The Ambassador in Paraguay (Frost) to the Secretary of State

No. 1562

Sir: I have the honor to refer to my despatches Nos. 1530 and 1552 of November 13 and November 20, 1943, respectively,74 and to report that although Foreign Minister Argaña returned to Asunción yesterday and Finance Minister Espinoza on the previous day, my conversations with them thus far have been brief and casual. As there is no northbound pouch after today for five days, the following general preliminary observations on the trade treaty75 may be offered at this time.

The treaty contains two or three evidences that Dr. Espinoza secured the inclusion in it of provisions which he discussed in Washington last June (with Messrs. Fowler and Smith76) in connection with our own prospective trade agreement, and which were apparently special ideas of his. (a) The Argentine-Paraguayan trade agreement will only cease to function one year after denunciation by either side. It will be recalled that he objected strongly to our provision for the termination of our trade agreement only thirty days after denunciation, (b) The treaty with Argentina provides for a mixed commission with important functions, in conformity with Dr. Espinoza’s idea that such a mixed commission can keep trade agreements alive [Page 709] by adapting them continually, (c) The problem presented by Paraguay’s incredibly tangled system of special internal duties on imported goods, which amount to the second zone of tariff defense, is covered in the Argentine treaty by approximately the same language which Finance Minister Espinoza proposed in Washington when we endeavored to provide against future discrimination arising from these secondary and indirect imposts upon importation.

An interesting provision in the supplementary Argentine-Paraguayan “Convenio Complementario” looking toward the balancing of exports and imports between the two countries provides (see its Article 5) for the promotion of new industries in Paraguay, for the despatch of Argentine experts and technicians to study and formulate plans for such new industries, and for the use of Argentine capital in connection with them, drawn from funds deposited as a result of the balancing operations. This doubtless reflects Minister Espinoza’s disappointment that the American Government would not send experts to study possibilities for new Paraguayan industries, in accordance with the present Paraguayan urgent desire to foment new production in this country. From a practical standpoint the arrangement need not be taken with seriousness, however, as it is to be doubted whether Argentine technical advisers and funds will actually be forthcoming in a manner actually to effect the founding of new industries here.

It is perhaps to be deprecated that the Mixed Commission to formulate measures to bring about the Customs Union between the two countries will likewise have other functions of a permanent nature, so that it will constantly hold meetings from time to time during the life of the commercial agreements. If the Commission had been solely for the purpose of working toward the Customs Union its sessions might have been sporadic and it might gradually have ceased to be very active.

With regard to the visit of President Morínigo and Dr. Argaña to Buenos Aires in mid-December, I am informed confidentially by the Uruguayan Minister here that there seems to be little prospect of a visit to Uruguay at that time. The Paraguayan Government is seriously dissatisfied at the campaign conducted by Uruguayan labor unions, students and newspapers against the Morínigo régime; and while it does not doubt that the Uruguayan Government would take suitable precautions if Morínigo were to accept its still-outstanding invitation, it believes that untoward incidents would be highly likely to occur. This will leave Uruguay as the only country in South America to which President Morínigo will not have made an official visit during the present year. Presumably he and Dr. Argaña hope that Uruguay will take steps gradually to bring about the disappearance of the hostile agitation in Montevideo.

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During my two curbstone conversations with Finance Minister Espinoza since his return he made two remarks which may be of interest. In the first place he was anxious to learn whether the American Government has indicated that it accepts Paraguay’s assurances of continued loyalty to the American and Allied group of nations despite the negotiation of the Argentine agreements. (A certain amount of delay in any indication of the Department’s attitude might possibly not have an unwholesome effect here.) In the second place he inquired at once regarding the Department’s reactions to his requests for changes in the text of the proposed Paraguayan Trade Agreement with the United States. It is conjecturable that he has a private sense of apprehensiveness because of his unjustifiable delay in dealing with the draft submitted to him after his return from Washington embodying the agreements which he had accepted when he was in the United States. He will probably be glad to move promptly now to secure the Agreement with us, as a demonstration that Paraguayan-American relations have not been damaged.

Respectfully yours,

Wesley Frost
  1. Neither printed.
  2. For text of the Argentina-Paraguay trade agreement, see Ministerio de Relaciones Exteriores y Culto de la Republica Argentina, Instrumentos internaeiomales de caracter bilateral suscripios por la Republica Argentina, vol. ii, p. 1207.
  3. William A. Fowler, Acting Chief, and H. Gerald Smith, Assistant Chief, Division of Commercial Policy and Agreements.