126. Telegram From Secretary of State Rusk to the Department of State 1

Secto 11. For Ball from Secretary. I am convinced after my talks with Illia, Foreign Minister, and economic team that it is time for us to begin to move forward with Argentina.

They have proceeded with oil negotiations in good faith.2 So far as I can see the Hickenlooper amendment is not now being violated in letter or in spirit. The oil companies including PanAm are making profits and repatriating them.

In terms of self-help the Argentines have taken significant steps to increase tax collections which have risen 74 percent over last year, they have produced a serious development plan; they have the respect of the IBRD and IAB and are actively negotiating project loans with them; they are entering a period of crucial confrontation with Peronist unions in an effort to hold wage increases to 15 percent in the next round.

They believe—and I agree—1966 may be the crucial year to demonstrate that stabilization and growth are compatible.

And I am not unmindful of the 1967 Argentine elections and the various matters in which I shall wish to have the collaboration of the Foreign Minister in the months ahead.

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In all our conversations there was no whining. But they feel they have now created the basis for a new relation with us. What they want to know is what we are prepared—and what we are not prepared—to do in Argentina over the next year.

Specifically, as I understand it, there are the following issues:

1.
The Ex-Im loan for the four Boeings. The domestic airlines operate at a deficit. There is a decent hope that their international flights can be made profitable if they get the Boeings. We understand that the British made yesterday an offer of UC–10’s for immediate delivery. They would be less economical than the Boeings. For quite narrow reasons of U.S. interest I am inclined to believe this loan should be urgently completed. Would you inform Linder.3
2.
The three loans for which funds have been committed and which simply await our action. I believe we should move in one or more of these promptly.
3.
The housing loan which was held up awaiting legislation and then withdrawn. The legislation has now gone through. We should carefully consider if we cannot move in this field of considerable political and social importance.
4.
Assistance in debt roll-over. I am told they will require debt and other adjustments of something like $100 million in 1966. Against the background of a favorable IMF report and U.S. support they seek a further European roll-over early in 1966. We should begin staff work now to see what can be done, if their performance continues to improve.

Neither the position of our bilateral relations nor their actual self-help performance yet justify full steam U.S. support. But would you look into the best ways to put some coal in the furnace promptly.4

Rusk
  1. Source: National Archives and Records Administration, RG 59, Central Files 1964–66, POL ARG–US. Confidential; Exdis. Rusk was in Buenos Aires, November 15–16, for meetings with the Illia administration; he then proceeded to Rio de Janeiro for the Second Special Inter-American Conference.
  2. In a November 18 memorandum to Mann, Sayre reported that Argentina has recently settled with five American oil companies, leaving two with outstanding contracts. (Ibid., ARA/APU/A Files: Lot 69 D 87, PET 4—Agreements)
  3. Harold F. Linder, president and chairman of the Export-Import Bank.
  4. Ball replied that the Department was “in general agreement” with the Secretary’s analysis but that action on the silo and housing loans would require “special strong presentation at highest level because of potential effect on U.S. balance of payments.” (Telegram Tosec 46 to Rio de Janeiro, November 18; National Archives and Records Administration, RG 59, Central Files 1964–66, POL ARG–US) Martin later complained that the Embassy had heard “noises” from Washington which were not in keeping with the Secretary’s telegram from Rio. The Deputy Chief of the AID Mission in Argentina, for example, had recently reported that the “attitude in AID/LA was quite negative on reactivating housing loan which was canceled last June.” (Letter from Martin to Vaughn, December 21; ibid. AID(US) 7 ARG)