835.24/352: Telegram

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

477. (Section 1) Department’s 330, March 10, 2 p.m.47 The continued approval of export license applications without respect to the merit of the shipper or consignee is the cause of constant embarrassment to the Embassy. It tends to render nil the work being done both by and with the Central Bank and if it is allowed to continue, will greatly endanger our hope of retaining the cooperation of that institution. [Page 330] It is useless for us to work with the bank and to insist to individual importers that they do not qualify for quotas under allocation when at the same time they are able to see by the manifests of incoming ships that large quantities of iron and steel and other products subject to allocation are constantly arriving, consigned either to order or to firms which would not normally be entitled to any quota whatsoever. Please refer to Department’s instruction 1879, February 29 [21], 1942, and to Embassy’s 417, March 4, 7 p.m.,49 the company also the steamship Penelope, referred to in cable under reply, brought a total of 178 consignments covering 5269 long tons of iron and steel. Of these, 97 consignments, covering 2400 tons, came to firms who would either not merit any quota, or to order, or to other entities which in numerous cases the Embassy has reason to believe are instrumental in providing materials for Proclaimed List firms. It is difficult to understand why export licenses are granted in such questionable cases without referring the matter to this Embassy, while at the same time a transaction involving the International General Electric Company, Incorporated, and the Compañía Argentina de Electricidad is made the subject of a special inquiry, even though it involved only 475 pounds of mica tape and strips (Department’s 342, March 11, 6 p.m.50).

A further result of the present practice is the following: The German chemical and pharmaceutical firms, whose monthly sales turnover is 5 million pesos and whose profits are sufficiently large to enable them to be the most effective contributors to the German propaganda machine, are still obtaining all their requirements through a series of small intermediaries in the United States and here. Química Merck, one of the leading German firms, is now advertising recently received American drugs as made in the United States but bottled by Merck here as propaganda to their clients that the Proclaimed List and the export control system of the United States is ineffectual as far as the Axis is concerned. This is but one of many examples.

As the Department feels that the recommendation of Embassy’s 372 [322], February 22 [20],50 to the effect that no further export licenses be granted for products subject to allocation unless accompanied by the corresponding certificate of necessity or in lieu thereof special recommendation of this Embassy, would result in delays in shipping and in upsetting of production schedules, it is suggested that effective control could still be maintained through application of the recommendation contained in Embassy’s 64, January 10, 2 p.m. This suggested that Department forward daily to this Embassy an air mail list of all requests [Page 331] for export licenses for Argentina, listing the firm making the request, the consignee, the material concerned, its volume and value.

(Section 2) This system should be employed for all merchandise until such time as final decision on allocations procedure is taken. Thereafter it should still be applied to all merchandise not subject to allocation. There would be relatively little delay if the Department were to follow this suggestion, since the Embassy’s recommendation on each application for export license could be in Washington within 1 week from the time the application was made. This would eliminate a term of shipping delays and the upsetting of production schedules, but it would at the same time effectively stop both speculation, which is everywhere in evidence at present, and the shipment of merchandise which we are confident now finds its way into the hands of Axis firms.

I feel sure Department will appreciate the difficult position in which Embassy finds itself as regards work with the Argentine Government in the mutual attempt properly to control destination and distribution of the limited critical and strategic materials which we are in a position to provide for Argentina’s most imperative needs. Furthermore, the practice which now allows indiscriminate shipments to reach Argentina does not appear consistent with the policy which I understand was adopted following the Rio Conference.51

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  5. Third Meeting of the Foreign Ministers of the American Republics, held at Rio de Janeiro January 15–28, 1942; for correspondence concerning this meeting, see pp. 6 ff.