Dr. Dye’s statements are thought pretty well to cover the subject in its
present aspects and to leave little to be said. However, I venture to
refer to my despatch No. 77 of November 2, 1933,6 in which I quoted the then
opinion of a prominent American business man in which, [Page 512] referring to the old Exchange
Commission, he said that there could be no doubt that discrimination was
being practised against American importers to Argentina but that he felt
this was a policy originating in the highest government circle.
The opinion cited is thought to be eminently true today; in other words,
the existing Exchange Commission in its discriminatory attitude toward
American exporters to Argentina but echoes instructions given it by the
Administration.
Dr. Dye’s report synthesizes a condition of such gravity as to warrant
and to counsel a firm attitude on the part of our Government, and in all
the circumstances I am wondering if this might not primarily be
manifested toward the Argentine diplomatic representative at Washington,
or at least concurrently with any steps to be taken here, preferably the
former. I incline to this preference in view of the fact that Argentine
exports to the United States have more than doubled during the past year
and have an increasingly upward tendency, while any pressure brought by
exchange restrictions here against American imports into Argentina might
lead to counter restrictions there tending to slow down this increasing
tendency in the northward movement of Argentine products.
[Enclosure]
Memorandum by the Commercial Attaché in
Argentina (Dye)
Buenos
Aires, February 2, 1934.
Importers of American products in Argentina are experiencing
increasing difficulties in securing dollar exchange to pay for their
imports. The evidence seems conclusive that the Argentine
Government, through the Minister of Finance, has issued instructions
to the Exchange Control Commission to allow import permits for
American goods only to the extent to which dollar exchange is
provided by Argentine exports to the United States.
There is also apparent a marked tendency in the Exchange Control
Commission to influence importers to purchase in Europe any goods
which can be supplied from Europe instead of the United States.
Among concrete evidences upon which the above statement is based are
a personal conversation which I had with the Argentine Minister of
Agriculture, Luis Duhau, on an occasion recently when he asked me to
come and see him with regard to wine shipments to the United States.
In the course of discussing the question of wine, I asked him if
they had settled on the policy of giving exchange to the United
States only in proportion to the amount of Argentine products sold
to the United States and his reply was: “Yes, we are automatically
[Page 513] forced to that
position by the requests of other countries who demand under the
‘most favored nation’ clause the same treatment we are giving to
Great Britain under the Roca Agreement”.7. I
called his attention to the fact that Argentine exports to the
United States the past year had increased over 100 per cent and his
reply was: “Yes, that is true, but the trade is still on a very low
level as compared to our trade with Europe.”
On January 31, 1933, Mr. Norman G. Buxton, General Manager of the
Otis Elevator Company in Buenos Aires, came to me and protested with
some vehemence against the attitude of the Exchange Control
Commission and told me that he had asked for import permits for Otis
elevators and for the steel rope, sheeting, oil and other
accessories, which go with Otis elevators. The Exchange Control
Commission had granted his request for the importation of the
elevators but had told him quite frankly that they would not give
him permits for the rope, oil, etc., and gave as a reason that he
could buy that in Europe. He stated that he wished to import these
from his own company and that he would not want to import these
products from Europe but he was told that the above instructions
came direct from the Minister of Finance and that if he did not like
it, he could go and talk to the Minister of Finance. The attitude of
the Exchange Control Commission as given to Mr. Buxton was that they
would give permits for only the absolute necessities which had to
come from the United States but that everything else would be
diverted to Europe as far as possible. Mr. Buxton is an English
subject, is a fellow member of the Rotary Club and I believe that
his statement is correct as given to me.
Mr. Henry L. Jones, Manager of the Latin American Department of the
U. S. Steel Products Company, 30 Church Street, New York, is now in
Buenos Aires investigating the question of exchange for his company.
He tells me that it is practically impossible for the U. S. Steel
Products Co. to get any exchange. His local manager has been advised
by the Exchange Control Commission along the same lines as reported
by Mr. Buxton. In view of the fact that the U. S. Steel Products
Co., furnishes large quantities of steel to a number of Government
departments, Mr. Jones has asked for an interview with the Minister
of Finance, at which he has asked him definitely for his position
with regard to exchange. The Minister of Finance has stated that he
wants to prepare the answers to Mr. Jones’ questions in writing as
he wishes to consider them very carefully before making a reply. Mr.
Jones has promised to give me the result of his interview with the
Minister of Finance.
[Page 514]
As further specific evidence, I enclose herewith a memorandum9 of a conversation
between the Under Secretary of Agriculture, Dr. Carlos Brebbia, and
Mr. Charles Waterman, representing the firm of E. Waterman & Co.
of New York. This memorandum was dictated personally by Mr. Waterman
to my secretary in this office.
I also enclose copy of a letter received from F. Plata y Plata, La
Rural 176, Buenos Aires,9 from which you will note that this company,
which represents the Albemarle Paper Mfg. Co., of Richmond, Va.,
have practically been forced to suspend imports of blotting paper
due to inability to get exchange; that they have hitherto supplied
about 75 per cent of the general consumption with this brand of
blotting paper.
These specific instances quoted are merely samples of urgent appeals
which are made to this office daily to intervene to try to secure
more exchange for importers of American products.
For practical purposes, it may be stated that the market for foreign
exchange consists of two categories:
The first consists of all the exchange which is supplied by the
export of Argentine produce. This exchange is sold to Argentine
importers at a rate fixed daily by the Exchange Control Commission
based on competitive bids received the day before. However, there
are some exceptions in that markets which are being opened for new
products abroad are given the right to sell their exchange in the
open market. For instance, Argentine grapes which are sold in the
United States are allowed to sell the dollars received from those
sales in the open market.
The second category of exchange is this “open” market and means that
all exchange which does not come from the sale of Argentine exports
or which comes from exports which are exempted, as indicated above,
is sold in the open market; that is, subject to free
competition.
There is a third category for which exchange is granted for amounts
under 1,000 pesos but this may be left out of consideration as it
does not affect the larger transactions.
The difference between the two rates is usually between 20 and 25 per
cent. On January 31, 1933, in the first category 100 U. S. dollars
were worth 323.57 Argentine paper pesos and in the second category,
388 pesos, a difference of about 20 per cent.
The advice given by the Exchange Control Commission to Mr. Buxton was
that if he did not like their restrictions, that he could buy the
exchange for his steel rope in the “open” market but his reply was
that in that case he would have to pay 20 per cent more than his
competitors. [Page 515] I find, in
questioning the trade, that many importers of American products are
simply basing their imports on the open market rate. This can be
done where imports are not so strongly competitive but what they can
add this 20 per cent extra to the cost of the goods and pass it on
to the consumers.
There is felt through all of this a definite tendency on the part of
the Argentine Government to bring pressure on the United States to
conclude a reciprocal treaty, and on that account of [sic] this matter should be called to the
attention of the Department of State as it has a direct bearing on
that question.
Unless a commercial treaty is concluded, which may modify the above
position, two conclusions seem evident:
- First, that our exports to Argentine will be restricted to
the amount of our imports from Argentina;
- Second, that pressure will be exerted to substitute
European goods for American goods wherever possible by
giving exchange for the purchase of such goods if ordered
from Europe but refusing it if ordered from the United
States.
We, therefore, must firmly and frankly oppose the position of the
Argentine Government that trade must be strictly bilateral. Since we
have kept records in good years and bad, U. S. exports to Argentina
have practically doubled Argentine exports to the United States. In
normal times such excess of imports is provided for by an excess of
Argentine exports to Northern Europe, principally Scandinavia,
Holland, Belgium and in some years Germany and Italy. Considering
the large investments in Argentina of the United Kingdom and the
invisible balances, the large excess of exchange which comes from
the sale of Argentine products to Great Britain, which purchases
roughly 35 per cent of Argentina’s exports, has been used to
purchase British exchange to be used for the remittance of invisible
balances coming from purchases of the British-owned Argentine
railways and other public utility companies, dividends on British
investments, interest on foreign loans held in England, etc. It is
not, therefore, so much the triangular theory of trade between
England, Argentina and the United States, which we must sustain as
it is the multiangular theory of all world trade which must be kept
in mind.
A copy of this report is given to the Ambassador for such comment as
he feels should be made.
Submitted by:
