840.51 Frozen Credits/6701

The Secretary of State to the Ambassador in Argentina (Armour)71

No. 2480

Sir: Reference is made to the telegram, no. 680, May 14 [15], 1942, 6:00 p.m., “From the Secretary to the Ambassador”.72 There are now enclosed:73

(1)
A memorandum of the Treasury Department dated May 12, 1942, proposing the freezing of Argentine funds because of the pro-Axis financial and commercial transactions which are occurring in Argentina either because of the failure of the Argentine Government to impose adequate controls, or to apply effectively the controls which have been put into operation;
(2)
A memorandum of the Department of Justice dated May 12, 1942, entitled “Axis Funds and Financial Activities in Argentina”.

As you know, it is of paramount importance to eliminate pro-Axis financial and commercial transactions which are being executed in Argentina. To accomplish this, not only is it necessary for the staff of the Embassy effectively to implement the various control measures which have been adopted by our Government, but it is also necessary to induce, if possible, the Argentine Government to adopt complementary controls in accordance with the provisions of Resolution V adopted at the Rio Conference. This Department, and the other interested government agencies, view with grave concern the pro-Axis transactions which are being carried on in Argentina and the uncooperative attitude of the Argentine Government. It is, therefore, suggested that you personally follow questions raised by action designed to strengthen United States control measures or to induce the Argentine Government to carry out the commitments embodied in Resolution V.

I

In communications between the Embassy and the Department, and in discussions between various missions from Washington and the Embassy, measures which would strengthen United States controls have, of course, been suggested from time to time. In accordance with those suggestions, and with steps already taken by the Embassy, further vigorous action along the following lines, among others, is an indispensable prerequisite to increasing the effectiveness of our controls:

(1)
In so far as possible, a careful check should be made regarding the liquidation of looted currency and securities, with a view to implementing [Page 479]General Ruling No. 5, as amended.74 (Reference is made to the circular telegram of May 18, 1942.75) Information regarding the specific firms or persons or other channels direct or indirect through which such currency and securities are flowing, and information regarding serial numbers, or any other identifying marks on such currency or securities would, of course, particularly facilitate the administration of that Ruling.
(2)
A careful check should be made of holding companies, dubious exchange houses, and other firms which are suspected of being engaged in cloaking activities. Evidence of cloaking by firms in Argentina should, of course, result in their immediate recommendation for inclusion on the Proclaimed List. Such evidence regarding firms in the United States or firms in Argentina suspected of having accounts in the United States should, of course, be submitted as a possible basis for ad hoc freezing by the United States Treasury Department. That Department is making an investigation regarding the material under item 2 of its memorandum and has been requested to submit information or suggestions which would aid investigation by members of the Embassy staff.
(3)
Investigation should be made of the amount of remittances to Axis territory directly, or indirectly through neutral countries. It is suggested that information might be secured through the Central Bank or otherwise, regarding remittances to each neutral country for the last four years. These figures might be analyzed in the light of the trade balances between Argentina and the countries involved, and an estimate might be made of the amount of remittances not referable to “legitimate trade transactions” which have been made to Axis territory directly, or indirectly through neutral European countries. In this connection, it is, of course, significant that officials of the Central Bank and the Argentine Government have repeatedly stated that remittances to neutrals are limited to those connected with “legitimate trade transactions”. An explanation of the transactions which are deemed “legitimate trade transactions” by the Argentine authorities should also be submitted.
(4)
A careful check should be made of the progress of negotiations between the Argentine Government and the Spanish trade mission. Any significant development should be reported to the Department by telegram.
(5)
A careful check should be made on the possible flow of goods between Europe and Argentina, with a view to recommending the strengthening of the navicert system.
(6)
A careful check should be made of all transactions which appear to involve, directly or indirectly, an Axis interest. Important transactions should be reported in summary by telegram, but details on all of the transactions described above should be sent by air mail.

Reports to the Department on the foregoing items, including suggestions for remedial action, should be kept current. In addition, an immediate report on the accuracy of the facts set forth in the attached memoranda is requested.

[Page 480]

II

The Argentine Ambassador to the United States has already been informed of the Treasury proposal, its rejection and the view of the United States Government that Argentina’s cooperation under Resolution V has been unsatisfactory in character. In addition, you should make strong representations to the Argentine Government regarding its failure to implement Resolution V by severing commercial and financial intercourse direct or indirect between Argentina and the nations signatory to the Tripartite Pact and its failure to take measures to eliminate financial and commercial activities which are prejudicial to the welfare and security of the American republics. It is requested that, in the first instance, this matter should be taken up with the President of Argentina to insure his receiving a proper report of the attitude of this Government.

The Department is also preparing an instruction suggesting representations to be made to the Argentine Government concerning pro-Axis activities in Argentina, in fields other than commercial and financial. It is suggested that you do not seek an interview with the President until you have received that instruction and are prepared to make representations concerning both the matters covered herein and in that instruction.

Your representations regarding Resolution V should, unless you perceive some objection, include reference to the following:

(1) As a result of Argentina’s failure to implement Resolution V and the consequent inadequacy of Argentine controls, the nations signatory to the Tripartite Pact, the territories dominated by such nations, and the nationals and partisans of both, are executing financial and commercial transactions in Argentina, or through the use of Argentine facilities, which prejudice the welfare and security of the American republics.

For illustrative purposes, unless you perceive some objection, you may refer to the following transactions (and similar transactions of which the Embassy is aware) which have been executed in Argentina with the apparent approval or knowledge of the Argentine Government, notwithstanding that those transactions run directly counter to Resolution V, since they prejudice the welfare and security of the American republics by increasing the strength of the signatories to the Tripartite Pact:

(a)
With the authorization of the Argentine monetary authorities, remittances have been made to Axis nationals to service Argentina’s external debt owed to the residents of Axis countries. (Despatch no. 4925 dated May 1, 1942.76)
(b)
Substantial private remittances have been made to, or for the benefit of, firms or persons in Axis territory.
(c)
Substantial transfers have been made to occupied France, contrary to assurances by the Central Bank that no payments [Page 481]would be made outside of the Argentine-French payment agreement. Although the pesos which may be made available to French banks as a result of such transfers are blocked, it is the understanding of the United States Government that such funds may, under existing Argentine controls, be freely unblocked and used for purposes which prejudice the welfare and security of the United States and the other American republics.

(2) As a further result of Argentina’s inadequate controls, shipments of material from the United States to Argentina, and the extension of public or private credit by the United States to Argentina may directly or indirectly increase the economic and financial power of Axis agents and other Axis partisans in Argentina who are executing commercial and financial transactions which are inimical to the security and welfare of the American republics. In determining allocations of increasingly scarce material and shipping space and in its total commercial and economic relations with Argentina, the United States Government will be compelled to give appropriate weight to this fact—that shipments from the United States and other transactions between the United States and Argentina may, in the absence of appropriate controls by Argentina, directly or indirectly increase the economic and financial power of the enemies of the United States and of the other American republics.

(3) The United States Government would be constrained to view the future continued failure of Argentina to carry out the commitments embodied in Resolution V adopted at Rio de Janeiro as a definitive indication of Argentina’s intention neither to fulfill the obligations, nor to gain the benefits, of the several inter-American instruments with respect to commercial and economic matters, to which she is a party.

It is requested that a copy of any note or aide-mémoire which is transmitted to the Argentine Government be submitted to the Department and that the Department be kept fully informed of developments.

Very truly yours,

For the Secretary of State:
Dean Acheson
  1. The file copy of this instruction bears the following notation: “Returned to FF (Mr. Hiss) to be given to Mr. Meltzer to deliver to the Ambassador in person.” Donald Hiss was Chief of the Foreign Funds Control Division.
  2. Not printed.
  3. Enclosures not attached to file copy.
  4. See footnote 63, p. 474.
  5. Post, p. 789.
  6. Not printed.