217. Memorandum of a Conversation Between President Frondizi and the Ambassador in Argentina (Beaulac), Buenos Aires, April 7, 19601
SUBJECT
- Economic Policies; Post Election
The President said that the elections had strengthened the Government’s intention to carry on the recovery development program. The danger of subversion from Peronist sources, on the one hand, and anti-Peronist sources, on the other hand, has greatly diminished. There would be no change in policy and no change in the “team” as a result of the elections and the program will be carried out with renewed intensity. The Government has a majority in Congress and, besides, no further major legislation is required.
[Page 627]I noted that the elections had had poor publicity abroad. I said it was probably natural to compare them with the 1958 elections and I thought the conclusions were excessively pessimistic. He agreed. I said that the Embassy had been careful to keep the Department informed in some detail and to transmit its conclusions, which coincided with the President’s, and that I was confident that the Department was using these messages to help to orient persons in Washington.
I said I understood the Government was having trouble with the budget and that credits had exceeded the limitation placed by the Monetary Fund by some 100 million pesos. The President said that this was indeed the case. It was hard to reduce the budget as quickly as the Government would like to. I asked him if he had any particular plans for meeting the problem. He said that the Government hoped for increased revenues and would continue to reduce personnel. He said the Grain Board would be reduced by 50 percent. I asked him about the Meat Board. He said it would be reduced, too. I noted that the Meat Board was as big as when the Government intervened the meat industry and that I understood that most people over there had nothing to do. He agreed that this was the case.
The President said that the bureaucracy could be reduced more rapidly if there were places for the workers to go.
He said that what the country needed urgently now were: 1) highways; 2) airfields; and 3) additional steel capacity.
He said the Government will have spent $300 million on San Nicolás before it gets a ton of steel out. Furthermore, when San Nicolás begins to operate it will be an uneconomic operation. He said the mill will produce 600,000 tons of steel but will have processing facilities for 2 million tons. Two more blast furnaces are needed. The Export-Import Bank is willing to consider financing one but only after the mill has begun to operate and the results are visible. It is willing to consider financing still another blast furnace but only after the first two are in operation and the results are evident. In the meantime, the San Nicolás mill will continue to be an uneconomic operation. Argentina needs more steel making capacity immediately.
I said that I had seen articles in the press concerning a new private steel plant which was to be brought down. He said that that operation had not been completed.
He said that Argentina would welcome private investment in the field. I asked him whether there was any chance of interesting private investment in the San Nicholás plant. He said he did not see how private capital would be interested in becoming partners in an uneconomic enterprise. I suggested that maybe the Government might be willing to take some of the losses already incurred. He said that that [Page 628] was a possibility but not a great one. He said he intended to write President Eisenhower a letter on this subject, and he would also mention highways and airfields.
With reference to highways, he said that what they need is one or two American companies who would come in and start to build highways on a large scale and furnish financing at the same time. I said I understood that some American companies were already talking to the Government. He said that was true but he thought the program had to be arranged on a high level. I said I understood that pesos were available for this program from the proceeds of the gasoline tax. He said they would be available but that up to now they had gone to YPF. However, YPF is being obliged to change its plans. The Government has talked to Esso and Shell in this connection.
I referred to reports in the press concerning a possible rail strike. He said there was no rail strike in the offing. The problem had to do with the railroad hospital. It was a minor problem. I asked him what progress was being made in reducing the railroad deficit. He said progress was slow but they were working on it. The railroads could get along with 50,000 men but it was not possible to fire as many as should be fired. Some operations had to be turned over to private firms; some rails had to be removed.
The task of reducing personnel would be much easier if there were a road building program. I noted that the limitation on credits was already being exceeded and that pesos spent in the public sector aggravated the budget problem and resulted in fewer pesos being available to the private sector. He said this was unfortunately the case.
- Source: Department of State, Central Files, 835.10/4–1260. Confidential. Drafted by Beaulac. Transmitted in despatch 1468 from Buenos Aires, April 12.↩