Memorandum by the Chief of the Division of Latin American Affairs (Wilson)
General Palmer E. Pierce, of the Standard Oil Company, and a member of the Council on Inter-American Relations’ committee dealing with the foreign exchange situation in Argentina, came in. He said that the committee, working through the branch of the First National Bank of Boston in Buenos Aires, had been urging the Argentine Government to appoint a representative in this country to discuss the question of unblocking American credits in Argentina. This the Argentine Finance Minister declined to do, pointing out that under the Roca Agreement Argentina could give no more favorable treatment in respect of frozen funds than it had given to Great Britain; the Finance Minister had pointed out that France and other European countries were now negotiating in this matter in Buenos Aires and that if the Argentine Government should send representatives abroad for such negotiations it would only result in confusion.
General Pierce said that a meeting had recently been held in New York of representatives of some 80 American companies doing business in Argentina. It had been the sense of the meeting that the Argentine proposal of 20 year 4% bonds in exchange for the frozen pesos was unacceptable, because the American companies could not get the American banks to discount the bonds or handle them in some [Page 762]way which would provide cash for the companies. General Pierce said that the British had handled the matter through forming a holding company, by action of Rothschilds, Baring Brothers and Sehroeder: This company takes the Argentine bonds, the holders thereof receiving 20% in cash, 60% in stock of the holding company, and 20% of the value of the bonds goes to the company. The assets of the company are “sweetened” by £10,000,000 Sterling of British Government bonds put up by the bankers. General Pierce said that he intended to recommend that the American group appoint the National City Bank and the First National Bank of Boston as their representatives to discuss the situation in Buenos Aires. He said that he felt they would have to get the bankers into the situation, as the matter of financing some arrangement under which the industrial concerns could get cash was primarily a banking problem. He said, however, that he did not know how his suggestion would be accepted by other members of the American group and that so far the American banks which had been approached in the matter had said it was impossible for them under existing legal requirements in this country to assist in the matter.
General Pierce mentioned the Brazilian situation briefly. He said that the arrangement made by the American interests last summer was running into some difficulties. The American concerns which had received a promise of exchange to meet current requirements were now being “discreetly” referred by the Bank of Brazil when they sought such exchange to the “gray” market. This market, General Pierce said, is a “semi-official bootleg market” in which the premium for exchange is about 10%. General Pierce said, however, that the American interests were making strong representations in the matter and he had hopes that the difficulties would be removed.