Memorandum by Mr. Henry Dearborn of the Division of River Plate Affairs to the Assistant Secretary of State for Inter-American Affairs (Miller)1


Subject: Argentine Financial Arrears

The National Foreign Trade Council2 proposes to issue a press release (attached as Tab A)3 expressing the view that the Argentine Government should be strongly urged to take immediate steps to approve the transfer of at least a portion of Argentine financial arrears and to establish a definite formula to clear the entire backlog. Four hundred million pesos in unremitted profits were worth $82,000,000 at the end of 1948 but are worth only $29,000,000 at the current rate of exchange according to the release.

The number 1 objective of the NFTC in connection with this matter is undoubtedly to achieve payment by Argentina of the arrears at the [Page 1134] most favorable possible rate. We are, I am sure, ready to help in any way we can to gain this objective. However, given the present state of the Argentine economy and the present attitude toward foreign capital of the Peron Government, it is doubted that the desired objective can he reached either by sending a collector to pound on the door or by publicizing the debt.

The proposed NFTC release in effect charges that Argentina, by not settling its financial arrearages is not honoring a commitment to the Eximbank. This charge puts Argentina on the defensive by appearing to brand her as a welcher. Such an inference, if made, should be true beyond any argument. It is not likely, however, that Argentina considers she has failed to honor a commitment. She has recognized the debt and has agreed to pay it—not on any given date, however, but rather “when the status of the balance of payments so permits it”. Argentina has, to be sure, sufficient dollar balances to pay these arrears at once, but if she feels that her balance of payments situation does not permit payment now, her position has some substance. Owing to Argentina’s dismal crop outlook for 1952 and her depleted European balances, her balances in the US are, in a way, a nest egg for hard times. It is not therefore clear that Argentina has failed to live up to a commitment. If it is not clear the case of US creditors may be harmed if they so charge.

The disadvantageous situation in which the US creditors find themselves in the face of the depreciation of the peso is naturally a cause of real concern to them. It seems highly unlikely, however, that Argentina will recognize, as desired by the NFTC, a responsibility to remit earnings at an exchange rate approximating that in existence at the time remittances were blocked. Since Argentina is under no obligation to recognize such a responsibility, her only motives in adopting such a course would be in order to encourage, or at least not to discourage, foreign investment. Unfortunately the past actions of Peron’s Government have been such as to show clearly that Peron wants foreign investment only on his own terms. It is well known that his terms have not been liberal and it would be most surprising if they included remittance of profits at higher than the current rate of exchange.

There can be little doubt but that the Peron Government will regard any effort to collect financial arrears at this time, when Argentina finds herself in severe economic difficulties, as an attempt to kick her when she is “down.” We are not in a good psychological position. Despite Argentina’s reserves, we are not even in a good bargaining position outside the psychological realm if it is true that Argentina is going to rely on a program of austerity instead of foreign aid to pull her through 1952.

What action should be taken?

[Page 1135]

I see no reason why an inquiry should not be made by our Embassy of Cereijo or Gomez Morales4 whether Argentina has any immediate plans for implementing the latter’s stated intention to pay her financial arrears when her “balance of payments so permits it.” The Embassy might add that in the opinion of the creditors Argentina’s dollar balance seems to be more than enough to justify at least the formulation of a plan for payment and some initial action by way of implementation of the plan. We should not, however, put on any pressure through the Foreign Office at this time. It is my view that a press statement by the NFTC would not hasten payment and might, in fact, retard the Argentine willingness to cooperate by creating an even more hostile attitude in Argentina toward US capital.5

Attached as Tab B is a memorandum6 giving a chronology of significant steps since March 1950 pertaining to Argentine financial dollar arrears.

Tab B


Chronology of Significant Steps since March 1950 Regarding Argentine Financial Arrears.

[Here follow those sections of the chronology pertaining to the period from March to December 1950.]

5. A despatch from our Embassy in Buenos Aires of January 29, 1951, inquired whether the Argentine Government should be approached regarding the resumption of financial remittances. About a month later Dr. Cereijo told Assistant Secretary Miller that he (Cereijo) had completely fulfilled his agreement with the Export–Import Bank regarding financial arrears. As for current remittances, Cereijo referred to Argentina’s remittance of 5 percent on current earnings and appeared to think that was satisfactory. We have not taken the arrearage problem up with Argentina since Mr. Miller’s talk with Cereijo. Relations between the two countries became increasingly difficult as the November 11 elections approached. “Wall Street” was one of the principal targets of the Peron Government’s anti-US propaganda and it was realized that any approach on this problem would be turned to the disadvantage of the US, and would probably [Page 1136] make a satisfactory settlement less likely by making the question more a political than an economic one.

6. On September 27, 1951, Messers Akin, Jacob7 and Emerson8 of the National Foreign Trade Council called at the Department to request the Department’s opinion as to the advisability of issuing a press release on the subject of Argentina’s financial arrears.9 They were advised that such a release prior to the Argentine presidential elections might be detrimental to the achievement of their principal objectives. They agreed with the Department after hearing its reasoning. The latter recommended that the problem be discussed again following the elections and that a course of action be developed in the light of the situation at that time.

7. On November 20, 1951, Mr. Akin wrote to Mr. Miller suggesting that he and Mr. Gray10 would like to go over the problem with him at an early date. Mr. Miller replied that he would be glad to do this at their earliest convenience.

8. The following conversation took place on November 30, 1951 between Mr. Multer11 of the House Banking and Currency Committee, President Peron and the Argentine Minister of Finance:

Congressman Multer:

I am sure that when there is confidence in the United States that Argentina will allow the re-export of earnings as readily as she allows the importation of materials, this situation (strict terms of payment for Argentina in US) will find its solution.

Minister of Finance:

But there is no payment pending.

Congressman Multer:

What happens is that, although they know there is no payment pending, today it is not possible to re-export the earnings from North American investments in the country and that has there its repercussion.

The President:

Gentlemen, I do not discount the importance which this minor and circumstancial matter has in international relations, particularly commercial ones, between the United States and Argentina, but as a statesman, I view the problem from a more elevated [Page 1137] place, a higher one, because I do not believe that an entire economic policy can be based on an insignificant matter such as this.

I analyze, since I have been the head of the government, what the conduct of the United States has been in the interchange between Argentina and that country. I see a very unfavorable circumstance for us when, during five years they owed us thousands of millions of dollars and we said not a single word, while in great contrast, when we have a small debt they wish to take us to the scaffold for it. …12 We have not had reciprocity from the United States.

  1. Addressed also to Mr. Mann, Deputy Director of the Office of South American Affairs Rollin S. Atwood, and Mr. Randolph.
  2. A private organization representing United States corporations engaged in international trade.
  3. Not printed.
  4. Alfredo Gómez Morales, Argentine Minister of Finance.
  5. A memorandum from Assistant Secretary Miller to Mr. Dearborn, dated December 18, 1951, and attached to the source text, reads as follows: “I have talked with both [William S.] Swingle [Executive President and member of the Board of Directors, NFTC] and John Akin [Executive Officer in charge of Western Hemisphere matters, NFTC] about the attached matter in the last few days and they have indicated that they are going along with my suggestion that in the first instance the Council confine itself to writing a letter to us which we could in turn pass on to our Embassy at BA for any action that they might think appropriate.” (835.10/12–1351)
  6. Printed below.
  7. Leonard Jacob, II, Vice President, International Telephone and Telegraph Corporation; member of the Board of Directors, NFTC.
  8. Earl A. Emerson, President, ARMCO International Corporation; member of the Board of Directors, NFTC.
  9. The discussion which took place at the Department of State on September 27 is recorded in a memorandum of conversation of the same date, by Mr. Dearborn, not printed (835.10/9–2751).
  10. W. Latimer Gray, Senior Vice President, First National Bank of Boston: member of the Board of Directors, NFTC.
  11. Abraham J. Multer (D–N.Y.).
  12. Omission in the source text.