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

No. 2482

Sir: I have the honor to refer to the Department’s telegram no. 398 of May 8, 6:00 P.M.6 stating that the Standard Oil Company has informed the Department that the Argentine Government is insisting that wage increases be granted to the workers in the industry before consideration is given to price increases which would be compensatory; that the Standard Oil Company fears noncompliance with the demands of the workers would mean expropriation of the companies under the guise of national emergency; that the Department is inclined to protest to the Argentine Government that continuing forced increases in costs without compensatory price increases is in effect confiscation of the company assets without compensation therefor. The Department states that it is awaiting the Embassy’s report and recommendations before recommending such step.

Immediately upon receipt of this telegram I have sent a telegram to the Department, no. 561 of May 9, 1:00 P.M.,6 in which I state that [Page 280] I do not believe it would be desirable to make any formal protest at this time.

In this connection I may inform the Department that shortly after I assumed charge of this Mission I had contact with the heads of the American oil interests in the Argentine. Our interests in the Argentine in this field are covered, I believe, entirely by the Standard of New Jersey which has, I believe, six or seven subsidiaries here, and by the “Ultramar” which is owned jointly by the Texas Company and Socony. The American companies are engaged in production and distribution. The Department is aware that the situation of the American and foreign companies in the Argentine has not been on a very satisfactory basis for some years, and it was for this reason that from the beginning of my stay here I have been in touch with them constantly with regard to their current problems.

Although the situation of the companies has been on this unsatisfactory and somewhat uncertain basis for a number of years, in fact for many years, the immediate position of the companies seemed to be improving in some respects when the present constitutional Government took office in June, 1946. In view of the importance of fuel, and particularly petroleum, in the Argentine economy, there were definite indications that the Argentine Government was viewing the problems of the foreign oil companies with greater understanding, and particularly in view of the fact that the Government was much dissatisfied with the operations of the Government company Yacimientos Petrolíferos Fiscales (YPF).

About three weeks ago the workers in the oil industry outside of the YPF began a slow-down strike. The companies were already losing money because of the inadequate price and these losses were being suffered by the YPF as well as by the private companies, among which there are a number of purely Argentine-owned private companies. The companies began discussions with the Government concerning a price increase, and these had started before the slow-down strike in the private industry. The Government had shown a recognition of the fact that a price increase was necessary if the companies were to operate without loss. The Government apparently had no doubt that the companies were operating at a loss as the Government itself was obliged to make up the considerable deficit of YPF.

When the slow-down strike in the private industry started, the companies entered into conversations with the workers but these made slow progress because of the intransigence of the workers and because the companies were uncertain as to what price increase they could depend upon from the Government. The activity in the refineries under the slow-down strike reached the point where the refineries [Page 281] could not, according to the statement of the companies, be continued without danger. About a week ago, therefore, the companies felt themselves under the necessity of closing down the refineries. This immediately caused a serious gasoline and fuel shortage which has had serious repercussions and great inconvenience for the public.

When this point was raised, I informed the heads of the American companies that I thought every effort should be made by them to reach a solution as public opinion which would ordinarily be with the companies would, through this aggravated shortage, turn against them. The companies were fully aware of this situation, and I believe that their attitude in the conversations with the workers have on the whole been reasonable.

I cannot in this despatch, as the pouch is leaving in a few hours, go into details with regard to the negotiations, but I shall do so in a further despatch to follow in the next confidential pouch. It is sufficient to say that the companies have felt ready to grant the wage increases asked for by the workers even though they did this before the price increases were granted as they felt the Government realizes the present losses of the companies and would grant an adequate price increase. The companies, however, have objected to the demands of the union for a single union to include workers and employees as they are of the opinion, which seems in many respects justified, that this will make proper operations for them practically impossible and as they believe the Government, in imposing such a solution of a single union in this important industry, will create a very difficult precedent for itself and for Argentine industry.

The companies, however, have felt that arbitrary action might be taken and therefore have agreed two days ago to the increases which the workers up to that time had asked and have also agreed to the single union, much as they believe this contrary to the best interests of the industry. There was reason to believe that the Government supported the agreement which was signed two days ago in the Ministry of Labor.

To the surprise of the Government and of the companies, the workers yesterday refused to accept the settlement which the heads of the syndicates and the companies had signed, and the workers are now demanding further wage increases which seem extravagant.

Day before yesterday the Ministry of Labor issued a statement to the press with respect to the shortage of gasoline and the conversations between the workers and the companies, which statement was tendentious and which placed the responsibility for the gasoline shortage on the intransigence of the private companies. If the information which I have from the companies and which the Embassy has from [Page 282] other sources is correct, which it has every reason to believe, then this statement of the Ministry of Labor was not only tendentious but incorrect.

I have during the last week been in touch with the Foreign Minister8 informally with regard to this matter. I have informed him that the attitude of the companies is reasonable and that they are willing to give any wage increases which the Government may determine just. I informed the Minister that while the companies did not believe it desirable that there should be this single union, they would, if the Government imposed this solution, accept it.

The Foreign Minister stated to me yesterday that he had discussed the matter with the President9 and that it was recognized that appropriate price increases were necessary in order to meet the costs of the industry. He further stated that expropriation was in his opinion not in question.

. . . . . . .

I have informed the Department in the telegram above mentioned that I do not consider intervention desirable at this time through formal representations. The head of the Standard Oil Company here10 has informed me this morning that he has not recommended such formal protest by our Government to his principals in New York and that he is deeply appreciative of what the Embassy has done up to now through its interest and informal representations. My own opinion is that to make formal representations at this time would not be justified and could aggravate the situation. The matter up to now is purely an internal one, and up to now is a labor question in which it would be improper for us to intervene. The Government has informed the companies that price increases will be granted. The companies are willing to grant increased wages before the price increase is announced and becomes effective. There has been no formal threat of expropriation or arbitrary action of this kind to take the plants over even temporarily. That there has been thought of such action in certain quarters in the Government there is no doubt. It is not believed, however, that the Argentine Government would proceed with expropriation unless there are developments which presently are not in the offing.

I am following this matter closely with the heads of the American companies, and will keep the Department informed. In case there should be danger of expropriation being undertaken by the Argentine Government, I will inform the Department and request its instructions authorizing me to make a formal protest.

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The Embassy considers this whole matter of extreme importance in view of the fact that the American petroleum interests in this country are important and should become more important in the interests of the Argentine Government and economy as well as of the companies. It is to be hoped that the present situation which has developed will not result in arbitrary action or attitudes by the Government which could endanger the favorable developments which have been in the offing so far as this industry is concerned.

Respectfully yours,

George S. Messersmith
  1. Not printed.
  2. Not printed.
  3. Juan Atilio Bramuglia.
  4. Juan D. Perón.
  5. Eugene Holman.