Foreign Relations of the United States, 1958–1960, American Republics, Volume V

201. Memorandum of a Conversation, Department of State, Washington, October 6, 1959¹

Washington, October 6, 1959

SUBJECT

• Call by Minister Alsogaray on Under Secretary Dillon²

PARTICIPANTS

• Under Secretary Dillon
• Argentine Minister of Economy Alvaro C. Alsogaray
• Secretary of Finance Eustaquio Mendez Delfino
• Vice President of Central Bank Julio Gonzalez del Solar
• Sr. Roberto T. Alemann, Financial Counselor, Argentine Embassy
• Mr. C.A. Boonstra, Director, Office of East Coast Affairs

Mr. Dillon expressed his pleasure at having the opportunity to receive Minister Alsogaray and alluded to his sympathetic interest in Argentina and in the economic program to which the Minister is dedicating his efforts.

Minister Alsogaray replied with a detailed statement concerning recent events in Argentina. He referred briefly to the program of Perón, particularly the socialist and statist economic institutions which by the time of Perón’s fall had carried the country a long way from private enterprise. By 1955 the country was ruined economically and was dominated by unproductive practices and procedures both in business and in labor. The Provisional Government was not able to make much progress in the economic sector although it did provide the opportunity for expression of private enterprise philosophies such as advocated by the Minister himself. President Frondizi recognized the problems before he took office but action during the first few months of the Frondizi administration was dictated, perhaps inevitably, by political necessities. Subsequently, President Frondizi made the final decision that only the private enterprise approach could be productive in helping to speed Argentina’s recovery. This led to negotiations for financial assistance culminating in the December 1958 financial arrangements, in connection with which Argentina greatly appreciates the United States’ assistance. From January to mid-June 1959, there existed in Argentina a period of considerable confusion caused by the fact that the Frondizi Government was headed firmly toward private enterprise as its basic orientation, but was trying to do so with a government which contained many counter forces and persons who were endeavoring simultaneously to go in other directions. The resulting confusions culminated finally in the crisis of mid-June 1959 which resulted in a decision to move out those persons who were not fully in agreement with the administration’s objectives. Similar confusion has existed in the military and labor sectors. The climax of the military disorientation perhaps was the crisis of early September. There has now been established a more generally accepted orientation for the military forces and the Minister believes there will probably not be any further similar difficulties. The labor policy likewise has been confused but is now being oriented in a satisfactory manner. This has been demonstrated by the recent failure of the general strike which was called for political purposes. It appears now that the administration will be able to deal with labor on economic rather than on political grounds.

Minister Alsogaray said that the first productive results of the stabilization program and the private enterprise approach are now becoming evident. In this connection he spoke of progress toward balancing the government’s budget although there remains at the same time the very serious problem of extremely large budget deficits for the state operated enterprises. He mentioned also the favorable balance of trade during the first half of 1959 and the recent stability of the dollar exchange rate. He pointed out that the exchange rate stability had been achieved without government support and in fact the government was continuing steadily to buy dollars at the present rate in order to build up its reserves. Next year there would be a need for additional financial assistance but the favorable trends are firmly established. During his visit in Washington he had spoken with the IMF and with United States financial agencies about the help which Argentina would need in 1960,³ and also he had spoken with Erhard, Makin, and Pinay with respect to suitable arrangements in European financing.

Following this rather lengthy discourse, Minister Alsogaray said that he had a few specific points to which he would like to call Mr. Dillon’s attention. The first is Argentina’s urgent need to revise its tariff. The present tariff is hopelessly antiquated both with respect to rates and nomenclature. To assist the recovery program it has been necessary to place heavy surcharges on imports. These surcharges cause difficulties in administration as they are subject to executive determination and contribute toward an unstable situation. Also they can be justified only as an emergency measure and it is to Argentina’s advantage to move away from an emergency basis as rapidly as possible. Accordingly, Argentina has been working toward a broad revision of its tariff including the adoption of the Brussels nomenclature and will soon desire to begin negotiations, principally with the United States and the British, toward placing the new tariff in operation. Negotiations with the United States will be required under terms of the present bilateral agreement. The Argentine Government will appreciate the cooperation of the United States in expediting such negotiations and in helping to clear the way for early adoption by Argentina of its revised tariff.

Mr. Dillon inquired as to whether Argentina is a member of GATT, and whether in any case the new tariff might not be negotiated within the GATT framework. The Minister replied that Argentina is not a member of GATT but is exploring this possibility and would like to discuss this with United States technicians. Mr. Dillon said that such discussions would be welcome.

The Minister then mentioned that common market discussions among the South American countries were well advanced and that United States support would be helpful in achieving a successful arrangement. Mr. Dillon noted that the United States had been following these discussions with much interest and would continue to study sympathetically such projects. In this connection the Minister noted that the Minister of Finance Delfino and Sr. Alemann have taken a special interest in this matter and, as Delfino would be staying in Washington a few weeks for further financial discussions, he would be able to follow up further on common market consultations. Dr. Alemann will be returning temporarily to Argentina but will be back to work on both the tariff and the common market.

At this point Mr. Dillon said that he would like to bring up one matter of current interest to the United States. This relates to the aviation negotiations held in Washington which last week terminated without making any progress toward a bilateral agreement.⁴ The United States had expected that, with the arrival of Argentine negotiators, there would be an opportunity for some progress on this matter and was disappointed when nothing was achieved.

In reply, Minister Alsogaray referred again to his earlier comments concerning the difficulty of redirecting at once all of the many sectors of government policy, particularly as many individuals have remained in the government who are not working directly toward the achievement of the government’s policies. As he had previously pointed out, these people are being changed. On the day of his departure from Buenos Aires, Ambassador Beaulac had spoken with him concerning the aviation problem but there was nothing which he could appropriately do at that point. There now has occurred a change, with news of the resignation two or three days ago of several members of the Board of Directors of Aerolineas Argentina. This would provide the opportunity for reexamining Argentina’s aviation policy and for reopening the negotiations on a basis in which progress can be made. Mr. Dillon stated his gratification that the prospects appeared better for a future negotiation.

Just before saying goodbye to Mr. Dillon, the Minister remarked that the Argentine Government has now approved the investment guarantee program and is prepared to go ahead with the signing of the agreement. He mentioned also that approval has been given to the Inter-American Bank and that Argentina looks forward to depositing its ratification jointly with the United States.

1. Source: Department of State, Central Files, 835.00/10–659. Confidential. Drafted by Boonstra. A note on the source text indicates the memorandum was approved in U on October 19.
2. Alsogaray arrived in the United States on October 1 for discussions with U.S. officials on U.S.-Argentine economic relations.
3. Details of Argentina’s aid requests for 1960 are described in a memorandum by Frank A. Southard, Jr., of the Department of the Treasury, October 1, attached to a memorandum from Rubottom to Dillon, October 2. (Department of State, Central Files, 735.13/10–259)
4. Information on the negotiations which opened on September 15 is in Department of State Bulletin, October 5, 1959, p. 491.