Four-and-a-half years ago when we picked up the mantle, I fully understood that if our southern neighbors were to live in peace and be spared the tragedy of Communist dictatorship, we must have a balanced policy on Latin America. Our strategy's been based on four mutually reinforcing elements. We've been seeking to help bolster the development of democratic institutions, to improve the living conditions of the people and restore economic growth, to provide security assistance and thwart Communist-supported subversion and aggression, to find realistic diplomatic solutions to conflict in the region.

No strategy is worth the paper it's written on unless it's backed up with the hard work of loyal and talented individuals, and I'd like to take this opportunity to recognize a man that I've relied on heavily. Bill Middendorf, would you please stand up? I want to tell you how much I personally appreciate your service. You've done a terrific job at the Organization of American States during a very trying time. And having just returned from Europe, I can tell you that your next job, representing us to the European Communities, will also be a major challenge. [Laughter]

And I'd also like to introduce Elliott Abrams, whom I've asked to serve as Assistant Secretary of State for Inter-American Affairs. Elliott has been an articulate spokesman for our country in the field of human rights. And I'm looking forward to working even more closely with you. Now, just make sure you get all the phone numbers of everybody in the room before they leave today. [Laughter] Seriously, I hope you'll give Elliott your strong support.

With the energy and the creative talents of people like Bill Middendorf, Elliott Abrams, all of you here today, much has been accomplished in Central America. The people there, with the regrettable exception of Nicaragua, are enjoying the rising democratic tide.

One of the most damaging lies of our era is the falsehood that people must give up freedom to enjoy economic progress, which makes me think of a story -- everything makes me think of a story -- [laughter] -- about three dogs, an American dog and a Polish dog and a Russian dog. And they were all having a visit, and the American dog was telling them about how things were in this country. He said, ``You know, you bark, and if you have to, you bark long enough, and then somebody comes along and gives you some meat.'' And the Polish dog said, ``What's meat?'' [Laughter] The Russian dog says, ``What's bark?'' [Laughter]

I have to interrupt right here and tell you that on one of my visits -- I won't name him; I don't want to embarrass him -- but one of the heads of state that I met with on this visit, he gave me one while I was on the way. He told me the story about the two fellows in the Soviet Union who were walking down the street, and the one of them says, ``Have we really achieved full communism? Is this it? Is this now full communism?'' And the other one said, ``Oh, hell no, things are going to get a lot worse.'' [Laughter]

Well, developing countries are discovering that the only things produced by communism are oppression and deprivation. The political freedom now emerging in Latin America gives us reason to be optimistic about the changes for economic progress. We're doing all we can to work with the new democracies in Central America, our neighbors in the Caribbean, and other countries in the hemisphere to strengthen their democratic institutions and to invigorate their domestic economies.

In Central America the downward economic spiral, by and large, has been halted. Excluding Nicaragua, the regional gross domestic product was up 1.2 percent in 1984. This year we expect regional growth, again excluding Nicaragua, of 2\1/2\ percent.

We recognize this economic growth is fragile, and sustaining it will require a long-term process of prudent economic reforms. Consistent with the findings of the bipartisan Kissinger commission, we're moving forward with a wide-ranging economic and security assistance effort in Central America called the Jackson plan, named, of course, after the late Senator Henry ``Scoop'' Jackson.

Throughout Latin America, we've committed considerable resources to human development. We're spending hundreds of millions of dollars in health initiatives, housing and infrastructure programs, food and agricultural assistance also, and employment projects and educational opportunities, including scholarships permitting young people in the region -- many of them from poor families -- to study here in the United States. Now, more can and will be done in each of these areas.

In the Caribbean our Caribbean Basin Initiative went into effect January 1, 1984. It's just beginning to take hold. Companies are starting to respond to new incentives that provide for manufacturers of most goods 12 years of duty-free commerce with the United States. This should encourage domestic and foreign investment. Already, some 250 to 300 new export-oriented investments in the region have created over 30,000 jobs.

In 1984 CBI-eligible imports to the United States increased by about 17 percent over the 1983 level, and that's a $555 million increase. And for the first time since 1981, our exports to the region also showed growth last year.

Our administration has stressed the necessity of strong private sector involvement if economic progress is to be made in Latin America. The single most important reform any government can make is to lower its peoples' personal income tax. Government spending programs -- but what I should say, not just income tax -- I'm sorry, I've been just coming from a session having to do with our own income tax -- lowered personal tax rates in those countries. Government spending programs aimed at building the infrastructure will not do the job.

The efficiency, the ingenuity, and vitality of private enterprise and free people must be brought into play. I'd like to express my appreciation for the courage and foresight of those American companies who, during a time of economic uncertainty, invested in the future of Latin America.

I think we've turned the corner, and better times are ahead for our neighbors to the south. Our own economic growth has helped and continues to help stimulate growth in Latin America. And as their economies come around, their prosperity will add to ours.

I'd also like to thank Puerto Rico's Governor, Rafael Hernandez Colon, with us today, for the support that you've given to help us promote democracy and economic progress in the entire Caribbean region.

Now, last week I met with President Duarte of El Salvador, a country that is turning around a desperate economic situation and making great progress in its efforts to develop the institutions of democracy. I couldn't help but remember how close the House vote was last year on the crucial issue of military assistance to his government. A loss would likely have undermined everything that President Duarte was trying to accomplish.

Recently a top Salvadoran guerrilla leader surrendered. And according to press reports, this commandant confirmed, as have other defectors, what we've been trying to tell some of the doubting Members of Congress: Nicaragua supplies and supports the Communist insurgency in El Salvador. The former Salvadoran guerrilla leader reportedly confirmed they'd been getting 20,000 to 30,000 rounds of ammunition and 5,000 sticks of TNT from Nicaragua every month, and he asserts they get 70 percent of their arms from Nicaragua. One encouraging thing we can say is that this does reflect something of a decline in what has been normal over the recent years; so possibly we're having some success in intercepting those shipments.

With that, the Communists have been conducting military operations, kidnaping and murdering village mayors, and destroying El Salvador's economic infrastructure -- blowing up bridges, power lines, and more. This is aggression, pure and simple. Those who willfully ignore this aggression endanger freedom in Central America and, in the long run, the security of the United States.

I might point something out here that's rather of interest. Our Bud McFarlane was in Central America not too long ago, and he was talking to the contra leaders there. And he asked them -- he said, apropos of what the guerrillas are doing in El Salvador and the attacks that they're making on these vital structures -- he said, ``Why, if you're trying to put pressure on your government here -- why don't you attack some of these vital, strategic targets?'' And to show you the difference between the contras and the guerrillas, the contras said, ``No, that would hurt the people, and we're of the people. We're not going to do that.'' I think they deserve our support.

Let there be no mistake, helping those who fight for freedom and supplying security assistance for our democratic friends in Central America are vital to the future of that region and to our national security as well.

We have it within our grasp to build a new unity of purpose in this hemisphere, to recapture the spirit of freedom and enterprise that brought many of our forebears from the Old World to the New.

The challenge is great, but I know we'll meet our responsibility. As I told the people of Europe during my recent trip, the future is on the side of the free.

I thank each of you for what you're doing to make the dream of the Americas come true from one end of the hemisphere to the other. I need your active help to inform your fellow citizens and the Congress of how vital it is for us to see our southern neighbors through this time of economic uncertainty and Communist subversion. Together we can work with the people of Latin America to build a freer, more prosperous future. And I know I can count on you.

Thank you, and God bless you.

Note: The President spoke at 4:31 p.m. in Room 450 of the Old Executive Office Building. In his remarks, the President referred to Ambassador J. William Middendorf II, Permanent United States Representative to the Organization of American States.