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

840.51 Frozen Credits/6837: Telegram

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

Buenos Aires, June 20, 1942—5 p.m.
[Received 10:38 p.m.]

1196. Embassy’s 1146, June 15, midnight. Cochran, Gantenbein, and Meltzer had long and frank conference yesterday with Prebisch and with the Central Bank’s representatives to Conference, Gagneux and Grumbach, regarding adequacy of decrees. Bank officials appeared anxious to learn of criticism of decrees which might be made in Washington and of methods for improving them. Following is a summary analysis of decrees and of conversations:

1. Decrees do not increase authority to block assets of Axis nationals and partisans in Argentina. However, bank officials stated that an earlier decree number 110,790 (see despatch 3865, June [January] 13⁸⁸) blocking of funds of Axis nationals as such and of any other person or firm, irrespective of nationality, in Argentina, which carries on pro-Axis activities. The basis for such blocking which was admitted to be tenuous as a matter of interpretation, is as follows: Since such firms or persons may make external transfers, their internal operations are “related” to external transfers and hence subject to blocking control under decree 110,790. Bank officials asserted that this power has already been exercised, and will submit full particulars. Previously the bank in discussions with the Embassy had questioned whether the decree conferred this power.

2. Bank officials also state that accounts, cash, and securities in the name of residents of Germany and Italy, as well as Japan, are blockable under earlier measures and are submitting memorandum regarding these measures and their practical operation. Since the Embassy, Department, and Treasury previously had not been aware of the authority allegedly conferred by such measures, the memorandum will be carefully studied and a report on the existence and applications of the authority will be submitted.

3. In discussing decree number 122,712 and the interventor system, the following deficiencies were brought to bank officials’ attention:

(a) Interventors are authorized only to watch and report. Interveners require but do not have authority to prevent or suspend any transaction which appears undesirable. In the absence of such authority, undesirable transactions may be executed while the interventor’s reports are traveling through the time consuming administrative process established by decree 122,712.

Bank officials replied that a bill endowing interventors with such powers was about to be introduced into Congress, and that a firm would probably refrain from completing the transactions questioned by an interventor because of the fear that such action would result in the immediate blocking of all of its assets by the bank (see item 1 above).

(b) Present decree, even if supplemented by that bill, places upon interventors burden of discovering undesirable transactions. This will be extremely difficult in view of deceptive devices which Axis firms have contrived. It was suggested that all operations of firms in which interventors are placed be blocked and that only licensed transactions be permitted. In this way the burden of justifying doubtful transactions would be imposed upon the firm under intervention (bank officials in reply to an inquiry stated that article 1 was applicable to a firm or person, ostensibly Argentine, who was suspected of engaging in undesirable activities).

4. In discussing decree 122,714, following points were made:

[(a)] Article 2 was not broad enough because it was limited to intangibles, to formal rather than beneficial ownership, and to persons resident in Axis territory rather than to Axis nationals or partisans in Argentina. Bank officials adverted to administrative and political difficulties involved in census of property held by or for all Axis nationals in Argentina. It was then suggested that census could initially be confined to property of persons or firms carrying on or suspected of, undesirable activities. This suggestion was favorably received.

(b) In reply to an inquiry, bank officials stated that authorized banks, under article 3, included German banks. They sought to explain away this anomaly on the ground that all banks were controlled by Central Bank and that would justify political position of Axis banks insured [insuring] their compliance with Central Bank regulations.

(c) Bank officials stated that all property covered by article 2 “blocked” and agreed to submit full particulars regarding practical effect of such blocking.

In their earlier informal conversations with Ministry of Finance and Central Bank officials Cochran and Meltzer had been assured of the sincere desire of these officials to implement Resolution V. The new decrees were cited as concrete evidence. Further proof of this determination was promised. Yesterday the bank officials welcomed the criticisms discussed above.

These officials indicated a reluctance to seek legislation which would confer more specific authority to control internal transactions lest this intensify existing political criticism that the Central Bank has excessive power over the country’s economy. However, the bank officials promised immediately to attempt to tighten the decrees. They could not say yesterday whether this would be through revision of the bills about to be introduced or through regulations issued under the existing decrees or under any new enabling legislation. They appeared anxious to strengthen their administration of foreign property in order both to stop undesirable transactions and to enable their delegation in Washington to meet questions and criticisms offered by other countries.

The bank officials were informed that the Embassy prior to the issuance of the decrees had received instructions which would be the basis of representations to appropriate officials of the Government. It was suggested to the bank officials that such representations particularly while the administration of the decrees was in a formative state, might assist the bank in achieving its program by making the Argentine Government agreeable to a vigorous implementation of Resolution V.

A full analysis of decrees and report on a wide range of other subjects covered in conversations will follow by next courier.

Please send copy to Secretary of Treasury.

Armour

88. Not printed.