740.00112A European War, 1939/9617

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

No. 4450

Sir: With reference to the Embassy’s despatch of yesterday42 reporting authorizations recently granted by the Central Bank for transfers of French francs outside of the Franco-Argentine payments agreement, I have the honor to report that a member of the Embassy staff called this morning upon Dr. Edgardo Grumbach, head of the foreign-exchange department of the Central Bank, and inquired about these transactions.

Dr. Grumbach confirmed that the authorizations had been granted, although he emphasized that the pesos paid for the francs would be deposited in a blocked account. He admitted that the resulting blocked funds could be released for such purposes as expenses of the French Embassy (which, like the embassies of the Axis countries, has been limited to 200,000 pesos per month), but said that the French Embassy could always obtain its peso requirements for expenses by a deposit of francs, so that the release of blocked funds for this purpose would not in reality represent any important facility. When Dr. Grumbach was reminded of the assurances given by Dr. Prebisch to the effect that the negotiations for the renewal of the French payments agreement had been suspended by the Central Bank and that there was no intention of renewing them (Embassy’s despatch no. 4116 of February 10, 1942,43 and previous despatches), and when he was told that the recent authorizations did not seem to be consistent with those assurances, Dr. Grumbach said that, speaking in great confidence and “off the record”, the recent action was taken, against [Page 461]the wishes of the Central Bank, as a result of instructions from the Ministry of Foreign Affairs.

Dr. Grumbach was told that although our Government had no desire to interfere in any way with Argentine relations with a friendly third country, as had been made clear in the previous conversations, it had hoped that the Argentine authorities would be able to cooperate in this matter with our Government’s policy of endeavoring to minimize the foreign exchange made available in the Hemisphere for Axis uses; that while these funds might be blocked they could nevertheless be unblocked for purposes that would represent facilities to the Axis countries; that the very fact that so much interest had been shown to have the authorizations made was in itself evidence that the authorizations represented facilities; and that, indeed, it was feared that the news of the authorizations would be viewed with disappointment in Washington, where the friendly cooperation in regard to the payments agreement had previously been a source of gratification.

. . . . . . . . . . . . . .

Mr. Simon thinks that it would be advisable for both of our Embassies to discuss the subject at the Foreign Office and states that the British Ambassador would be disposed to do so if I should take similar action. I am hesitant to do this, in the absence of instructions from the Department, inasmuch as our Government, unlike the British Government, is continuing to maintain diplomatic relations with the Vichy Government. The Embassy has interpreted the Department’s telegram no. 1002 of December 2, 9 p.m.,44 to refer only to very informal conversations with the Central Bank. In the event, however, that the Department should wish me to approach the Foreign Office in the matter, I should welcome instructions in that sense.

Respectfully yours,

Norman Armour
  1. Despatch No. 4436 not printed.
  2. Not printed, but see memorandum of February 9, and footnote 31, p. 453.
  3. Not printed; it instructed the Embassy to use its influence to prevent any agreement that would result in an accumulation of pesos available to the French Government (635.5131/51).