Mr. Bernard D. Meltzer62 to the Assistant Secretary of State (Acheson)

Dear Dean: The Embassy at Buenos Aires is so exercised about the ineffectiveness of export controls that I thought it desirable to report to you. I understand that Mr. Armour may supplement the Embassy’s strong telegram on this subject (No. 477, March 12, 2 p.m. [midnight]) with a personal letter to Mr. Welles.

In addition to the points made in the Embassy’s telegram, the staff has told me the following: Many new shoestring operators have mushroomed into the import field in Argentina. They are prepared to act as cloaks for blacklisted concerns in return for the high prices which the latter are willing to pay. Established importers are more reluctant to run the risks involved in cloaking.

These new importers have their counterparts in the States where many new exporters have recently sprung up. These exporters appear to be working with the cloaks down here because the latter will pay more than the established importing units in Argentina. OPA’s63 price ceilings are often circumvented by concealed arrangements for extra compensation.

Export controls, in the States, have apparently been ineffective as a means of stopping shipments to questionable consignees in Argentina. The Embassy states that this is true even of those commodities subject to specific licensing requirements. In fact, the Embassy states—this appears to be an exaggeration—that export controls have operated in reverse, permitting shipments to new and doubtful consignees while blocking them to old reliable concerns. The administration of the controls has, according to the Embassy, been so capricious and perverse that local importers and officials grin slyly, put it all down to grafting by the authorities in the States, and consider it a first-class scandal.

I believe that some of the Embassy’s indignation results from inadequate information regarding the time when the requirement of a specific export license is imposed on particular commodities, and from inadequate information in general concerning the operation of export controls, allocations, etc. As a result of lacking adequate information, 1) The Embassy often suspects that shipments have arrived because of stupid or irregular issuance of export licenses when, in fact, the [Page 337]difficulty lies in the absence of any requirement of an export license. 2) The Embassy is not in position to explain away to the Central Bank, or to reliable concerns which have been denied licenses, shipments of commodities which left the States a few days before the requirement of a specific license was imposed. 3) The Embassy lacks an adequate framework of reference for its investigations, often seeking to determine the method by which a license was secured by an undesirable when the commodity involved was not subject to the requirement of a specific license at the time it left the States.

I have discussed the whole question of information with appropriate members of the Embassy staff, all of whom say that Washington has kept them very poorly informed. Mr. Lankenau,64 who is assigned to export control matters, has prepared a despatch to Mr. Ravndal, urgently requesting certain specified information, and proposing a procedure whereby he may be kept informed in the future.

I have not been able to check the merit of the Embassy’s objections with respect to specific cases, and I recognize the possibility of another Pennzoil dud.65 I have, however, suggested that a full report on all questionable shipments, giving the names of ships, days of departure and arrival, names of consignees and shippers and quantities consigned, be transmitted to the Department so that specific cases can be checked by B.E.W., and flaws of [or] irregularities in control system be discovered.

I have also suggested that the Embassy quickly report to Washington any evidence that price ceilings in the States are being violated by exporters there. In this connection, OPA may, with respect to price-controlled commodities, be of some assistance in reducing questionable shipments. Exporters in the States may be encouraging or winking at such shipments because they can be made at prices well in excess of price ceilings. A vigorous enforcement of those ceilings as they relate to exports may remove economic incentive for dealing with questionable customers and thereby cut down such dealings.

As you know, several measures have been suggested for tightening up export controls down here:

The requirement of specific licenses for all commodities.
Clearance of all applications for licenses with the Embassy.
Clearance by the Embassy of applications covering shipments to consignees deemed “questionable” by B.E.W.
Furnishing copies of the confidential list to the collectors of custom, with instructions to stop shipments to unsatisfactory consignees. (Collectors may be already doing this, or may be precluded [Page 338]from doing this by administrative or shipping difficulties. I have previously written Donnie66 on this subject.)

The Embassy favors the first two measures, and particularly the second. If, as seems to be the case, difficulties here result from the repeated issuance of licenses to questionable consignees or for suspiciously large amounts, a trial of the second measure is warranted—unless administrative or shipping difficulties make it unfeasible. In connection with measure 3, a greater degree of skepticism in Washington, particularly in relation to shipments of unusual quantities, would seem to be in order.

Some skulduggery may be taking place in the form of forging of certificates of necessity which are issued by the Central Bank. As you know, the Bank issues a numbered certificate to appropriate importers, and forwards a copy to the Embassy. Since the Embassy does not forward copies to Washington, there appears to be no basis for an adequate check of the authenticity of the certificate of necessity in Washington. Although there is no indication that forgery has occurred, it would seem desirable to have summaries of the certificates transmitted to Washington so that they can be checked against export applications. The Embassy is of the opinion that such a procedure would be desirable and would involve only a negligible administrative burden. I have asked the Embassy to submit its views to the Department.

We have had a most pleasant stay in Buenos Aires, and are leaving for Montevideo tonight.

With best wishes [etc.]

  1. Mr. Meltzer, Assistant to Assistant Secretary of State Acheson, was on a visit to Argentina.
  2. Office of Price Administration.
  3. Richard F. Lankenau, junior economic analyst in the Embassy in Argentina.
  4. This is a reference to an unsupported surmise that the Pennzoil firm shipped oil to a Proclaimed List national.
  5. Presumably Walter J. Donnelly, Commercial Attaché in Brazil.