The Ambassador in Argentina ( Bliss ) to the Secretary of State

No. 37

Sir: I have the honor to refer to the Embassy’s telegram No. 39, of May 21, 1926, and subsequent correspondence concerning the Argentine naval construction program, and, for the Department’s information, to submit the following report concerning the various contracts which have already been let.

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Two scout cruisers, nominally of approximately 8,000 tons, have been awarded to the Orlando Company, at Leghorn, in Italy. The keels of these vessels were laid on October 12. Two destroyer leaders were bought outright from Spain. It is understood that these ships, which are not yet completed, are being constructed in that country by the Sociedad Española de Constructores Navales. The actual, but not nominal, head of this company, which is supposedly a subsidiary of Armstrong and Vickers, is Sir Philip Watts. J. Samuel White and Company, of Cowes, will build three destroyer leaders. Two sloops and two tugs are to be constructed by Hawthorn, Leslie and Company; and the contract for the construction of three submarines has been awarded to Tossi, of Taranto, Italy.

The failure so far of the two American concerns most actively engaged in attempting to obtain contracts, i. e., the Electric Boat Company for submarines and the Bethlehem Steel Corporation for other units, may be explained as follows: it would undoubtedly appear that Admiral Domecq Garcia, the Minister of Marine, and Admiral Galindez, Chief of the Argentine Naval Commission in Europe, desired to have the complete naval program constructed in Italy. For various political reasons, however, the British and Spanish naval construction firms received contracts, although I understand that it was distinctly against naval opinion to purchase the two flotilla leaders from Spain. I am also led to believe that Sir Malcolm Robertson, the British Ambassador, interested himself extremely in the allotment of the various units to Great Britain and pointed out that as his country is Argentina’s best customer, and the largest ship-building nation in the world, it should receive due consideration.

. . . . . . . . . . . . . .

Even before presenting my letters of credence, I had a conversation with Dr. Gallardo, the Minister for Foreign Affairs, on behalf of the Electric Boat Company, recommending to the earnest consideration of the Argentine Naval authorities its proposition to build three submarines in France for the Argentine Navy. Before his departure for Europe, I talked with him again on the subject and also took it up later with Dr. Sagarna, Acting Minister for Foreign Affairs, and with Admiral Domecq Garcia, the Minister of Marine.

In view of the letting of the contract to the Tossi Company, I personally do not believe that the Electric Boat Company have any further opportunity of obtaining the units which are to be constructed in the future, unless they should adopt different means of approach.

As far as it has been possible to learn, the bid made by the Electric Boat Company exceeded that of the Tossi Company. It has been reported that Signor Mussolini, at the request of the head of the [Page 436] Argentine Naval Commission in Europe, intervened with the Italian company, with the result that its price for the submarines was reduced from £218,000 to £208,000 for each vessel.

The Bethlehem Steel Corporation have, I believe, a fair chance to gain the contract for the four river gunboats, inasmuch as Mr. Hill, Vice President of the Corporation, who is now in Buenos Aires, has made a tender which has appealed to the Argentine Government. He has offered to assemble one of these units in Argentina, with Argentine workmen, only the direction to be controlled by the Bethlehem Steel Corporation. As this would be the first naval unit of any importance to be built in South America, it would naturally be a subject of local pride, and there is a reasonable expectation, therefore, that the Bethlehem Steel Corporation will be able to obtain the contract by this means.

The appropriation calls for $35,000,000 gold to be spent during the first three years, $20,000,000 during the next three, and $20,000,000 during the last four. Of the complete program there remain to be ordered one light cruiser, one destroyer leader, three submarines and various smaller craft for river work which are not specifically named in the bill.

Whether or not American firms will be able to obtain orders for these units depends principally upon whether they can reduce their cost of production sufficiently to enable them to approximate the prices of their European rivals.

I have [etc.]

Robert Woods Bliss