811.20 Defense (M) Argentina/36: Telegram

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

1116. Reference is made to the Embassy’s telegram 1101, October 9, 1 p.m., transmitting the text of the memorandum dated October [Page 379] 7, 1941, received from the Ministry of Foreign Affairs concerning over-all purchase proposal which the Embassy understands is identical with that handed to the British Embassy by the Argentine Government, the Department will observe that paragraphs 2 to 6 inclusive of the Argentine Government’s reply to us have reference wholly to the British part of the program and are only of indirect concern to us. Following a discussion with the British Commercial Counselor, Mr. Jerram, and Mr. Cutts, Attaché of the British Embassy, we gained the impression that they do not regard the project of the blocked sterling question as being germane to their part of the purchase program. From their unofficial reaction it would appear probable that the British Embassy will recommend to its Government that the question of blocked sterling should be considered apart from their purchase program.

In so far as our Government is concerned we consider the reply of the Argentine Government as constituting a workable basis upon which to carry on negotiations of a more specific nature with a view to concluding an agreement for the purchase of exportable surplus of products under consideration.

There are two main points in the Argentine Government’s reply which should be clarified before definite negotiations are undertaken.

The first concerns paragraph 9 which expresses the hope that the list of purchases proposed by the United States and Great Britain should be extended to include products such as linseed, butter, canned meat, pork products, etc., we consider, however, that only linseed has reference to proposal.

The second point one [on] which a clearer understanding must be reached is contained in paragraph 1 (b) [paragraph 13] which he states that the Argentine Government is disposed to establish a control of exports in the manner requested except for small quantities which are exported to countries which in turn supply Argentina with the goods necessary to maintain the equilibrium of Argentine economy. Williams of the Federal Loan Agency has requested from the competent officials the exact interpretation to be [put?] upon “these small quantities” and a clarification is expected shortly.

In view of the generally favorable nature of the Argentine reply, it is suggested that authority be granted to proceed immediately with the negotiations with a view to concluding an agreement for the purchase of the various products under consideration. It is furthermore suggested that such action be authorized irrespective of the progress of the British negotiations and with no [indication] whatsoever that the two proposals are combined in any manner beyond the recognized mutual interest of the United States and Great Britain.

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I could not escape the impression during our informal conversation with the British that they are still adopting a somewhat defeatist attitude with regard to their purchase program which, in my opinion, may have been accentuated by the blocked sterling question being projected into the program.

Williams was informed today by a responsible Argentine official that the utmost urgency existed for an early conclusion of the purchase program, since the Argentine Government was being flooded by requests for export licenses of many of the commodities included in our program. This official added that such requests were being held in suspense but that the pressure was great.

Armour