218. Memorandum of a Conversation, Department of State, Washington, July 20, 1956, 12:15 p.m.1
SUBJECT
- Summation of Discussions with Argentine Financial Mission
PARTICIPANTS
- Dr. Coll Benegas, Head of Mission
- ARA—Mr. Holland
- OSA—Mr. Bernbaum
- OSA—Mr. Vaky
Mr. Bernbaum summarized general impressions received by the US group which has been holding discussions with the Argentine Financial Mission. He said that the conversations have been very useful. The data obtained were being studied and digested. It would be premature to offer more than certain general impressions at this time. There were certain points which were highlighted and which impressed all members of the committee: 1) The US members, he said, were impressed with the Government’s general program for internal economic reform, such as reforms of the banking system, plans to control inflation, credit policy, etc. These were felt to be sound objectives. 2) The crux of Argentina’s economic recovery program was its ability to produce and export agricultural products, particularly feed grains. It was felt that Argentine estimates of export possibilities may be somewhat over-optimistic, considering world market conditions in the next several years, as regards both quantity and price. 3) While Argentine estimates of capital needs were very large, the Government feels unable to utilize all possible resources—namely private capital—to the full extent it could for political reasons. Speaking in strict economic terms, the economic consequences are that the Government is diluting its own resources and undertaking heavy burdens when private capital is available for use in meeting requirements. Petroleum and electrical power were mentioned. It was pointed out that the Government contemplates investing $300 million in a program which will do only little more than keep up with the increase in fuel consumption and not solve the basic fuel deficit. Thus the Government is handicapping itself in the realization of its economic recovery program. 4) The nature of Argentina’s foreign trade means that its principal export earnings are in European currencies. Consequently, arrangements which Argentina will make with these European countries regarding convertibility are of basic importance to their program. Dr. Coll said that that is [Page 428] one of his major preoccupations and recalled that it was the first point he had mentioned to Mr. Bernbaum.
Mr. Bernbaum observed that there had been several discussions about the problems of American investors such as the meatpackers. He thought it well to reiterate the desirability for prompt and concrete action in their solution. Finally, he said, he understood that the Mission upon its return from New York would begin discussions with the Eximbank. He noted that the IBRD would be a very logical institution to talk to as well since it could offer financing in the international market.
Dr. Coll asked if there were any suggestions as to how talks with the banks might be handled or what channel to use. Mr. Holland said he had a suggestion, and that was that Dr. Coll might suggest joint conferences with the two banks. He emphasized that he did not know if that would be possible, and he has not talked to the Banks about it. However, it seemed to him to be a useful procedure, and perhaps Dr. Coll might tactfully explore that possibility.
Dr. Coll asked if we had any suggestions as to what projects to propose to what bank. Mr. Holland said that that would be something the mission should decide. He noted that the mission could be guided by the spheres of activity of the two banks, noting that normally anyone desiring financing for purchases in the US went to the Eximbank and anyone desiring financing in the international market went to the IBRD. Dr. Coll raised the point of competition between the two banks, and Mr. Holland said that that had diminished greatly in the past several months.
Mr. Holland also pointed out that the main thing the Eximbank would look at was the possibility of success of the broad program, and individual projects would be examined in that light. It wanted to know “who would win the ball game,” and consequently, it is important that the mission be able to demonstrate that the program it presents is sound overall. Mr. Holland said that it would be tremendously important if the American firms with problems in Argentina, such as the meatpackers and American & Foreign Power, could inform this government that they were satisfied. Dr. Coll said that he had no doubts about American & Foreign Power on that score.
Dr. Coll said that he felt he must be frank, and observed that he had definite instructions to the effect that the CADE problem could not be handled in any other way than that he outlined. Some differences might be possible in procedures, but the principles must be the same. Consequently, Argentina could not bargain on the point. Mr. Holland said that that was unfortunate because he did not believe that the banks would depart from the policy that loans [Page 429] would not be made where private capital was willing and able to do the job on reasonable terms. However, he felt it should not be said at this juncture that the matter was insoluble, but that we should try to work out the problem.
He said that he felt the objectives of the US and and Argentina were the same. The US wants to help Argentina, because it is in the selfish interest of the US that all countries in this hemisphere be stable and prosperous.
Dr. Coll said that as regards the convertibility question he felt that Argentina had a strong position vis-à-vis the European countries. Mr. Bernbaum observed that that was true, but that strong resistance from these countries might be expected. It was also pointed out that a favorable factor has been that the trend is toward more rather than less convertibility.
Dr. Coll confirmed his impression that the World Bank did not have the information he had provided the US group, and observed that he would have to begin from scratch with that institution. It was agreed that it would be desirable for the mission to provide the documents it had given us to the Bank for study as soon as possible so that talks could begin with some factual base.2