835.51B861/67: Telegram

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

81. Bankers representing holders of dollar loans of Province of Buenos Aires report that the Minister of Finance of the Province proposes a plan by which payment of amortization is deferred and interest is to be paid in paper pesos at par of exchange, that amount to be converted monthly into foreign currencies and transferred. This process would throw the weight of currency depreciation on the creditor, contrary to the intent of the contract. This plan is proposed not only for the dollar loans but for the sterling and franc loans.

Furthermore, because sterling has itself depreciated in terms of gold, holders of sterling bonds would receive a far greater part of the amount called for by the coupons in sterling, than the holders of dollar bonds will receive in dollars. It is not the understanding of the Department that the sterling bonds are payable in gold. This, therefore, seems a discriminatory arrangement which is especially serious in view of the precedent it might create throughout the Argentine and in other countries. The Department desires that you investigate this situation through the Foreign Office and report your recommendations. The Argentine Ambassador in Washington has made it clear that his Government has repeatedly taken the definite position that there would be no discrimination as between holders of British and American bonds. Furthermore, Argentine products are sold for the same prices in gold value in the United States and elsewhere.

The Bankers here believe that the plan originated in England and apparently it has already received the endorsement of both the French and British Councils of Foreign Bondholders.