823.6584/7–2447: Airgram
The Ambassador in Peru (Cooper) to the Secretary of State
A–490. Effective July 22, Peruvian Ministry of Agriculture lifted regulations on wheat which previously required 85% flour extraction and directed distribution under Ministry quotas for each locality. Simultaneously, Government subsidy is being withdrawn for wheat entering into white flour, whose price will be drastically higher than for whole wheat flour as latter will continue to receive subsidy. One mill is being directed, however, to devote its production solely to 85% flour extraction (estimated 12.5 per cent of total domestic output) and more will be added if warranted by demand.
Total wheat and flour supplies now in sight for July–December 1947 indicated approximately 60,000 tons. This includes (1) United States emergency allocation 10,000 long tons flour, wheat equivalent, June shipment, (2) United States allocations 17,000 long tons wheat, July–August shipment, (3) Argentine shipments 13,500 metric tons, in transit, (4) tentative Argentine commitments 20,000 to 25,000 metric tons, shipment next few months.
Embassy has brought to Minister’s attention the fact that world supply situation has not improved (reference last paragraph Department’s A–286, July 16) and that apparent liberalization of Peruvian controls might prejudice United States assistance in wheat supply. Minister indicated urgent need for further United States allocations to mitigate Argentine exploitation of Peru’s deficit position, and explained that his present action was essential and not conducive to increased consumption, for the following reasons: (1) Ministry efforts to control flour distribution by localities had caused serious maladjustments, because of inadequate personnel and flexibility; (2) compulsory 85% extraction has proved inadvisable because of mill evasion, consumer resistance, and reduced millfeeds needed for dairy feed; (3) heavy subsidy on wheat imports must be abandoned and this can be accomplished by elimination first on white flour, with subsidy maintenance at least temporarily for whole wheat flour; (4) higher price for white flour is expected to restrict total consumption more effectively than previous controls; and (5) political factors, including [Page 1041] strategy in reducing subsidies, raising prices, and freeing internal commerce, require this immediate step which can be reconsidered when the initial purpose has been accomplished (after Congress session beginning July 28 is well under way).