740.00112A European War, 1939/15861: Airgram

The Secretary of State to the Chargé in Argentina (Reed)

A–103. Your despatch 6001, August 6. The Department is not disposed to accept the modified undertaking of the Banco de la Provincia as set forth in your despatch under reference. This decision has been reached with the full realization that if the Banco de la Provincia is not included in the approved list, the Central Bank will not permit the other banks to participate in the credits of the Export-Import Bank.

It is believed in a situation of this kind, where the facilities of an instrumentality of this Government are being made available, that this Government is fully justified in insisting upon an undertaking on the part of the recipients of the benefits of these facilities which will afford some degree of assurance that the recipients will cooperate in the economic warfare policies designed to strengthen the security of the Western Hemisphere.

The modified undertaking of the Banco de la Provincia falls far short of the four points outlined in the Department’s 827, June 8, 11 p.m., which the Department considers to be the minimum requirements of a satisfactory undertaking. It does not even contain an assurance that no new credits or overdrafts will be granted to Proclaimed List nationals; it merely states that the Banco de la Provincia will [Page 495]not invest the proceeds of the credits received from the Export-Import Bank in operations benefiting such nationals. It is true that in a backhanded manner, the Banco de la Provincia has stated that it has decided “not to conduct credit operations with new ‘enlisted’ clients” but this at most means that the bank will not take new undesirable accounts and in no way limits the bank in granting new credits, et cetera, to the numerous Proclaimed List accounts already on the bank’s books. The second point in the Department’s suggested undertaking is not answered at all. The Banco de la Provincia does not agree in any way to eliminate existing credits and overdrafts of Proclaimed List nationals; it merely refers to the fact that such credits and overdrafts are being reduced due to the curtailing of the business of Proclaimed List nationals, which fact is in no way attributable to any policy of the bank. The third and fourth points of the Department’s suggested undertaking are evaded by reference to the purported controls of the Central Bank, which, as you well know, have as yet shown no signs of being enforced effectively.

The undertaking of the Banco de Italia y Río de la Plata is likewise considered unsatisfactory. It is so vague in its terms as to be practically meaningless. If that bank is as cooperative as you state and is in effect complying with all the points of the Department’s suggested undertaking, it is difficult to understand why it does not wish to confirm this in writing.

It is believed that a further approach to Prebisch might result in the giving of satisfactory undertakings by both the Banco de la Provincia and the Banco de Italia y Río de la Plata. You should indicate to Prebisch that the points embodied in the Department’s suggested undertaking represent the putting into operation of the basic provisions of the resolutions of the recent Inter-American Conference on Systems of Economic and Financial Controls3 and that the Central Bank, having subscribed to these resolutions, should certainly not want to place any obstacles in the way of activating them. You should also indicate to Prebisch that undertakings by the individual banks will afford the Central Bank ancillary and independent method of enforcing the Central Bank’s own controls. With respect to the psychological argument that the giving of undertakings by the individual banks is inconsistent with the controls exercised by the Central Bank, you should inform Prebisch that the known pressure exerted by the Foreign Office leaves the Department with no alternative but to recognize that the Central Bank’s controls of necessity have to be relaxed frequently irrespective of what the independent desires of the Central Bank may be. It is believed that this [Page 496]argument, if cautiously presented, will in no way offend the Central Bank and may well strengthen the hand of the Central Bank in its attempts to resist the pressure of the Foreign Office. In the event, however, that the above outlined approach to Prebisch should prove fruitless, it may be that the Central Bank, as the agency in which the control over banking operations is centralized, will be willing to give the appropriate undertaking on behalf of all the interested banks.

Should the appropriate undertaking be forthcoming from the Banco de la Provincia, the Department is willing to forego the approval by the bank’s board of directors provided the undertaking is signed by D’Olivera and you are satisfied that he has full power to sign.

The Department has noted that the Banco del Río de la Plata is not interested in the credits at this time. As a consequence, its name will not be included in the approved list with the understanding that it may be included at a future date, if it so desires, upon the giving of an appropriate undertaking.

For your information, the Export-Import Bank has informed the Department that for non-political reasons the Banco Polaco P.K.O. is not being included on the approved list.

Please proceed on this matter in the manner above outlined and keep the Department fully informed. The Export-Import Bank is being informed that pending further developments the Banco de la Provincia, the Banco de Italia y Río de la Plata and the Banco del Río de la Plata4 should not be included in the approved list.

Hull
  1. For correspondence concerning this Conference, see pp. 58 ff. For text of resolutions, see Pan American Union, Congress and Conference Series No. 39: Final Act of the Inter-American Conference on Systems of Economic and Financial Control (Washington, 1942).
  2. In airgram A–168, September 4, the Chargé in Argentina stated that the Embassy knew of no such institution as the “Banco del Río de la Plata”. (740.00112A European War, 1939/17071)