The Ambassador in Argentina ( Bruce ) to the Secretary of State
Sir: The Embassy has the honor to acknowledge the Department’s unclassified instruction of October 14, 1947,93 transmitting request from the Office of International Trade of the Department of Commerce, dated October 8, 1947 (Reference: IT–1010–CFC), that the Embassy comment on the exchange aspects of trade and financial relations between the United States and Argentina during the next year.
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The first report cited above94 indicates the confusion created by the Central Bank’s rulings on capital investments and remittance of profits. Apparently the Bank itself did not realize the many problems that would arise by reason of the vagueness and incompleteness of the regulations and is somewhat overwhelmed with the deluge of questions to which it must give answers. It is now accumulating information in order to make decisions on the points of major interest to business men, and private entities are assembling data with the view to being of assistance.
Until the uncertainties concerning foreign investments already in the country are clarified and/or more definite assurances are received [Page 274] from the Central Bank covering new investments, the objectives of the measures on the inflow of funds appear to be nullified. On the other hand, the President of the National Economic Council, Sr. Miguel Miranda, recently explained to the Commercial Attaché95 of the Embassy that he is the author of the Central Bank Circulars on the subject, that he considers them crystal clear and expressive of a most generous attitude toward foreign capital and its profits, and cannot understand the reported confusion of business men on the subject, and that he will personally be glad to answer any questions addressed to him directly. He characterized the measures as “transitory”, “Temporary” and designed to meet “emergency conditions” and not as representing long-range policy. These measures were designed, without doubt, to attract much needed foreign capital; as previously reported, the President has indicated his desire to encourage the investment of American capital in Argentina. It is believed that any liberal attitude on the part of the Argentine Government concerning transfers of capital or remittances of profits derived therefrom will depend on the improvement in the exchange position through trade channels, or upon the realization of the necessity of attracting a growing volume of foreign funds to the country.
The complete suspension of imports in August was followed by the publication in September of a list of permissible imports which was later expanded, and the division of the countries of the world into two groups, with preferential treatment for one group. The Central Bank indicated that in the favored countries Argentina has heavy surpluses of foreign exchange by reason of recently concluded agreements or as the natural results of trading. The channelizing of trade by means of these regulations is already in practice. For example, it has been reported that exchange permits for the importation of galvanized wire from the United States have been refused, and that they will be granted only for imports from Europe, at least until the situation of dollar availability improves or a solution is found to the question of the inconvertibility of the pound. Applications for exchange permits to cover round, flat and square steel bars from the United States have also been rejected, except for that material already having an import license from the Secretary of Industry and Commerce. According to reliable sources, the possibility of lifting the import prohibition against these items would be contemplated in order to facilitate imports from Europe. It may be asserted that the trend is to reject applications for dollar exchange for products that may be imported from Europe, even though the price is much higher, and even though the supply is inadequate.[Page 275]
The curtailment of exchange for essential U.S. imports may be relieved, at least slightly, by the agreement just concluded by the U.S. Army Grain Mission covering the purchase of grain to be shipped to Europe, and to a greater extent if more purchases are made in the future. Sr. Miranda has stated that Argentina is willing to sell its available production, including meat, at export prices prevailing in the United States, provided his country is guaranteed the delivery of much needed equipment at prices prevailing in the United States for such equipment. This observation was made by Sr. Miranda in view of his recent discussions with the Ambassador on the subject, and apparently the Argentine Government has some hope that this can be arranged.
During a recent interview between officials of the General Motors Corporation, who were escorted by the Commercial Attaché of the Embassy, and Sr. Miranda, the latter categorically refused to grant further exchange permits desired by General Motors for the importation of chassis, refrigeration equipment, and a long list of other materials required for continued operations of General Motors plants in Argentina. Sr. Miranda explained his refusal on the ground that Argentina has no dollar exchange, and that even if it had sufficient exchange for the purpose, it would hesitate to use it for anything that would promote the production of automotive equipment, since such equipment requires the use of gasoline. The country, Sr. Miranda added, is desperately in need of gasoline and must use dollar exchange for its purchase. Sr. Miranda further remarked that so long as Argentina continues to deliver its exports to countries that cannot pay in dollars, as she has been forced to do in recent months, it will be impossible for her to build up the necessary dollar reserves to carry out her much needed industrialization. He spoke of credits having been made to France, Italy, Spain and other countries calling for the delivery of Argentine agricultural products, but he emphasized that payment cannot be foreseen and that none of the countries is in a position to offer dollar payment. The solution to the whole problem, he repeated over and over again, lies with the United States.
Of great importance, also, in the shaping of Argentina’s future foreign trade policy will be the arrangements reached with Great Britain. The accentuation of the principle of bilateralism referred to above might also imply that on the conclusion of a satisfactory agreement with Great Britain, British imports will be in a favored position. As indicated in the second report cited above, whether the United Kingdom will be able to manufacture and export to Argentina in quantities sufficient to achieve a balancing of accounts and to supply some of the sorely needed goods here is a moot question. A concerted [Page 276] effort, no doubt, will be made to do this; the morning press, for example, carries a UP despatch date-lined London in which it is reported that British locomotive firms have promised the Trade Mission coming to Buenos Aires that if it gets an order for 300 steam locomotives that are needed for the Five-Year Plan, “delivery will be on time”. It is also reported that the British will seek the order as soon as the railway deal96 is signed and that despite American competitors, will have a good chance because “the British companies are the traditional builders of Argentina’s rolling stock and know the railways there inside out”. It might be added in this connection that in recent weeks local representatives of American railway equipment manufactures have called on the Embassy several times for assistance in closing orders with the Government. Their difficulty stems from the fact that although they can offer the equipment preferred by Government officials and can guarantee earlier delivery than European competitors, the question of scarcity of dollar exchange weighs heavily in prompting Argentine officials to give serious consideration to European firms.
To summarize, the prospects for United States imports into Argentina at present are not bright, and it is believed that this situation will obtain for some months to come. The most likely improvement in dollar availabilities would result from United States purchases of Argentine foodstuffs for the needy countries of Europe. Rumors of a loan or credits from the United States continue, but these are denied by the authorities.
Counselor of Embassy for Economic Affairs
- Not printed.↩
- The Ambassador cited his despatches 3116, October 22, and 3090, October 21, and report 989, October 30 (none printed).↩
- Joseph Louis Apodaca.↩
- Reference is to the transfer of Argentine railroads owned by British interests to the Argentine Government. According to airgram A–307, February 13, from London, the purchase price was said to be 150 million pounds sterling. Management of the railroads was to remain in British hands. (835.51/2–1347)↩