835.24/543

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

No. 4954

Sir:

I. Certificates of Necessity—Issuance and Approval

I have the honor to refer to this Embassy’s confidential despatch No. 4000 of January 28, 1942, discussing allocation procedure, especially as regards the insistence on the part of the Embassy to Central Bank officials that proper control can only be exercised if the Embassy approves the issuance of each Certificate, both as regards the firm or entity to which it is issued and the amount of the product involved.

This system has worked with relatively complete success from the beginning until recently. We now find that the Central Bank is prone to issue an increasing number of Certificates without prior approval of the Embassy. In some cases they subsequently ask our approval and explain the case and in others no mention is made at all. In order that our control might be complete, every Certificate has been carefully studied and the Department has been advised as to our recommendation on every Certificate issued. These recommendations have gone forward in the form of despatches or reports, for example, see voluntary report No. 982 of April 17, 1942,73 reviewing Argentine Certificates of Necessity—first quarter allocation—iron and steel, reports Nos. 980 and 981, also of April 17, 1942,74 and strictly confidential despatch No. 4438 of March 16, 1942, prepared by Mr. J. L. Camp, Senior Economic Analyst.73 By this procedure, the Embassy has made a specific recommendation for every Certificate of Necessity issued by the Argentine Central Bank. The bulk of the Certificates were covered in the revised estimates of the Central Bank studies and in the Embassy’s original recommendation for distribution of quotas. In those cases where the Certificates issued have been to firms and for amounts approved in those reports, no special mention of the Certificate has been made, but in every other case a special reference has been provided to the Department.

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As the Department will realize, this offers a means of providing a thorough and complete check, covering the distribution of every allocation. At the same time, it requires a great deal of careful work, as it is not the intent of the Embassy to refuse any request simply because the Argentine Central Bank may have issued the Certificate without prior Embassy approval. This means that each case must be discussed and studied carefully, and while the Embassy prefers to continue with this system, it would very much appreciate the Department’s viewpoint as to the extent to which it is utilized by the Board of Economic Warfare in approving or disapproving export license applications. Likewise, except from the standpoint of scarcity, it would be helpful for the Embassy to know the degree to which its recommendations are accepted by the Board. If, except for scarcity of a product, the Embassy recommendations are generally accepted in making final decisions, unless later additional information is available in Washington, the system will be continued. If the Board of Economic Warfare does not utilize these reports or find them sufficiently useful to warrant their continuance, the system will be dropped.

The Embassy feels that it would be much more practicable to apply the greatest element of control possible here in Argentina and thus relieve the Board of Economic Warfare in Washington of the necessity of passing on the relative merits of each individual case. Always, the exception must be made as regards scarcity of the product concerned, as only the Board can be in a position to determine that point. However, the Embassy has certain advantages. It is limited in its work to the requirements of only one country. Staff members engaged in this work, with few exceptions, range from four to twelve years experience in Argentina. The advice and assistance of business men, whose knowledge of this market is still greater, is also utilized. This makes possible the relatively rapid separation of the desirable from the undesirable consignees or purchasers.

This is one of the primary reasons why it is believed that a system requiring the issuance of a Certificate of Necessity for all products, whether allocated or not, would be preferable.

II. Embassy Review of Special Committee Recommendations—WT76 Reports

The Embassy believes that the combined system of reviewing Special Committee export license recommendations established by Department’s instruction No. 2161 of April 14, 1942, and the WT reports initiated by the Department’s strictly confidential telegram No. 586 of April 27, 3 p.m.,77 will do much to eliminate the speculator and cloak [Page 353]from future trade with the United States. It is regretted, however, that in the first case, approvals cannot be withheld pending Embassy advices. It is also hoped that the Board of Economic Warfare has been able to revoke the licenses in the 247 cases recommended by the Embassy covering the lists of applications reviewed by the Special Committee from March 24 through April 16, 1942. The efficacy of this system is apparent when it will be noted that these 247 cases represent approximately 17% of the total number recommended by the Committee for approval.

The difficulty anticipated by the Embassy on the WT inquiries is that seldom will we be able to make the “three” recommendation, simply because it is common practice for nearly all firms to attempt entering fields where they have not heretofore been engaged. In any case, this combined procedure should do much to eliminate numerous cloaks and to retain trade in normal channels, at least during the transition period prior to the establishment of the system requiring the Certificate of Necessity for all products, provided always that the Department and the Board of Economic Warfare decide to adopt such a system.

The viewpoint of the Department on the points mentioned above would be greatly appreciated.

Respectfully yours,

Norman Armour
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  4. Division of World Trade Intelligence.
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