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

No. 4000

Sir: I have the honor to refer to the Department’s instruction of December 12, 1941, file No. 810.20, Defense/l791a,43 concerning the proposed procedure to be followed in the distribution of any product allocated by the United States.

This Embassy is concerned with the procedure providing for issuance of the certificate of necessity by the foreign country, in this case Argentina.

In the case of tinplate, for example, the Argentine Government recently made a partial distribution involving 16, 194 metric tons of the approximately 27,000 tons allocated to this country for the first quarter of 1942. Further, the Central Bank immediately advised the individual firms as to the quota pertaining to each. The Bank has also shown us a copy of the cable from the Argentine Embassy in Washington to the effect that the State Department approved of the allocation made by the Bank.

With one exception, that distribution was made on the basis of 1940 consumption. For the first quarter of 1942, however, the semi fiscal [Page 327]Corporación Argentina de Productores de Carnes (CAP) was granted a total of 200% of the tinplate used by the Company throughout the year 1940, whereas in other cases the distribution consistently approximated 25% of 1940 performance. This matter was called to the attention of the Central Bank, which entity insists that not only did they have the State Department’s approval, but that the allocation was justified by reason of purchase by the CAP of a small frigorífico44 in Concordia. It was further stated by the Central Bank that they have subsequently received advice from their Embassy in Washington to the effect that the State Department has asked them to immediately distribute 54,000 tons of the total allocation of 77,500 tons granted Argentina for all of 1942, and that in said distribution each frigorífico would be guaranteed as much tinplate as it needs up to a maximum production capacity. This has since been done by decree of January 27, 1942.

While this distribution would appear to be fair, it would be regrettable if the Argentine Government were to understand that the United States approved of an 800% increase in the quota for the CAP, while at the same time other producing units were held at their 1940 production levels. Consequently, it is respectfully suggested that the Argentine Embassy be advised that any approval given by the Department was only for the purpose of expediting the deliveries of tinplate and could not be construed as an approval of the actual distribution. Otherwise, should a greater shortage arise in the future, the Argentine Government may plead that the precedent has already been established whereby the CAP is justified to a share equal to or in some cases larger than the other frigoríficos who have been heavy producers for years. The basic features governing production capacity include first, the number of animals available and, second, the amount of machinery of each establishment.

This same situation is anticipated for the Yacimientos Petrolíferos Fiscales (YPF—Government Oil Fields) and, possibly, for some private concerns of considerable influence. In order to avoid such a difficulty, it would seem preferable that the power of redress which the Board of Economic Warfare retains, could better be exercised before the firms here are advised by the Argentine Government as to their particular quotas. It is believed that the full cooperation of the Central Bank can be obtained to the end that the Embassy confer with them before each individual firm is advised of its quota. The critical analyses of the Central Bank requirements studies which the Embassy is now preparing and forwarding to Washington contain complete recommendations as to distribution by firms. Hence, in [Page 328]each case where these analyses have been prepared, the Embassy could immediately make its recommendations to the Central Bank. In those cases where no agreement is reached, an explanatory despatch would be prepared by the Embassy for the Board of Economic Warfare for its guidance. By this method, both embarrassment and unjust discrimination should be avoided.

This matter has been discussed informally with the Central Bank. Unfortunately the Director and his immediate subordinates in charge of this office are now absent from Buenos Aires, but those left temporarily in charge see no objection to that procedure. It is felt that Dr. Prebisch45 will also approve.

Respectfully yours,

For the Ambassador
Thomas L. Hughes

Commercial Attaché
  1. Not printed.
  2. Packing house or cold storage plant.
  3. Raúl Prebisch, manager of the Banco Central de la República Argentina.