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

No. 3069

Sir: I have the honor to transmit free translations of two Argentine Government decrees15 which have been signed but not published textually. The first of these decrees establishes a scale for retention by the private petroleum companies operating in the Argentine of fixed shares of the general increases on sales price of gasoline and kerosene recently authorized. The second of these decrees, which is being jealously guarded by Y.P.F. and the existence of which is not generally known, authorizes an even larger retention of the increase for that entity than is provided for the private companies.

The Embassy, in its report no. 581 of June 26, 1947,15 reported the signing of a decree whereby increases of ten centavos and three centavos a liter respectively were authorized for sales within the Republic of gasoline and kerosene. It was explained at that time that only 25% of the increase could be retained by the producers, and that the balance would have to be deposited in a special account of the Central Bank pending final government decision as to the amount of the total increase to be retained by the producers.

The first of the two decrees which constitute enclosures to this despatch stipulates that the private companies may retain nine centavos of the total increase of ten centavos a liter when the gasoline is imported from abroad; that they may retain seven centavos a liter when the gasoline is produced from imported crude; and that they may retain five and one half centavos a liter when the gasoline is produced from domestic crude.

In all cases listed immediately above, the producers shall pay, out of their respective shares, an additional commission of one centavo a liter to the retail distributors, thereby reducing their own share by that amount in each category.

The entire three centavo increase on kerosene, as stipulated in the earlier decree, may also now be retained by the private companies,

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In addition to the increased benefits to the private companies cited above, it will be noted that a further concession has been made in Article 5. In the earlier decree mentioned in paragraph 2, black oils refined within the country, whether from domestic or imported crude, were taxed 23 pesos per ton, while the companies importing black oils were permitted to retain “a reasonable profit” above cost, depositing the excess in sales price to the account of the government in lieu of direct taxation. In actual practice, they were able to retain a considerable portion of the sales price. At the same time, they were losing heavily on their refining of imported crude while the important local producers of crude were still making money. In the Article alluded to above, it will be seen that black oils refined from imported crude are to be treated in the same manner as imported black oils, representing a distinct improvement in the private companies’ positions.

In contrast to the terms of the decree described above, those of the decree which constitutes the second enclosure to this despatch will be of especial interest. As previously mentioned, this decree has not been made public.…

This decree authorizes the retention by Y.P.F. of the total increase of ten centavos a liter on all gasoline sales without reference to source of origin. It further authorizes the retention of the total increase of three centavos a liter on kerosene. It does not stipulate that Y.P.F. shall pay an additional commission of one centavo a liter to its distributors.

This secret decree, which clearly discriminates against the private oil companies, appears to be the more iniquitous in that Y.P.F. was recently granted a blanket exemption from customs duties on all products other than crude oil. The private companies, of course, are required to pay duties on all products.

On September 30, as was widely announced in the press, Y.P.F. officially denounced the market agreements which had been in force between that entity and the private companies since 1936 and 1937. Under these agreements, the private companies were restricted to a fixed marketing gallonage for gasoline while Y.P.F. was permitted to monopolize any expansion of the market. In exchange, the private companies were permitted to carry on the importation of crude oil and petroleum products with Y.P.F. abstaining from these latter activities.

Although the denouncement of this agreement is described in press releases as having been dictated by “the new revolutionary concepts”, the aim appears to be that of legalizing Y.P.F.’s position as an importer of petroleum products. The immediate effect is to throw the market wide open, permitting all segments of the industry to import [Page 292] at will and, conversely, allowing the private companies to expand their internal marketing operations. Although the private companies, through their international ramifications, might be considered as enjoying a preferential position for the acquisition of petroleum abroad, they are placed in an unfavorable competitive position due to the fact that importations effected by Y.P.F. have been exempted from duties.

Officials of the private companies state that the denouncement actually means little at this time since the country needs all the petroleum products it can acquire abroad, and that as long as the present acute shortage exists there is no particular cause for concern on the part of the private companies. The lack of any specific agreement between them and the government entity, however, might prove extremely prejudicial at such time in the future as the world petroleum market may return to normalcy. The exact effect, of course, cannot be foreseen at this time.

Respectfully yours,

For the Ambassador:
Julian Greenup

Counselor of Embassy for Economic Affairs
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