Foreign Relations of the United States: Diplomatic Papers, 1943, The American Republics, Volume V

840.51 Frozen Credits 35/106: Telegram

The Ambassador in Argentina (Armour) to the Secretary of State

Buenos Aires, October 27, 1943—6 p.m.
[Received 10:27 p.m.]

2530. Reference Department’s 1644, October 24, 8 p.m. and one [sic] 1647, October 29 [25], 9 p.m. What would appear to be an unfortunate leak reported in Embassy’s telegram No. 2526 of October 27, 4 p.m.,⁵ would seem to precipitate action along one of the three following lines: (a) to freeze Argentina immediately, (b) to issue an announcement denying the press story and follow a policy of inaction, or (c) for Washington neither to confirm nor deny the United Press story, while observing reaction here. This latter course is dangerous since it would provide time for any Axis dollar assets cloaked via the Argentine to be liquidated. Furthermore it is doubtful if the United Press despatch will be released by censor so that true reaction will be difficult to determine. The following message was prepared before the Embassy had knowledge of the United Press story, but as it covers the situation in all its aspects no changes are being made.

The following represents the Embassy’s considered judgment with respect to the situation:

(1) The Embassy’s immediate objective in making freezing recommendation was economic warfare. Recent events have convinced us that Argentine Government has practically ceased to exercise any control over totalitarian activities or their financing. There are mounting evidences that from control the Government is rapidly passing to the promotion of such activities. The extent of the effectiveness of Treasury measures naturally depends on the degree to which our Government wishes to impose its controls. The Department realizes that the measures could of course be used to the extent of imposing a financial and merchandise embargo. The Embassy’s minimum aims would be the following:

Supervision of a large percentage of Argentina’s international financial transactions and, through the use of the licensing procedure, a beneficial ownership breakdown of assets held through local banks and financial institutions in the United States; the elimination of credit to Axis firms on the part of generally licensed banks; the certification by such banks that no direct or indirect Proclaimed List interest was involved in any transactions handled by them; and, possibly a disclosure of funds held locally for European account by such banks.

(2) The Embassy never believed that the measure recommended could have the extreme political effect mentioned by the Department. It hoped first to select an appropriate moment to announce freezing so that the measure would be interpreted as directed against the Government and [not] the Argentine people. Recognizing supersensitivity of Argentines, it must be remembered that there is now strong and widespread feeling within Argentina against present Government. It was our thought that proper action by United States at this time (when the cumulative effect of Government’s totalitarian and unpopular acts is at a peak) would be interpreted as an alignment with Argentine people against an already unpopular Government. A better occasion may or may not arise. It should be emphasized that foregoing is merely a matter of opinion although it does represent our considered judgment. After the imposition of freezing, the Embassy hoped that the Argentine Government would give our Government an opportunity to disclose publicly the extent to which the present and previous Government were aiding and abetting those firms which could be universally defined as inimical to the security of the Western Hemisphere. The Embassy predicates its recommendations on the basis that nothing should be done to strengthen the present Government, but risks should be taken to weaken it. Risk is inherent in these recommendations.

(3) In order that the American point of view may be clearly understood by Argentina and the American Republics, it is thought that even press censorship in this country could not prevent the publication of a statement by the President and it is for this reason that the Embassy respectfully suggests that if freezing is determined upon, the President consider issuing a statement along the following lines:

“A year and a half ago the Treasury Department proposed that those financial controls applicable to neutral countries, as provided by Executive Order No. 8389, be extended to Argentina. That action, if approved, would have had the effect of subjecting all financial and commercial transactions to prior license by the Treasury. In other words, there would have been a recognition of Argentina’s self-proclaimed status of neutrality and Argentina would have been accorded by the United States the same treatment given neutral countries under the above mentioned order.

Since at that time I had every confidence that Argentina would comply with the Rio de Janeiro Resolutions, I disapproved the Treasury proposal even though recognizing that in doing so I was in a sense countenancing a measure of discrimination against other neutral countries to which this measure had been applied. However, in view of recent events and for reasons of continental security, the Treasury has again proposed such action. My present reaction to the Treasury’s proposal, after a year and a half of keen disappointment waiting for Argentina to join her sister republics, is one of sad and reluctant agreement; I feel constrained to approve the action. In doing so I feel that I must repeat that it is nothing more than precognition of Argentina’s oft-avowed position of neutrality, a position which that country, as a sovereign nation, of course has every right to adopt.”

(4) Comments on Department’s statement regarding potential dangers:

(a) The British attitude would not be a new one and as the United States has constantly borne major brunt of onus for economic warfare measures, a slight intensification should not be too greatly feared. However, the British might agree to announce simultaneously or shortly thereafter that recent developments in Argentina including instructions to press to publish no longer the Proclaimed and Statutory Lists, made it necessary to intensify British controls with respect to shipments from Great Britain and neutral countries to Argentina.

(b) There is no question but that the Argentine Government might attempt to impede the shipment of essential materials needed by the United Nations. However, as this country has as great a need of selling as the United Nations of buying, such measures would only be temporary or would lead to elimination of the present Government. The only real danger, other than temporary, foreseen by the Embassy is that some export such as beryl, which is unimportant in Argentine economy, might be affected, but these questions could be worked out on the basis of straight trading for essential materials such as oilfield equipment.

(c) If the President issues the suggested statement, it is believed that reaction among American Republics would be favorable.

(d) Nonbelligerent rights might be withdrawn.

(e) Wilcox and Welch, respectively of the Boston and National City Banks, who were confidentially consulted, are afraid of dire results possibly including the intervention of American firms, prohibition of exports, and even deportation of Americans, due to character of present Government. The Embassy cannot fully share these fears. If action taken on the basis of Argentina’s neutrality should lead to such reprisals, it would be such a definite alignment with the Axis that a failure to recognize this and to accept the challenge implied [in?] such a situation could well expose us to the criticism rather than approval of the American Republics, since this Government represents even at the present time, in the Embassy’s opinion, what the United Nations are fighting in other parts of the world.

(5) The Embassy has no desire to do more than state its position and does not wish to influence the Department into recommending action the Department considers unwise. However, it must express the opinion that an opportune moment has come to make public the attitude of the United States with regard to the present Government of Argentina.

(6) Consequently, the Embassy would like to repeat its recommendation that the amendment to Executive Order 8389 be announced. Further, it is believed that no immediate provision should be made for the issuance of Argentine general licenses; such licenses should be given only after a full study by the Treasury and only after the Embassy can calculate with reasonable certainty the influence of repercussions produced in Argentina by this action. Naturally, the Treasury may desire to permit small and unimportant transactions to continue undisturbed and the Embassy could see no objection to this.

Armour

5. Not printed; this telegram called attention to a United Press report of the imminence of a general freezing measure (840.51 Frozen Credits 35/105).