The Ambassador in Argentina (Weddell) to the Secretary of State
[Received June 2.]
Sir: I have the honor to refer to my despatch No. 1161 of April 29, 1936,18 regarding the efforts of the Yacimientos Petrolíferos Fiscales (Argentine State Oilfields) to increase its sale of gasoline and other petroleum products in Buenos Aires by means of a proposed Executive Decree which would effectively reduce the proportionate shares of this market now held by private oil companies, and to my despatch No. 1164 of May 4, 1936,18 informing the Department that such a proposal was not put into effect because of the imminent opening of the ordinary session of the Argentine Congress.
I now have to report to the Department that, in accordance with the terms of an Executive Decree originating in the Ministry of Agriculture and dated May 8, 1936, a committee of three was appointed on May 14, 1936, to realize an intensive study of the distribution, sale, importation, exportation and transportation of petroleum and its derivatives in all Argentine Territory. A translation of this Decree as appearing in the Boletin Oficial of May 15, 1936, is enclosed.18 Members of the committee chosen to carry on this work are: Dr. Eduardo J. Bullrich, former secretary to the President, Dr. Horacio Morixe, Under Secretary of Agriculture during the Uriburu19 Administration and author of a book on petroleum, and Sr. Luis Rojas, one of the directors of the Yacimientos Petrolíf eros Fiscales.
The importance of this decree lies not in the fact that a representative of the Yacimientos Petrolíf eros Fiscales will directly participate in the drafting of laws and decrees regarding the petroleum industry, for this entity has enjoyed a similar privilege in the past, but rather that a definite campaign to increase the sale of Yacimientos Petrolíferos products to the detriment of those elaborated by private oil companies has been initiated under official auspices. An official of an American petroleum company summarized this situation in the following manner: “The Basic Petroleum Law of 193520 restricted to a marked degree an [all?] future efforts to increase our production of crude [oil?] by obtaining new concessions, while now an attempt is being made to limit our sales. We are actually being squeezed at both ends.”[Page 185]
Private oil companies consider that the section of Article 1 of this Decree which states “This Committee will submit preliminary projects of decrees and laws which it may deem necessary in connection with this subject” implies that some enactment may be put into effect establishing a sales quota for each petroleum company operating in the Buenos Aires market alone and not for the country as a whole. If this belief should prove true, then the Yacimientos Petrolíferos Fiscales will undoubtedly be guaranteed sales in the Federal Capital, the market in which the greatest profits may be realized because of the absence of transportation charges, in excess of those now being made.
The basis for the Decree of May 8, 1936, namely that certain private oil companies through rebates and price reductions have cut into the share of the petroleum market which normally would be held by the Yacimientos Petrolíferos Fiscales is open to question. By common agreement the retail price for gasoline was fixed at 23 centavos per liter in 1933, and since that time no “price war” has occurred. Furthermore, when the private oil companies in 1935 invited the Yacimientos Petrolíferos Fiscales to join with them in an accord binding themselves from granting rebates, the Yacimientos Petrolíferos Fiscales refused on the grounds that the private oil companies would not live up to its terms and as a result the State oil company would be penalized. Thus at the present time the Yacimientos Petrolíferos Fiscales is able to grant rebates whereas the private companies, according to their statement, are unable to do so because of the aforementioned agreement.
The latter organizations feel that the Yacimientos Petrolíferos Fiscales has resorted to this practise and cite the following instances: In 1934 34 per cent, of the gasoline sales in Buenos Aires were made by the Yacimientos Petrolíferos Fiscales. This cipher dropped to 31 per cent, in 1935 although the total consumption in the city increased by 10 per cent. By March, 1936, however, Yacimientos Petrolíferos Fiscales sales have increased to 38 per cent, of the total, a gain which presumably could only be accounted for by rebates.
I am informed by representatives of the private oil companies that they do not expect any immediate discriminatory action arising out of the terms of this decree. The advisory committee has only just been appointed, and it will require considerable time for this body to effect a comprehensive study of the petroleum market, especially when it is considered that one of the members, Dr. Bullrich, has little more than a superficial knowledge of the petroleum question.
First Secretary of Embassy