835.24/2759
The Ambassador in Argentina (Armour) to the Secretary of State
[Received June 19.]
Sir: I have the honor to attach hereto a memorandum of an informal conversation5 between an officer of the Embassy and three officials of the Argentine Central Bank held at their request.
It is felt that the attitude of the Bank is clearly expressed in the statements made by Dr. Hector C. Liaudat, Chief of the Exchange Department, who is also in charge of the Certificate of Necessity procedure in so far as the Argentine Government is concerned.
The decision as to whether the present system should continue in force rests with the Department, and the Embassy will appreciate an early instruction in this regard.
[Page 417]It is felt that the Embassy should call the Department’s attention to certain pertinent points in connection with the matter, and these are outlined below.
Certificate of Necessity System
I. Background
- 1)
- In January 1942, the Argentine Government was requested to issue Certificates of Necessity, distributing quotas which had been fixed by the United States for allocated materials;
- 2)
- The idea behind the procedure was that the receiving country should decide which consignees and end uses would be most essential to its economy, taking into consideration the limited amounts available from the United States as a result of the war;
- 3)
- In January 1943, the Argentine Government was requested to issue Certificates of Necessity for all commodities, whether allocated or nonallocated, and on February 19, 1943, the Central Bank started issuing such Certificates;
- 4)
- A study of various systems whereby exports from the United States could be channeled into proper end uses and to satisfactory consignees resulted in the Embassy’s decision and the Department’s concurrence that the Certificate of Necessity was the most satisfactory answer.
II. Implementation
- 1)
- Before adding approximately 75 new officers to its staff, the Central Bank asked, and obtained the Embassy’s assurance, that no commodities would be granted export licenses in the United States unless the applications were accompanied by Certificates of Necessity, the only exceptions to this agreement being shipments valued at less than $25.– (U. S. Currency), newsprint, and materials needed by frigoríficos and strategic mines;
- 2)
- B. E. W.6 continued issuing certain licenses until August 1, 1943, in spite of the Embassy’s agreement with the Central Bank, much to the embarrassment of both the Central Bank and of the Embassy;
- 3)
- From August 1, 1943 to February 25, 1944, the Certificate of
Necessity-Consignee Control System operated efficiently and
functioned as follows:
- (a)
- Importers make application to Central Bank for a Certificate of Necessity;
- (b)
- Bank bases its decision on granting Certificate, using
separate yardstick for each of the following groups of
commodities:
- (1)
- Allocated,
- (2)
- Non-allocated,
- (3)
- Short supply in the United States,
- (4)
- Plentiful supply in the United States,
- (5)
- Essential to Argentine economy,
- (6)
- Non-essential to Argentine economy.
- (c)
- Only normal importers may obtain Certificates unless valid reasons can be given for not having imported previously;
- (d)
- Two copies of Certificates are given to importers and three copies to the Embassy;
- (e)
- Embassy screens Certificates against economic policy towards Argentina, end use, and consignee;
- (f)
- Embassy recommends to licensing agency in Washington, as a result of this screening that license application be approved or rejected.
- (4)
- System requires Notes Verbales to Foreign Office communicating allocations and lists of commodities in short supply in the United States, and also requires daily informal conversations between officers of Embassy and Bank to discuss numerous individual cases and problems;
- (5)
- Since February 25, no Notes Verbales have been sent to Foreign Office and no informal conversations have been held by the officers of the Embassy and the Central Bank;
- (6)
- Since February 25, the Bank has consistently granted Certificates, using only those allocations and criteria communicated by Embassy prior to that date;
- (7)
- As a result of (6), commodities earmarked for Argentina are not being made available to importers here.
III. Conclusions
- (1)
- The Embassy is convinced that the consignee control system, of which the Certificate of Necessity procedure is a part, has been the most effective economic warfare weapon employed in Argentina, a country which, while doing nothing to assist the United States, has consistently aided enemy firms to continue operations;
- (2)
- Consignee control with Certificates of Necessity has kept exports in normal trade channels which is an important protection against unethical and unscrupulous exporters in the United States and importers in Argentina who would not hesitate to profiteer and ruin the good name of American manufactures and products;
- (3)
- Should the situation continue which has existed since February 25, undoubtedly the Bank will be forced by pressure from the Government and public opinion to become more liberal in granting Certificates of Necessity and the result will be large numbers of such Certificates which the Embassy must recommend unfavorably to Washington. This will result in increased inconvenience, expense, ill will, and disappointment to both importers in Argentina and to exporters in the United States;
- (4)
- As materials become more plentiful in the United States, there is
no valid reason for continuing the present rather complicated system
of controlling exports, except to make certain that:
- (a)
- American material does not reach our enemies;
- (b)
- Unscrupulous exporters and importers are not permitted to distribute goods of unsatisfactory quality which will damage the good name of American products. (The Department will remember the serious effects on American trade of indiscriminate [Page 419] “dumping” in Argentina and elsewhere at the conclusion of the first World War.)
- (c)
- Make certain that commodities in extremely short supply in the United States not be exported to Argentina except when the end use is our war effort or Argentine public health or safety.
- (5)
- Great Britain and all other countries, with the exception of the United States and Canada, will, as their materials become more plentiful, attempt to supplant American sales to Argentina because importers prefer to buy without going to the inconvenience of filling out all the forms necessary for obtaining Certificates of Necessity and licenses. (This is already a part of the sales campaign of representatives of British and other exporters.)
- (6)
- The danger exists that Argentina will continue to use the Certificate of Necessity system, or a similar control after the end of the war, and nothing should be done by the United States to encourage such a program which would result in discrimination and control of imports from the United States;
- (7)
- The Division of World Trade Intelligence now has sufficient Consignee Control Reports from the Embassy to permit a satisfactory screening of most license applications and thus assure the objectives set forth in 4(a) and 4(b);
- (8)
- The question should be asked whether licensing authorities in Washington can successfully withstand the pressure of “fly-by-night” exporters who are unsympathetic to any controls which keep them from selling their wares in a lucrative market such as Argentina;
- (9)
- Not one single exception has been made to the rigid rules of the consignee control policies. No favors have been shown because of nationality, race, creed, prestige, or persuasive argument, and even though the system causes many inconveniences to importers, it is felt that the fair and consistent treatment of all cases has created a favorable impression and considerable goodwill. Should equally fair and consistent treatment not be possible under a system implemented in Washington, that goodwill could easily be broken down and our economic warfare controls again become ineffective.
The Embassy feels that the above outline is sufficiently complete to permit of a thorough and careful study by the Department which will also have additional information, such as the advisability of sacrificing certain economic warfare controls in favor of postwar trade, or vice versa.
The Embassy repeats that an early instruction from the Department is greatly needed at this time.
The Special Representative of the Foreign Economic Administration requests that a copy of this despatch be transmitted to the Foreign Economic Administration.
Respectfully yours,
Counselor for Economic Affairs