Foreign Relations of the United States, 1961–1963, Volume XII, American Republics

190. Memorandum of Conversation¹

Washington, July 19, 1962, 4:03 p.m.

SUBJECT

• Argentine Economic Situation²

PARTICIPANTS

• Argentine Minister of Economy—Alvaro Alsogaray
• Vice President, Argentine National Development Council—Admiral Francisco Castro
• Argentine Ambassador—Roberto T. Alemann
• The Secretary
• The Under Secretary
• Assistant Secretary—Edwin M. Martin
• Deputy Coordinator—Alliance for Progress—Graham Martin
• Deputy Assistant Secretary—Herbert K. May
• Chief, Latin American Division, Treasury Department—Henry Costanzo
• Officer in Charge, Argentine Affairs—Bruce M. Lancaster
• Department of State Interpreter—Donald Barnes

After he had been welcomed by the Secretary, Minister Alsogaray gave a detailed review of the current Argentine situation and his plans to bolster the Argentine economy. He stated that under his Government’s newly announced political plan, elections would be held next June and a new President and Congress inaugurated in October 1963. In the meantime, the present Government would have considerable freedom of action to work on economic problems and he hoped that the economy of Argentina could be brought to a state where elections would take place under favorable circumstances.

The Minister stated that in his opinion the announcement of the Alliance for Progress had ushered in a period in which the Argentine people took a particularly favorable attitude toward the U.S. It was his hope that the Alliance would be able to offer the right aid at the right time. A long range development program for Argentina was very necessary, but his Government needed immediate support for projects which had already been undertaken and which could not be completed because of budgetary difficulties. If the U.S. could help with these projects within the terms of the $150 million aid package there would be three desirable consequences: necessary projects could be completed, Argentina’s own efforts to reduce its federal budget would be buttressed and financial stability could be maintained. Many of the projects which he had in mind were as much as 80 per cent complete, with the entire cost to date having been borne from Argentine funds. A memorandum regarding such projects would be ready in several days.

The Minister added that he was not seeking assistance from the U.S. which would be designed for or publicized as emergency aid, but as part of a continuing program of cooperation under the Alliance for Progress. He mentioned the need for housing to replace Buenos Aires slum districts as of particular importance.

(In concluding his remarks, Minister Alsogaray referred to several miscellaneous subjects, including the possibility of P.L. 480 aid in providing forage for cattle producers in drought areas, the desirability of completing the investment guarantee agreement between the U.S. and Argentina and the highly favorable reaction in his country to the U.S. arrangement for providing a sugar quota for Argentina.)

The Secretary asked what the political atmosphere might be like in Argentina during the year preceding the elections. Would people take a wait-and-see attitude or would there be active cooperation with the present Government? Minister Alsogaray replied that at present the Argentine public was much more preoccupied with economic than political problems. The man-in-the-street in Argentina knew about and was very interested in the present financial negotiations with the U.S. He believed that his Government could maintain a mutually agreed truce with rank and file union members. Even though union leaders, many of whom were actively involved in politics, could be expected to attempt to stir up trouble, he did not expect to have acute political difficulties with the unions. Indeed he believed that, considering the economic difficulties which most Argentines had had to cope with in the past few months, labor had been remarkably restrained.

The Secretary then asked if there had been recent capital flight from Argentina and whether Argentine capital could be mobilized for the development of the country. In response the Minister stated that capital flight had been a problem after Frondizi was deposed. The peso had gone as high as 137, but capital flight had now largely stopped and he believed that the peso could be stabilized at around 114. The attitude of the Argentine public during the next few weeks would be crucial. A favorable aid arrangement with the U.S. would evoke a very good reaction.

The Secretary commented that he hoped that Alsogaray’s discussions with the IMF would proceed to a successful conclusion. An agreement with the IMF would generate confidence abroad which would be transmitted back to Argentina and thus increase the confidence of the Argentine people in their own economy.

(At this point the Secretary and the Under Secretary withdrew to keep other appointments.)

At the suggestion of Mr. Edwin Martin, Mr. Graham Martin commented on the Minister’s interest in AID support for uncompleted projects, stating that his agency would want to examine details before expressing its views. Mr. May referred to the $50 million portion of the aid package which was an Eximbank commitment, stating that these funds could only be used to cover purchases in the U.S.

Minister Alsogaray agreed that this was the case. He said that he was interested additionally in talking to the Eximbank about a loan for highway construction equipment which had been granted some time ago. A good portion of this loan had not been used and he was hopeful that it could be released for other purposes. [An Eximbank official stated later that only $20 million of this $40 million loan had been drawn to date.]³

Mr. Edwin Martin stressed the U.S. view that Argentina should reschedule its debts with the Europeans as soon as possible. He asked whether these debts were to be extended by their present holders or whether they would be refinanced by European financial institutions. Minister Alsogaray replied that his Government would be talking to the Europeans very soon about extensions of the debts of the Government of Argentina as well as those of Government-owned enterprises. He still did not know the extent of private indebtedness to the Europeans or to U.S. banks. He believed that some private debtors who had undertaken excessive obligations would have to learn a lesson. Mr. May said that he believed that the Europeans were very receptive to the idea of rescheduling Argentina’s debts and might perhaps even provide new money. He was sure that the Argentine Government did not want to get into a position where private debtors (including even those who had incurred unwise obligations) would place a heavy burden on Argentina’s foreign exchange reserves by rushing in to purchase foreign currencies.

Mr. Edwin Martin said that in the process of straightening out the Argentine economy prior to the elections, it appeared highly important to avoid any sort of inflation which would place an undue burden on the wage earner. Minister Alsogaray agreed, and stated that U.S. help with a low-cost housing program would be particularly helpful in meeting the desires of labor.

Minister Alsogaray concluded by stating that Argentine financial experts were arriving Sunday⁴ who would provide the IMF with detailed information and proposals on credit stabilization during the early part of the coming week. He hoped to be able to complete negotiations with the IMF by Wednesday.⁵ Mr. Edwin Martin said that, after the Argentine position with the IMF had been clarified, he and senior officers of the Alliance for Progress and Eximbank would like to sit down with the Argentine group and review U.S. programs.

Mr. Martin then added that he understood that Minister Alsogaray was interested in calling on the President before he left. The Minister stated that he was indeed anxious to do so and hoped that this might be arranged for the latter part of the coming week. Mr. Martin said that the President had an extremely tight schedule but that the State Department would see what it could do.⁶

1. Source: Department of State, Secretary’s Memoranda of Conversation: Lot 65 D 330. Confidential. Drafted by Lancaster and approved by Swank in S on July 31. The time of the meeting, which lasted until approximately 5 p.m., is from Rusk’s Appointment Book. (Johnson Library)
2. At the White House daily staff meeting, July 19, Kaysen briefed the staff on Argentina: “Kaysen reports that a crisis is momentarily expected in Argentina, probably in the form of an outright military takeover. The immediate problem is that the Argentine finance minister is in town and the US has to take some firm position, or lack thereof, in regard to the Argentine financial crisis.” (Memorandum by Ewell, July 19; National Defense University, Taylor Papers, Daily Staff Meetings, May-Sept. ‘62)
3. Brackets in the source text.
4. July 22.
5. July 25.
6. See Document 191.