216. Memorandum of a Conversation, Department of State, Washington, July 16, 19561
SUBJECT
- Possible Statement by President Eisenhower to President Aramburu at Panama on Assistance to Argentina
PARTICIPANTS
- Mr. Dulles, Secretary of State
- Mr. Humphrey, Secretary of Treasury
- Mr. Holland, Assistant Secretary of State
- Mr. Kalijarvi, Deputy Assistant Secretary
- Mr. Bernbaum, OSA
- Mr. Rosenson, REA
- Mr. Arey, Export-Import Bank
- Mr. Blowers, Export-Import Bank
Mr. Holland said that the President will undoubtedly see Aramburu at the forthcoming meeting in Panama and that the latter will press for some indication as to where the U.S. stands on the matter of loan assistance. A fact-finding group consisting of representatives [Page 422] of State, Treasury, Export-Import Bank and Agriculture has been holding meetings with the Argentine Mission for about 10 days. Argentina is seeking a total of $500 million for rehabilitation of its railroads, expansion of electric utilities, and industrial and agricultural equipment. Of this amount they consider $262 million urgent.
Mr. Holland said that in Latin America Brazil, Argentina and Chile, in that order, are crucial in the struggle against communism. He mentioned the new Russian economic offensive which he said is still in the “tooling up” stage. If the communists got a foothold in any one of these three countries it would present us with a very serious problem in the whole continent. The new government is the first one in many years to be friendly to the United States. They need help badly. If we refuse our help there is a real danger that they will move toward closer relations with the Soviet bloc.
Any assistance we give Argentina should be accompanied by certain conditions with respect to (1) American and Foreign Power (2) the meat companies and (3) CADE (Compania Argentina de Electricidad). Mr. Holland said that as regards CADE we should insist first that any change in the present setup should be made only in agreement with the present owners and secondly, that the enterprise should remain in private hands. He explained parenthetically the bad reputation of CADE and the government’s needs to eliminate it on political grounds.
Summing up his brief presentation, Mr. Holland expressed the view that we probably should be prepared to lend the Argentines $200 million for their railroads, letting them look to private capital for their electric utility needs. He believed that we should recommend to the President that in speaking to Aramburu he should leave the impression that the U.S. will help out Argentina with some financing.
Mr. Humphrey said that we cannot look at this problem in terms of Argentina alone. It must be regarded as a part of an over-all South American problem. There are also Brazil and Chile to consider. Taken together, the programs of these countries involve huge amounts of money. In one sense Argentina is the worst of the three in that it has the least commercial contact with the U.S., although in its treatment of U.S. investors it was probably no worse than Chile. Mr. Humphrey recognized that the new Argentine government is in every respect a great improvement over the old. They are trying hard to do the right thing and we should encourage them. However, the magnitude of the problem is such that we cannot reach a decision in the next 2 or 3 days.
Mr. Holland pointed out that Chile is already well on the road to getting both Eximbank and IBRD loans. The Eximbank is now talking to the Brazilians in terms of very large amounts. So that [Page 423] Argentina is trailing the procession rather than setting a pattern for the others.
Mr. Humphrey thought the President should not commit the U.S. Government to make any loans to Argentina.
Mr. Dulles agreed that there should be no commitment, but he pointed out that the talk between the two presidents is bound to give rise to certain inferences. Even friendly statements couched in the most general terms are likely to be considered later as moral commitments on the part of the U.S. He therefore thought that our recommendations to the President should contain caveats on this score.
Mr. Humphrey said that the main trouble with lending to Argentina is that the country has such little dollar earning capacity.
Mr. Arey said that when Mr. Waugh visited Argentina some time ago he had in effect told the government “We have committed ourselves to assist you in purchasing a steel mill in the U.S. even though we do not consider it an economic venture. We hope you will think about whether you really want to go ahead with the steel mill, because if you do it may affect your ability to borrow money from the Bank for other purposes.” Mr. Arey said that in addition to the $60 million they will get from the Bank for the steel mill they will need at least $40 million more, and they already owe the Bank $90 million. He thought the steel mill was a very unwise investment. (Mr. Humphrey agreed.) He added that the Argentines have no servicing capacity in dollars and therefore the thing for them to do is to borrow in non-dollar currencies.
Mr. Kalijarvi said that there has not as yet been an opportunity to study the problem with sufficient care, particularly as we have not had any real economic information from Argentina for the last 10 years. We should not make any decisions on this important matter until we have made an exhaustive study of the facts.
Mr. Holland said that the only purpose of this meeting is to decide on the recommendation to the President regarding what he should say to Aramburu. After Aramburu speaks to the President he will go away with one of two impressions: (a) that the U.S. has decided not to help Argentina, (b) that the U.S. is prepared to do something for Argentina. We have to decide which it will be.
Mr. Humphrey said that the Argentine Government is a good one but that they are entirely unrealistic in the amount of borrowing they want to do. He mentioned $20 to $30 million as the order of magnitude we should be thinking of. In this connection he again reverted to the difficulties which the Argentines would have in attempting to convert their soft-currency surpluses into dollars.
Mr. Dulles asked what would happen if the Argentines did not get some assistance from the U.S. Mr. Holland said that the present [Page 424] government would fall and that the Radicals and Socialists, who don’t like the U.S., would probably take over.
Mr. Humphrey agreed that the present government must show results to stay in power. We ought to try to help them, but first and foremost we should work through the IBRD because of the currency problem. We should try to help them, but not encourage them to think in terms of the magnitudes about which they are now talking.
- Source: Department of State, Central Files, 835.10/7–1656. Confidential. Drafted by Rosenson.↩