Foreign Relations of the United States: Diplomatic Papers, 1942, The American Republics, Volume V

835.796/243

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

No. 4383

Buenos Aires, March 11, 1942.
[Received March 16.]

Subject: Further Information on the Corporación Sudamericana de Servicios Aéreos, S. A.

Sir: With reference to the Department’s telegram no. 127 of January 29 and the Embassy’s telegram no. 188 of January 30,⁹² I have the honor to submit further information regarding the question of including the above mentioned airline on the U. S. Proclaimed List.⁹³

An official decree dated December 22, 1941, increased this company’s subsidy, but at the same time specified a period of 60 days in which to improve its financial situation and to increase its capital so that the majority would be in Argentine hands. Mr. Wm. Barclay Harding of the Defense Supplies Corporation⁹⁴ arrived in Buenos Aires shortly after the expiration of the 60-day period, and he discussed this matter with Dr. Bosch, Director General of Civil Aeronautics. Dr. Bosch indicated that the company had not yet completed its reorganization under the terms of the decree. Before returning to Rio de Janeiro, Mr. Harding informed Dr. Bosch that the Embassy would follow up the matter in a short time.

There is attached hereto a copy of memorandum dated March 7,⁹⁵ outlining the conversation which Asst. Commercial Attaché Walstrom had with Dr. Castells (Undersecretary of Interior) and with Dr. Bosch. It will be noted that the latter says that a 60-day extension has been recommended. Both of these Argentine officials have expressed the hope, informally, that the inclusion of the Corporación on our Proclaimed List be deferred. While such a reaction might have been expected, it is nevertheless interesting to obtain the personal views of the Argentine officials concerned.

There is also attached hereto a copy of Mr. Walstrom’s memorandum dated March 10,⁹⁵ reporting an interview with Sr. Antonio Biedma, who recently resigned as the local manager for the Corporación. Sr. Biedma has very strong doubts that the Argentine Government will be able to effect a reorganization of the Corporación in a manner which would actually eliminate the Italian participation, or even reduce it to a minority interest.

There are several arguments both for and against placing the Corporación on the Proclaimed List. One of the arguments against such action is the fact that the U.S. apparently is in no position to arrange for a substitute service, as has been done in other cases where pro-Axis airlines were eliminated. In this connection the following paragraph is quoted from a letter dated February 25 from Ambassador Frost at Asunción, regarding the rumored purchase of airplane engines by the Corporación in Paraguay:

“The question of the Axis affiliations of the Corporación has been a vexatious one, and any light which you may be able to throw upon it will be appreciated. The Corporación’s representative here, Manuel Ferreira, S.A., is a very large purely Paraguayan firm which we are disposed to consider friendly and above suspicion. The Corporación’s service is greatly needed and greatly appreciated in Asunción. If it disappears because of lack of new engines, or because of inclusion in the Proclaimed List, I believe that it may be well for the general public to have no idea that the result could have been brought about through our interest.”

As will be noted in the attached memorandum, the son and the law partner of Acting President Castillo are both connected with the Corporación. Should the company be placed on the Proclaimed List, with the consequent stoppage of gasoline sales by Intava,⁹⁸ it is possible that the Acting President would instruct the Argentine company Y.P.F.⁹⁹ to supply the Corporación with gasoline henceforth. It will be recalled that several months ago Y.P.F. agreed to supply no more gasoline to airlines on the Proclaimed List, but the inclusion of a nominally Argentine airline on this List might well cause a change in Y.P.F.’s sales policy. Up to this time the Argentine Government has shown little or no formal opposition to the application of Presidential Proclamation 2497¹ to firms in this country, but there is always the possibility that our black-listing of an Argentine public service might antagonize the Argentine Government in such a manner as to prejudice the smooth operation of the Proclaimed List.

On the other hand, there seems to be no doubt that the Corporación is controlled by Italian interests, and that should it begin to show a profit, these funds would go to Fiat Argentina, which is also on the Proclaimed List. According to a report of October 6, 1941, prepared by the former Director General of Civil Aeronautics (and forwarded with Embassy’s confidential despatch no. 3634 of December 3, 1941),² the liabilities of the Corporación include 582,000 pesos owing to Ala Littoria and 380,000 pesos to Fiat.

As mentioned previously, the company’s present operations constitute little if any threat to hemisphere defense. However, should Brazil decide to sell the Lati³ planes to the Corporación, or to the Argentine Government, it would permit the establishment of a new service to Kio (competing with Pan American Airways), together with the slight possibility of occasional trips to Italy to obtain replacement parts.

Although, as stated above, there is considerable doubt whether the Corporación can be converted into a real Argentine enterprise, the Government is continuing its demands for further changes. For this reason it may be desirable to withhold action for the immediate future.

The Embassy is also considering the possibility of approaching the Corporación with a proposal whereby its profits would be blocked for the duration of the war, in return for which it would not be placed on the Proclaimed List. However, such a plan should be contingent on a restriction of the company’s operations to its present routes.

Respectfully yours,

Norman Armour

92. Neither printed.
93. For correspondence on the Proclaimed List, see pp. 280 ff.
94. The Defense Supplies Corporation operated as a buying agency of the Federal Loan Agency until February 24, 1942, when it was transferred to the Department of Commerce.
95. Not printed.
95. Not printed.
98. International Aviation Associates.
99. Yacimientos Petrolíferos Fiscales.
1. Proclamation Authorizing a Proclaimed List of Certain Blocked Nationals and Controlling Certain Exports, July 17, 1941; for text, see Department of State Bulletin, July 19, 1941, p. 42, or 55 Stat. (pt. 2) 1657.
2. Neither printed.
3. Lmeas Aéreas Transcontinentales Italianas.