Memorandum by the Economic Adviser (Young) of a Conversation With Mr. Hugh Knowlton of the International Acceptance Bank

Subject: Proposed Loan to Argentina for Naval Construction

Mr. Knowlton stated that the Argentine Government was in course of realizing a naval program calling for an expenditure of some 75 million dollars over a period of years; that it was now contemplated to raise a loan of 15 million dollars to finance the building of certain vessels; that the bonds in question would be six per cent bonds, with a one per cent cumulative sinking fund running for thirty-three years.

The business had been brought to the attention of the International Acceptance Bank through the Argentine branch of the French firm of Louis Dreyfus. I inquired where the proposed naval construction would be carried out. Mr. Knowlton stated that he did not know definitely, but that there had been some discussion of having part, at least, done in France or Italy. Mr. Knowlton would be prepared to specify that a part of the construction be carried out in the United States. He inquired whether the Department would desire a preference for American firms. I replied that it is not the ordinary practice of the Department to suggest any preference, but that we always hoped that in the case of construction work of any sort American firms would have the fullest opportunity to compete freely, and that as to construction work in general the Department was always glad to see the work done by American firms. Mr. Knowlton stated that he would be prepared in any case to stipulate that American firms [Page 428] should have the fullest and freest opportunity to compete for any proposed work.

In reply to his inquiry whether the Department would object to a loan for naval construction by Argentina, as such, I stated that I was not prepared to express any views without consideration, but that I would take up the matter promptly and communicate with him.

A[rthur] N. Y[oung]