Foreign Relations of the United States, Diplomatic Papers, 1945, The American Republics, Volume IX

800.515/12–1745

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

No. 7284

Washington, December 17, 1945.

The Secretary of State refers to the Department’s telegram no. 1570 of November 6, 1945 and the Embassy’s telegrams no. 2810 of November 8, 1945⁹² and no. 2846 of November 13, 1945 in relation to the revising of the January 1945 memorandum⁹³ concerning Argentina. A swift but intensive survey over a period of three weeks of all available material relative to the economic aspects of the Argentine case has shown that developments both in Argentina and elsewhere require, as explained to greater length below, that Exhibit II of the Argentine memorandum be revised in a fundamental fashion.

I

The Officer in charge should of course report as soon as possible all known instances, mentioned in the Embassy’s telegram no. 2810, of Argentine governmental aid to spearhead firms subsequent to January 1945 or of an earlier date which were not mentioned by Messrs. Skelton and King. The Embassy is requested to report whatever evidence may be available that the Argentine Government countenanced the delivery of Swedish newsprint to pro-Axis newspapers. The Embassy should also report in detail all contracts with, or purchases from or in behalf of, spearhead firms since January 1942, which are known to have been made and are not discussed or listed in the Skelton–King report. While, as the Embassy recognizes, the assumption of control over these firms by the Argentine Government renders such contracts somewhat less objectionable than formerly from the point of view of security, the fact remains that title to these firms continues to rest in the enemy and that under the contracts funds are accumulating which may ultimately go to the actual owners. The Embassy should indicate in the case of each spearhead with which contracts have been negotiated, or from which purchases have been made, the date on which the Argentine Government placed it under control and possession. The Department would appreciate the Embassy’s also commenting concerning each contract as to its essentiality and the existence of an alternate friendly choice to the spearhead firm in the accepting of a bid. It is understood that in at least one instance the Argentine Government accepted a high bid from Cía. General de Construcciones in preference to a lower bid submitted by a politically satisfactory firm.

Thus there are two groups of contracts in which the Department is presently interested: (1) the contracts negotiated prior to the issuance of possessory decrees which can be cited to demonstrate the Argentine Government’s willingness to assist enemy firms in evading the Proclaimed List and that Government’s indifference to any possible aid to the enemy that such contracts might render, and (2) the contracts made after the taking of possession which further increase the accumulation of blocked funds in accounts in the name of the enemy. If the Argentine Government should fail ultimately to force the sale of all the firms under its control with which contracts have been made, the firms not sold would probably be returned to their former owners, including the blocked funds representing the firms’ profits under the contracts. Moreover, if the Argentine Government should not be sincere in its expressed intention of forcing the sale of the firms under its control and possession, as there is considerable reason to believe, then the granting of contracts to them even after the establishment of control would represent in the long run an additional means of perpetuating the enemy interests in them and a continued avoidance of the sanctions of the Proclaimed List. While the names of the firms remain on the Proclaimed List, traffic with them not expressly authorized by the Embassy or the Treasury must be regarded as trade with the enemy.

If in the Embassy’s statement that the Argentine Government had no scruples in dealing with Proclaimed List firms, the Embassy had in mind transactions or actions other than the negotiation of contracts and making of purchases, these too should be reported in detail.

In the event that the Embassy has already reported the foregoing information in part or entirety, or that the details are being incorporated in the memoranda contemplated in the Embassy’s despatch no. 1316 of November 14, 1945,⁹⁴ the Officer in Charge may restrict his report to this extent by making specific references to the earlier reports and to the memoranda.

II

The economic phase of the Argentine case must be considered from at least three aspects: (1) the accomplishments of Argentina since January 1945; (2) the deficiencies that remain; and (3) the propositions that can be supported against Argentina.

Subsequent to the memorandum of January 1945 the situation in Argentina with respect to economic warfare rapidly changed. The Inter-American Conference on Problems of War and Peace was called at Mexico City. Argentina declared war against the Axis. The United Nations convened at San Francisco. Hostilities came to an end. Under the incessant persuasion of Ambassador Braden and the press of these and other events the Argentine Government took the first steps toward the elimination of enemy spearhead firms. The consequence is that Argentina can now be said to have made substantial progress toward compliance with the minimum requirements of Rio V, Washington VII, and Mexico City XVIII Resolutions.

It is in this light that the Department has reviewed the Skelton-King report concerning “The Failure of Argentina to Observe Her Commitments Under Resolution V of the Rio Conference”. Concerning some six principal charges contained in that report must be considered the following points: (1) With respect to Axis economic penetration in general, Argentina has made substantial progress toward compliance with the minimum requirements of Rio V. (2) While it is apparent that Argentina continues to evince greater regard for the immediate well-being of her local economy than for the security of the Hemisphere, Argentina has placed enemy economic interests under a modicum of control. (3) Although Argentina never did take proper measures to prevent activities in behalf of the enemy, hostilities are at an end and the enemy himself is under Allied occupation. (4) The Argentine Government has eliminated several enemy spearhead enterprises, has decreed the elimination of several others, and has taken control and possession of all the remaining spearheads. (5) The Argentine Government continues to render assistance to enemy spearhead firms through the making of contracts with them, but most of these firms are in possession of the Argentine Government. (6) Finally, while Argentina is everywhere recognized as the center of Safehaven activity in the Hemisphere, Argentina has on paper at least done more than any other republic to ferret out hidden enemy loot and assets.

It is thus readily evident that Exhibit II must be revised not only in content but in approach. While certain corollaries or refinements of the original propositions remain apposite today, it appears that the economic case against Argentina must now be constructed around one fundamental charge and one fundamental fact: (1) Argentina is insincere in its ostensible efforts to eliminate enemy economic interests, and (2) despite all the so-called accomplishments, the Nazi economic spearhead remains today in Argentina in essentially the same strength and vigor that it existed four years ago. These are the propositions which this Government hopes to maintain in its revision of the Argentine case.

As to sincerity this Government would charge that Argentina deliberately constructed a facade of controls for the sole purpose of creating an appearance of compliance with her international commitments. In support of this charge it can be shown that each successive measure was taken only after persistent protest and prodding, that measures once taken were executed in so dilatory a fashion as to render them for months practically ineffective, and that, as confirmation of this insincerity, the Argentine Government threatened with dismissal at the behest of an enemy spearhead the official in charge of the entire program, and forced him ultimately to remain in office with a further threat of dismissal from the Army, necessarily without independence of judgment or action. All during the period when the enemy spearheads were very gradually being brought under a pseudo-control—a control which is always subject to the influence of the enemy with the Government as in the cases of Staudt, Freude, and von der Becke—the Argentine Government continued to make contracts with the enemy firms in order that they might not be injured by the sanctions of the Proclaimed List.

Above all, however, as proof of the Argentine Government’s insincerity, is the fact that the Nazi economic spearhead remains today in essentially the same strength and vigor as it existed four years ago.

Argentina has been from the beginning the center of Nazi influence in the Hemisphere. Instead of taking measures, while the United Nations were struggling against the Nazis at their very doorsteps, to extirpate that influence, the Argentine Government permitted it not only to perpetuate itself but to expand. There would be cited here the accumulated proof of enemy penetration, the increased profits made by enemy firms during the war, the total failure of Argentina to take any step to assure that these firms which operated without restriction could not injure the war effort of the United Nations. The egregious inadequacy of Argentine controls would be demonstrated by the delineation of glaring example after glaring example.

As shown in the political portion of the memorandum, the Government which failed to support the United Nations during the war is the same Government which is permitting Argentina to remain the only possible center for Nazi revival in the Hemisphere. Instead of eliminating the enemy firms when they were assisting the enemy, Argentina waited until the enemy was defeated in Germany to place them even under control. The control that is exercised is limited to the firms owned or controlled from Germany which are already subject through that ownership to control by the Allied Control Council in Germany. Certainly such firms can do this country little harm and the enemy little good within the proximate future. The essential requirement is therefore elimination so that these and other firms shall never again be in a position to form the economic basis for Nazi activity in the Americas.

It is of no great significance as far as Argentina is concerned that certain other American republics have taken unsatisfactory action against enemy enterprises. In these countries Nazi penetration had not reached the same proportion as in Argentina, nor were the enemy firms nurtured all during the war with the same devoted concern for their profitable and continued operation. As a matter of fact, in one of these countries most of the enemy spearheads are merely branches or affiliates whose head offices are in Argentina. These countries did not permit the relatively free interchange of funds and communications during the war between the enemy and this Hemisphere which in Argentina provided the elements of Nazi penetration with access to funds for inimical purposes and with means of receiving instructions from and conveying information to the enemy. While in some of them vestiges of the enemy remain, only in Argentina does the enemy still constitute a menace to Hemispheric security.

The objective of Rio Resolution V is elimination. Other American republics when confronted by Nazi penetration differing only in degree proceeded almost at once to vest title and eliminate enemy ownership. Until elimination is effected in Argentina by liquidation or forced sale of the vast economic interests which constitute today as they did four years ago the spearheads of German penetration, the Argentine replacement program must be considered outward but fictitious compliance with its international obligations. In fact, without elimination of enemy interests, mere control must be regarded as protection and perpetuation of enemy interests.

Incidentally the Embassy should under no circumstances regard the possessory control exercised by the Argentine Government as in any way comparable to the action taken by the United States Alien Property Custodian against enemy owned properties. The Custodian has vested title to all known German enterprises in this country. This title is firm and could be returned to former ownership only by act of Congress. The supervisory orders of the Alien Property Custodian mentioned in the Embassy’s despatch no. 999 of October 6, 1945 are issued only in the instances where enemy ownership cannot be determined. With respect to vested firms not yet sold by the Alien Property Custodian, firm title to these firms rests with the United States Government, and in most instances the firms exist only as shells. Firms which still exist as going concerns under the Alien Property Custodian are the subjects of litigation and will be sold as soon as the litigation is settled. These firms are now very few in number. It is the determined policy of the Alien Property Custodian to sell vested titles to satisfactory ownership as swiftly as possible.

The Argentine Government permits Nazi leaders like Freude and Staudt to enjoy complete freedom and their commercial interests to operate unrestricted. These persons and others in the Nazi network are believed to continue to make contributions to the political party in power. A Nazi removed from an enemy firm at the instigation of one of the United Nations has been given a high place in the Argentine Government from which he can actually control the future operations of the firm from which he was removed. As a matter of fact, an interventor in the firm itself has stated that he was instructed by the head of the Argentine Alien Property Custodian that this person should still be considered unofficially in charge. At the behest of a known Nazi against whom action was contemplated by the Argentine Government, the official in the Government who was responsible for the action was threatened with dismissal. Thus Argentina refused to attack the enemy when he was strong and now that he is weak is offering the succor which may represent his only means of survival.

III

While the Skelton–King material, together with the information requested in Part I above, substantiates a good many of the foregoing statements and offers some opportunity for reinterpretation in the light of Safehaven objectives and the circumstances of peace, it is apparent that additional evidence must be developed in support of this Government’s position. As a means of securing this evidence, it has been proposed to initiate simultaneous investigations in the files of a limited number of spearhead firms in Argentina and in the files of their principals in Germany. The Department’s telegram no, 1736 of December 7, 1945 indicated the nature of the project as well as the general types of evidence which seem to be most needed. As of further possible assistance in this connection, there is enclosed a detailed outline⁹⁵ of the items of evidence which the Department believes should be among the foremost objectives in the investigative work. This outline should not, of course, be regarded as a limitation with respect to either subject matter or nature of evidence.

A copy of a draft cable to General Clay in Germany concerning the coordinate German investigation is enclosed.⁹⁶ Since this cable lists certain firms in an order of priority for investigation, it is suggested that the Embassy follow the same general priority in its investigations in Argentina. With respect to the banks, however, the Department is inclined to feel that, unless the Embassy anticipates almost immediate results of an impressive character, the investigation should be suspended for the time being and the experienced investigators working in them assigned to other unexplored spearhead files. It may be that investigations in other files will provide leads which can be followed up or verified in the banks’ files, and it is possible that the proposed investigations and interrogations in the banks’ home offices will produce suggestions for further action in Argentina. The Embassy may also desire to take advantage of investigations already undertaken in Germany and begin its investigation in the affiliates of Philip Holzmann, I.G. Farben, Stahlunion, and Mannesmannroe-hrenwerke. The Department is presently reproducing copies of reports concerning I.G. Farben, Stahlunion and Mannesmannroehren-werke, and these, together with copies of other reports received from Germany, will be transmitted to the Embassy as they are received and reproduced.

It is hoped that in accordance with the Department’s telegram no. 1765 of December 11, 1945⁹⁵ the Embassy will be able to secure permission from the Argentine Foreign Office for free access, at the place of business and without limitation, to the files of all the firms listed in the cable to Germany. If this should prove to be impossible, the Embassy should attempt to secure for examination at the office of the Junta or in the Embassy all the records that the Junta will make available or at least the parts of the records which are believed by the Embassy to offer the greatest prospect of assistance. In requesting access to the files of specific firms, the Embassy must not overlook the possibility that, on advance notice, interested persons might destroy important papers. The Embassy may desire for this reason to limit its request to the firms in which it is in a position at once to place at least one investigator.

The Embassy should, of course, report any obstacles placed in its way by the Argentine Government to full and free inquiry. Such obstruction, as the Embassy will appreciate, would represent a significant indication of the insincerity of the Argentine Government. Investigators in Germany will be specially assigned to the search of the files of the German counterpart of any Argentine firm to whose files access is denied.

In general, it is recommended that the Embassy carefully note the suggestions as to methods of investigation incorporated in the request to General Clay.

Persons specially assigned to the project in the Department will attempt to coordinate between Argentina and Germany both the investigative work and the evidence as it accumulates. If the Embassy at any time believes that specific investigations of an explicit nature in Germany would be of assistance in its investigations, the Embassy should transmit its inquiries, together with all related information, by the most expeditious means for relay to Germany. On the other hand, if the Embassy should develop information which might assist the counterpart investigation in Germany, this information should be flashed at once to the Department so that it can be placed with the proper persons in Germany as soon as possible and while the German investigations are in progress.

The Department is making an extreme effort to recruit the additional personnel heretofore requested by the Embassy and especially needed in view of the extent and urgency of the present project. While it is most difficult to find qualified persons and although adequate funds are not available, three Auxiliary Foreign Service Officers are presently en route to Buenos Aires. The Department is striving to obtain the necessary transportation out of Miami so that as many of them as possible can reach Buenos Aires in time to assist the Embassy in the project. In addition, as the Embassy is aware, other Embassies have graciously accepted the temporary detail to Buenos Aires for this project of certain officers from their staffs who appeared to be eminently qualified for the work at hand.

It is suggested that the Officer in Charge designate at once an officer of the Embassy to coordinate, as well as exercise general supervision over, all of the investigative and reporting work connected with the project. Because of the importance and urgency of the project, the Officer in Charge should transfer to it all qualified persons who are presently engaged in investigations offering in his opinion less prospect of imposing results along the lines desired within the next few weeks. All persons working on commodity or other economic work who can be spared and who are qualified to assist in the project in any respect should be included in the transfer. The designated officer should of course coordinate the work of this team with that of the offices of the Legal, Military and Naval Attachés. This coordination might be helpful in the location and use of informants as well as increase the available number of investigators. If the Officer in Charge believes that directives of any specific nature from the Federal Bureau of Investigation or the War or Navy Departments would be of assistance now or in the future in this connection, the Embassy should of course so recommend to the Department. The Embassy should also inform the Department concerning the availability for the project of any personnel in Argentina presently assigned to other agencies or departments of the Government.

The Officer in Charge is requested to keep the Department informed of the progress being made and of any problems that develop.

Byrnes

92. Neither printed.
93. The King-Skelton report entitled “The Failure of Argentina to observe her commitments under resolution V of the Rio Conference,” not printed.
94. Not printed.
95. Not printed.
96. Not printed; the draft cable referred to was transmitted on December 12, 1945, by John Hickerson, Acting Director of the Office of European Affairs, to Maj. Gen. J. H. Hilldring, Director, Civil Affairs Division of the War Department, with the request that contents thereof be further transmitted to Lt. Gen. Lucius D. Clay, “as a matter of the most particular urgency.” (862.20235/12–1245) General Clay was at this time serving as Deputy Military Governor for Germany.
95. Not printed.