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

[Extracts] confidential
No. 556

Sir: I have the honor to submit the following comments on the present situation in Argentina:

General Situation

Argentina’s political situation is so confused at present that not even the highest officials themselves seem to be able to make heads or tails of it, but both in the political and economic situation one development completely overshadows everything else and that is Argentina’s acute shortage of dollar exchange. High Argentine officials are still hoping that some miracle will bring them large ECA dollar purchases. Several of these officials have remarked in private conversation that unless a remedy is found for Argentina’s dollar shortage it will be necessary to change the country’s entire foreign policy.

Perón is quite possibly sincere when he says that he would prefer to have no dealings whatsoever with Russia and the satellite countries. The administration would like to show us that it can get along without dollars, but both the President and the Foreign Minister admit that it is impossible to obtain what they desire from Russia and the satellite countries. Many of the projects included in the Five-Year Plan have been abandoned, at least temporarily, because of a lack of dollars to pay for machinery and equipment, and if the acute shortage of dollars continues, many of these projects will undoubtedly be abandoned entirely.

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Attitude of the Administration Towards the United States

Perón has assured us time and again that he is extremely anxious to have American capital come to Argentina. However, his recent public declarations can hardly contribute to attract United [Page 291] States capital. In his speeches he continues to rave and rant about economic independence and liberating Argentina from the yoke of the foreign capitalists.

Industrialization has become almost a mania with Perón and some of his Cabinet, and they realize that the industrialization program cannot be carried out without American equipment, machinery and technical know-how. If the dollar shortage continues, Argentina will have to abandon a good part of its Five-Year Plan.

It seems likely that if some ECA dollar purchases are made in Argentina, and so long as there is hope of additional purchases, Perón and his administration will indicate a desire to cooperate with the United States. Argentina’s whole policy for the last year or two has been based on the assumption that war between the United States and Russia is inevitable. Perón feels that Argentina should not be caught betting on the wrong horse for a third time, and that in the war to come between the United States and Russia, Argentina should cast its lot immediately with the winner, which he believes will be the United States. He thinks that as allies we would get along much better, and that Argentina would not find itself in the unpleasant position of seeing lend-lease and similar “favors” extended to the other Latin American countries while Argentina was left out in the cold.

If Perón should reach the conclusion that there is no hope of increasing exports to the United States or of obtaining ECA dollars, his position would become more desperate, he would be filled with resentment against the United States and his course of action would probably become more and more totalitarian. Our relations with Argentina would undoubtedly become progressively more difficult.

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Argentina’s financial and economic situation appears to be growing steadily worse. Most of these economic ills stem from a bad political situation. If the economic situation becomes worse, the political situation will probably deteriorate all the more rapidly. The more the administration finds itself in a tight spot, the more it is likely to become hysterical. It will probably follow the totalitarian pattern of trying to find an object on which the public can vent its resentment and distract attention from the real problem. If at least a partial solution can be found of Argentina’s dollar difficulties through increasing exports to the United States and/or ECA purchases, the administration may be able to weather the storm. If not, it will probably become more and more openly totalitarian and our relations with Argentina could become really difficult. At best, Argentina will continue to be a serious [Page 292] problem for us. There are many rumors of Cabinet changes, but they are so numerous and so conflicting that it hardly seems worth while to report them to the Department.

Respectfully yours,

Guy W. Ray