The Executive Vice President cmd Secretary of the Foreign Bondholders Protective Council, Inc. (White) to the Secretary of State

Sir: Mr. Luis Lariviere, representing the Province of Buenos Aires, has recently discussed the default of that Province on its dollar bonds. He submitted to the Council a tentative proposal with respect to this default. Copies of this proposal were sent by the Council some days ago to Mr. McGurk.20

The Council has just received a copy of the confidential offer made by the Province of Buenos Aires in London to the holders of the sterling bonds of that Province. The proposal to the British holders, like the one to the American holders, provides that certain revenues of the Province which will be collected by the Federal Government under [Page 281] the Federal Law for the Unification of Internal Taxes, passed December 21, 1934, will be allocated to the service of the outstanding loans of the Province.

In the offer to the British, however, it is proposed that the 3 to 3½% Loan of 1906/09 will receive the first charge on such revenues; that the 5% Consolidation Gold Loan (sterling) of 1915 will receive the second charge on such revenues; and that “there will be a third charge in favor pari passu of all the other European loans (with the exception of the 4½% Banco de la Provincia Loan of 1910 which is separately secured on the dividends of the Banco de la Provincia) and of the United States Dollar Loans”.

The Council feels that there is no justification for this discrimination against the dollar bondholders. The dollar bonds were issued on the faith and credit of the Province and are just as much an obligation of the Province as its sterling and other loans. Furthermore, under the plan new security is being offered to the bondholders for the service on their bonds, namely, revenues to be collected by the Federal Government. The Council feels that the only fair and equitable way to deal with the matter is to allocate such revenues in equal proportion for the service of all the outstanding obligations of the Province.

The Council has cabled to the Minister of Finance of the Province of Buenos Aires and to the Minister of Finance of the Republic of Argentina regarding the matter, and I have the honor to enclose herewith copies of these cables.21

I have the honor to bespeak the good offices of the Department on behalf of the holders of the dollar bonds of the Province of Buenos Aires in order that no discrimination may be practiced against them.

I have [etc.]

  1. Joseph F. McGurk, Assistant Chief of the Division of Latin American Affairs.
  2. Not printed.