811.20 Defense (M) Argentina/85

Memorandum by the Acting Chief of the Division of Defense Materials (Finletter)4a

Negotiations have been under way in Buenos Aires since June of this year for the acquisition by the Federal Loan Agency of a long list of strategic materials from Argentina. The chief purpose of the agreement is to obtain for the United States additional supplies of the important strategic materials produced in Argentina. It will also have the result of affording to Argentina a stabilized market for many of her products during this period of disturbed international commerce.

[Page 385]

The agreement for the purchase of the exportable surplus of Argentine tungsten has just been signed.5 The negotiations with respect to the other materials are still incomplete, but the latest report received is encouraging. The Loan Agency has requested its representative in Buenos Aires, Mr. Thomas J. Williams, to come to Washington for a discussion of the many details of price and method that remain to be settled. It is also reported that this is one of the subjects Irigoyen6 plans to review with us.

The tungsten agreement is in the form of an underwriting—that is, the Metals Reserve Company has agreed to buy for a period of three years at $21 per unit, up to a maximum of 3,000 tons of concentrates each year, such amount of the exportable surplus of Argentina tungsten as shall not be bought by the private trade in the United States.

It will probably be found most expedient that most of the remaining minerals—fluorspar, manganese ore, antimony ore, vanadium ore, tin and silver ore, beryl ore and mica—will be bought during the contract period by Metals Reserve Company, which will resell to private users or place in stock pile. There will obviously have to be an agreement on price. The Argentine Government will establish an export control which will prohibit the export of these minerals except to the Metals Reserve Company in the United States, the British Empire, the other American republics having systems of export control approved by the Government of the United States and other purchasers which may be designated by the United States or the United Kingdom. The quantities of metal in question are small.

Zinc and lead concentrates are a special case. The entire exportable surplus of these materials in Argentina is owned by a subsidiary of the St. Joseph Lead Company, a United States corporation, and the Metals Reserve Company will enter into a contract with this subsidiary for the acquisition of its entire exportable surplus. The standard export control provision will apply to these materials.

Beryllium oxide is also in a special category. This commodity, in contrast to the other minerals, will be purchased for a period of two years. It is all produced by one company. This commodity will be purchased directly by Metals Reserve Company and the standard export control provision will obtain.

The form of the wool agreement is a simple underwriting. The offer of Defense Supplies Corporation is to purchase specified amounts of various grades of wool, less amounts exported to private purchasers in the United States and to the other permissible destinations. [Page 386] Export control will prohibit the shipment of wool except to the United States and to the other permissible destinations.

Linseed. Linseed differs from the other commodities in that the amount to be purchased by the United States private importers and Defense Supplies Corporation is less than the total exportable surplus of Argentine linseed. The offer in this case is that Defense Supplies Corporation (with the approval of the Department of Agriculture) will purchase 30 million bushels during the calendar year 1942 less the amount of sales made through commercial channels to United States purchasers. The Argentine exportable surplus of linseed is more than twice the amount to be so guaranteed by Defense Supplies Corporation.

Quebracho. Quebracho is another special case. The potential production of quebracho in Argentina is large. It has been held to a fixed limit through the operation of a pool, operated by the Forestal Company, an English company. Unlike the commodities discussed above, the British desire a substantial amount (20,000 tons) of this material. The plan accordingly is that the Argentine Government will restrict the export of quebracho to a total of 115,000 tons in each year and this amount will be allocated through Argentine Government action as follows: (a) to the other American republics, 10,000 tons; (b) to the United Kingdom, 20,000 tons; and (c) to Defense Supplies Corporation, 85,000 tons. There will be no purchases by the private purchasers in the United States since such purchases would be inconsistent with the fixed limit on production. The Argentine export control will restrict exports in accordance with the above figures.

Cotton linters. The Argentine purchase of cotton linters is part of a program which includes Brazil and Mexico. Defense Supplies Corporation has received a recommendation from the Office of Production Management and the Department of Agriculture that it acquire 250,000 bales of cotton linters, less some amount to be agreed upon to be shipped from Brazil directly to the United Kingdom. The total amounts recommended are 200,000 bales from Brazil, 25,000 bales from Mexico, and 25,000 bales from Argentina, being approximately the entire exportable surpluses of the respective countries. The purchase is being made in all three instances by the Defense Supplies Corporation in accordance with the recommendation of the Office of Production Management and the Department of Agriculture. Export control in Argentina will provide that exports may be made only to Defense Supplies Corporation and to the other American republics having parallel systems of export control.

Casein. Casein is unique in that it is desired to divide the supply available between the United Kingdom and the United States. The [Page 387] British are accordingly proposing to the Argentine Government to purchase a specified amount of the two grades of casein and Defense Supplies Corporation will acquire the balance. Export control will limit exports to the United Kingdom and to Defense Supplies Corporation in the United States. If there is any demand, exports will also be allowed to the other American republics having parallel systems of export control.

Glycerine. The form of this offer is that Defense Supplies Corporation shall acquire the entire exportable surplus of Argentina. The present limit suggested is 10 million pounds. The glycerine so acquired will be kept in Government stockpile to the extent possible and to the extent required by the domestic trade will be allocated by Office of Production Management orders. The Argentine export control will prohibit the export of glycerine except to the Defense Supplies Corporation, the other American republics having parallel systems of export control, and the United Kingdom.

Hides. Hides present a difficult case. The Argentine exportable surplus of high grade hides is substantially less than the combined United States and British demand. The Office of Production Management has been working for some time with representatives of the British Leather Control for the purpose of determining how these high grade hides shall be divided. These discussions are currently continuing. The method which will be adopted will depend upon the result of these conversations. The Office of Production Management has formally recommended to the Federal Loan Agency by a letter from Mr. Knudsen7 that the supply of hides needed for the United States be acquired by Defense Supplies Corporation.

Thomas K. Finletter
  1. Addressed to Herbert Feis, Adviser on International Economic Affairs, the Secretary of State, and the Under Secretary of State.
  2. See despatch No. 3617, December 2, from the Ambassador in Argentina, and its enclosures, supra.
  3. Alonzo Irigoyen, Argentine Under Secretary of Finance.
  4. William S. Knudsen, Director General of the Office of Production Management.