840.51 Frozen Credits/8477: Airgram

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

A–468. Your 2367, November 24; your 2382, November 25; and Department’s 1846, November 28, 7 p.m. The following is sent for your information and for such use as you may deem appropriate:

(a)
The Department must reject the view of the Central Bank that the latter’s approval of transactions which benefit the enemy insulates the commercial banks consummating those transactions against the application of United States controls. The logic of the Central Bank’s position would immunize all pro-Axis Argentine entities against United States controls since their pro-Axis activities often involve the tacit acquiescence or the affirmative approval of the Argentine Government.
(b)
The Department welcomes Prebisch’s proffer of cooperation so far as it goes, and approves the joint study. However, the following considerations create some doubt as to the good faith of the proposal and some suspicion that it may be a delaying action and no more.
1.
The Central Bank for a long time has claimed adequate authority to cut off pro-Axis remittances. However, as a matter of administration, that authority has not always been exercised, and some remittances benefiting the Axis have been going forward from Argentina. Whether those remittances result from pressure by the Foreign Office or the Ministry of Finance upon the Central Bank, or from the Bank’s own attitude does not change the fact that these remittances are aiding the enemy.
2.
Although a joint study of the Argentine controls may be useful, it seems clear that as a result of the Embassy’s continuing efforts, discussions between the Central Bank and special missions from the Department, and the Washington Conference, Prebisch is already well aware of our objectives and of the deficiencies in existing Argentine control measures. It would appear that it is not information [Page 512] the Central Bank needs but the willingness, or the authority from the Foreign Office, to eliminate pro-Axis transactions. It is recognized, of course, that there are some marginal cases which the Central Bank may handle along lines designed to protect allied interest, notwithstanding that the Foreign Office might pursue a different approach. However, basically, the policy of the Central Bank will, of course, be governed by Argentina’s overall foreign policy. It would therefore seem necessary to secure the support of the Foreign Office before a substantial strengthening of the Argentine controls will be effected.
3.
With reference to the Central Bank’s statement that its influence has been exerted to prevent expansion of the commercial activities of Proclaimed List nationals, the Department would welcome the Embassy’s comments as to whether the bank’s claim is well founded. In this connection it will be helpful to know whether Proclaimed List nationals who are not vulnerable to our controls and who are in a position to expand their commercial operations have experienced any difficulty in securing the necessary credit. With respect to Proclaimed List nationals adversely affected by our controls, there would, of course, be little occasion for expansion, and if such cases arose, it would appear that prudent private banking would dictate against the expansion of credit to such Proclaimed List nationals.
4.
Thus far, the Argentine interventor system does not appear to have been more than a ceremony—except for its possible deterrent effect. In connection with any discussions of that system, it would seem desirable to emphasize the need for making it an effective anti-Axis weapon in these cases where it is used, as well as for extending its use.
(c)
The Bank’s promise to inspect all foreign dollar holdings of Argentine banks and to block any found to be the property of the Axis is not entirely clear. If by the “Axis” is meant the Axis Governments, the promise is very narrow and even a good faith effort at performance will probably not be very fruitful. However, if the “Axis” includes the property of all pro-Axis individuals, e.g., all persons on the Proclaimed List, a vigorous inspection by the Bank may prove very useful.

Hull