840.50 Recovery/1–2549

The Chief of the Division of River Plate Affairs ( Tewksbury ) to the Ambassador in Argentina ( Bruce )

secret

Dear Jim: Although you will note from the letters exchanged between Mr. Lovett1 and Howard Bruce,2 dated December 20, 1948 and January 10, 1949 respectively, and enclosed under a concurrent instruction, that we have made good use of your telegram No. 1153 dated November 26, 1948 and other related communications, I am only now able to send the memorandum which you requested on ECA discrimination against Argentina.3

As I stated in my letter of January 4,4 we have good reason to believe that deliberate discrimination by ECA is at an end. You may feel confident that both ECA and the Department will henceforth be on the watch for inadvertent discrimination. I understand from Mr. Labouisse,5 who handled the recent discussions with ECA, that Howard Bruce has been most cooperative, confirming your impression that ECA staff officers had led ECA into policies and procedures without the knowledge or approval of its highest officials. Thus the enclosed memorandum, serves to complete the record, and we can hold it in reserve in case we should ever need it in the future.

Now that this situation has been corrected, I hope that both ECA and the Department will be able to devote their attention to the dual [Page 479] problem of counteracting the impressions unfortunately created in Argentina and in Europe by the repeated discriminations, and of seizing or making opportunities to authorize purchases in Argentina. While the present emphasis is on hides, I hope that ECA can also begin to authorize purchases of edible oils and possibly other products.

We must not be overly confident that ECA funds will flow soon or in considerable quantities to Argentina. In addition to the legislative limitations which continue to be applicable under the revised policy statement of October, certain European countries evince reluctance, probably as a result of Argentina’s previous or present economic policies, to purchase in Argentina what can be obtained at the same price elsewhere. It is further evident that, as Argentina is obliged to turn from the U.S. to Europe for many of her essential imports, European trade deficits with Argentina will be smaller and ECA financing less necessary. In the coming year participating countries will probably be able to increase their export of goods regarded by Argentina as essential. Our own grain surpluses are likely to be very great. Canada continues to accord Great Britain a price on wheat below that of the U.S. ECA anticipates that Belgium, France, Italy, The Netherlands, Sweden, and probably the U.K. will not request ECA financing in Argentina in 1949. The ERP program as a whole envisages that ECA will finance for each successive year a decreasing proportion of agricultural products and an increasing proportion of industrial products. All of these factors obviously suggest that Argentina’s loss is irreparable, and that ECA financing at best in Argentina in 1949 will be small in terms of Argentine needs. A change in world or U.S. crop prospects would, of course, alter the situation.

Since European countries exercise considerable discretion in deciding on sources of supply in Latin America, Argentina should attempt to encourage purchases in Argentina by all legitimate means. ECA will authorize purchases in Latin America, but will not require that a participating country make purchases in Argentina. I think that it is important to us, in this connection, that Argentina understand beyond a shadow of a doubt that ECA will authorize purchases in Latin America including Argentina, but that the European country will decide whether or not the purchase is made in Argentina or elsewhere. ECA has, for example, actually urged France to buy with ECA or non-ECA dollars in Argentina but France has refused. While we cannot prevent a participating country from deciding to “strike back” at Argentina, I hope that we will not have to bear the responsibility in Argentina for such a decision.

Although I regret that this letter is running to such length, I must call to your attention, concerning the enclosed memorandum, the following [Page 480] considerations in the light of which the memorandum was prepared and in the light of which it must be read:

1.
The discriminations as listed are apparent discriminations. They were not invariably discussed with ECA, and ECA’s reaction or interpretation is not always definitely known. The officers of RPA have, however, regarded as discriminatory all the instances which are cited.
2.
The whole ERP is in a very real sense discriminatory against Latin America. While an attempt is made to confine this discrimination within the bounds of necessity and to balance it with programs assisting Latin America, some discrimination is inherent and unavoidable.
3.
In connection with the agricultural purchases mentioned in paragraph 9, Great Britain was able to purchase wheat in Canada at a price below the U.S. price.
4.
In some instances of discrimination, the apparent discrimination was subsequently eliminated as a result of protest from the Department.
5.
Apart from the discrimination against Latin America inherent in ERP, there is the discrimination in favor of the U.S. explicit or implicit in ECA legislation. In this respect, the significance of “effective demand” is important. Although the participating nations had great demand for Argentine products during 1948, this demand was effective only to the extent that these countries could sell their exports or obtain credits in Argentina, or to the extent that ECA was prepared to finance their purchases. Where the demand was for products of which the U.S. had exportable surpluses, both legislation and administration tended to render that demand effective only in the U.S. The effect was that the U.S. disposed of its grain surpluses and Argentina did not.

The memorandum paints a picture which is bitter indeed for us who seek to create trust, confidence, and mutual understanding in the relations between Argentina and the U.S. While the loss in dollars to Argentina is irreparable, I am still hopeful that the loss to the U.S. of Argentine confidence can be repaired. If the economic situation does lead to catastrophe and Argentina must seek scapegoats, I believe that she should direct at least some of the anathema against countries other than the U.S.

We will assist you in any manner that we can to convince Argentina that no discrimination has existed or will exist in the authorization of offshore procurement, and to replace whatever political casualty we may have sustained. We are reading Guy Ray’s despatch No. 7 of January 4, 1949 in this light and will respond as soon as opinions and policies have crystallized.

Sincerely yours,

Howard H. Tewksbury
  1. Robert Lovett, formerly Under Secretary of State.
  2. Deputy Administrator of the Economic Cooperation Administration.
  3. None of the documents referred to in this paragraph are printed. The question of off-shore purchases in Argentina financed by ECA was discussed during the visit of Argentine Foreign Minister Bramuglia to the United States in December 1948; see the compilation on United States Political and Economic Relations with Argentina in Foreign Relations, 1948, volume ix .
  4. Not printed.
  5. Henry R. Labouisse, Coordinator of Foreign Aid and Assistance in the Department of State.