811.20 Defense (M) Argentina/254

The Chargé in Argentina (Reed) to the Secretary of State

No. 5742

Sir: I have the honor to refer to this Embassy’s despatch No. 5622 of July 2, 1942,29 forwarding a copy of an informal unofficial proposal of the Argentine Government to the effect that the United States agree to supply Argentina with a minimum amount of rubber and at the same time to allow Argentina to purchase the entire Bolivian output.

The proposal is self-explanatory and copies both of the original Spanish and the English translation29 are forwarded for the information of the Department. Reference is also made to Embassy’s despatch No. 4935 of May 4, 1942.29

After briefly studying the present proposal, it is difficult to see where the Argentine Government has made any headway in the past two months. The situation is basically the same as described in the above despatch. In brief, Argentina has really put in little or no actual restriction on the use of rubber. It will be noted, for example, in the first table, under paragraph 2, that the presumed consumption of rubber in all branches is greater in 1942 than it was in 1941. This is accounted for, presumably, by reason of a reduction in imports of rubber manufacturers. It is true that they suggest sharp reductions in the use of crude rubber, ranging from 40% for shoe manufacture to 55% for industrial, medicinal and miscellaneous, with 45% reduction planned for tires, tubes and repair materials. If these restrictions were actually in effect, the case would be considerably more convincing. Dr. Raúl E. Arrarás Vergara, who signs the present informal proposal, is the representative of the Ministry of Agriculture on the Argentine Rubber Rationing Commission and has also been officially designated to discuss a rubber modus vivendi with [Page 318]the United States. The position of our Government, as set forth in Department’s circular telegram of May 18 midnight,31 which was transmitted by Embassy note No. 750 of May 21, 1942, to the Foreign Minister, has been explained. Further discussions have been very frank to the effect that the Argentine stock position is comparatively better than that of the United States considering demand, and that in view of this, it is quite improbable that our Government would be able to set aside further quantities of rubber for uses now prohibited in the United States.

It is believed that Dr. Arrarás Vergara understands thoroughly this point of view, but as he explains it, his problem is that of facing the different Argentine manufacturers, who are demanding that the Government provide ways and means of obtaining rubber from other American republics. Consequently, while he personally agrees that it would be better for Argentina to reach a modus vivendi with the United States, and withdraw from attempts to make purchase contracts with the other republics, it is thought that he personally fears the political pressure that would be brought by domestic manufacturers, should they be forced to drastically curtail their crude rubber consumption.

With this in mind, the discussion outlined under paragraph 4 was drafted. Likewise, Dr. Arrarás Vergara is now in Bolivia and when he left Buenos Aires, planned to go on to Peru. The proposal to be made to Peru is that, although the United States has a purchase contract with that country, Argentina could still supply rubber manufacturers, provided some Peruvian crude rubber could be diverted to Argentina.

The Embassy would appreciate instructions as to whether or not the United States is prepared to entertain a formal proposal of the Argentine Government to negotiate a rubber modus vivendi. At the same time it is presumed that with the conclusion of purchase contracts by the United States with Bolivia and Ecuador, the Argentine Government will realize that no substantial quantities of crude rubber can be obtained from those sources. It may then be willing to treat Argentine crude rubber requirements the same as those of other critically important materials. The Department will recall that rubber was made a special exception by reason of the sudden appearance of the decree providing for the Rubber Commission and giving to the Ministry of Agriculture the control over acquisition and importation of that product. (See voluntary report No. 870, March 6, 1942, and Embassy’s despatch No. 4339, March 6, 1942.)32 The [Page 319]accomplishments to date of the Commission have not been substantial, probably for the same political reasons mentioned above which have hindered the adoption of any forthright restrictions on consumption.

There is one further point meriting attention, although only indirectly connected with the Argentine proposal. This has to do with the American companies—Goodyear and Firestone. Actually, their branches are Argentine companies and the local managers are interested in maintaining their plants at a level of production that will at least in some way be economical. Consequently, while they would prefer to look to the United States for rubber, they do not feel that it would be advisable to give the impression to the Argentine authorities that they do not wish to cooperate with any program devised for the purpose of obtaining more crude rubber for Argentine manufacturers, regardless of the source from whence it comes. Again, presumably, the contracts with Ecuador and Bolivia should automatically solve this problem, but the Department’s opinion, especially as regards the position of the American companies, would also be appreciated.

Respectfully yours,

For the Chargé d’Affaires, a.i.
Thomas L. Hughes

Commercial Attaché
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  4. See footnote 21, p. 315.
  5. Neither printed.