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

244. Memorandum of a Conversation, Department of State, Washington, October 25, 1957, 4:45 p.m.¹

Washington, October 25, 1957, 4:45 p.m.

SUBJECT

• Financial Assistance for Argentina

PARTICIPANTS

• W—Mr. Dillon
• ARA—Mr. Rubottom
• Ex-Im—Mr. Brand, Mr. Sauer
• OSA—Mr. Sanders
• OSA—Mr. Vaky

The discussions began before Mr. Dillon joined the group.

Mr. Rubottom noted that we had been given [giving?] considerable time to policy review of this subject, and that events were moving rapidly. He noted the recently passed banking reforms, the Radical Party convention which modified the economic stand of the party, and Ambassador Beaulac’s recommendation for assistance at this time in the private sector (Embtel 699).²

Mr. Brand said that the Bank had also been giving the matter considerable thought. He said that in the past two weeks the Bank has been looking for something it might be able to do to ease the situation. Unsure that State would concur and in view of Ambassador Beaulac’s earlier recommendations that the Bank extend no gesture in the financial field, the Bank saw little it could do. Meanwhile Coll was pressing very hard, and as a result the situation hardened. Mr. Brand described Coll’s various talks with Mr. Waugh, the most recent of which had been this morning.³ In this morning’s conversation, Mr. Waugh had told Coll that a) the Bank needed more time for consideration of the Argentine Aide-Mémoire requesting $150 million in loans; b) this was not a closing of the door; and c) the Bank continues ready to consider credits in the private sector. Dr. Coll pressed Mr. Waugh for an answer. Mr. Waugh replied that if pressed today for an answer he must say that at this time the Bank was not prepared to make additional loans for railroads or the coal industry.

Mr. Brand said that Dr. Coll took that as a closing of the door and as an indication that the Bank would not do anything for the Provisional Government. He had told Dr. Coll earlier that he had misunderstood. The Bank was not closing the door, had only said that at this time it could not move, but this had nothing to do with the Provisional Government.

Mr. Brand observed that in view of Coll’s talks with Mr. Waugh and the conversation today it would be very difficult to flip-flop over night. This would cause the Bank great difficulties. As regards aid in the private sector, he noted that the $15 million had not been utilized and would probably not be utilized for a long time. To establish now an additional line of credit would not make sense, especially when the Bank knew it would not be utilized for some time. He also mentioned the relatively small remaining lending authority as a problem and the fact that Congressional consideration of the Bank’s loans was also a factor. The Bank could hardly in these circumstances justify to Congress the earmark of more money for Argentina when the promptness of its utilization was doubtful.

Both Mr. Brand and Mr. Sauer expressed the opinion that a line of credit to the private sector might be a slap at the Government. They reasoned that at a time when the Provisional Government was seeking loans to it, the Bank’s ignoring that and making loans to the private sector might not help the Government.

Mr. Dillon joined the meeting at this point.

Mr. Rubottom observed that while it was true that the situation had hardened somewhat as a result of Waugh’s talks, we could not overlook the fact that the situation was changing in Argentina and for the better. There was clearly some progress being made, and we could quite justifiedly do something on the grounds that the situation had changed. Mr. Dillon added that some of the pluses were on our side and that anything we might do could be tied to the progress made by Argentina.

Mr. Brand said that the real question was what could we do. Mr. Dillon asked what it was the Argentines were pressing for the most, and Mr. Brand replied that it was aid for transportation. Mr. Dillon asked if the Bank was willing to consider further assistance to the railroads. Mr. Brand replied that there was some reluctance by the Bank in that regard. He noted that the capital needs of the railroads were tremendous and that the IBRD had indicated that about the only thing it would be interested in Argentina were the railroads. The IBRD had also made clear, however, that it would do nothing until a new Government came in. Given the great magnitude of capital needs the Bank was a little reluctant to get in too deep. Mr. Brand did acknowledge, however, that the railroads probably provided a very sound economic development project. In response to other questions he indicated that Dr. Coll was more interested in the railroads than the coal project.

Mr. Brand suggested something else, which he said might appear shocking at first. If the A&FP matter could be cleared up the Bank might consider financing in the power field perhaps both public and private power projects. It was acknowledged, however, that the A&FP and general power picture would probably not be cleared up any time soon to the point where the Bank might give consideration to this matter. Hence this would not help the immediate situation.

Mr. Dillon asked if consideration might not be given to a mixed public-private sector line of credit as was made last time, say $50 million of which $40 million would be for railroads and $10 million for private loans. He acknowledged that a line of credit for the private sector to be subsequently allocated on a case by case basis probably did not make economic sense as sound Bank procedure.

Mr. Brand and Mr. Sauer explained that agreement had been reached, with Dr. Coll on procedures to implement the allocation of the $15 million, and the first loan thereunder, for $26,000, would be announced soon. They also indicated that the Bank had not defined any limit for private sector loans. This would depend upon the merits of individual applications. The Bank was prepared to go beyond $15 million if sound applications were at hand. They said that the possibility of a public announcement had been considered but as of that afternoon the Bank had decided against it. This however would not preclude the possibility of changing and making such an announcement. Mr. Sauer expressed the opinion that some public announcement was necessary to make known to industry that they could apply for loans.

Mr. Dillon suggested the possibility of such a public announcement as a means of taking the pressure off and indicating willingness to move ahead in the private sector. In the meantime we could give further consideration to possible assistance to the railroads, which would also give us time to see the results of the Constitutional Convention.

After further discussions it was decided that the Bank would

a) Give immediate consideration to a public announcement that agreement had been reached with the Argentine Government on procedures to implement the allocation of the $15 million. Such an announcement would also indicate that $15 million was not a ceiling, and that the Bank would consider applications beyond that amount. This might serve as a helpful psychological gesture for the Provisional Government.

b) Consider the possibilities for further assistance in the railroads and possibly in the coal industry, including technical study of the latter.

Mr. Brand said that Mr. Waugh would return on Sunday and that he would notify him immediately of this conversation and show him the various pertinent memos. He himself would be leaving next week but would return the following week.⁴

1. Source: Department of State, Central Files, 835.10/10–2557. Confidential. Drafted by Vaky.

   In a memorandum to Dillon, dated October 24, Rubottom wrote in part as follows: “the problem of Argentina continues uppermost in my mind. I believe that those of us most directly responsible for United States policy toward Argentina would greatly benefit from a discussion at the highest possible level to weigh all the factors involved.” He suggested that a meeting be called as soon as possible between himself, Dillon, Waugh, and their respective staffs. (Ibid., 611.35/10–2457)

2. Dated October 24. (Ibid., 835.4241/10–2457)
3. Memoranda of Waugh’s conversations with Coll Benegas on October 24 and 25 are ibid., 103–XMB/10–2557.

4. In telegram 766 to Buenos Aires, October 29, the Export-Import Bank informed Ambassador Beaulac as follows:

   “Position of Directors remains consistent as follows:

   “We favor an announcement that Bank is prepared (1) to implement credits in private sector in previously authorized amount $15 million and (2) thereafter is prepared to consider additional private credits above that amount on case-by-case basis. Preference will be given to credits that will improve dollar exchange position.”

   The telegram also stated that the Directors of the Export-Import Bank “do not favor at this time any further announcement or commitment regarding public sector.” (Ibid., 835.10/10–2657)