Foreign Relations of the United States, 1955–1957, American Republics: Central and South America, Volume VII

240. Memorandum From the Deputy Assistant Secretary of State for Inter-American Affairs (Snow) to the Assistant Secretary of State for Economic Affairs (Kalijarvi)¹

Washington, August 13, 1957.

SUBJECT

• Cotton PL 480 Agreement with Argentina

Discussion

In June, Argentina requested the purchase of 45,000 tons of cotton fiber under PL 480. In late July, they revised this request, indicating that only 25,000 tons were desired this year. This request is based upon the fact that Argentina has had a failure in the cotton crop and imports will be required for the comparatively well-developed and large textile industry. An additional factor is that Argentina’s production is increasingly of low-grade cotton which is not usable by its textile mills. Increasingly, therefore, Argentina finds itself in need of importing high-grade fiber. Because of its serious balance of payments position Argentina faces a difficult exchange problem in the importation of cotton.

Embassy Buenos Aires has recommended, on the basis of its statistical information, that 10,000 tons should be sold to Argentina under Title I. It supports this on political grounds, and I attach a copy of Embassy cable 275² to that effect. On August 9, we learned informally from Agriculture that that Department was not going to recommend any cotton for Argentina under Title I. This position is based upon the relatively small amount of cotton ($135 million) to be disposed of world-wide under the Title I authorization, and Agriculture’s desire to use all of this in countries where there are prospects of building up a future market for US cotton. Agriculture does not feel that such prospects exist in Argentina.

I believe that there are strong political reasons for an accommodation with Argentina:

1. Argentina is, of course, a strong critic of our agricultural disposal program because of her competitive export economy. The more Argentina benefits from this program, the more restrained she will feel in criticizing it. This has happened in the case of two previous PL 480 sales to Argentina which had a modifying effect on her position. With Agriculture prepared to push feed grains and fats and oils in the coming year, both highly competitive with Argentine products, incipient friction can be lessened by a Title I transaction with Argentina.

2. The US has a particularly strong political interest in Argentina. With the current domestic political situation in that country presenting a rare historical opportunity to improve relations with that country, we must be alert to every chance to improve understanding and cooperation. Particularly when we are trying to get Argentina to do certain things, notably on American & Foreign Power expropriation claims and the meatpackers’ problem, we should not risk a misunderstanding of our attitude or willingness to be friends with Argentina.

3. There is increasingly little that we can do elsewhere for Argentina. Economic competition presents obstacles to closer relations. Traditionally, Argentina has felt sensitive over our refusal to permit imports of Argentine fresh meat. She felt apprehensive over our PL 480 program’s possible effect of cutting into her markets at a time when she must necessarily increase her export earnings. Very desirous of increasing trade with the US, Argentina is frequently faced with trade barriers cutting into her dollar earnings. Tung oil restrictions are a case in point. Although she badly wants financial aid from us, we are limited in extending it both by Argentina’s limited credit and capacity to service loans and by her domestic policies which exclude private foreign capital from the petroleum and electric power fields which represent the major portion of Argentina’s capital needs. We have been unable to satisfy certain requests for military equipment due to non-availability and hemispheric precedents. We shall probably, for the same reasons, be unable to satisfy a request for the purchase of merchant ships. On numerous points, we have been forced into the posture of refusing Argentine approaches for some type of action.

If, in addition to not doing things for Argentina because we lack the capabilities (such as extending substantial additional loans), we fail to do something which it is within our power to do, our sincerity will become suspect to the Argentines. The consequences will adversely affect our general relations as well as make far more difficult the securing of specific things we want from Argentina.

It is recognized that from some points of view, such as those held by Agriculture, there are strong reasons for refusing a Title I transaction with Argentina. From other points of view, however, there are strong reasons supporting such an agreement. It is essentially a question of weighing one against the other to determine what is in the best overall interest of the US. ARA believes that the net advantages to be gained from such an agreement, plus the adverse effects which would result if we deny the request completely, far outweigh other considerations, and that it is in the best overall interest of the US to conclude such a transaction.

Recommendation

I recommend that the Department support a Title I transaction for the sale of cotton to Argentina. The amount of 10,000 tons, which was recommended by our Embassy, would appear to be the minimum quantity.³

1. Source: Department of State, Central Files, 411.3541/8–1357. Confidential. Drafted by Vaky.
2. In telegram 275, the Embassy stated that it was “very desirable” on political grounds to provide Argentina with 10,000 metric tons of cotton, “as it would lessen basis Argentine criticism PL 480 program and serve offset government disappointment re tung oil restrictions.” (Ibid., 411.3541/8–957)
3. Negotiations concerning a possible P.L. 480 agreement with Argentina continued through the end of the year without resolution. Documentation is ibid., 411.3541.