555. Memorandum From the Officer in Charge of River Plate Affairs (Watrous) to the Deputy Assistant Secretary of State for Inter-American Affairs (Snow)1
SUBJECT
- Issues Between Uruguay and the United States
Political
Political relations between the United States and Uruguay are traditionally excellent. This has been true both because of a common devotion to democracy in theory and practice and because in the past Uruguay has made a point of seeking friendship with the United States as a measure of protection in relation to her large and powerful neighbors.
What political differences the two nations have are largely marginal and matters of emphasis rather than substance. Thus, Uruguayans are given to criticizing the United States for “supporting” dictators in Latin America and tend to take a somewhat holier-than-thou attitude toward our dealings with undemocratic regimes.
[Page 1108]The reverse of this coin recently has been a feeling in United States circles to the effect that Uruguay, or more specifically the present Uruguayan administration, has been “soft on Communism.” The Arbenz case, of course, provided a good talking point for this theory, although, for reasons set forth in a previous memorandum, I am not convinced that the charge of “softness” has always been kept in proper perspective.
If, as is often maintained, relations between the two countries have suffered somewhat in the past few years, my belief is that this has been caused less by differing political viewpoints than by specific irritants, mostly in the economic field. These are discussed below.
One difficulty stemming from Uruguay’s political system is the slowness of Uruguay to ratify signed agreements, a process requiring the approval of both houses of Congress. Among agreements which have been pending in the Congress for a long time are an FCED Treaty, a General Agreement for Technical Assistance (consolidating several separate agreements), and an agreement for an industrial productivity program. In addition, Uruguay has still to renew the Air Mission agreement which expired in December, 1955.
In practice, while the delay in ratification has caused inconveniences, no serious consequences have ensued. Nevertheless, the laboriousness of the ratification procedure has on occasions been mistaken by other U.S. Government agencies for a lack of Uruguayan interest, and the Department has had to struggle against a tendency to cut down, or out, programs in Uruguay on this ground.
Economic
Wool Tops. The U.S. countervailing duty on Uruguayan wool tops, imposed by our Treasury in 1953, is probably the single greatest grievance Uruguay has against us. The duty was imposed because Treasury considered that under Uruguay’s multiple rate exchange system wool tops were receiving a subsidy. Since the imposition Uruguayan wool tops have practically ceased to enter the United States.
The Uruguayans have several times attempted, unsuccessfully, to convince Treasury that under the latter’s formula the duty should be removed. On the basis of an exchange reform of August, 1956, there is some reason to believe that the removal of the duty could now be justified. As soon as Uruguay sets two missing exchange rates, another attempt will probably be made. It should be added that there is heavy political pressure from U.S. wool manufacturers for the maintenance of the duty.
GATT Meat Items. As a result of negotiations at Annecy in 1949 the United States agreed to lower its duty on three meat items. [Page 1109] These reductions were held up at the time for technical reasons, following which pressure developed to have them not put in effect. They never have been. The Department has several times urged the Trade Agreement Committee to have these items proclaimed, but with no success.
P.L. 480 Program. Until recently Uruguay has been probably the most outspoken critic of our P.L. 480 program. Opposition has been expressed on the grounds that our “dumping” of agricultural products cannot fail to hurt Uruguay’s exports. In point of fact, there is no evidence to support this theory other than the general argument that if the U.S. had not “dumped” Uruguay might have received higher prices.
Now that Uruguay is contemplating a P.L. 480 negotiation itself, it is likely that much of this criticism will die down; some resentment, however, will probably persist.
Loans. Despite the fact that Uruguay has not officially approached us on this score, the Embassy has consistently reported that Batlle Berres wants a dollar loan, and is resentful that we have not supplied one.
We have tried to indicate to the Uruguayans that we would be happy to consider a loan, but that, if it were of the stabilization type, Uruguay would be expected to institute some financial reforms; this condition Uruguay seems unwilling to face up to. Rather, they have approached New York banks and been turned down, thus increasing Batlle’s pique.
The problem is complicated by the fact that, in present political conditions, Batlle probably would not want to ask Congress to approve a loan. Nor, if he did so, is there any assurance that Congress would do so.
Crossties. Almost three years ago the Uruguayan State Railroad, through intermediaries, contracted for over one hundred thousand crossties from a U.S. firm, A.F. Pylant. The ties were produced when, through a technicality, the order was cancelled, leaving Pylant facing bankruptcy.2 He is unable to sell the ties elsewhere as they were produced and bored to peculiar Uruguayan specifications.
For practical reasons Pylant has no way of obtaining legal redress; yet, not having exhausted legal remedies, we cannot make a formal diplomatic claim on his behalf. We have, therefore, been urging the Uruguayan Government on grounds of equity to find some solution to the problem. There is a chance that the newly-installed Railroad Board may be sympathetic to this approach.
[Page 1110]The case is badly tangled up in Uruguayan politics (which caused cancellation in the first place) and several U.S. Senators are active in pressing Pylant’s claim.
Meatpackers Problems. During the past decade a diminishing cattle supply in relation to a growing population has led the Uruguayan Government to restrict the amount of meat which it has permitted the two U.S. meatpacking concerns in Uruguay to pack. In addition, Uruguayan price and wage controls have made the packers’ operations unprofitable; to compensate for this the Government has paid a subsidy to the packers, although the subsidy has not always made up the deficit or been paid promptly.
The packers feel that the Government is sympathetic to their problems, but they still do not have a firm base for profitable long-term operations.