840.51 Frozen Credits/6701

Memorandum by the Secretary of State for President Roosevelt58

Proposal of the Treasury Department to the Board of Economic Warfare That Argentine Funds in the United States Be Frozen

I. The nature of the proposal.

The proposal is that the funds of Argentina in the United States be frozen and that a general license then be issued for purely Argentine transactions. The purpose of the proposed action is twofold:

a.
To coerce Argentina into greater collaboration with the war effort of the United Nations.
b.
To demonstrate to all the other American countries that the United States Government “means business” and will wield its huge economic power to force more effective collaboration. The Treasury memorandum59 states “it may be that the freezing of Argentine assets should be accompanied by similar action against Chile and that the policy (i.e. freezing) should be based on their continuance of relations with the Axis.”

II. The proposal is one of basic foreign policy.

Treasury and the Board of Economic Warfare frankly admit that they are not concerned primarily with methods of improving Argentine administration of foreign property but are attempting to force a change in the basic relationships of Argentina and the United States. The technical inadequacy of the proposed freezing order is admitted by all, but it is sponsored by Treasury and the Board of Economic Warfare in the utterly mistaken view that it will coerce Argentina into the line desired by us.

The question raised is clearly one of foreign policy, namely, what is the best way for this Government to bring about better collaboration in the war effort by Argentina. The determination of such a fundamental matter of foreign relations is obviously of proper concern only to the Department of State under the instruction of the President.

III. Argentine policy regarding hemisphere solidarity.

The Treasury and the Board of Economic Warfare start from the premise that Argentina is affirmatively working in the interests of the Axis. This is definitely erroneous. The active collaboration of Argentina in some aspects of our war effort is demonstrated by:

1.
The offer by the Argentine Government of the use of its ports and territorial waters by the armed vessels of the United States, just as though the United States were not a belligerent.60
2.
Argentine refusal to permit itself to become the haven of Axis diplomats from the countries which had severed relations with the Axis.
3.
Refusal of Argentina to sell aviation gasoline to Axis-controlled airlines.
4.
Sale of its strategic materials to the United States.61

Nevertheless, Argentina has not collaborated in the way hoped for at the Rio Conference; primarily, it has not severed diplomatic relations with the Axis.

IV. United States policy toward Argentina and its results.

In order to persuade Argentina of where its vital interests lie, the United States, since Rio has withheld delivery of military and naval [Page 473]supplies to Argentina unless Argentina agrees to contribute substantially in some acceptable way to the security of the hemisphere, and is furnishing scarce nonmilitary goods only after the needs of the other American republics have been supplied. This policy is bearing fruit. The powerful military and naval elements in Argentina, which really maintain the present Government in power, are beginning to question the desirability of Argentina’s present policy. Public opinion, carefully influenced by us, in general is becoming more and more insistent upon a more effective collaboration by Argentina with the democracies.

V. Effect of freezing Argentine funds in the United States.

A.
If in this situation Argentine funds here were to be frozen, not only would commercial intercourse and the flow of trade, including strategic materials, be hampered but of far greater importance, the Argentine Government would be pushed toward the Axis. Our action would be considered by most Argentineans, even our friends, as a demonstration of the thesis which the Axis is subtly promoting, namely, that the United States, under the guise of hemisphere solidarity, is actually embarked upon a policy of ruthless economic imperialism. Indeed, this action would be received with grisly satisfaction by the Axis, which would view it as a specific result of its efforts to drive a wedge between Argentina and the other American republics.
B.
The contemplated measure would likewise produce serious repercussions in the other American republics. The whole basis of our inter-American policy over the past few years has been nonintervention, respect for individual sovereignty, and the reaching of decisions through voluntary agreement. Far from applauding the proposed freezing of Argentine funds as Treasury and the Board of Economic Warfare believe, the other American republics would begin to wonder whether we had repudiated our present policy and returned to the days of the Big Stick. The spectacle of Argentina being beaten over the head with an economic club would in no way advance the confidence in our aims and purposes so painstakingly, but so successfully, built up in the other American republics.

If those countries were to lose confidence in our ability to maintain a broad, tolerant, and collaborative attitude, even in this time of stress, we might well, by dramatic coercion, toss away the results of a decade of careful development in relations and do harm inestimably greater to our war effort than the difficulties flowing from Argentina’s lack of full collaboration.

VI. The problem of Argentine deficiencies of administration of foreign property.

Those deficiencies which have aroused the Treasury and the Board of Economic Warfare no less than the Department, of course require [Page 474]continual attention and our best efforts to remedy them. Effective control action can immediately be taken by this Government in conjunction with the United Nations regarding some aspects, such as by more thorough navicert control over shipments between Argentina and Spain, or by an amendment to Treasury General Order No. 563 prohibiting the transfer of United States currency from any foreign country to the United States. Other action can be taken through implementation of our blacklist program, and some action can only be taken by the Argentine Government itself. The Department has lost no opportunity to bring to the attention of the Argentine Government the loopholes and weaknesses in its administrative machinery.

C[ordell] H[ull]
  1. Handed to President Roosevelt May 14, 1942. A notation on the memorandum by the President reads: “C. H. Not in accord with Good Neighbor Policy F. D. R.”
  2. Not found in Department files.
  3. This offer was effected by decrees of December 9 and 13, 1941; see Embassy’s despatch No. 3740, December 24, 1941, printed in Foreign Relations, 1941, vol. vi, section entitled “Reactions in the other American Republics to the declarations of war between the United States and the Axis Powers.”
  4. See pp. 306 ff.
  5. This refers to General Ruling No. 5, amended May 19, 1942, and September 3, 1943. See 5 Federal Register 2159; 7 Federal Register 3770; 8 Federal Register 12286.