835.5151/605: Telegram

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

281. Reference is made to my despatch No. 1403 of November 6.45 Central Bank has now received instructions to sell exchange in official market at the rate of 16 pesos to pound instead of at former rate of 17 pesos, according to official communiqué of yesterday. Communiqué states further as follows: “In compliance with its reiterated promise to return gradually to monetary normality as soon as circumstances should permit, the Government has decided to take new measures tending toward realization of this desire,” The communiqué envisages the necessity of possibly discarding gradually the measures set up by exchange control and minimum prices on grains. On December 2 the Government suppressed minimum prices on wheat and linseed.

Present reduction in the margin of exchange profit has been done largely for the following reasons:

Continued increase in exports over imports and the excellent state of the grain market.
Natural appreciation of exchange value of the peso with the free market selling rate coming to within about 4.4 per cent above the official selling rate.

This decrease in exchange margin is felt in some circles to be a possible forerunner of the abolishing of exchange control should circumstances later permit. With free market selling rate today at 335 pesos per hundred dollars, peso has strengthened appreciably.

Please advise Commerce.

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