Office of the Historian

835.5200/3–949: Telegram

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

restricted
us urgent
niact
Buenos Aires, March 9, 1949—1 p. m.

230. Much concern shown here by public utility interests over proposed constitutional revisions pertaining expropriation private property.1 Understand representations made yesterday by Swedish, Belgians and Dutch to Perón, Bramuglia and others. Proposed law provides: “Public services pertain fundamentally to state and under no concept can be alienated or conceded for exploitation. Those which may be found in possession private interests will be transferred to state, through purchase or expropriation, with previous indemnification when national law so determines.”

The above section of clause was in original draft and involves national sovereignty. However recent addition stated formula for indemnification which is original cost minus depreciation and minus any profits during period of exploitation which might be considered in excess of reasonable return. This formula is serious part clause as it would result in reducing indemnification to zero or in many cases leaving companies with debt to state.

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Provision which causes most concern seems to be that “sums which may have been amortized during period since granting concessions and excess over reasonable profit will be considered as recovery invested capital and deducted from price from [of] expropriation”. I have urged on President and Foreign Minister seriousness repercussions expropriation which might amount to confiscation and importance clearing up situation. They emphasized constitutional provision not yet passed and furthermore regulating law would be necessary. Perón states has issued order eliminate objectionable provisions and cabinet meeting this morning agreed support Perón’s demand. Perón says he wishes encourage investment foreign capital here and will stick to purchase formula similar purchase telephone company and railways.

Please inform James Bruce.

Ray
  1. Reference is specifically to Article 40 of the Argentine Constitution of 1949, which came into effect as of March 16, 1949.↩