72. Backchannel Message From the Ambassador to Argentina (Lodge) to the Executive Secretary of the Department of State (Eliot)1 2
Subject:
- Transmittal of Message from Ambassador Lodge
The following message was received [text not declassified] from Buenos Aires for transmittal to The Department of State Executive Secretary.
1. Assistant Secretary of Treasury Mr. John R. Petty was received by President Lanusse at residence in Olivos at 1630 hours 30 August. Meeting lasted almost two hours. Argentines in attendance were Lanusse, Brigadier Major (Major General) Martinez, Chief of Joint General Staff, Brigadier General Pannullo, Secretary General of Presccy, Dr. Brignone, President of Central Bank and Dr. Ismael Quijano, one time Minister of Labor and Social Welfare and now Lanusse’s designate as Special Envoy. (See separate Embassy telegram.) United States was represented by Assistant Secretary Petty, Mr. Polgar and myself. Brignone translated into Spanish and Polgar into English.
2. Lanusse opened discussion by stating he was already informed of meeting Mr. Petty had earlier that day with Central Bank President Brignone and Under Secretary [Page 2] of Foreign Trade Girelli, which covered technical economic aspects and that he now wished to put his request for financial assistance in broader political and social framework. (ref Embtel 4472) (78457)
3. Lanusse said that United States aid to Argentina was essential not in the sense that without such aid Argentina would sink, but that only United States assistance can buy the time and thus provide the margin of safety which Lanusse requires to bring about a return to a politically-based system. Lanusse said he needs U.S. assistance as a security factor.
4. Lanusse said that what is and will be happening in Argentina has immediate impact on all of Southern Cone, including Peru and even Brazil, and will have political and psychological effects throughout Latin America. Argentina is fighting not only for her own future but for a way of life which is the free, Western-style way of life. Argentina can and does influence its immediate neighbors even at cost to herself and always bearing in mind Argentine belief in no [Page 3] intervention. Solutions must come from within countries concerned but these solutions can be assisted from outside such as Argentina has just done with some success in Bolivia. Lanusse said that if things had gone ahead in Bolivia along the lines that country was taking recently, within a few months he would probably have had here a Special Envoy from President Nixon discussing what could be done about Bolivia. Lanusse said he intended to aid Bolivia, Peru, and Uruguay and perhaps even Chile despite the cost of these efforts to Argentina because of the moderating effect Argentina can exercise. He said the President of Uruguay on 8 July had asked him for money “which frankly I do not have”but which he said he would find for President Pacheco.
5. Fundamental problem is that Argentina’s economic solutions must have a political base but that the necessary political support cannot be obtained in face of the continuing deterioration of the economy. Lanusse and advisors are well aware of orthodox economic solutions but political price is too high. Lanusse said [Page 4] “we will do what needs to be done but we do not wish to talk about it.” The two obvious choices are between a rigidly planned economy with social content which [could? would?] satisfy the immediate aspirations of the people but which in the long run would lead to socialism or [worse?] or a policy to revitalize the economy without [social?] content. Peru, Chile, until recently Bolivia are examples of the first, Brazil and Paraguay examples of the second. Neither method is appropriate for Argentina which must find a balance between the requirements of the economy, and the requirements of the people in such a way that the upcoming hard decisions will also have political support. Lanusse said he did not wish to go toward socialism as practiced in Latin America because he anticipated nothing but disaster and a threat to our way of life, and he was convinced that should he fail, Argentina would inevitably go leftist.
6. In view of the tough problems confronting Argentina, he needed not only sympathy and comprehension [omission in the original] United States support for Argentina’s role. This [Page 5] was the reason he asked for a private channel of communications with President Nixon.
7. Mr. Petty explained that he came to speak to General Lanusse as the personal representative of President Nixon, that he had also spoken with Kissinger and Helms and that Argentina’s problems were indeed well understood and her aspirations appreciated. That while he had to say, as was previously indicated, that bilateral financial assistance in the magnitude indicated by Lanusse was simply not possible, he came to explain the various possibilities (which he then proceeded to do and need not be repeated herein). Petty also explained the legislative and related publicity problems which Mr. Nixon would have to face if he had to seek legislation for special aid for Argentina and with very uncertain results. Mr. Petty also spoke of the reasoning behind President Nixon’s recently announced economic measures where the combination of shock and surprise resulted in an immediate increase in confidence in the U.S. Lanusse said that the same means were not [Page 6] available to him.
8. The discussion then turned to the possibilities of the international lending market and Argentina’s failure to take advantage of existing opportunities. Lanusse criticized the international channels as too slow and not responsive to his immediate requirements. With respect to the U.S. offer to assist in putting together an international consortium, Lanusse felt that the Western European bankers would follow the lead of their New York colleagues and if this is the road to be taken, he would propose to send his own representatives to New York to take soundings. He said he would send Dr. Quijano immediately and Central Bank President Brignone maybe two weeks later (for the IBRD-IMF meetings).
9. I mentioned to Lanusse at this point that Admiral Gnavi indicated that he and General Rey might go to the United States to undertake negotiations on financial matters. Lanusse said this was a possibility, whereupon I did my best to discourage the idea.
10. The lack of concrete programs, which could be [Page 7] supported by the international institutions, was then raised by me, pointing out that there was little or nothing in the pipeline for Argentina at the international agencies. Lanusse, with the aid of Brigadier Martinez, replied that the lack of loan applications did not indicate lack of programs, that Argentina was currently [garble—financing?] over two billion dollars worth of public works [garble—projects?] and that the more proper explanation was that [garble—Argentina?] was skeptical of the procedures and conditions [garble—imposed?] by the international agencies or for that matter [garble—the?] EXIM Bank.
11. I pointed out that the investment climate was not favorable, that confidence was lacking, that in some degree this was caused by the policies of Aldo Ferrer but that the prospect of elections was also creating doubts and uncertainties and acts against the stability and continuity which investors prefer. I said that the three Latin countries with perhaps the greatest economic recovery experience were Mexico, Brazil and Spain and while I naturally did not advocate their particular form [Page 8] of government, I noted the interrelationship of stability, continuity and the economic conditions. Lanusse did not agree that there was any similarity in the situations of the three countries and Argentina. He said he knew Mexico and Brazil well. Mexico was a dependency of the United States although its star was not yet in the flag, that Mexico had the strongest, authentic, home-grown anti-United States sentiment in the hemisphere and that from President to the last peon there was resentment against the United States. Brazil had no trade unions, no freedom of speech or of press, the population was docile and more than half of them lived at subsistence level. Brazil could afford policies which he could not. As for Spain, there was indeed great economic recovery but the regime was based on a million killed in the civil war, a price Argentina is unwilling to pay.
12. With respect to Aldo Ferrer and the related issue of nationalism, Lanusse said that we could have no conception of the pressure he is subjected to from the [Page 9] nationalist sector. He, Lanusse does not wish to go down the nationalist road because while we are all nationalists in the sense of advocating the interests of our countries, the nationalist road in Latin America seems to lead to national socialism or Marxism. It would certainly be advantageous, Lanusse said, to wrap himself in the blue and white flag and it would certainly help him politically but “if I make moves because of political considerations which I know will be bad, then I deserve to lose.”
13. Despite all the difficulties, Lanusse felt the country had to move toward elections even at the cost of economic instability. The problem was, and this brought us back to the beginning of the conversation, to maneuver the social and economic factors in such a way as to bring about an acceptable election result.
14. After closing remarks by Mr. Petty in which he referred to Washington’s understanding of Argentina’s situation, Lanusse said that he was gratified that some information was getting through, that the U.S. had some [Page 10] good eyes here but he wished that they had better ears. I said that although I have only been back here for a few days I have observed a noticeable improvement in the atmosphere and that this would also increase confidence. I alluded to the fact that it is generally accepted among Argentines that the Peronists would win the elections, to which Lanusse did not answer. On the other hand, I said that things were improving and that if the economic trend could be reversed, Lanusse might emerge as the “available” candidate. Lanusse let this one go too but he did agree that things were better “despite some deaf North Americans” (i.e. deaf to Lanusse’s repeated requests for money laid on the line).
15. The President escorted us out of the building and walked with us to the cars. Mr. Petty proceeded directly to the airport. for that reason this message could not be cleared with him.
- Source: National Archives, Nixon Presidential Materials, NSC Files, Box 769, Country Files, Latin America, Argentina, 1 September 1970–31 December 1973. Secret; Sensitive; Nodis. The message was sent under a September 1 covering memorandum from Haig to Kennedy; not published. In the covering memorandum Haig stated that “we should move rapidly on a change of ambassadors. This man [Lodge] apparently does not have the confidence of President Lanusse; and from reading the dialogue, it is also evident that he hasn’t the humility to recognize it.”↩
- The wide-ranging discussion revealed President Lanusse’s motives for U.S. assistance, and U.S. attitudes towards Argentina. Nixon’s personal representative, Assistant Secretary of the Treasury, John Petty, discussed the reasons why the United States could not meet its requests for assistance.↩