840.51 Frozen Credits/10528
The Ambassador in Argentina (Armour) to the Secretary of State
[Received June 1?]
Sir: I have the honor to refer to the Department’s instruction No. 4199 of April 24, 1943,84 relative to certain transfers made by the Banco de la Naciόn from its dollar accounts in the United States to the account of the Central Bank.
As the Embassy has previously reported concerning the depreciation of the dollar in relation to the Argentine peso from the latter part of March to April 20, 1943, the Central Bank cushioned the drop of the dollar in this period by making purchases in the free market. These purchases were not made directly by the Central Bank but for the Central Bank by the Banco de la Naciόn and the Banco de la Provincia on alternate days. The amounts thus purchased for the Central Bank by the banks in question are not known but it is known that the purchases were on a large scale and probably amounted to more than the withdrawals in question. Accordingly, one possible explanation of the withdrawals would be the probability that settlements with the Central Bank were not made on a day to day basis and that the amounts in question represented the amounts purchased by the Banco de la Naciόn for the Central Bank and transferred to it on the three occasions in question.
While the above explanation appears credible, it must also be remembered that Argentina and particularly the Banco de la Naciόn have feared some kind of blocking sanctions being applied by the United States Government. It was probably thought that the large amount of dollar selling in the days preceding the issuance of Decree No. 148263 of April 20, 1943 might precipitate such action. Accordingly, with this thought in mind, it is possible that the Banco de la Naciόn, which is known to hold a great many dollars for the Central Bank, wished to transfer them to the Central Bank to avoid difficulties. As the Department is aware, authorized banks in Argentina purchase and sell dollars in the official market for the account of the Central Bank. A commission is paid for the purchase and another commission is paid for the sale. Accordingly, the banks attempt to hold the dollars as long as possible and sell them in order to get both commissions. For this reason almost all of the authorized banks in Argentina hold considerable dollars for the account of the Central Bank.
Whether one or the other or both of the explanations above-given motivated the Banco de la Naciόn to effect the transfers to the Central [Page 480] Bank, the Embassy believes that the dollars transferred belonged to the Central Bank and that the Central Bank was not receiving such dollars merely to protect the Banco de la Naciόn in any way.
Respectfully yours,
Counselor for Economic Affairs
- Not printed; in this instruction the Department advised the Ambassador and requested his comment on relatively small transfers from the dollar accounts in the United States (840.51 Frozen Credits/10188).↩