FOREIGN RELATIONS, 19 5 0., VOLUME I


American Republics under the provisions of the Surplus Property
Act of 1944. Since the expiration of this Act in 1947, there has been
no legal authority for such sales until the passage of the Mutui 1 De-
fense Assistance Act (Public Law 329) in October 1949. However,
vessel sales under that law were not practicable because of the "full
cost" provisions. Public Law    621, 81st Congress, approved by the
President on 26 July 1950, has amended this provision to permit sales
at a "fair value -as determined by the President."
   A plan for hemispheric defense is now being formulated by the
Inter-American Defense Board. This plan will reaffirm the need for
the standardization of military equipment, training and methods of
operation among all countries signatory to the Rio Treaty. It is ex-
pected that the principal naval responsibilities assigned by this plan
to the Other American Republics will be the protection of their lines
of sea communications, over which must pass the major portion of the
vast quantities of the strategic materials supplied to us by those
countries.,
   Although these countries have indicated their desire to produce a
 plan of hemispheric defense and agree to it, in most instances they
 do not have the naval equipment to make such plans effective. The
 publication of the revised wording of Section 408(e) of the Mutual
 Defense Assistance Act'1 has raised the expectation and hope that, at
 long last, the purchase of excess U.S. naval vessels required for the
 implementation of the Inter-American Defense Board's plans may
 soon be effected.
   In light of the above, I recommend that a program of sale of excess
 U.S. naval vessels to certain of these countries be finalized at the
 earliest opportunity, and that the countries concerned be informed
 as to the vessels which we are prepared to sell to them, with the ap-
 proximate prices. Such a program is set forth on the inclosure.2 The
 prices tabulated in the inclosure represent the total of the following:
   Public Law 621, approved July 6, 1950 (64 Stat. 373).
   in a ,memorandum of September 7, 1950, to Messrs. Warren and Miller, Dun-
 can A. D. Mackay of the Office of Regional American Affairs said in part
he had
 learned from the Defense Department that Secretary of the Navy Matthews
had
 recommended to Mr. Johnson an allocation as set forth above, except that
 Mr. Matthews had suggested only one cruiser for Argentina.
   "It is understood that the Navy made this tentative allocation primarily
on the
 basis of the need of these countries for these ships in their probable role
in
 hemisphere defense; other factors considered were the governments' traditional
 friendship to the United States and whether the government had requested
this
 type of ship.
   Brazil and Chile, as you may know, have made requests for the exact number
 of cruisers tentatively allocated for them by the Navy, and are most anxious
 to purchase them. Argentina has requested either one heavy and two light
 cruisers, or two heavy and two light cruisers, as well as a number more
DE's
 than are proposed by the Navy be-allocated." (720.562/9-750)


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