The Ambassador in Argentina (Armour) to the Undersecretary of State (Welles)
Dear Sumner: I am increasingly concerned regarding the extent to which the Department and the B.E.W. find it possible to consider and follow Embassy recommendations on allocations and export licenses. This was recently covered in part by Confidential Despatch No. 4954 of May 5, 1942. However, the list of the export applications reviewed by the Special Committee, the WT inquiries, and information received by local firms of rejections in Washington of Certificates of Necessity, lead me to believe that the condition discussed in Embassy cable 47782 still exists. I feel that I should emphasize that this practice is having an increasingly detrimental effect and has reached the point at which not only local business men but actually Argentine Government officials openly express the feeling that the Certificate of Necessity is of little if any value. At the same time, from the lists of export license applications reviewed by the Special Committee, approvals are noted of license applications which this Embassy recommends should be revoked for reasons ranging from the fact that the merchandise is outside the normal business of the Argentine importer to that in which the importer has actually been recommended for the Proclaimed List. I know you appreciate fully how this limits the effectiveness of the Embassy in the exercise of its control. A case which I believe to be of vital importance is found in the informal approach yesterday made by officials of the Central Bank regarding the distribution [Page 355]of the second quarter allocations of iron and steel and of plastics. Their position is that owing to the limited amount of the quotas, they feel that it will all have to be given to Government entities, as they are of first consideration. Obviously, this would produce the exact opposite of the desirable results commented upon in your personal letter of March 27,83 and the position now taken may be of definite political significance, as up to now, Central Bank officials have agreed completely with members of the Embassy staff to the effect that the maintenance of operations on any kind of an economic basis by Argentine private industry, both small and large, was of greater collective importance to the economy of the country than most Government construction or similar projects. I feel that under present conditions the Embassy is handicapped in combatting effectively the proposed distribution to Government entities. Were it possible to employ our recommendations, especially as regards Certificates of Necessity, we could logically take the position that allocations could not be made to Government departments, but only to the individual firms holding Government contracts for essential works. However, Certificates of Necessity for at least some of the few cases we have recommended of that nature have been rejected.
I note that Current Controls Bulletin No. 20, forwarded with the Department’s instruction No. 2308, of May 7, 1942,83 states that Certificates of Necessity will be followed except when interests of national defense dictate the contrary and further, that applications for export licenses of allocated materials unaccompanied by the Certificate of Necessity will be returned without action other than in exceptional cases. Perhaps it has not yet been possible to place this procedure in practice, as on some occasions licenses are granted for allocated materials in quantities greater than the total allocation made to Argentina, and for uses for which both the Argentine Government and this Embassy understood would be unacceptable. As an example, I refer to the case of cellulose acetate, discussed under application No. 2376, reviewed by the Special Committee April 13 and reported on fully and recommended for revocation by Embassy cable 804, May 1, 12 noon.83 Another case was No. 3633, for bakelite molding powder reviewed on April 30. This company is believed to have stocks for more than two years of normal operations. They would not be eligible for any quota allocation. The amount of the powder for which export license was approved would also be sufficient for another two years normal operations. Similar cases seem to have occurred in [Page 356]formaldehyde, other plastic materials, iron and steel, caustic soda and tanning materials. I particularly refer, for example, to pipe for YPF86 mentioned in Embassy cable 871, May 9, 2 p.m.87
I feel that I must also report the increasing expression on the part of local business people of the belief that so many inconsistencies can hardly be explained by other reasons than plain graft and I regret to state that this accusation is being increasingly made as regards obtaining export licenses. One man who has recently returned from Washington admits that he obtained numerous licenses using fictitious Argentine consignees, subsequently shipping the merchandise to order and receiving it here himself for sale to other people. On at least one other occasion, one person has advised us that he has duplicated his application for export license on the theory that probably one would be granted. Both were. Five cases have been called to our attention where the firms in the United States requested export licenses for materials which have never been ordered by the reported consignee. The duplicate applications appearing in the lists reviewed by the Special Committee suggests that this practice may be rather common.
I fully realize that the magnitude of the problem in Washington makes some confusion inevitable. Also, we appreciate that the WT inquiries now in effect should help considerably. However, I feel that many mistakes could be avoided by adopting the system outlined in my letter to you of April 16, 1942. The Central Bank has recently informed us that they would not only approve this system but that in its application they would use a Committee upon which the Ministries of Agriculture, Treasury and Foreign Relations are represented. They are already preparing “use” priority schedules for certain products and would, I feel, be inclined to accept the major part of our recommendations in that regard. To require Embassy recommendation for all export license, both for allocated and unallocated products, with the further understanding that these recommendations would be considered and under ordinary circumstances accepted in Washington for other than questions of supply and use, would, I realize, require the Embassy to accept some of the responsibility now assumed by the BEW. However, I feel that the Embassy staff, being on the ground, is in a good position to perform that duty effectively for the BEW, and I hope that early action will be possible which will embody this or some other more satisfactory system.