY AID
FROM WHITE PEOPLE. HE IS SHARPLY CONSCIOUS OF HIS COLOR AND OF THE
INFERIOR POSITION OF BLACK PEOPLE AND BLACK NATIONS AROUND THE WORLD. HE
IS ALSO IMBUED WITH IDEAS OF INTERNATIONAL SOCIAL JUSTICE AND BELIEVES
THAT THE RICH NATIONS HAVE A MORAL RESPONSIBILITY, WHICH THEY ARE
SHIRKING, TO HELP THE POOR NATIONS JUST AS THOSE WHO HAVE SUCCEEDED,
WHICH BY HIS DEFINITION IS "AT THE EXPENSE OF THE PEOPLE", HAVE A MORAL
OBLIGATION TO MAKE SACRIFICES IN THE COMMON GOOD. THE RICH NATIONS AND
THE WHITE MAN ALSO BEAR MORAL RESPONSIBILITY FOR THE INJUSTICES AND
EVILS OF THE PAST, ESPECIALLY SLAVERY AND COLONIALISM. THUS, WHATEVER
THEY DO IN LESS DEVELOPED COUNTRIES IN THEIR OWN SELF-INTEREST IS EVIL.
BURNHAM IS AN AVOWED SOCIALIST WITH A SOCIALIST'S ATTITUDE TOWARD
CAPITALISM AND PRIVATE INVESTMENT. SINCE THESE ARE PREDOMINANTLY WHITE,
HE PROBABLY ALSO CONSIDERS THEM EVIL, ESPECIALLY AS THEY CONTROL THE
ECONOMIC LIFE OF HIS OWN COUNTRY. BURNHAM IS INTENSELY AMBITIOUS AND
RESTLESS, AND HE IS FRUSTRATED. GUYANA IS PROBABLY TOO SMALL FOR HIS
AMBITIONS, AND HIS PEOPLE, INCLUDING HIS CABINET, ARE TOO SLOW FOR HIS
RESTLESS ENERGY. WE HAVE SEEN EVIDENCE OF HIS EFFORTS TO ASSUME
LEADERSHIP IN THE CARIBBEAN. HE IS NOT DOUBT ALSO CONCERNED WITH HIS
IMAGE AMONG THE LEADERS OF THE THIRD WORLD, WHERE HE WOULD LIKE TO PLAY
A ROLE. HE IS KNOWN TO ADMIRE SUCH MEN AS TITO, JULIUS NYRERE, AND
KENNETH KAUNDA (AND NKRUMAH EXCEPT THAT HE FAILED.) LASTLY, BURNHAM IS
EXCEEDINGLY SENSITIVE. HE DOES NOT TAKE ADVICE EASILY, EVEN FROM THOSE
CLOSE TO HIM. ON SEVERAL OCCASIONS RECENTLY HE HAS OVERRIDDEN MEMBERS OF
HIS CABINET, OR ACTED CONTRARY TO THEIR ADVICE. THEY TELL US "HE IS
BEING MISLED" OR "HE IS GETTING WRONG INFORMATION", BUT NONE DARES
APPROACH HIM TO ARGUE. (AND WE'RE NOW SEEING SIGNS OF EMERGING RIVALRIES
AND CONFLICTS WITHIN THE CABINET ITSELF). BURNHAM IS IMPULSIVE, AND WHEN
HIS SENSITIVITIES ARE TOUCHED HE IS CAPABLE OF LASHING OUT IN DIRECTIONS
CONTRARY TO WHAT HIS OWN BETTER JUDGMENT WOULD DICTATE. HIS
WELL-ADVERTISED PRAGMATISM OF EARLIER YEARS, WHICH KEPT HIM ON A
RELATIVELY STEADY COURSE, IS MUCH LESS IN EVIDENCE TODAY.
B. BURNHAM THE POLITICIAN: BURNHAM IS AN EXPERIENCED AND CONSUMMATE
POLITICIAN, EXPERT IN THE WAYS OF MANIPULATING HIS PEOPLE, INDIVIDUALLY
AND COLLECTIVELY, AND QUICK TO IDENTIFY AND RESPOND TO SIGNIFICANT
CURRENTS AND PRESSURES. HE IS A PLUNGER WHO WILL TAKE GREAT RISKS IF HE
SEES A LONG-TERM ADVANTAGE. HIS DETERMINATION TO "MAKE THE SMALL MAN A
REAL MAN" AND TO "SEIZE CONTROL OF THE COMMANDING HEIGHTS OF THE
ECONOMY" CAN THUS BE SEEN IN THE CONTEXT OF EFFORTS TO UNDERCUT THE
APPEAL OF JAGAN'S CALLS FOR NATIONALIZATION OF THE MEANS OR PRODUCTION
FOR THE BENEFIT OF THE WORKING CLASS IN ADDITION TO BE REFLECTIONS OF
HIS OWN SOCIALIST PHILOSOPHIES. BURNHAM IS ALSO UNDOUBTEDLY NETTLED BY
JAGAN'S CONSTANT CHARGES THAT HE IS A PUPPET OF US IMPERIALISM AND FEELS
HE MUST PROVE HIS INDEPENDENCE TO HIS OWN PEOPLE. HIS DENOUNCEMENTS OF
FOREIGN AID DONORS AND OF FOREIGN ASSISTANCE IN GENERAL, HIS DEMANDS FOR
MEANINGFUL PARTICIPATION IN THE EXPLOITATION OF GUYANA'S RESOURCES AND
HIS CALLS ON GUYANESE TO DEVELOP GUYANA FOR THEMSELVES CAN THUS BE
VIEWED IN THIS POLITICAL FRAMEWORK. HIS SPEECH TO THE PARTY CONGRESS, IN
PARTICULAR, WAS CLEARLY AIMED AT A DOMESTIC AUDIENCE IN AN EFFORT TO
AROUSE HIS CABINET AND HIS PARTY TO GREATER EFFORTS. HE IS PERFECTLY
AWARE THAT HE WILL NEED CONTINUED ECONOMIC ASSISTANCE FROM THE
INTERNATIONAL LENDING AGENCIES AND INDIVIDUAL AID DONORS, BUT HE WANTS
HIS DEVELOPMENT PROGRAM TO CARRY A "MADE IN GUYANA" STAMP AND NOT APPEAR
TO DEPEND EXCESSIVELY ON ASSISTANCE FROM ABROAD. HE IS TRYING TO DESTROY
THE "COLONIAL MENTALITY" WHICH CAUSES SO MANY GUYANESE TO HAVE
FATALISTIC VIEW THAT IT MAKES LITTLE DIFFERENCE WHAT THEY DO THEMSELVES
BECAUSE THE QUALITY OF THEIR LIVES WILL IN ANY EVENT BE DETERMINED BY
THE IMPERIALIST POWERS. HENCE HIS STRESS ON SELF-HELP. PSYCHOLOGICALLY,
THIS DICTATED THE CHANGE TO REPUBLIC STATUS.
C. BURNHAM AND BLACK POWER: BLACK POWER FOR BURNHAM IN THE CARIBBEAN
MEANS BLACK ECONOMIC POWER TO REPLACE THE WHITE EXPATRIATES AND THEIR
LACKEYS WHO NOW CONTROL THE REGION'S ECONOMIC LIFE. HE BELIEVES WILLIAMS
LOST TOUCH WITH THE REALITIES OF LIFE IN TRINIDAD AND TOBAGO AND THAT
SHEARER IS DOOMED TO FAILURE IF HE CONTINUES RIGIDLY TO RESIST POPULAR
PRESSURES FOR CHANGE. BURNHAM IS KEENLY CONSCIOUS OF THESE PRESSURES
AND, IN PUSHING HIS REVOLUTION IN GUYANA, IS TRYING TO STAY OUT IN FRONT
OF THEM. HE SAID THE OTHER DAY "EITHER WE HELP THE REVOLUTION OR THE
REVOLUTION WILL CONSUME US" AND HE HAS REPEATED BEFORE THAT IN GUYANA
"BLACK POWER AS AN OPPOSITION IS SELF-DEFEATING". DESPITE HIS PAST
PROTESTATIONS THAT HE IS THE LEADER OF A MULTI-RACIAL PARTY OUT TO
CREATE A MULTI-RACIAL STATE, WHICH HE REITERATED YESTERDAY IN HIS
INDEPENDENCE DAY SPEECH AS A PARTIAL ANSWER TO STOKELY CARMICHAEL'S
RECENT VISIT, HE AT LEAST TOLERATES RACIAL DISCRIMINATION AND FAVORITISM
WITHIN THE GOVERNMENT, PERHAPS AS A MEANS OF KEEPING THE BLACK POWER
MILITANTS REASONABLY QUIET. THERE ARE MANY HERE WHO SEE IN EUSI KWAYANA
BURNHAM'S PRINCIPLE RIVAL FOR POWER IN THE LONG RUN. PERHAPS HE SHARES
THIS VIEW, ALTHOUGH HE HAS NOT SAID SO. CERTAINLY HE IS DOING ALL HE CAN
TO AVOID A CONFRONTATION. HE PERMITTED STOKELY CARMICHAEL TO COME HERE,
FEELING THE RISKS INHERENT IN HIS VISIT WOULD BE A LESSER DANGER THAN
BRINGING ON A CONFRONTATION. IN A PRIVATE CONVERSATION YESTERDAY HE
IMPLIED HE WAS RESISTING EFFORTS TO HAVE THE BLACK POWER CONFERENCE
BARBADOS HAS BANNED HELD HERE. BUT HE IS SAYING "WE DON'T HAVE THE
NECESSARY HOTELS AND OTHER FACILITIES" AND, IN THE END, PROBABLY WILL
LET THEM COME RATHER THAN PRECIPITATE A CONFRONTATION BY BANNING THE
MEETING.
D. BURNHAM AND FOREIGN POLICY: WHILE MINISTER OF STATE RAMPHAL HAS A
CERTAIN AMOUNT OF LEEWAY IN CONDUCTING GUYANA'S DAY-TO-DAY FOREIGN
RELATIONS, BURNHAM HIMSELF HOLDS THE FOREIGN AFFAIRS PORTFOLIO. IN LINE
WITH HIS DESIRES TO SHOW MORE INDEPENDENCE, IT CAN BE EXPECTED THAT
GUYANA WILL INCREASINGLY ACT MORE LIKE THE NON-ALIGNED COUNTRY IT HAS
CLAIMED TO BE. THIS OF COURSE WILL FIT NEATLY INTO BURNHAM'S AMBITION TO
DEAL ON A MORE EQUAL FOOTING WITH NYRERE, KAUNDA, OBOTE, KENYATTA AND
PERHAPS ABOVE ALL TITO, ALL OF WHOM HE EXPECTS TO VISIT IN THE NEXT NINE
MONTHS. HE WILL, OF COURSE, PARTICIPATE IN THE NON-ALIGNED SUMMIT IN
LUSAKA THIS FALL. WHILE HE IS NOT UNAWARE OF THE RISKS INVOLVED, BURNHAM
IS ALSO A BIT INTRIGUED BY THE SUPPOSED BENEFITS THAT WOULD DERIVE FROM
INCREASED TRADE AND CONTACTS WITH THE SOVIET BLOC. HE ENTERTAINED A
CZECHOSLOVAK TRADE MISSION IN 1968 AND WAS DISAPPOINTED THAT NOTHING
MATERIALIZED FROM IT. MORE RECENTLY, HE HAS PUT OUT FEELERS TO EAST
GERMANY AND AN EAST GERMAN TRADE REPRESENTATIVE IS EXPECTED HERE IN THE
NEXT FEW DAYS. UNDOUBTEDLY GUYANA WILL BE LESS PRONE IN THE FUTURE TO
SUPPORT AUTOMATICALLY WESTERN INITIATIVES IN INTERNATIONAL FORUMS AND IT
MAY WELL OPPOSE THE WEST ON SOME KEY ISSUES, INCLUDING CUBA GIVEN THE
RIGHT CIRCUMSTANCES. YET BURNHAM IS SMART ENOUGH AND REALISTIC ENOUGH TO
KNOW THE PERILS OF GOING TOO FAR AND WILL ATTEMPT TO STEER A THOROUGHLY
UNCOMMITTED COURSE. HE WILL ALSO, OF COURSE, ATTEMPT TO LEAD THE
COUNTRIES OF THE ENGLISH-SPEAKING CARIBBEAN ALONG A SIMILAR ROUTE.
E. BURNHAM AND ECONOMIC NATIONALISM: FOR THE LAST SIX MONTHS OR SO, THE
EMBASSY HAS REPORTED GROWING SIGNS OF ECONOMIC NATIONALISM IN GUYANA,
INCLUDING SHARPLY INCREASED TAXES, INTERVENTION IN BUSINESS DECISIONS,
DEMANDS FOR GOVERNMENT PARTICIPATION IN ECONOMIC ACTIVITIES AND
INCREASED CONTROLS TO ASSURE THE PEOPLE "A BIGGER PIECE OF THE CAKE."
THIS IS NOT A NEW DEPARTURE IN TERMS OF BURNHAM'S BASIC PHILOSOPHIES AND
THOSE OF THE PARTY HE LEADS. IT CAN BE TRACED BACK TO THE ORIGINS OF THE
PARTY. THE TREND HAS BEEN ACCELERATED, HOWEVER, SINCE THE IC WAS FREED
OF THE CONSTRAINTS IMPOSED BY ITS NEED TO GOVERN IN COALITION WITH THE
CONSERVATIVE UNITED FORCE UNTIL THE ELECTIONS IN DECEMBER 1968. BURNHAM
HAS UNDOUBTEDLY READ AND REREAD THE ARUSHA DECLARATION. HIS MOUTH MUST
WATER WHEN HE THINKS OF WHAT KAUNDA GETS OUT OF THE ZAMBIAN GOVERNMENT'S
SHARE OF THE COPPER MINES. HE PROBABLY ADMIRES THE DECISION ANNOUNCED ON
MAY 1 BY OBOTE TO ACQUIRE FOR THE GOVERNMENT OF UGANDA A 60 PERCENT
SHARE IN THE PRIVATE COMPANIES ENGAGED IN MANUFACTURING, TRANSPORTATION,
BANKING, COPPER MINING, "OTHER ECONOMIC ACTIVITIES", TO BE PAID FOR OUT
OF FUTURE PROFITS. WHILE BURNHAM PROFESSES, SINCERELY WE BELIEVE, A
DESIRE TO FIND A UNIQUELY GUYANESE FRAMEWORK WITHIN WHICH TO REACTIVATE
THE ECONOMY OF THE COUNTRY, HE MOST CERTAINLY IS INFLUENCED BY THE
EXAMPLES OF HIS AFRICAN BROTHERS. BURNHAM'S CHOSEN INSTRUMENT IS THE
COOPERATIVE. THERE HAS BEEN MUCH RHETORIC, MOST OF IT MEANINGLESS, TO
THE EFFECT THAT COOPERATIVES HAVE TRADITIONALLY BEEN GUYANESE AND THAT
THEY THEREFORE PROVIDE A "GUYANESE SOLUTION."
IT IS FAIRLY CLEAR THAT WHAT BURNHAM HAS IN MIND IS A FORM OF
COOPERATIVE ORGANIZATION LARGELY IMPOSED FROM THE TOP AND GUIDED AND
CONTROLLED BY THE GOVERNMENT (PARTY?) RATHER THAN THE VOLUNTARY
ASSOCIATIONS OF GROUPS OF INDIVIDUALS WITH COMMON INTERESTS AND
OBJECTIVES WHICH HAVE EXISTED IN THE PAST. HE SETS HIS GOALS AS ENDING
UNEMPLOYMENT, ENDING POVERTY AND VESTING CONTROL OF THE ECONOMY IN
GUYANESE HANDS. HE SEEKS ECONOMIC INDEPENDENCE TO GO WITH THE POLITICAL
INDEPENDENCE ATTAINED FOUR YEARS AGO. HE ALSO AIMS TO BUILD A HOMEGROWN
IDEOLOGY TO COUNTER CHEDDI JAGAN'S MARXISM. BUT WHAT BURNHAM REALLY
WANTS IS FOR THE GOVERNMENT (AND HIS PARTY) TO HAVE ACCESS TO THE
ALLEGEDLY VAST PROFITS BEING MADE BY THE PRODUCERS OF BAUXITE AND SUGAR
AND THE PRIVATE INTERESTS THAT NOW CONTROL IMPORTS. ONLY THEN WILL HE
"CONTROL THE COMMANDING HEIGHTS OF THE ECONOMY." HE HAS HAD PRELIMINARY
DISCUSSIONS WITH THE TWO PRODUCERS OF BAUXITE TO WARN THEM THAT THE
GOVERNMENT WILL OPEN NEGOTIATIONS WITH A VIEW TO ACHIEVING MEANINGFUL
PARTICIPATION IN THEIR ENTERPRISES. JUST WHAT FORM THIS PARTICIPATION
WILL TAKE HAS NOT YET EMERGED AND WILL BE THE SUBJECT OF THE
CONTEMPLATED NEGOTIATIONS, BUT HE MADE CLEAR TO THE AMBASSADOR THAT HE
WANTS EQUITY PARTICIPATION IN ORDER TO HAVE A VOICE IN MANAGEMENT
DECISIONS RATHER THAN SIMPLY A BIGGER SHARE OF THE PROFITS THROUGH
INCREASED TAXES OR ROYALTIES. TO OUR KNOWLEDGE THE SUGAR INDUSTRY HAS
NOT YET BEEN APPROACHED BUT BURNHAM HAS SAID IT IS NEXT IN LINE. HE HAS
ALREADY REVEALED PRIVATELY HIS PLANS TO ESTABLISH A GOVERNMENT IMPORT
AGENCY TO TAKE OVER IMPORTS OF BASIC FOOD ITEMS AND AGRICULTURE AND LAND
CLEARING MACHINERY AND THE GOVERNMENT RECENTLY ACQUIRED A CONTROLLING
INTEREST IN A LOCAL BUSINESS FIRM WHICH GIVES IT A PLATFORM FROM WHICH
TO LAUNCH ITS NEW SCHEME. BURNHAM SAYS HE WILL PERMIT PRIVATE INTERESTS
TO CONTINUE IN WHOLESALE AND RETAIL TRADE BUT WITH THEIR MARKUPS
CONTROLLED. HIS OBJECTIVE, AS HE EXPLAINED IT, IS TO REDUCE THE COSTS OF
THOSE ITEMS WHICH ARE IMPORTANT IN THE LIVES OF THE MASSES OF THE
PEOPLE. HE IS CONVINCED THAT IMPORTERS ARE MAKING VAST PROFITS BY
IMPOSING MARKUPS OF UP TO AND EVEN MORE THAN 100 PER CENT. SOME OF HIS
ADVISERS ARE CAUTIONING HIM TO MOVE SLOWLY SINCE THE GOVERNMENTS
ADMINISTRATIVE MACHINERY ALREADY IS OVERTAXED, BUT OTHERS MORE
IDEOLOGICALLY INCLINED ARE PRESSING HIM TO CHARGE AHEAD. BURNHAM HAS
MADE IT CLEAR THAT HE WILL DEAL HARSHLY WITH THOSE WHO OPPOSE HIM IN HIS
ECONOMIC REVOLUTION AND AUTHORITARIANISM WILL PROBABLY INCREASE HERE. HE
HAS WARNED THAT "IT IS BETTER TO YIELD SOME THAN TO LOSE ALL" AND HAS
SAID THAT THE SACRIFICES HE WILL DEMAND OF THE PRIVATE SECTOR ARE THE
PRICE THAT MUST BE PAID "TO AVOID ANOTHER TRINIDAD". BURNHAM UNDERSTANDS
PARLIAMENTARY DEMOCRACY, PERHAPS BETTER THAN MOST OF HIS COLLEAGUES, AND
HE PROBABLY VALUES THE ESTEEM OF THE DEMOCRATIC LEADERS OF THE
COMMONWEALTH ENOUGH TO RETAIN AT LEAST A SEMBLANCE OF A DEMOCRATIC
SYSTEM. BUT HE IS TOUCHY, DOES NOT RELISH CRITICISM, DOES NOT FACE A
RESPONSIBLE OPPOSITION AND IS DETERMINED TO PUSH AHEAD WITH HIS
REVOLUTION. HE WILL CRUSH THOSE WHO STAND IN HIS WAY. IN THIS ATMOSPHERE
IT IS NOT SURPRISING THAT THERE HAS BEEN LITTLE PRIVATE INVESTMENT,
DOMESTIC OR FOREIGN, IN RECENT MONTHS. IN FACT, BANK MANAGERS TELL US
THERE ARE SIGNS OF DISINVESTMENT AND FLIGHT OF CAPITAL. CERTAINLY THE
PROSPECTS FOR LARGE-SCALE PRIVATE INVESTMENT IN THE FUTURE ARE NOT
BRIGHT, AND THE GOVERNMENT ITSELF DOES NOT HAVE AND WILL NOT HAVE THE
RESOURCES TO DEVELOP THE COUNTRY ON ITS OWN, BURNHAM'S EXPECTATIONS OF
WHAT HE CAN EXTRACT FROM THE PRIVATE SECTOR TO THE CONTRARY NOT
WITHSTANDING. FOREIGN ASSISTANCE WILL BE NEEDED AND WILL BE REQUESTED,
ALTHOUGH EFFORTS WILL BE MADE TO SOFTEN ITS MORE ONEROUS TERMS.
6. CONCLUSIONS: WHILE THE IMMEDIATE FUTURE IN GUYANA THUS DOES NOT LOOK
BRIGHT, THE VITAL INTERESTS OF THE UNITED STATES ARE HARDLY THREATENED
(EXCEPT OF COURSE FOR THE INVESTMENT OF REYNOLDS METALS). THE REAL
PROBLEM TO BE FACED IS THAT BURNHAM MUST NOT FALL SO FLAT ON HIS FACE AS
TO MAKE JAGAN A MORE ATTRACTIVE ALTERNATIVE FOR THE GUYANESE PEOPLE. THE
UNITED STATES, WHILE IT WILL NOT LIKE MUCH OF WHAT HE MAY DO, WILL THUS
HAVE TO CONTINUE TO HELP BURNHAM, OFTEN DESPITE BURNHAM, FOR THERE IS NO
ACCEPTABLE ALTERNATIVE TO BURNHAM IN SIGHT. AND THE HELP WILL HAVE TO BE
IN TUNE WITH WHERE BURNHAM THINKS HE WANTS GUYANA TO GO. THIS CONCLUSION
MAY BE DEPRESSING TO SOME, BUT IT HAS A POSITIVE SIDE AS WELL. THE
SITUATION DEVELOPING HERE PROVIDES OPPORTUNITIES, PARTICULARLY IN THE
ADMINISTRATION OF ECONOMIC ASSISTANCE ACTIVITIES, FOR THE USG TO
DEMONSTRATE WHETHER IT HAS THE CAPACITY AND FLEXIBILITY TO MEET THE
CHALLENGE OF CHANGE. CAN IT FACE AND REACT POSITIVELY TO THE RISING
EXPECTATIONS OF THE AWAKENING PEOPLES OF A DEVELOPING NATION SEEKING ITS
OWN SOLUTIONS? IN THESE TIMES, AS EVENTS AT HOME AND ABROAD ARE PROVING,
CHANGE CANNOT BE STAYED. IF OPPOSED, IT WILL COME VIOLENTLY, IN GUYANA
AS WELL AS ELSEWHERE. BURNHAM IS KEENLY AWARE OF THIS, AND HIS WAY MAY
PROVIDE AN ANSWER. THE METHODS OF THE PAST, POLICIES, RULES AND
REGULATIONS, ARE PROVING INADEQUATE. MUST THE US INEVITABLY SIT BY AND
WATCH REPETITIONS OF WHAT HAPPENED IN TRINIDAD AND TOBAGO SWEEP THROUGH
THE ENGLISH-SPEAKING CARIBBEAN? IS IT IMPOSSIBLE FOR THE USG TO IDENTIFY
ITSELF WITH THE FORCES SEEKING CHANGE AND IMPROVEMENT IN THE LOT OF THE
COMMON MAN, ESPECIALLY THE BLACK MAN? WE THINK NOT AND SHALL BE
DEVELOPING RECOMMENDATIONS ON WAYS IN WHICH WE CAN HELP BURNHAM AND IN
THE PROCESS, PERHAPS, MODERATE HIS PACE.
KING
1 Source: National Archives, Nixon Presidential Materials, NSC Files,
Box 785, Country Files, Latin America, Guyana, Vol. 1. Secret.
369. Memorandum for the 40 Committee, Washington, June 15, 1970.11.
Source: National Security Council, NSC Intelligence Files, Country
Files, Guyana, 23 May 1969-6 February 1973. Secret; Eyes Only. A
handwritten note at the bottom stated, "Continuation approved by the 40
Committee on 27 June 1970."
15 JUN 1970
MEMORANDUM FOR: The 40 Committee
SUBJECT: Status Report--[text not declassified] Support to the People's
National Congress Party of Guyana
1. Summary
Prime Minister Forbes Burnham of Guyana, who had previously received
covert assistance [text not declassified] early in 1969 requested
that the U.S. Government provide $10,000 a month for two years to
support his efforts to build his party, the People's National Congress
(PNC), into an effective, permanently-organized political organization
capable of serving as a bulwark against the possibility of Cheddi
Jagan's accession to power in Guyana.
The 303 Committee on 17 June 1969 approved a subsidy to the PNC of
$5,000 per month for two years with the understanding that at the end of
the first year the subsidy would be reviewed and could be terminated if
the PNC had not made satisfactory progress toward establishing a
permanent party mechanism. This stipulation and the amount of $5,000 per
month had been recommended by the then Ambassador Delmar Carlson [text
not declassified] The above-mentioned conditions under which the
subsidy was being made available were explained to Burnham [text not
declassified] who emphasized high level U.S. Government concern that
he refrain from engaging in schemes to raise funds for the party which
could, if exposed, subject him to public embarrassment and erode his
political capital. Flour mill sales were mentioned as an area of special
concern.
This report describes the progress that has been made during the first
year and contains a recommendation that the subsidy be continued at the
same $5,000-a-month level for the second year.
2. Status of Activities
A monthly subsidy of $5,000 was paid to Burnham, beginning 1 July 1969,
[ not declassified] Burnham has used these funds to build the PNC
into a permanently established and well-organized political party that
will be able to participate effectively in the next national elections.
The importance of the PNC's ability to affect a turnout of every
possible pro-Burnham vote is underscored by population and voting trends
which, if continued, would enable the Jagan forces to win an honest
election.
Burnham has made steady progress in strengthening the organization and
financing of his party. Almost $60,000 was raised at a successful party
congress held in April, and the PNC is making a concerted effort to
prepare for a series of municipal elections to be held beginning 22
June. In addition to specific actions in connection with the elections,
a general reorganization of the party is being carried out to build an
increased awareness of party responsibilities and encourage a greater
effort from rank and file members.
An analysis of internal party documents concerning the PNC's campaign
performance to date provides meaningful insights into its capabilities.
In an election briefing on 1 May, Burnham gave a pep talk to 135 local
party representatives and outlined the organizational strategy to be
used. The choice of leaders for the various election areas was ratified,
party activists from non-election areas were nominated, telephones in
each election area were installed for quick and easy communication with
party headquarters, and a propaganda and research committee was
established to provide materials and assistance to the various groups
tailored to their local needs. Special emphasis was given to involving
youthful members in these activities. Specific provision was made for
assigning PNC parliamentarians to various districts for electioneering.
The internal reorganization calls for a renewal of the party membership
lists and mandatory collection of party dues. In fact, a concerted
effort is underway to improve the dues collection process and, to
enforce these new procedures, new coded membership cards recording both
financial contributions and participation in meetings will be issued. In
addition, intra-party elections to select working level leaders will be
held in July and new party regulations established to maintain
ward-level records. The internal reorganization also included new
procedures for the handling of the budget account and for the planned
training of the various categories of party members. Monthly working
level progress reports to the PNC leaders now call for a detailed
description of actions taken, problems encountered, and assistance
needed. These reports enable tighter party control over both the PNC
membership and the programs undertaken.
The fact that the PNC has not encountered major disorders and confusion
in preparation for the local elections is in marked contrast to the 1968
performance. Campaign activities have proceeded smoothly and, by
Guyanese standards, are the mark of a professional, well-honed political
machine. This improved performance is due to a number of factors
including the experience gained in the 1968 elections, [text not
declassified] It is doubted seriously that this momentum could have
been maintained without the covert subsidy which permitted the PNC to
continue its system of files and records, and hire a permanent staff of
organizers, secretaries and clerical help.
Although the PNC is unquestionably a stronger political structure in
comparison to its opposition, its ability to make major inroads into the
East Indian community is still hampered by the overwhelming acceptance
by the East Indians of Jagan as their leader, mainly for racial reasons.
There are, nevertheless, signs that some East Indians have become
disillusioned with Jagan, or conversely, at least resigned to acceptance
of the Burnham government. One positive sign is a separate East Indian
municipal election ticket being run by the PNC in one area for the
purpose of taking away votes from Jagan's People's Progressive Party
(PPP).
Burnham has also made significant progress in raising funds for the PNC
without incurring unacceptable political risks, but he did not withdraw
the Greenland Investment Company (GLICO) from involvement in the flour
business. However, the expansion of GLICO into the flour distribution
business has not caused the political problems that might have eroded
Burnham's political capital or caused his government embarrassment.
All parties now accept this arrangement. The profit margin for American
businessmen who own and operate the flour mill is reliably reported to
be satisfactory to them. Further, they enjoy the benefits of a five-year
tax holiday which began in 1969. The consumer has benefited in that he
is now able to purchase flour at a slightly reduced price than he did
prior to the involvement of GLICO. The GLICO operation, which has not
become a public political issue since its inception, has provided from
its flour sales a total of $40,000 to the PNC during the last six months
of 1969.
A detailed PNC financial statement for calendar year 1969 shows that the
covert subsidy, which commenced 1 July 1969, represents approximately 60
percent of the party's budget for this six-month period. An itemized
list of PNC expenses shows that the total amount of funds received,
$105,486, was spent on a variety of activities directly related to party
programs and activities. The largest single expenditure (34 percent) was
for salaries of party workers.
Although Burnham clearly understood from the outset that the subsidy was
subject to review at the end of the first year, he is counting on
continued financial assistance for the additional year. He has requested
that the sum be increased to $10,000 for the first six months of the
second year and $5,000 for the last six months, making an annual total
of $90,000. Burnham explained that the requested increase would be used
to meet PNC expenses connected with a series of municipal elections
scheduled to be held from June through November 1970. While it is
important for the PNC to make a strong showing in these local elections,
Ambassador Spencer King [text not declassified] that the $5,000
per month level is adequate to meet the election expenses. Their
recommendation was based on the knowledge that Burnham has made good
progress toward bringing the PNC closer to financial self-sufficiency,
that there are reliable reports that the PNC campaign is moving along
smoothly, and that heavy expenditures above and beyond the party's
current subsidized budget level are not expected.
3. Conclusions
The basic objectives of the covert subsidy to the PNC during the past
year have been met. The PNC is stronger, better organized, better
financed and more effective than it was one year ago. However, the
specter of Jagan still looms large and the East Indian electorate is
burgeoning. Therefore, greater efforts by the PNC are called for in the
future. A continuation of the subsidy for a second year would measurably
assist Burnham in this task and would serve the further objective of
keeping open another channel for communication with this head of
government. Ambassador King [text not declassified] have
recommended $5,000 per month as an adequate amount for this purpose. [text
not declassified] further recommended that the July and August
payments be made in advance in order to assist the PNC during the
principal urban elections. Assistant Secretary Charles Meyer concurs in
these recommendations.
4. Recommendation
It is recommended that the Committee note the progress that has been
made toward establishing a permanent PNC party mechanism and approve a
continuation of the subsidy to the PNC in the amount of $5,000 per month
for the second year.
1 Source: National Security Council, NSC Intelligence Files, Country
Files, Guyana, 23 May 1969-6 February 1973. Secret; Eyes Only. A
handwritten note at the bottom stated, "Continuation approved by the 40
Committee on 27 June 1970."
370. Telegram 1436 From the Embassy in Guyana to the Department of
State, December 5, 1970, 1700Z.11. Source: National Archives, Nixon
Presidential Materials, NSC Files, Box 785, Country Files, Latin
America, Guyana, Vol. 1. Secret; Priority. Copies sent to Bridgetown,
Caracas, Kingston, London, Ottawa, Port of Spain, USINCO POLAD, and
Paramaribo UNN.
TELEGRAM
Department of State
GEORGETOWN 1436
P R 051700Z DEC 70
FM AMEMBASSY GEORGETOWN
TO SECSTATE WASHDC PRIORITY 5169
INFO AMEMBASSY BRIDGETOWN
AMEMBASSY CARACAS
AMEMBASSY KINGSTON
AMEMBASSY LONDON
AMEMBASSY OTTAWA
AMEMBASSY PORT OF SPAIN
USINCO POLAD
AMEMBASSY PARAMARIBO UNN
GEORGETOWN 1436
SUBJ: BAUXITE NEGOTIATIONS
REF: (A) GEORGETOWN 1417; (B) 1389 (C) 1342
1. SUMMARY: ON EVE OF OPENING OF NEGOTIATIONS WITH DEMARARA BAUXITE
COMPANY IN WHICH GOG PROPOSES ATTAIN "MEANINGFUL PARTICIPATION" IN
BAUXITE INDUSTRY, LINES ARE NOW CLEARLY DRAWN. PROSPECTS FOR AMICABLE
SETTLEMENT SEEM DIM, AND NATIONALIZATION OF COMPANY MAY WELL BE END
RESULT. GOG MAKING TRANSPARENT EFFORTS GENERATE POPULAR BACKING. THESE
INEVITABLY HAVE OVERTONES WHICH ENCOURAGE ANIMOSITY TO FOREIGNERS,
ESPECIALLY WHITE FOREIGNERS, AND EMOTIONS MAY REACH LEVELS WHERE
DEMONSTRATIONS AND/OR VIOLENCE COULD TAKE PLACE. END SUMMARY.
2. LATE ON SATURDAY, NOVEMBER 28, JAMES CAMPBELL, HEAD OF ALCAN'S
GUYANESE SUBSIDIARY DEMBA, RECEIVED LETTER FROM PERMANENT SECRETARY IN
OFFICE PRIME MINISTER, OSCAR HENRY, FORMALLY NOTIFYING HIM OF GOG
INTENTION OPEN NEGOTIATIONS MONDAY, DECEMBER 7 AND SETTING TIME AND
PLACE FOR INITIAL SESSION. LETTER STATED THAT "BY CABINET DECISION IN
NATIONAL INTEREST FOLLOWING ARE NON-NEGOTIABLE" AND SET FORTH SIX POINTS
COVERED ESSENTIALLY IN ALCAN'S STATEMENT TRANSMITTED REF A. GOG WILL
ACQUIRE MAJORITY EQUITY; WILL PAY REASONABLE COMPENSATION; COMPENSATION
IS TO BE BASED ON BOOK VALUE AS USED BY DEMBA FOR INCOME TAX PURPOSES;
COMPENSATION TO BE PAID FROM FUTURE PROFITS ACCRUING TO GOG AFTER
PAYMENT OF TAXES; MANAGEMENT CONTROL OF NEW COMPANY WILL BE COMMENSURATE
WITH EQUITY HOLDINGS; AND NEW ORGANIZATIONAL AND MANAGEMENT ARRANGEMENTS
TO BE CONSIDERED EFFECTIVE JANUARY 1, 1971 REGARDLESS OF WHEN
NEGOTIATIONS CONCLUDED.
3. CAMPBELL WENT TO MONTREAL SUNDAY FOR MEETINGS WITH SENIOR OFFICIALS
OF ALCAN TO DISCUSS STRATEGY AND PUT TOGETHER NEGOTIATING THEM.
ACCOMPANIED BY HEAD OF ALCAN, NATHANIEL DAVIS, CALLED ON SENATOR PAUL
MARTIN, WHO IN ABSENCE MITCHELL SHARPE SERVING AS ACTING SECRETARY OF
STATE FOR EXTERNAL AFFAIRS. PURPOSE, OF COURSE, WAS TO ENLIST OFFICIAL
GOG SUPPORT FOR COMPANY. AS RESULT THIS MEETING, CANADIAN HIGH
COMMISSIONER GEORGETOWN INSTRUCTED SEND MESSAGE TO PRIME MINISTER
BURNHAM THROUGH MINISTER OF STATE RAMPHAL, WHICH HE DID DECEMBER 2. TEXT
FOLLOWS:
4. QUOTE: PRIME MINISTER BURNHAM'S STATEMENT OF NOVEMBER 28 CONCERNING
THE POSITION OF THE GOVERNMENT OF GUYANA IN FORTHCOMING NEGOTIATIONS
WITH DEMBA WAS OF COURSE CARRIED IN THE CANADIAN PRESS. I READ THE
STATEMENT WITH CONSIDERABLE INTEREST AND, WOULD LIKE TO RECONFIRM THE
KEEN INTEREST OF THE CANADIAN GOVERNMENT IN THE FORTHCOMING
NEGOTIATIONS. YOU HAVE KEPT OUR HIGH COMMISSION WELL INFORMED ON THIS
MATTER AND I HOPE YOU WILL BE ABLE TO CONTINUE TO DO SO. YOU WILL RECALL
THAT AT THE TIME OF MY VISIT IN OCTOBER I SAID IN REFERENCE TO
NEGOTIATIONS, THAT IT WAS OF COURSE UP TO THE GUYANESE GOVERNMENT TO
DECIDE ITS OWN INTERNAL POLICIES AND THAT I WAS CONFIDENT GUYANA WOULD
TREAT CANADIAN COMMERCIAL INTERESTS FAIRLY AND IN ACCORDANCE WITH THE
LAWS OF GUYANA. I ALSO MENTIONED CANADIAN EXPERIENCE WITH NEED FOR
SUBSTANTIAL AMOUNTS OF FOREIGN INVESTMENT AND THE FACT THAT CANADA HAD
FOUND IT DESIRABLE TO KEEP THIS IN MIND WHEN DRAFTING DOMESTIC
LEGISLATION AND REGULATIONS AND SAID I PRESUMED GUYANA WOULD BE FACED
WITH A SIMILAR SITUATION. I WOULD LIKE TO REITERATE THAT THE CANADIAN
GOVERNMENT RECOGNIZES THAT GUYANA, AS AN INDEPENDENT SOVEREIGN NATION,
HAS THE RIGHT TO SET CONDITIONS WHICH WOULD SERVE ITS OWN INTERESTS FOR
THE OPERATION OF FOREIGN COMPANIES WITHIN ITS TERRITORIES. THE CANADIAN
GOVERNMENT IS MOST CERTAINLY INTERESTED IN SEEING THAT THE CANADIAN FIRM
GETS FAIR AND EQUITABLE TREATMENT AND IS NOT DISCRIMINATED AGAINST IN
RELATION TO OTHER COMPANIES. THE CANADIAN GOVERNMENT WOULD HOPE THAT A
SATISFACTORY SETTLEMENT BASED UPON MUTUALLY ACCEPTABLE ARRANGEMENTS
COULD BE REACHED. PAUL MARTIN. END QUOTE.
5. COMPANY NOT SURPRISINGLY FEELS THIS MESSAGE "MUCH TO WEAK".
6. CAMPBELL WILL HEAD DEMBA'S NEGOTIATING TEAM SUPPORTED BY ASSISTANT AT
MACKENZIE, ROBERT E. ROSANE (WHO INCIDENTALLY IS US CITIZEN) AND D.F.
MACORQUODALE, ALCAN FIDUCIARIES LTD., MONTREAL. ADVISERS, ALL FROM
MONTREAL, WILL BE PAUL H. LEMAN, PRESIDENT ALCAN CANADA LTD; D.D.
MACKAY, PRESIDENT ALCAN ORE LTD; GERALD CLARK, VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER, ALCAN ORE LTD; AND R. GRIMES-GRAEME, CHIEF, RESOURCES
DEPARTMENT, EXPLORATION DIVISION, ALCAN RESEARCH AND DEVELOPMENT (WHO IS
DEEPLY INVOLVED IN DEVELOPMENT NEW FINDS IN BRAZIL). W.R.A. PILGRIM,
PUBLIC RELATIONS OFFICER FOR DEMBA AT MACKENZIE, WILL BE IN ATTENDANCE.
7. MINISTER WITHOUT PORTFOLIO HUBERT JACK WILL HEAD GOG NEGOTIATIONS.
(MINISTER STATE RAMPHAL TOLD ME HE HAD MISGIVINGS AND DID NOT THINK JACK
GOOD NEGOTIATOR ALTHOUGH CONSIDERED HIM ABLE.) ALSO ON TEAM WILL BE
MOHAMMED SHAHABUDDEEN, SOLICITOR GENERAL, SOBHARAN SINGH, DIRECTOR OF
GEOLOGICAL SURVEY, AND BERNARD CRAWFORD, PERMANENT SECRETARY IN MINISTRY
OF ECONOMIC DEVELOPMENT. (SHAHABUDDEEN IS ABLE AND RELATIVELY MODERATE;
SINGH REPORTEDLY IS ONE OF STRONGEST ADVOCATES OF IMMEDIATE AND TOTAL
NATIONALIZATION.) THERE MAY BE OTHERS. ALL THE RESOURCES OF GOG WILL BE
HELD AVAILABLE TO RENDER TECHNICAL ADVISE AND COUNSEL.
8. UNDERSTAND ALCAN BELIEVES COULD GET ALONG IF NECESSARY WITHOUT
GUAYANA'S BAUXITE, AS IMPLIED LAST SENTENCE REFTEL. HOWEVER, IS
EXTREMELY WORRIED ABOUT PRECEDENTS WHICH MIGHT BE SET HERE AND THEIR
EFFECT ON OPERATIONS ELSEWHERE, ESPECIALLY JAMAICA. CONSEQUENTLY, HAD
INTENDED BE FAIRLY HARD-NOSED IN NEGOTIATIONS ALTHOUGH HOPED IT WOULD BE
POSSIBLE IN LONG RUN REACH SOME MUTUALLY SATISFACTORY AGREEMENT WITH GOG.
9. IN VIEW NON-NEGOTIABLE POINTS GOG HAS SET FORTH, WHICH ARE TOTALLY
UNACCEPTABLE TO COMPANY, ALCAN NOW WONDERS WHAT THERE IS TO NEGOTIATE. I
HAVE STRONG IMPRESSION COMPANY MAY PREFER PRECIPITATE NATIONALIZATION
RATHER THAN TO AGREE TO CONDITIONS WHICH MIGHT WELL ADVERSELY AFFECT
SOME PERCENT OF NORTH AMERICA'S SOURCES OF BAUXITE. IT MAY BE
SIGNIFICANT THAT AIRCRAFT WILL BE STANDING BY FROM TUESDAY EVENING TO
RETURN ALCAN OFFICIALS TO MONTREAL.
10. MEANWHILE, GOG IS MAKING TRANSPARENT EFFORT GENERATE MASS PUBLIC
SUPPORT FOR ITS DEMANDS. HEAD OF MINE WORKERS UNION, WINSTON VERBEKE,
ADDRESSED RALLY OF WORKERS AT MACKENZIE THURSDAY CALLING FOR SUCH
SUPPORT. OTHER UNIONS ISSUING STATEMENTS BACKING GOG. RALLY ALSO HELD AT
UNIVERSITY FRIDAY EVENING. SATURDAY'S "GRAPHIC" REPORTED A STATEMENT
ISSUED BY ASCRIA (RADICAL BLACK POWER ORGANIZATION) TERMING ALCAN'S
STATEMENT "A DECLARATION OF WAR AGAINST ALL OUR PEOPLE" AND CHARGING
THAT ALCAN "THREATENING BREAK UP THE TALKS FROM THE FIRST DAY UNDER THE
PRETEXT OF SEEKING CLARIFICATION THE POINTS RAISED".
11. CANADIAN HIGH COMMISSIONER HAS RECEIVED REPORTS THAT BAND OF GUYANA
BUILDING, WHERE NEGOTIATIONS WILL BE HELD (AND WHERE COINCIDENTALLY
CANADIAN HIGH COMMISSION IS HOUSED) WILL BE PICKETED BEGINNING MONDAY
MORNING TO IMPRESS ON ALCAN OFFICIALS DETERMINATION OF GUYANESE PEOPLE
STAND BEHIND GOG IN ITS STRUGGLE WITH "IMPERIALISM".
COMMENT: DAYS AHEAD WILL OBVIOUSLY BE DIFFICULT ONES FOR ALL CONCERNED,
WITH EMOTIONS RUNNING AT INCREASINGLY HIGH LEVELS. POSSIBILITY THAT
DEMONSTRATIONS COULD GET OUT OF HAND CANNOT BE DISCARDED. IT IS
DIFFICULT TO SEE HOW NEGOTIATIONS CAN LEAD TO AGREEMENT AND GOG MAY FEEL
IT HAS NO CHOICE BUT TO NATIONALIZE. GP4.
KING
1 Source: National Archives, Nixon Presidential Materials, NSC Files,
Box 785, Country Files, Latin America, Guyana, Vol. 1. Secret; Priority.
Copies sent to Bridgetown, Caracas, Kingston, London, Ottawa, Port of
Spain, USINCO POLAD, and Paramaribo UNN.
371. Telegram 106 From the Embassy in Guyana to the Department of State,
January 29, 1971, 1430Z.11. Source: National Archives, Nixon
Presidential Materials, NSC Files, Box 785, Country Files, Latin
America, Guyana, Vol 1. Secret. A stamped notation on the telegram
indicates that it was received in the White House Situation Room at 9:10
on January 30.
TELEGRAM
Department of State
GEORGETOWN 106
R 291430Z JAN 71
FM AMEMBASSY GEORGETOWN
TO SECSTATE WASHDC 5320
SUBJ: BAUXITE INDUSTRY NEGOTIATIONS
REF: STATE 013910
1. AS DEPT RECOGNIZES IN REFTEL, OUR CRYSTAL BALL IS A BIT HAZY AND IT
IS DIFFICULT TO SPECULATE ON ULTIMATE OUTCOME OF CURRENT NEGOTIATIONS
WITH DEMBA. OF ONE THING WE HAVE LITTLE DOUBT, HOWEVER, BURNHAM WILL GET
WHAT HE HAS COMMITTED HIMSELF PUBLICLY TO GET, I.E. MAJORITY OWNERSHIP
AND CONTROL OF THE BAUXITE INDUSTRY, OR, ACCORDING TO BURNHAM HIMSELF,
HE WILL NO LONGER BE PRIME MINISTER.
2. HOW THIS WILL COME ABOUT DEPENDS PRIMARILY ON THE COMPANIES. IF THEY
ARE WILLING TO REACH AN ACCOMMODATION, ON BURNHAM'S TERMS, THEY HAVE A
GOOD CHANCE OF RETAINING A MINORITY INTEREST, A VOICE IN MANAGEMENT (BUT
NOT THE FINAL SAY), AND CONTINUED ACCESS TO GUYANA BAUXITE (WHICH WE
UNDERSTAND HAS CERTAIN UNIQUE QUALITIES). THIS IS WHAT BURNHAM HOPES
FOR. IF COMPANIES ARE NOT WILLING TO REACH SUCH AN ACCOMMODATION (AND WE
RECOGNIZE THAT IN MAKING THIS DECISION THE COMPANIES WILL BE INFLUENCED
BY THEIR INTERESTS IN OTHER COUNTRIES) IT IS VIRTUALLY CERTAIN THAT
BURNHAM WILL NATIONALIZE THE INDUSTRY AND TURN ELSEWHERE FOR TECHNICAL
ASSISTANCE AND MANAGEMENT EXPERTISE TO HELP RUN IT AND SEEK OTHER
MARKETS.
3. BURNHAM KNOWS FULL WELL THE RISKS, DISLOCATIONS AND SACRIFICES THIS
COURSE WOULD ENTAIL, BUT HE IS COMPLETELY WILLING TO PAY THE PRICE IN
THE NAME OF "NATIONAL DIGNITY" AND "ECONOMIC INDEPENDENCE." WE KNOW
[text not declassified] THAT LEGISLATION AND A PUBLIC RELATIONS CAMPAIGN
ALREADY HAVE BEEN PREPARED TO COVER THIS CONTINGENCY, AND WE ASSUME
BURNHAM AND HIS PARTY WILL DISCUSS THE MATTER IN DETAIL DURING VISIT TO
YUGOSLAVIA BETWEEN FEBRUARY 1 AND 4.
4. SO FAR, ALTHOUGH GOG-DEMBA TALKS HAVE CONTINUED IN A REASONABLY
FRIENDLY ATMOSPHERE, WE HAVE RECEIVED NO RPT NO INDICATIONS THAT DEMBA
AND ALCAN ARE PREPARED TO ACCEDE TO BURNHAM'S DEMANDS. COMPANIES HAVE
CONTINUED "TO EXPLORE IMPLICATIONS FOR FUTURE OPERATIONS OF GOG'S
NON-NEGOTIABLE DEMANDS," HAVE OFFERED COUNTERPROPOSAL WHICH DOES NOT
MEET THOSE DEMANDS AND HAVE SAID PRIVATELY THAT THEY CANNOT AND WILL NOT
MEET THEM.
5. AS EXPECTED NEGOTIATIONS "ADJOURNED" JANUARY 27 UNTIL FEBRUARY 8 AT
REQUEST OF COMPANIES. JOINT COMMUNIQUE ISSUED NIGHT OF 27TH STATED
"...THE NEGOTIATING PARTIES HAVE BEEN ENGAGED IN EXAMINING VARIOUS
ASPECTS OF THE NEW COMPANY WHICH IT IS INTENDED TO FORM FOR THE PURPOSE
OF ACHIEVING GOVERNMENT'S PARTICIPATION IN THE BAUXITE INDUSTRY. THE
NEGOTIATIONS HAVE NOW COME TO THE END OF THE FIRST PHASE. THE
REPRESENTATIVES OF DEMBA WILL TAKE THE OPPORTUNITY OF THE RECESS TO
REPORT TO THEIR PRINCIPALS IN CANADA ON THE PRESENT STATE OF THE
NEGOTIATIONS. WHEN NEGOTIATIONS RESUME ON 8TH FEBRUARY, IT IS EXPECTED
THAT, AS A RESULT OF THE DISCUSSIONS SO FAR HELD THE REPRESENTATIVES OF
DEMBA WILL BE RETURNING IN A POSITION TO FURTHER CONSIDER THE
GOVERNMENT'S PROPOSALS, AND IT IS HOPED THAT AN AGREEMENT WILL BE
REACHED BEFORE THE END OF FEBRUARY."
6. THIS COMMUNIQUE TELLS IT PRETTY MUCH AS WE UNDERSTAND IT. BURNHAM
WILL BE BACK ON FEBRUARY 6. DEMBA (READ ALCAN) WILL GIVE ITS FINAL
ANSWER BEGINNING FEBRUARY 8, PERHAPS TO BURNHAM HIMSELF, AND SOMETHING
FAIRLY CONCLUSIVE WILL BE ANNOUNCED PRIOR TO OR ON REPUBLIC DAY,
FEBRUARY 23. THE CANADIAN HIGH COMMISSIONER (PROTECT) IS PESSIMISTIC,
AND EVEN SPECULATES WHETHER COMPANIES REPRESENTATIVES WILL IN FACT
RETURN. WE THINK THEY WILL, BUT SHARE HIS PESSIMISM ABOUT THE ANSWER
THEY PROBABLY WILL BRING WITH THEM.
7. OF PARTICULAR INTEREST AT THIS JUNCTURE ARE STRAWS IN THE WIND
SUGGESTING THAT, CONTRARY TO WHAT BURNHAM TOLD ME IN DECEMBER, GOG MAY
HAVE DECIDED TO DIGEST DEMBA BEFORE TAKING ON REYNOLDS. HEAD OF GOG
NEGOTIATING TEAM TOLD USAID DIRECTOR TWO WEEKS AGO THAT IT WOULD BE SOME
TIME BEFORE REYNOLDS BECAME INVOLVED. ALSO, SOLICITOR GENERAL
SHAHABBUDDEEN, WHO IS MEMBER OF GOG TEAM, TOLD DCM LAST WEEK THAT
REYNOLDS MIGHT NOT BE CALLED IN UNTIL 1972. WE KNOW BURNHAM HAS BEEN
WARNED REGARDING IMPORTANCE OF GUYANA'S IMAGE. WITH THE U.S. CONGRESS
WHEN IT CONSIDERS NEW SUGAR LEGISLATION LATER THIS YEAR, AND I MYSELF
REMINDED BURNHAM PRIOR TO HIS DEPARTURE ON JANUARY 8 OF U.S.
GOVERNMENT'S 16,316,000 DOLLAR US GUARANTEE OF REYNOLDS INVESTMENT.
PERHAPS THESE REMINDERS AND DISCUSSIONS IN NEW YORK MAY HAVE COOLED HIS
ENTHUSIASM FOR TAKING OVER THE ENTIRE INDUSTRY ONCE AND FOR ALL AT THIS
TIME. IN ANY EVENT, LEGISLATION ALREADY PREPARED, [text not
declassified] IS AIMED SPECIFICALLY AT NATIONALIZATION OF DEMBA RATHER
THAN THE INDUSTRY AS A WHOLE AND WOULD NOT NECESSARILY AFFECT REYNOLDS.
IN TERMS OF SENATOR PAUL MARTIN'S NOTE TO BURNHAM ON DECEMBER 2, WHICH
SAID, IN PART "THE CANADIAN GOVERNMENT IS MOST CERTAINLY INTERESTED IN
SEEING THAT THE CANADIAN FIRM GETS FAIR AND EQUITABLE TREATMENT AND IS
NOT DISCRIMINATED AGAINST IN RELATION TO OTHER COMPANIES" (UNDERLINING
ADDED. (NOTE: SECOND QUOTE IS UNDERLINED)), THIS COULD CAUSE PROBLEMS
FOR GOG.
8. THERE IS NO DOUBT IN MY MIND THAT BURNHAM'S LONG-TERM OBJECTIVES FOR
THE BAUXITE INDUSTRY INCLUDE CONSOLIDATION OF PRESENT TWO COMPANIES INTO
AN INTEGRATED OPERATION, THE DEVELOPMENT OF WHAT HE CALLS "LINKAGE"
INDUSTRIES AND THE CONSTRUCTION OF A SMELTER. HE HAS MADE THIS CLEAR IN
A SERIES OF CONVERSATIONS. FOR EXAMPLE, WHEN I ASKED HIM LAST SUMMER IF
HE WANTED TO GO AHEAD WITH THE BERBICE BAR PROJECT WHICH WOULD ALLOW
REYNOLDS TO INCREASE PRODUCTION AND USE DEEPER DRAFT ORE BOATS, HE ASKED
THAT IT BE DEFERRED ON GROUNDS THAT GOG MIGHT FIND IT PREFERABLE TO MOVE
ORE FROM KWAKWANI OVERLAND TO MACKENZIE FOR PROCESSING THERE. HE ADDED
THAT A RAILROAD CONNECTING THE TWO POINTS WOULD HAVE THE SIDE EFFECT OF
"OPENING UP THE INTERIOR" (THUS MOVING WHAT IS GENERALLY CONSIDERED "THE
INTERIOR" SEVERAL HUNDRED MILES).
9. SECONDLY, BURNHAM HAS RAILED AT DEMBA REPEATEDLY FOR CONTINUING TO
IMPORT "WHEATEN FLOUR" RATHER THAN SWITCHING TO CASSAVA STARCH AS A
FLOCCULENT FOR ITS ALUMINA PLANT, ARGUING THAT COMPANY, HAD IT WISHED,
COULD HAVE HELPED DEVELOP NEW AGRICULTURAL INDUSTRY WHICH WOULD HAVE
BENEFITED GUYANA RATHER THAN CANADIAN EXPORTERS. SIMILARLY, HE HAS
ARGUED THAT CAUSTIC SODAS ALSO USED IN ALUMINA PLANT, COULD HAVE BEEN
PRODUCED LOCALLY HAD THE COMPANY BEEN WILLING TO ENCOURAGE IT AND INVEST
IN SOMETHING WHICH WOULD HAVE BEEN OF! BENEFIT TO GUYANA.
10. BURNHAM HAS ALSO CRITICIZED WORLD BANK'S NEGATIVE POSITION ON TIBOKU
HYDROELECTRIC POWER PROJECT AS OVER-LOOKING SUCH "LINKAGE" IN ARRIVING
AT COST ESTIMATES OF POWER DELIVERED TO MACKENZIE FOR A SMELTER (AND FOR
REASONS WE CAN APPRECIATE HE WILL NOT CONSIDER SERIOUSLY THE BANKS
ALTERNATIVE OF ECONOMIC POWER FROM ITS GURI DAM PROJECT IN VENEZUELA,
ALTHOUGH HE ONCE MENTIONED TO ME THE POSSIBILITY OF BUYING FROM
SURINAM'S PROPOSED KABALEBO HYDROELECTRIC PROJECT PROVIDED THE BORDER
DISPUTE WITH SURINAM WERE RESOLVED.
11. BURNHAM MAY BE SLOWED DOWN BY THE ECONOMICS OF HIS DREAMS BUT THERE
IS NO DOUBT AS TO THE EXTENT OF THESE DREAMS. THIS IS THE WHOLE POINT OF
TAKING ON THE BAUXITE INDUSTRY--TO BE SURE THAT MANAGEMENT DECISIONS ON
THE USE OF A NATURAL RESOURCE OF GUYANA HENCEFORTH WILL BE MADE BY
GUYANESE RATHER THAN FOREIGNERS AND WILL BE BASED ON WHAT IS GOOD FOR
GUYANA AND THE GUYANESE PEOPLE RATHER THAN ON THE INTERESTS OF STOCK-
HOLDERS AND WORKERS IN CANADA AND THE US. KING
1 Source: National Archives, Nixon Presidential Materials, NSC Files,
Box 785, Country Files, Latin America, Guyana, Vol 1. Secret. A stamped
notation on the telegram indicates that it was received in the White
House Situation Room at 9:10 on January 30.
372. Telegram 207 From the Embassy in Guyana to the Department of State,
February 17, 1971, 2150Z.11. Source: National Archives, Nixon
Presidential Materials, NSC Files, Box 785, Country Files, Latin
America, Guyana, Vol. 1. Secret; Exdis; Priority. Justice Goldberg
requested that this message be give no foreign dissemination. After
Burnham's conversation with Goldberg, Burnham decided not to nationalize
Reynolds, but would nationalized DEMBA. (Telegram 204 from Georgetown,
February 17, ibid.)
TELEGRAM
Department of State
GEORGETOWN 207
P 172150Z FEB 71
FM AMEMBASSY GEORGETOWN
TO SECSTATE WASHDC PRIORITY 5393
GEORGETOWN 207
FOR ASST SEC MEYER
SUBJ: BAUXITE: VISIT TO GUYANA OF JUSTICE ARTHUR GOLDBERG
REF: (A) STATE 025101 (B) GEORGETOWN 178
1. JUSTICE GOLDBERG REQUESTS THAT THIS MESSAGE BE GIVEN NO FOREIGN
DISSEMINATION.
2. JUSTICE ARTHUR GOLDBERG ARRIVED IN GEORGETOWN ON A REYNOLDS PRIVATE
AIRCRAFT THE EVENING OF SUNDAY, FEB 14 AND DEPARTED BY THE SAME MEANS AT
ABOUT 4 PM TUESDAY, FEB 16. HE MET WITH PRIME MINISTER BURNHAM FOR
ALMOST TWO HOURS BEGINNING AT 9 AM MONDAY AND FOR ABOUT 45 MINUTES AT 2
PM MONDAY AND FOR ANOTHER 45 MINUTES AT 2 PM TUESDAY. THE RESULT OF HIS
DISCUSSIONS WAS AN ASSURANCE BY BURNHAM THAT HE WOULD NOT MOVE
PRECIPITOUSLY AGAINST REYNOLDS AND THAT HE WAS PREPARED IN DUE COURSE TO
OPEN NEGOTIATIONS, AND ENTERTAIN PROPOSALS FROM REYNOLDS AS TO HOW IT
COULD PARTICIPATE IN THE EXPANSION OF A RE-ORGANIZED BAUXITE INDUSTRY IN
GUYANA. BURNHAM LEFT LITTLE DOUBT IN THE JUSTICE'S MIND THAT HE INTENDED
TO HAVE CONTROL OF DEMBA, ALCAN'S SUBSIDIARY, BY REPUBLIC DAY ON
FEBRUARY 23 OR HE WOULD NATIONALIZE IT AND THAT NATIONALIZATION WAS THE
LIKELY OUTCOME OF CURRENT TALKS.
3. JUSTICE GOLDBERG STAYED WITH ME AT THE RESIDENCE, WHICH PROVIDED
OPPORTUNITIES FOR SEVERAL LONG CONVERSATIONS IN PRIVATE, DURING WHICH, [text
not declassified] I TOLD HIM ALL I COULD ABOUT BURNHAM AND RECENT
DEVELOPMENTS IN GUYANA. HE TALKED PRIVATELY AS WELL AS IN MY PRESENCE ON
SEVERAL OCCASIONS WITH DICK ROBERTS, VICE PRESIDENT OF REYNOLDS WHO
ACCOMPANIED HIM ON HIS VISIT, AND VERNON ROOSEVELT THE LOCAL REYNOLDS
MANAGER.
4. MY IMPRESSION WAS THAT JUSTICE GOLBBERG REVIEWED WITH BURNHAM THE
GENERAL EFFECTS THAT NATIONALIZATION OF REYNOLDS WOULD HAVE ON OVER-ALL
USO GUYANESE RELATIONS, STRESSING THE PRESENT MOOD OF THE US CONGRESS
AND THE IMPORTANCE TO GUYANA OF CONTINUED ACCESS TO THE US MARKET
FOR A SUBSTANTIAL AMOUNT OF ITS SUGAR PRODUCTION. HE ALSO APPARENTLY
CAME DOWN HARD ON THE NEED GUYANA HAS FOR FOREIGN PRIVATE INVESTMENT AND
THE REACTION IN CAPITAL MARKETS THAT WOULD INEVITABLY FOLLOW PREJUDICIAL
MEASURES HERE. I BELIEVE HE ALSO SUGGESTED TO BURNHAM THAT HE SHOULD
LOOK CAREFULLY AT VARIOUS ALTERNATIVE MEANS OF RAISING CAPITAL FOR
EQUITY PARTICIPATION IN INDUSTRIES ALREADY ESTABLISHED IN GUYANA WHICH
MIGHT BE PREFERABLE TO THE NATIONALIZATION ROUTE. WHILE HE MADE CLEAR TO
BURNHAM THAT HE WAS NOT HERE TO NEGOTIATE ON BEHALF OF REYNOLDS BUT
RATHER HOPED TO OFFER HIS GOOD OFFICES IN ACHIEVING AN AMICABLE
ARRANGEMENT, THE JUSTICE APPARENTLY DID THROW OUT THE SUGGESTION THAT
REYNOLDS MIGHT BE WILLING TO CONSTRUCT SIZEABLE CALCINED BAUXITE
PROCESSING FACILITIES WHICH WOULD BE TURNED OVER 100 PERCENT TO THE GOG
TO OPERATE WHILE LEAVING REYNOLDS PRESENT MINING OPERATIONS IN THE
COMPANY'S HAND AS AT PRESENT. BURNHAM REPORTEDLY WAS INTERESTED AND
AGREED THAT SUCH IMAGINATIVE PROPOSALS COULD BE DISCUSSED AT A LATER
DATE.
5. JUSTICE GOLDBERG SAID HE DISCUSSED WITH BURNHAM THE REPORTS HE HAD
HEARD BEFORE COMING HERE (THIS TO PROTECT US IN EMBASSY) THAT EASTERN
EUROPEAN COUNTRIES OTHER THAN YUGOSLAVIA WERE MOVING IN WITH FINANCIAL,
TECHNICAL AND PERSONNEL ASSISTANCE. BURNHAM APPARENTLY REASSURED HIM. WE
HAD PREVIOUSLY TOLD HIM WE HAD NO BASIS TO ACCEPT SUCH REPORTS AS HAVING
ANY VALIDITY.
6. BURNHAM APPARENTLY REPEATED TO JUSTICE GOLDBERG MANY OF THE
CRITICISMS HE HAS MADE OF LATE REGARDING ALCAN'S ALLEGED INFLEXIBILITY.
HE WAS ALSO OBVIOUSLY MIFFED BECAUSE JOHN J. MCCLOY, WHOM HE EXPECTED
HERE TO INTERVENE ON BEHALF OF ALCAN, HAD DECIDED AT THE LAST MINUTE
THAT HE HAD MORE IMPORTANT BUSINESS IN CONNECTION WITH THE SALT TALKS.
HE TOLD THE JUSTICE HE COULD COUNT ON 7 TO 9 PPP VOTES IN FAVOR OF THE
CONSTITUTIONAL AMENDMENTS HE WILL HAVE TO PUT THROUGH TO NATIONALIZE
DEMBA EVEN IF CHEDDI JAGAN SHOULD OPPOSE THEM.
7. THE PRESS AND RADIO INEVITABLY LEARNED OF JUSTICE GOLDBERG'S PRESENCE
AND ASKED QUESTIONS OF THE EMBASSY AND OF THE PRIME MINISTER'S PRESS
OFFICER. WHILE NEITHER ISSUED ANY STATEMENT, IT WAS AGREED THAT QUERIES
WOULD BE ANSWERED BY STRESSING THAT JUSTICE GOLDBERG WAS HERE AS A
PRIVATE CITIZEN TO RENEW ACQUAINTANCES AND TO LOOK INTO THE SITUATION TO
SEE WHETHER HE MIGHT BE OF ASSISTANCE IN BRINGING REYNOLDS AND THE GOG
CLOSER TOGETHER. THE PRESS HAS NOT YET PUBLISHED ANYTHING ABOUT THIS
VISIT, ALTHOUGH THE RADIO MENTIONED IT BRIEFLY IN THESE TERMS. GP-3.
KING
1 Source: National Archives, Nixon Presidential Materials, NSC Files,
Box 785, Country Files, Latin America, Guyana, Vol. 1. Secret; Exdis;
Priority. Justice Goldberg requested that this message be give no
foreign dissemination. After Burnham's conversation with Goldberg,
Burnham decided not to nationalize Reynolds, but would nationalized
DEMBA. (Telegram 204 from Georgetown, February 17, ibid.)
373. Information Memorandum From the Director of the Office of Regional
Economic Policy (Rogers) to the Assistant Secretary of State for
Inter-American Affairs (Meyer), Washington, March 5, 1971.11. Source:
National Archives, RG 59, ARA Deputy Assistant Secretary Subject and
Country Files: Lot 74 D 343, Economic Policy Plans, Coordination,
Guyana, 1970, 1971. Confidential. Sent for information. Drafted by King
and Bittner; and cleared by Moser (ARA/ECP). Copies sent to Hurwitch,
Szabo, Broderick, Freeman, Heller, Feldman, and Richardson (INR/RAR).
The memorandum is an unsigned copy.
Memorandum
March 5, 1971
TO:
ARA - Mr. Charles A. Meyer
ARA - Mr. Robert A. Hurwitch
ARA - Mr. Daniel Szabo
ARA-LA/CAR - Mr. William D. Broderick
OPIC - Mr. Freeman
LA/DP - Mr. Jack Heller
FROM: ARA/ECP - J. T. Rogers
SUBJECT: Guyana - Bauxite Nationalization Act
Summary: On February 23, 1971 the GOG announced that it was
nationalizing Alcan's bauxite subsidiary (Demba) because GOG demands for
equity participation were not met. The proposed legislation does not
specify Demba and can be used for Reynolds Metal (a U.S. corporation) as
well. Compensation is to be paid from future profits, which depend on
Guyana finding markets and technicians (or keeping existing ones) to
keep the operation going. Reynolds' holdings are about $20 million with
an AID investment guarantee for $16 million. The holdings represent only
10% of Reynolds' requirements for bauxite, though a higher percentage of
calcined bauxite. Reynolds, therefore, has little incentive to negotiate
to give GOG major equity especially as this could jeopardize its more
important holdings in Jamaica. Rumors that Alcan may market the
nationalized bauxite have had a disturbing effect in Jamaica, as
anything which made the GOG action appear successful could put pressure
on Jamaica government to come up with a comparable arrangement for the
bauxite companies in Jamaica, despite substantial political and labor
opposition to radical moves.
Background. Following several months of negotiating for majority
"participation" by the GOG in Alcan's bauxite and alumina subsidiary (Demba),
Prime Minister Burnham, on the first anniversary of the Cooperative
Republic (February 23), bitterly attacked Alcan and Demba and announced
the impending takeover of Demba holdings following legislative approval.
Prime Minister Burnham admitted that Alcan had agreed to 51% equity, but
said negotiations had broken dawn on other issues.(1)
(1) Burnham said Alcan insisted GOG put up $50 million for expansion,
compensate with cash before taxes, and guarantee no better deal for
other bauxite companies. Canadian sources say Alcan wanted GOG to borrow
$23 million from IBRD, GOG to get 70% of profits.
The proposed legislation, called the Bauxite Nationalization Act, 1971,
amends the Constitution and makes other provisions for the "public
ownership" of bauxite "undertakings" as necessary to secure "the
interests of the people", and to "promote the development of the
economy." Among other things, "compensation" as presently provided under
the Constitution is made to conform with the terms contained in the Act.
Terms of nationalization provide that all assets and liabilities of the
nationalized company (unless excepted) are transferred to the state,
along with "actions" for and against the company. Related contracts,
deeds, bonds, etc. "unless limited by law" are in full force.
Compensation. According to the proposed Act: (1) the State shall pay
compensation as noted in (2) and (3) below or as may be agreed in
writing between the State and the company. (2) Valuation is to be based
on book value as of December 31, 1969, with any increase since then to
be "other than by revaluation or reappraisal." (sic). (3)
Compensation will be paid in annual installments beginning in 1972 out
of annual profits from the carrying on of the nationalized undertaking
by or on behalf of the state; provided that any annual installment shall
not be less than 1/8 of profits for the preceding year after taxes.
The Guyana Development Corporation is the successor of "the company"
with respect to employment.
An exploratory memorandum to the bill states that nationalization is
authorized only where the Minister of Mines certifies that negotiations
for participation by the state in the undertaking have failed to produce
agreement.
Reaction in Guyana to the nationalization has been mixed, with some
fearful of the effect on private investment, local and foreign. Reaction
in Jamaica has been mostly negative, and limited to comments by the
conservative press and by labor Leaders. Reports (as yet unestablished)
that Alcan may offer to market its nationalized bauxite have had a
disturbing effect in Jamaica, since anything which would give the
Guyanese takeover apparent success would put pressure on the Jamaicans
to produce an agreement comparable to the equity arrangement or to take
even stronger action. The Canadian Government continues its hands-off
policy, noting that negotiations for compensation between Alcan and the
GOG are going on. There are indications that the Canadian Government may
be more concerned about its position vis-a-vis U.S. investment in
Canada, than in protecting Alcan's interests in Guyana, especially given
the large U.S. ownership in Alcan. The Trinidadian Prime Minister is
reportedly unsympathetic to Burnham.
The Position of Reynolds Metal Corp. in Guyana has not been made clear
by the GOG, although former UN Ambassador Goldberg has approached the
GOG on behalf of that company and subsequently provided Prime Minister
Burnham information on the Hickenlooper Amendment and the Sugar Act.
While Alcan is a Canadian corporation 48 per cent U.S.-owned, Reynolds
is an American corporation. Alcan's holdings in Guyana are more
extensive - $100 million book value (est.) compared to about $20 million
for Reynolds. Reynolds also has an AID investment guarantee (now held by
OPIC) against expropriation and war for $16.3 million. While Alcan
depends on Demba for 1/3 of its bauxite requirements, Reynolds gets only
10% from its subsidiary. All in all, Reynolds may have less interest in
negotiating an equity agreement, especially if it might establish an
adverse precedent with regard to its more important holdings in Jamaica.
1 Source: National Archives, RG 59, ARA Deputy Assistant Secretary
Subject and Country Files: Lot 74 D 343, Economic Policy Plans,
Coordination, Guyana, 1970, 1971. Confidential. Sent for information.
Drafted by King and Bittner; and cleared by Moser (ARA/ECP). Copies sent
to Hurwitch, Szabo, Broderick, Freeman, Heller, Feldman, and Richardson
(INR/RAR). The memorandum is an unsigned copy.
374. Memorandum From the President's Assistant for National Security
Affairs (Kissinger) to the Secretary of State Rogers and the Secretary
of Defense Laird, Washington, March 17, 1971.11. Source: National
Archives, Nixon Presidential Materials, NSC Files, NSC Institutional
Files, (H-Files), Box H-181, NSSM Files, NSSM 117. Secret. A copy was
sent to the Secretary of the Treasury, the Secretary of Commerce, the
Chairman of the JCS, and the Chairman of the NSC Under Secretaries
Committee. A covering memorandum from Kennedy to Kissinger noted that
typically such memoranda are sent only to the Chairman of the
Undersecretaries Committee, and sending the memorandum to the
Secretaries of State and Defense was a new practice. Kissinger wrote on
the bottom, "What I want is the directive to go to all agencies on that
committee, as a directive [illegible] from me." Although the study was
not found, the portion of the response to NSSM 117 that dealt with
bauxite is published as Document 46.
THE WHITE HOUSE
WASHINGTON
March 17, 1971
MEMORANDUM FOR:
THE SECRETARY OF STATE
THE SECRETARY OF DEFENSE
SUBJECT: Guyanese Nationalization Policies on Bauxite and Their
Implications for U.S. Interests
The President has requested that the NSC Under Secretaries Committee
assess the implications for U.S. interests of the nationalization
policies on bauxite recently adopted by the Government of Guyana. The
study should set forth the options open to the United States for
protecting and advancing U.S. interests affected by Guyana's
nationalization policy and also consider the impact of adoption of
similar bauxite policies elsewhere in the Caribbean area.
Although this subject will be fully covered in NSSM 117 on U.S.
Caribbean policy, the matter is of sufficient urgency that a preliminary
consideration prior to completion of the NSSM is necessary. The study
should be submitted no later than April 1, 1971.
[signed]
Henry A. Kissinger
cc: The Secretary of Treasury
The Secretary of Commerce
The Chairman, Joint Chiefs of Staff
The Chairman, NSC Under Secretaries Committee
1 Source: National Archives, Nixon Presidential Materials, NSC Files,
NSC Institutional Files, (H-Files), Box H-181, NSSM Files, NSSM 117.
Secret. A copy was sent to the Secretary of the Treasury, the Secretary
of Commerce, the Chairman of the JCS, and the Chairman of the NSC Under
Secretaries Committee. A covering memorandum from Kennedy to Kissinger
noted that typically such memoranda are sent only to the Chairman of the
Undersecretaries Committee, and sending the memorandum to the
Secretaries of State and Defense was a new practice. Kissinger wrote on
the bottom, "What I want is the directive to go to all agencies on that
committee, as a directive [illegible] from me." Although the study was
not found, the portion of the response to NSSM 117 that dealt with
bauxite is published as Document 46.
375. Memorandum From the Assistant Secretary of State for Inter-American
Affairs (Meyer) to the Undersecretary of State (Irwin), Washington, June
18, 1971.11. Source: National Archives, RG 59, Deputy Assistant
Secretary, Subject and Country Files: Lot 73 D 395, Guyana. Secret;
Exdis. It was drafted by Hurwich. The memorandum is an unsigned copy.
JUN 18 1971
TO: The Under Secretary
FROM: ARA - Charles A. Meyer
SUBJECT: Guyana
Before leaving tonight for a long-planned trip to Nicaragua and Guyana,
I wish to register once again my concern over the effect of US actions
upon the political situation in Guyana.
Most U officials dealing with the Guyanese political situation believe
that only Forbes Burnham's method of vote counting and US extraordinary
support for Burnham prevented Cheddi Jagan, a Moscow-lining avowed
communist, from winning the Premiership of Guyana in the elections of
December 1968. Since that time, Burham's political position has eroded
and it is the current consensus of inter-agency analysts that were free
elections to be held in Guyana today, Jagan would be elected.
Although Burnham has adopted some economic policies that we find
contrary to some of our interests and that from an economic standpoint
are dubious at best, Burnham is not a Marxist, has manifested a
generally friendly attitude toward the US, and has shown himself
susceptible to our influence. For example, when he decided to establish
diplomatic relations with the Soviet Union (a widespread practice these
days in the hemisphere), he agreed at our urging not to permit the
establishment of a resident Soviet mission in Guyana. A Guyana governed
by Jagan would quickly become a hostile communist state and give the
Soviet Union a firm foothold on the South American continent. To equate
Burnham with Jagan, who most recently documented his political ideology
by attending the 24th Soviet Communist Party meeting in Moscow at Soviet
invitation, would make about as much political sense from the US
standpoint as would equating the East Indian Jagan and the negro Burnham
in cultural anthropological terms.
Given Burnham's present precarious political position and the
possibility that a rival negro leader may emerge and split the black
vote to the benefit of Jagan's solid East Indian support, the next
general elections in Guyana, which are scheduled no later than December
1973, do not augur well for US interests. In this political context, US
policies and actions are particularly significant. Burnham's political
rival, Jagan, or any other that may emerge is closely watching for US
signals of continuing or waning support for Burnham. In addition, our
ability to influence Burnham is a function of our posture toward his
government.
For these reasons we have, as you know, pursued a policy with regard to
US economic assistance for Guyana of applying usual developmental and
banking criteria, unless the assistance were required directly to bail
Burnham out of his bauxite expropriation mess. The US abstention vote
yesterday on Guyana's IBRD loan application was contrary to this policy
and has already had one of the predicted results: Burnham summoned
Ambassador King to protest our action formally and expressed his "deep
concern" that the US appeared to have adopted an anti-Guyana position
and he could only conclude that the US had embarked upon a new and
unfriendly policy toward his country. I wish that I could be confident
that other predicted effects which an abstention vote might cause will
riot conic to pass: Jagan will be comforted; a potential black rival
will be encouraged; and our influence with Burnham will be significantly
eroded. I shall do what I can with Burnham during my visit.
You should know that Mr. BROE, the CIA Western Hemisphere division
chief, after consulting with Mr. Helms made it a point of formal record
with ARA last month that CIA opposed any US policy or action that could
be detrimental to Burnham's political position. CIA has intimate
knowledge of the political situation in Guyana [text not declassified]
1 Source: National Archives, RG 59, Deputy Assistant Secretary, Subject
and Country Files: Lot 73 D 395, Guyana. Secret; Exdis. It was drafted
by Hurwich. The memorandum is an unsigned copy.
376. Memorandum for the 40 Committee, Washington, July 9, 1971.11.
Source: National Security Council, NSC Intelligence Files, Country
Files, Guyana, 23 May 1969-6 February 1973. Secret; Sensitive; Eyes
Only. A handwritten note at the bottom stated, "Telephonically approved
by the 40 Committee on 3 April 1972." In a memorandum from Jessup,
Kissinger indicated his approval the same day. (Ibid.)
9 JUL 1971
MEMORANDUM FOR: The 40 Committee
SUBJECT: Status Report --[text not declassified] Support to the People's
National Congress Party of Guyana
1. Summary
A monthly subsidy of $5,000 has been paid to Prime Minister Forbes
Burnham of Guyana [text not declassified] since 1 July 1969. The 303
Committee, on 17 June 1969, approved the subsidy for two years subject
to review at the end of the first year. Renewal was approved by the 40
Committee on 27 June 1970 on the grounds that the PNC was making
satisfactory progress toward establishing a permanent party mechanism.
[text not declassified] has no plans to seek renewal of the
subsidy which expires on 30 June 1971. The termination of this subsidy
has been cleared with Ambassador King and the Department of State.
The purpose of the subsidy was to help Burnham build the People's
National Congress Party (PNC) into an effective, permanent political
organization. With the continuing threat of pro-Communist leader Cheddi
Jagan, whose supporters outnumber those of Burnham's, the need was felt
to assure the continuation of an effective party organization following
the 1968 election victory by Burnham.
Burnham has understood from the outset that the subsidy would terminate
this year. [text not declassified]in January 1971, Burnham was
reminded of the termination date. At that time he stated that his party
had improved its financial position considerably.
This report describes the progress that has been made by the PNC and
notes the possibility that some other form of financial assistance to
Burnham may become advisable with the approach of new elections, which
must take place by March 1974 but can be called earlier at Burnham's
discretion.
2. Status Report
[text not declassified]
With the help of the subsidy, Burnham has made progress in developing
his party as an effective political force; probably the most impressive
evidence of this is the victories won in local elections during the past
year after considerable grass roots campaign effort. [text not
declassified]
The groundwork has been laid to allow Burnham's party to achieve
relative financial solvency without resorting to schemes that entail
unacceptable political risks. Burnham has succeeded in obtaining larger
public contributions to the party from private sources. In addition, the
PNC has continued to collect funds from the Greenland Investment
Company, a holding company controlled by the party. There have been no
politically embarrassing incidents connected with these fund-raising
efforts by the PNC.
The PNC has made some inroads, albeit slight, in winning support from
the East Indian community. Burnham is hampered, however, by the
overwhelming loyalty, for racial reasons, of the East Indians for Jagan.
The subsidy has also allowed the U.S. Government to keep open a direct
channel of communication with Burnham. This has had special advantages
during the past year when Burnham's official relations with the U.S.
have been somewhat strained as a result of his moving leftward in
economic policy and towards a "Third World" position internationally. It
is likely, for example, that the capability to present views directly to
Burnham allowed us to moderate his outlook on the security dangers that
would ensue if Burnham acceded to the Soviets' request for a resident
Soviet Embassy in Georgetown. This was done [text not declassified]
by passing documented information to Burnham on Soviet clandestine
activities in Mexico and elsewhere in the Free World. Although
non-resident diplomatic relations between Guyana and Moscow exist,
Burnham has shown definite signs that he is now less interested in
allowing a permanent Soviet mission to be established in his country.
This is subject to change, however, if Burnham should come to feel it
politically or economically expedient to make a deal with Moscow.
While the present subsidy thus expires, it is unlikely that either
Burnham or the U.S. Government will wish to dispense with this
confidential relationship of many years or that some level of funds may
not be highly useful in the future for both sides. A meeting is being
sought at an early date [text not declassified] to discuss the
next phase of this relationship. [text not declassified] It is
also possible that the tour d'horizon which we expect from this meeting,
including Burnham's views of where he is going, will suggest that an
insertion of funds is called for. In any event, Committee approval would
be sought prior to any further commitments being made.
The outcome of the next election (which must be held no later than March
1974) would not be in real doubt; Burnham will win, if necessary by
rigging the election. Our purpose in providing support would be to help
make the voting result look more plausible through funding a sufficient
level of pre-election organizational activity by Burnham's party to lend
credence to the victory. Burnham's party will have to engage in a wide
range of election campaign activity, including such things as a major
effort in organizing the overseas vote in the United States and Great
Britain as he did in 1968. The plausibility of the result will be
important in gaining at least passive tolerance of Burnham's government
among the East Indian population, who constitute more than half of the
population.
3. Coordination
The conclusions in this status report have been cleared with Assistant
Secretary of State for Inter-American Affairs Charles A. Meyer.
4. Recommendations
It is recommended that the Committee note the progress that has been
made in strengthening the PNC and that the subsidy to the PNC will
expire in June 1971 with no renewal requested. It is also recommended
that the Committee take cognizance of the possibility that some
different form of financial assistance to Prime Minister Burnham may be
considered advisable in the near future. Cheddi Jagan, who is totally at
Moscow's bidding, still poses a serious threat in Guyana; his East
Indian supporters comprise a majority of the population and are
increasing in numbers at a faster rate than the negroes. Burnham is
still clearly preferable from our point of view.
1
Source: National Security Council, NSC Intelligence Files, Country
Files, Guyana, 23 May 1969-6 February 1973. Secret; Sensitive; Eyes
Only. A handwritten note at the bottom stated, "Telephonically approved
by the 40 Committee on 3 April 1972." In a memorandum from Jessup,
Kissinger indicated his approval the same day. (Ibid.)
377. Telegram 996 From the Embassy in Guyana to the Department of State,
July 14, 1971, 1458Z.11. Source: National Archives, Nixon Presidential
Materials, NSC Files, Box 785, Country Files, Latin America, Guyana,
Vol. 1. Secret; Exdis. A stamped notation on the telegram indicates that
it was received at the White House Situation Room at 4:39 p.m. on July
14.
TELEGRAM
Department of State
GEORGETOWN 0996
R 141458Z JUL 71
FM AMEMBASSY GEORGETOWN
TO SECSTATE WASHDC PRIORITY 5999
INFO EMBASSY KINGSTON
AMEMBASSY OTTAWA
GEORGETOWN 0996
SUBJECT: BAUXITE: ALCAN AND GOG REACH AGREEMENT
REF: GEORGETOWN: 0992
1. AT ABOUT 2200 LAST EVENING ALCAN AND GOG REACHED AGREEMENT ON
COMPENSATION FOR FORMER'S SUBSIDIARY, DEMBA, WHICH WILL BE TAKEN OVER BY
GOVERNMENT TOMORROW. VALUATION SET AT GDOLLARS 107 MILLION, INTEREST
WILL BE PAID AT SIX PERCENT BEGINNING JANUARY 1, 1972 (IN OTHER WORDS,
NO INTEREST WILL BE CHARGED, DURING LAST 5 AND ONE-HALF MONTHS OF THIS
YEAR), COMPANY ASSUMES ALL CURRENT LIABILITIES, RILA FUNDS (RETIREMENT
INSURANCE AND LIFE ASSURANCE) WILL BE REPATRIATED AS PREVIOUSLY AGREED,
AND MARKETING ARRANGEMENTS FOR BALANCE 1971 WILL BE HONORED.
2. WHEN MINISTER STATE RAMPHAL CALLED ME TO ASK THAT I INFORM ARTHUR
GOLDBERG, WHO DID NOT PARTICIPATE IN LAST NIGHT'S NEGOTIATING SESSION, I
EXPRESSED SATISFACTION AND CONGRATULATED GOG ON ITS HANDLING OF THE
PROBLEM. I ASKED IF THERE HAD BEEN ANY TALK OF FUTURE RELATIONSHIPS. HE
REPLIED THAT "YESTERDAY AND TODAY AN ENTIRELY NEW CLIMATE OF
RELATIONSHIP HAS DEVELOPED, MARKED BY NEW CONFIDENCE, AND I WOULD EXPECT
THAT WE WILL BE DOING BUSINESS TOGETHER." I SAID I HOPED THE RHETORIC
COULD BE KEPT DOWN; AND HE AGREED, ALTHOUGH HE ADDED THAT BURNHAM WAS
TAKING A RISK, THAT THE OPPOSITION AND SOME ELEMENTS IN PNC WOULD ATTACK
HIM AND OPPOSE THE AGREEMENT AS "SELLOUT" TO UNCLE SAM.
3. DAVIS SUBSEQUENTLY CALLED GOLDBERG TO CONFIRM WHAT RAMPHAL HAD TOLD
ME. THEY HAD FRIENDLY TALK IN WHICH GOLDBERG PRAISED DAVIS' HANDLING OF
WHOLE AFFAIR AND DAVIS IN TURN THANKED GOLDBERG FOR HIS CONTRIBUTIONS.
4. GOLDBERG SPOKE WITH BURNHAM THIS MORNING. PRIME MINISTER SEEMED
PLEASED BUT A BIT SOBER. HE IS WORRIED ABOUT REACTION WHEN NEWS OF
AGREEMENT BECOMES PUBLIC. GOLDBERG, INCIDENTALLY, REPEATED TO BURNHAM
WHAT HE HAD SAID BEFORE, NAMELY THAT HE DID NOT RPT NOT AGREE ON COURSE
BURNHAM HAD CHOSEN. BUT IN CIRCUMSTANCES HE COULD ONLY CONGRATULATE HIM
ON HIS STATESMANSHIP IN REACHING CONSENSUAL AGREEMENT, WHICH WOULD HELP
HIS INTERNATIONAL IMAGE, AND WISH HIM WELL.
5. BURNHAM MADE REFERENCE TO HIS TALK YESTERDAY WITH ROBERTS OF
REYNOLDS, EXPRESSING SATISFACTION AND CONFIDENCE IN FUTURE
RELATIONSHIPS, WITH THAT COMPANY.
6. AT AIRPORT THIS MORNING, DAVIS REFLECTED SATISFACTION WITH WAY BAD
SITUATION HAD BEEN BROUGHT TO REASONABLE SOLUTION. VOLUNTEERED THAT NEW
RELATIONSHIPS WHICH HAD BEEN ESTABLISHED LED HIM TO BELIEVE THAT "MANY
AREAS OF COOPERATION WOULD BE POSSIBLE."
7. GOLDBERG LEFT ON ALCAN PLANE WITH DAVIS AND HIS PARTY AT ABOUT 0830.
CAMPBELL AND ROXANE, LAST REMAINING DEMBA EXECUTIVES, LEFT MOMENTS LATER
ON BOAC. SIGN ON DEMBA'S OFFICE BUILDING ACROSS THE STREET ALREADY TORN
DOWN.
8. COMMENT: A) AGREEMENT COULD NOT HAVE BEEN REACHED WITHOUT
PARTICIPATION OF SOMEONE LIKE ARTHUR GOLDBERG, WHICH I BELIEVE BOTH
SIDES RECOGNIZE. HE REPEATEDLY BROUGHT THEM BACK TOGETHER AS THEY BEGAN
TO DIVERGE, KEPT THEIR FOCUS ON ESSENTIAL ISSUES WHEN THEY TENDED GET
BOGGED DOWN IN HAGGLING OVER DETAILS AND ADVISED EACH HOW TO DEAL WITH
THE OTHER. KEY ELEMENT, OF COURSE, WAS CHANGE IN TIMING OF "SUMMIT"
MEETING SO THAT THEY HAD MORE THAN FEW HOURS WORK OUT DIFFERENCES.
B) GOLDBERG'S PRESENCE NOT MENTIONED BY PRESS OR RADIO, UNDOUBTEDLY AT
BURNHAM'S REQUEST, ALTHOUGH FACT THAT DAVIS HERE RECEIVED FAIRLY WIDE
PLAY. HOWEVER, CHEDDI JAGAN ENCOUNTERED GOLDBERG YESTERDAY AS HE WAS
LEAVING BURNHAM'S OFFICE AND CAN BE EXPECTED MAKE MUCH OF HIS
PARTICIPATION IN ARRANGING "SELLOUT", WHICH HE IS SURE TO CALL
AGREEMENT.
C) HAVE JUST LEARNED THAT PRESS RELEASE BEING PREPARED, THAT PAYMENT
WILL RUN FOR 20 YEARS AND THAT "EFFECTIVE RATE" OF INTEREST WILL BE FOUR
AND ONE-HALF PERCENT AFTER REDUCTION OF 25 PERCENT WITHHOLDING TAX. GP-3
KING
1 Source: National Archives, Nixon Presidential Materials, NSC Files,
Box 785, Country Files, Latin America, Guyana, Vol. 1. Secret; Exdis. A
stamped notation on the telegram indicates that it was received at the
White House Situation Room at 4:39 p.m. on July 14.
378. Memorandum From the Ambassador to Guyana (King) to the Assistant
Secretary of State for Inter-American Affairs (Meyer), Washington,
September 20, 1971.11. Source: National Archives, Nixon Presidential
Materials, NSC Files, Box 785, Country Files, Latin America, Guyana,
Vol. 1. Confidential. On October 7, Eliot sent a copy to Kissinger.
(Ibid.) Meyer discussed the negative ramifications of the U.S.
abstention on the World Bank loan in Document 375.
Memorandum
TO: ARA - Mr. Meyer
FROM: Ambassador Spencer M. King [SMK initialed]
DATE: September 20, 1971
SUBJECT: Guyana
Although we foresaw well over a year ago that Prime Minister Burnham and
his ruling party would swing to the left, the pace at which this now
seems to be occurring is a bit surprising. A Communist Chinese trade
delegation visited Georgetown last month and Burnham has indicated that
diplomatic relations will be established in due course. He hopes for
economic assistance. A Romanian trade delegation is due shortly. This
will be followed by an East German group. Overtures are being made to
open trading relations with Cuba. Diplomatic relations have been
established recently with Peru and Chile.
When I saw Burnham to take my leave on September 6 I mentioned among the
matters I would pursue in Washington Guyana's long-pending application
for a highway loan. He said he was relieved to know it was still alive
since it had become the unanimous view of his cabinet that the United
States would not grant this or any other loan to Guyana "for political
reasons". He claimed to have opposed the desire of some of his more
radical colleagues to embark on an openly anti-American policy and to
have argued that Guyana would have to turn to alternative sources for
assistance or, lacking these, to get along without it.
I believe that an important factor in the development of these attitudes
was the abstention by the United States representative when the World
Bank considered an application for a sea-defense loan in mid-June. You
will recall that Burnham's opening gambit in his conversation with you
on June 22 was "Are you going to kill us?" and that he then discussed
that abstention. Guyanese do not appreciate that the United States did
not oppose the granting of the World Bank loan but only abstained on the
basis that its consideration was premature pending a settlement of the
ALCAN nationalization. In Guyanese minds, we opposed it. And this
frightened them. They became skeptical of U.S. policies and motives,
especially as nothing happened on the highway loan application. Hence
their somewhat feverish search for new friends, new trading partners,
and possible new sources of economic assistance.
1 Source: National Archives, Nixon Presidential Materials, NSC Files,
Box 785, Country Files, Latin America, Guyana, Vol. 1. Confidential. On
October 7, Eliot sent a copy to Kissinger. (Ibid.) Meyer discussed the
negative ramifications of the U.S. abstention on the World Bank loan in
Document 375.
379. Memorandum for the 40 Committee, Washington, November 14, 1972.11.
Source: National Security Council, NSC Intelligence Files, Country
Files, Guyana, 23 May 1969-6 February 1973. Secret; Sensitive; Eyes
Only. A handwritten note at the bottom stated, "40 Committee Approved on
12 December 1972." Kissinger indicated his approval the same date in a
memorandum from Ratliff dated December 5. In the memorandum, Ratliff
concluded, "The key factor in this negative proposal is that Burnham has
made it clear that he will win the election with or without our help."
(Ibid.)
14 NOV 1972
MEMORANDUM FOR: The 40 Committee
SUBJECT: The Guyanese Elections
I. Summary.
The involvement of the United States Government in Guyanese politics has
its origin in a 1962 exchange of letters between the President of the
United States and the Prime Minister of Great Britain in which it was
agreed that the then British Colony of Guiana should reach independence
under the political leadership of someone other than Cheddi Jagan, the
Moscow-line Communist leader of the East Indian majority. [text not
declassified]
The only viable leadership alternative to Jagan at the time was Linden
Forbes Burnham, political spokesman for the strong black minority in the
country. As a result, Burnham and his party, the People's National
Congress (PNC), received [text not declassified] support in the
1964 as well as 1968 national elections and won both elections. The
covert support which was furnished Burnham [text not declassified] was a
significant factor in his ability to defeat Jagan on both occasions.
Under the Guyanese constitution, the next national election must be held
prior to March 1974. Because of Burnham's uninterrupted special
relationship [text not declassified] since 1962, he has assumed that
serious consideration will be given to supporting him and the PNC in the
next election despite his pursuit in recent months of increasingly
radical policies. Burnham has not been impressed to date by U.S.
Government efforts to persuade him to moderate his current policies,
particularly with respect to the proposed nationalization of the
Guyanese bauxite industry. [text not declassified] in September 1972,
Burnham made clear his intention to ignore, considerations, a firm
warning plans to recognize Cuba and to because of domestic political
that implementation of his nationalize the Reynolds bauxite operation in
Guyana would seriously jeopardize his prospects for U.S. election.
Burnham said that he could not be re-elected unless he had made some
definite moves toward recognizing Cuba and negotiating for majority
participation in the Reynolds bauxite operation prior to the election.
In fact, he felt he would be able to win with greater ease having made
these moves even though, in the process, he had to forego U.S.
Government support.
On 30 October 1972, Burnham discussed with his advisors the advisability
of requesting $1,000,000.00 in special election funding from the
People's Republic of China (PRC). No decision was reached as to whether
or not the request should be made.
Balancing Burnham's current radical trajectory against the risks
associated with manipulating a third election in his favor, leads to the
present proposal that covert support be withheld from Burnham and his
party in the forthcoming election. Should Burnham modify his attitude on
key issues prior to the election, the 40 Committee would be advised of
this development in order that it might re-evaluate the desirability of
not providing covert support to him. In this connection it is
interesting to note that Burnham has control over the machinery of
government and is determined to use this power leverage to keep Jagan
out of office.
[Omitted here are Section II, "Background;" Section III, "Proposal;"
Section IV, "Coordination;" and Section V, "Cost."]
1 Source: National Security Council, NSC Intelligence Files, Country
Files, Guyana, 23 May 1969-6 February 1973. Secret; Sensitive; Eyes
Only. A handwritten note at the bottom stated, "40 Committee Approved on
12 December 1972." Kissinger indicated his approval the same date in a
memorandum from Ratliff dated December 5. In the memorandum, Ratliff
concluded, "The key factor in this negative proposal is that Burnham has
made it clear that he will win the election with or without our help."
(Ibid.)
*
Document 46 referred to in footnote of Document 374
46. Study Prepared by the National Security Council Interdepartmental
Group for Inter-American Affairs, Washington, August 10, 1971.11.
Source: National Archives, Nixon Presidential Materials, NSC Files, NSC
Institutional Files (H-Files), Box H-214, NSSM Files, NSSM 117. Secret.
NSSM 131 is published in Foreign Relations, 1969-1976, volume IV,
Foreign Assistance, International Development, Trade Policies,
1969-1972, Document 155.
REVIEW OF U.S. POLICY IN THE CARIBBEAN AREA
Response, to NSSM-117
Prepared by National Security Council Interdepartmental Group for Inter-
American Affairs (NSC-IG/ARA)
Table of Contents Page
I. Overview 1
A. Historical 15
B. Current Interests 17
II. Introduction 14
III. U.S. Interests
IV. Situation, Trends and Policy Environment
A. The Current Situation 20
B. Trends 21
C. Current Policy Environment 22
V. Present U.S. Involvement in Area
A. Political-Psychological 25
B. Security 26
C. Trade 29
D. Investment 30
E. Development Assistance 30
F. Immigration 31
VI. Major Policy Problems
A. Nationalism, Black Radicalism and Anti-Americanism 32
B. British Disengagement from the Caribbean
1. British Presence and Intentions 35
2. British Alternatives 36
3. Implications for the U.S. 37
C. Increase in Soviet Military Activities 42
D. U.S. Caribbean Base Requirements 45
E. Bauxite in the Caribbean
1. Summary of Problem 46
2. Importance of Caribbean Bauxite 48
3. U.S. Policy Options 51
F. How Best to Best to React to Area's Social and Economic Problems,
Needs and Aspirations 57
1. Nature of Future Trade Relations 59
2. Nature of U.S. Economic Assistance Programs 65
3. Regional Integration Efforts 68
VII. Recommendations 70
VIII. Annexes
Annex A - NSSM-108 Interests (Summary)
Annex B - U.S. Bases and Installations in Caribbean
Annex C - Intelligence Community Response to NSSA-117, The Situation and
Trends in The Caribbean
Annex D - U.S. Trade Statistics
Annex E - U.S. Investment in Caribbean
Annex F - U.S. Immigration from Caribbean
Annex G - British Dependencies and Associated States in Caribbean
Annex H - Bauxite Outlook in Guyana, Jamaica and Surinam
Annex I - Barcelona Traction Company Case
[Omitted here are Sections I through VI, Part D.]
E. Bauxite in the Caribbean
1. Summary of Problem. Following three months of inconclusive
negotiations with the company, Guyana on March 1 passed a bauxite
nationalization law to permit it to take over the local subsidiary (DEMBA)
of the Aluminum Co. of Canada (ALCAN). ALCAN is a Canadian corporation
with about 46% ownership. The actual takeover occurred on July 15, but
was immediately preceded by intensive high level negotiations which
produced an agreement on compensation for the expropriated assets. Under
the agreement, the Government of Guyana will pay $53.8 million in equal
installments over 20 years, with interest of 6 percent. Interest
payments are subject to a 25 percent withholding tax. Up to 30% of
payments due in any given year (up to 40% in the first year) may be
deferred, but full payment of all such outstanding deferments must be
made at the end of the fifth, tenth, fifteenth and twentieth years.
The compensation is recognized as an obligation of the Government of
Guyana, and is to be covered by notes in two series; one covering the
fixed portion of the debt and the second, any deferred portion. The
notes are non-negotiable until 1977.
The precedent established in the ALCAN case may set the pattern for
similar action against Reynolds Metals' $31.5 million* investment in
Guyana. Guyanese officials including Burnham, however, have offered
assurances that action against Reynolds will not occur before 1972. OPIC
holds a $16.3 million investment guarantee covering the Reynolds
investment. Moreover, the Guyanese action may trigger demands for
increased local control and ownership of over $1 billion of U.S.
investment in bauxite and alumina located elsewhere in the Caribbean. Of
this, almost $650 million is in Jamaica and is covered by more than $430
million in OPIC insurance against expropriation. The outlook for Jamaica
and other Caribbean countries will depend in part upon the ability of
Guyana to successfully operate the nationalized properties and market
the output of bauxite and alumina.
[* "gross value" figures (total investment without regard to either
appreciation or depreciation) are used throughout this paper for bauxite
investments. Figures are confidential and were furnished by the
companies to the Office of Emergency Preparedness.]
Burnham is encountering a host of problems as a result of his own poor
planning and, notwithstanding the compensation agreement, the prospects
for a trouble-free operation are dim. To the extent that they remain so,
it will tend to alleviate pressures for expropriation elsewhere in the
region. With respect to Guyana's internal politics, however, total
failure of the nationalization scheme could pose serious bilateral
problems for us. Already Burnham's Marxist rival (Cheddi Jagan) is
trying to capitalize on the government's troubles which he depicts as
resulting from inept leadership, poor planning and the failure to take
over the entire bauxite industry (i.e., the U.S.-owned Reynolds
holdings). In fact, Jagan has hinted darkly of U.S.-Burnham collusion to
save Reynolds from ALCAN's fate. In an atmosphere of growing labor
unease and diminishing public confidence in the government's ability to
successfully operate DEMBA, Burnham might move impulsively against
Reynolds and adopt anti-U.S. positions in order to reassert his
"progressive" credentials. The likelihood of this would be increased if
he felt the USG were applying economic pressures on him. Even less
attractive alternatives include Burnham's replacement by more extremist
elements in his own party, or a Jagan return to power. In the latter
event, Jagan would certainly nationalize Reynolds, and seek to align
Guyana openly with USSR.
In Jamaica, neither the government nor the opposition is anxious to
follow Burnham's lead, although both see some local equity participation
in the bauxite industry as inevitable, and are searching for an
acceptable formula. Both Jamaican party leaders fear that a Burnham
"success" could create irresistible pressures on them to seek a similar
arrangement.
In Surinam, there is no pressure at present for expropriation.
Government leaders there have been critical of Burnham's actions. For a
more detailed discussion of the situation and outlook in Guyana, Jamaica
and Surinam, see Annex H.
2. Importance of Caribbean Bauxite.
(a) Bauxite imports are vital to U.S. We currently import nearly 90% of
bauxite/alumina from the Caribbean, nearly half from Jamaica alone and
an additional 20% front Surinam, on a content basis. Our Caribbean
bauxite/alumina suppliers (in rank order) are Jamaica, Surinam,
Dominican Republic, Guyana and Haiti.
Major expansion of bauxite/alumina capacity in Australia, and bauxite
capacity in Guinea, and to a lesser extent in Brazil and elsewhere, will
substantially increase alternative sources of bauxite/alumina supply by
1973-74. These expansions reflect to a large degree a projected increase
in world demand for aluminum. Substitutions for U.S. imports of
metallurgical grade bauxite from Guyana (about 3% of total U.S. imports)
should not be difficult. Canada, which imports nearly half (on an
alumina content basis) its bauxite/alumina from Guyana will face more of
a problem, but Alcan apparently believes imports could be supplied from
alternative sources with little difficulty given a two-year transitional
period. Larger scale substitution for existing Caribbean bauxite/alumina
production (particularly any large part of Jamaican production), would
take several years and major additional capital investment. Moreover,
transportation costs (port-to-port) from Australia at present are much
higher.
The developing situation, even assuming the worst outcome
(nationalization of the Jamaican bauxite industry without any agreement
on compensation) would not necessarily threaten U.S. access to adequate
supplies of bauxite/alumina. Given the lack of alternative buyers for
its ten million ton output, Jamaica needs our market as much as we need
its bauxite, even though it might be able to sell a small part of its
output elsewhere. The combination of stockpile availabilities,
medium-term alternative sources for the U.S., and, in particular,
Jamaica's relative lack of other buyers makes the access problem not a
critical one. What could be affected, in the worst outcome situation, is
terms. Jamaica might capitalize on the transportation cost differential
and certain technical considerations to seek a higher price for the
product it sells. Even short of nationalization, its demands on the
companies could compel them to consider a price increase for aluminum.
U.S. industries depend upon Caribbean producers for calcined bauxite, a
special type used for refractories, abrasives, and chemicals. Guyana
and, to a lesser extent, Surinam, together enjoy practically a world
monopoly in the production of refractory grades. If necessary,
substitutions of other materials (alumina, kyanite or synthetic mullite)
could be made for refractory purposes, but at a higher cost or loss of
efficiency. Available information suggests that such substitutions would
have only a marginal effect on the cost of steel or cement. Industries
producing these materials are primary users of bricks made from
refractory grade bauxite. At present, calcined bauxite is in short
supply and alternative sources are not likely to be in large-scale
production before 1974.
U.S. strategic interests are important, but do not appear to be
threatened. Although a preliminary review of requirements for refractory
bauxite indicates a potential growing deficit, this would not seriously
impair industrial activity. Strategic needs for aluminum would not be
threatened unless Jamaica and other Caribbean sources generally denied
or greatly reduced U.S. access to bauxite and to alumina and aluminum.
This contingency seems unlikely. Total annual mobilization requirements
for bauxite are calculated to be 14.5 million dry tons, of which 48
percent depends on imports from Jamaica and 26 percent on imports from
other Caribbean areas. The U.S. also depends on imports of 17 percent of
its alumina requirements from the Caribbean area. Direct military
requirements for aluminum would not be in question because they
constitute only about 23 percent of total mobilization requirements, and
would be seen to by the priority system already in effect under the
Defense Production Act. The other 77 percent would be required, even in
war, for transportation equipment, construction materials, food
containers, etc. The Caribbean area is considered available as a source
of supply during all three years of the war emergency planned for,
unlike other overseas area, which are not considered available during
the first year of a war. Under present stockpile procedures, which are
being reexamined in an inter-agency study in NSC channels, supply from
these Caribbean Sources is evaluated in terms of the following
reliability percentages: Jamaica 100 percent; Guyana, Surinam, and the
Dominican Republic, 75 percent; and Haiti 50 percent.
(b) U.S. bauxite investments in Caribbean exceed $1 billion. Five U.S.
corporations, Alcoa, Reynolds, Kaiser, Revere and Anaconda--are involved
in bauxite/alumina production in the Caribbean. Combined total
investment of these companies is estimated at over $1 billion, $650
million of which is in Jamaica. OPIC investment guarantees presently
cover $447.7 million but could reach $544.3 million under existing
agreements. The Aluminum Company of Canada, Ltd. (Alcan) also has
substantial Caribbean interests. Although a Canadian firm, Alcan's top
management is American and 46% of the company's shares (figure
confidential) are held by U.S. investors.
(c) Status of U.S. inventories, U.S. consumption in 1970 of
metallurgical and calcined bauxite, including refractory grade, was
estimated at 16 million long dry tons. U.S. industry purchased from GSA
some of the metallurgical grade bauxite which is excess to that required
by the strategic objective. There is no excess of refractory grade
bauxite in the USG stockpile and negligible commercial stocks. Including
these quantities of ore under contract but as yet not removed from GSA
storage sites, commercial stocks of metallurgical grade equate to about
five months current consumption. USG inventories hold an additional 3.9
million tons of metallurgical grade ore which is excess to that needed
to meet the objective. With Congressional approval, this could be made
available to meet non-wartime requirements. Should all imports of
metallurgical grades be stopped and the U.S. industry forced to rely
exclusively on the stockpile, differences between Jamaican and Surinam
bauxite would require the industry to make technical production
adjustments. Stockpile supplies not in excess of the strategic objective
can, of course, be made available for the purpose of the "common defense"
during peacetime; this criterion excludes other economic reasons. In a
wartime situation, security of access to foreign bauxite supplies would
become more critical.
U.S. Bauxite Stockpiles*
*All figures in long dry tons.
Type - Strategic Objective Inventory - Excess to Inventory
Metallurgical 10.3 million 14.2 million 3.9 million
Refractory 173,000 173,000 none
Type Strategic Objective Inventory Excess to Inventory
Metallurgical 10.3 million 14.2 million 3.9 million
Refractory 173,000 173,000 None
3. U.S. Policy Options. (Because of the intricate nature and the special
importance of the bauxite problem, which involves relations with Canada
as well as with three major Caribbean bauxite-producing nations and five
major North American aluminum companies, a more detailed consideration
of the options available to us is presented on this problem than for
several of the others.)
a. Guyana. NOTE - These options are subject to revision in the light of
decisions to be made on NSSM-131.
(Assumption: Reynolds will not face expropriation issue before 1972, but
cannot hope to maintain the status quo indefinitely.)
Option 1. Diplomatic representations stressing general U.S. position re
nationalization and compensation and problems that expropriation raises
for GOG vis-a-vis USG. The primary objective would be to avoid any
unilateral action by the GOG that would lead to expropriation of
Reynolds; and secondarily to insure just compensation for Reynolds in
the event of nationalization. This option would recognize the likelihood
of an ultimate change in ownership patterns in Guyana, and would place
priority on closely coordinating our actions with Reynolds and making
private diplomatic representations to Burnham and the GOG when it
appeared the GOG was taking any action inimical to our interests. We
would hope expropriation could be avoided via negotiations, and we would
encourage Reynolds to negotiate in good faith. However, we would not
encourage the company to accept terms that would constitute an
unfavorable precedent for future changes in Jamaica, even if the
alternative was expropriation and the OPIC guarantee had to he paid.
We would take a strong stand with the GOG on assuring prompt and
adequate compensation for an American company as a principle of
international law and in order to limit claims against OPIC.
Pro - Might help delay expropriation of Reynolds in Guyana and lead to
better settlement terms in event of expropriation; might limit, although
not necessarily avoid, claims against OPIC; could help assure access to
calcined bauxite for at least an interim period; problems with the GOG
would be less than under Option 2.
Con - May he interpreted by Jamaicans and others as showing lack of
strong U.S. concern over expropriation route; may bring criticism from
some U.S. bauxite companies as inadequate protection of their interests;
existing settlement with ALCAN might be limiting factor on terms.
Option 2. Hard line approach on expropriation. This option would be
predicated on the assumptions that an aggressive approach would help
deter expropriation of Reynolds, but that, even if it did not, it would
discourage similar actions elsewhere. It would place primary emphasis on
discouraging emulation of GOG pattern, even at the risk of undermining
Burnham's position vis-a-vis Jagan and limiting U.S. access to calcined
bauxite. Under this policy the USG might use its influence to discourage
U.S. firms from buying bauxite from Guyana or in any way cooperating
with Guyana. Moreover, the USG might use its influence with foreign
governments to limit foreign purchases and foreign assistance to the
bauxite industry. It could also involve the use of public high-level
statements critical of expropriation, designed to discourage
nationalization of Reynolds.
Pro - Helps bring about economic difficulties for Burnham thus
protecting position of U.S. bauxite companies in Jamaica and the rest of
the Caribbean and reducing the possibility of OPIC having to pay claims
in Jamaica; policy probably would be strongly supported by U.S. bauxite
companies.
Con - Would precipitate action against Reynolds and incur likelihood of
OPIC having to pay Reynolds' claim in Guyana; would adversely affect
over-all U.S. relations with Guyana and possibly cause Guyana to look to
Bloc countries for assistance; could push Burnham toward extremist
policies; might strengthen Jagan's position; would lead to charges of
economic imperialism by Guyana and others; U.S. would lose access to
Guyana's calcined bauxite, which would bring strong protest from U.S.
refractory industry; barring the unlikely assistance of ALCAN to him,
Burnham, who has already run into lots of problems, will have serious
difficulties in any event for same time.
Contingent Options. (Assumes ALCAN has already been expropriated and
Reynolds is also facing negotiation or expropriation; the options are
listed as contingent and are not necessarily mutually exclusive, because
we cannot now be sure of the circumstances which might prevail at the
time Reynolds would be called in. Therefore, no recommendations are made
concerning these options, other than that they be carefully reexamined
when the situation arises.)
1(a) Use our good offices to encourage both parties to achieve a
negotiated-settlement that would keep Reynolds operating in Guyana. This
option would accept a changed ownership pattern with probably at least
majority ownership for the GoG; the possibility of better compensation
arrangements than offered to ALCAN; could include a proposal for
expansion. It could involve our attempting to influence both the COG and
Reynolds toward this end, without assurance of success.
Pro - If successful, would assure access to calcined bauxite; would
avoid payment of claim against OPIC; could help maintain favorable
relations with Burnham. Would not necessarily be prejudicial to U.S.
interests in Jamaica, particularly if Guyana were having difficulties
assimilating DEMBA.
Con - Could be used by Jamaicans and other countries as a precedent for
demanding equity from bauxite companies; would probably be opposed by
other U.S. bauxite companies; if agreement on terms acceptable to
Reynolds may not be possible; if agreement reached, could strengthen
Burnham's position of leadership in the Caribbean.
2(a) Strong representation to the COG stressing general U.S. position re
nationalization and compensation. While seeking to avoid expropriation,
the primary objective of this option would be that of assuring just
compensation for Reynolds. It would be a concerted effort on this single
issue. This policy would have to recognize that Guyana could only make
compensation from future cash flow from bauxite/alumina operations thus
accepting the principle of deferred compensation. The emphasis would be
on a fair evaluation of assets and an acceptable formula for future
payments. It might involve our urging Guyana to submit the compensation
issue for international arbitration or judgment under the Convention for
Settlement of International Investment Disputes, of which Guyana is a
signatory.
Pro - Could lead to better settlement terms for Reynolds in event of
expropriation than would be available without representations; might
limit, although not necessarily avoid claims against OPIC; would
probably be acceptable position as far as other U.S. bauxite companies
are concerned.
Con - Would not assure continued access to calcined bauxite: risks of
having to pay OPIC claims would be greater than under Option 1(a); runs
likelihood of getting less adequate compensation than under 1(a).
3(a) Hardline Approach if Reynolds is Expropriated Without Prompt,
Adequate and Effective Compensation. This approach, like Option 2 above,
would emphasize sanctions against Guyana. It would include measures to
compound Burnham's difficulties in running bauxite industry, and could
include formal application of economic sanctions such as the suspension
of assistance and sugar quota upon expiration of the six-month waiting
period contemplated by statute.
Pros and Cons - Many of the pros and cons of Option 2 above would be
applicable, but relations with Canada would not be an issue as a U.S.
company would be involved. Although we would not be, concerned about
precipitating action against Reynolds, which would be a fait accompli,
this option would imply willingness to sacrifice compensator for
Reynolds in Guyana--and corresponding loss to the U.S. Treasury under
the OPIC guaranty--to protect larger investments in Jamaica and
elsewhere. Application of formal economic sanctions, however, would
require a finding by the President that Reynolds had exhausted all
adequate legal remedies in Guyana and that GOG was not prepared to take
other appropriate steps such as submitting the dispute to arbitration.
Moreover, formal application of sanctions would aggravate the political
costs foreseen under Option 2 above and would expose USG to charges in
the UN of economic coercion in violation of the UNGA resolution on
non-intervention and the Declaration on Friendly Relations between
States. Further, application of sanctions to Guyana while deferring such
application against Peru (and possibly Chile) would expose U.S. to
charges of racial discrimination with potentially wide repercussions.
This charge would be even more serious if Reynolds and OPIC reject in
Guyana terms that U.S. investors and OPIC have accepted in Chile or
elsewhere.
[Omitted here are Sections IV, Part F through Section VIII.]
1 Source: National Archives, Nixon Presidential Materials, NSC Files,
NSC Institutional Files (H-Files), Box H-214, NSSM Files, NSSM 117.
Secret. NSSM 131 is published in Foreign Relations, 1969-1976, volume
IV, Foreign Assistance, International Development, Trade Policies,
1969-1972, Document 155.