740.35112A/12–1644: Airgram
The Chargé in Argentina (Reed) to the Secretary of State
[Received December 26—5 p.m.]
A–936. The urgent attention of the Department is requested for a review of the policy statement contained in its telegram 1378, September 4, 7 p.m.23 The Embassy’s views toward the proposed policy were transmitted in its telegram 2303, September 6, 6 p.m.,24 wherein full accord was expressed on the condition that the Department outlined, namely that cooperation would be obtained from the British and other supplying countries. The Embassy refers further to the request in the Department’s 1746, December 4, 8 a.m. [p.m.]24 for a list of a [Page 372] few commodities important to Argentine economy for which it is dependent upon the United States so that strict control can be exercised over their exportation.
The Department is requested to analyze these instructions in the light of the following facts:
1. The British are disregarding the September policy.
Only one ship from Great Britain arrived in Argentina with general cargo from June 27 to September 28. Since that date three British ships, whose manifests on official British stationery are in the possession of the Embassy, and which left England since the September policy became effective, have arrived in Argentina. They carried a wide assortment of industrial chemicals (most of which were greatly in excess of such shipments during the first 6 months’ period), drugs, manganese ore, gums and resins, abrasives, anilines, bearings, and a variety of miscellaneous products. Since November 1st, five other British ships have arrived with either soda ash, caustic soda, or bicarbonate of soda as the sole cargo. These products are the backbone of the Argentine heavy chemical industry. All of these products are denied export licenses under current United States policy. Moreover, local British firms are daily advertising their willingness to accept orders for early delivery of a large variety of industrial, agricultural, and consumer goods.
Imports from Great Britain to Argentina in the 3-month period, July, August, and September, 1944, according to Argentine official statistics, were valued at 7,779,381 pesos. During October alone, such imports were 5,003,549 pesos. November figures will be much higher as more British ships have unloaded in Argentine ports.
In this connection, it has come to the attention of the Embassy that, acting upon instructions from London, the Anglo-Ecuadorean Co. of Ecuador and the Lobitos Oil Co. of Peru have just signed new petroleum supply contracts with Argentina. Reference Embassy’s A–916, December 7, 10 a.m.25
2. South Africa is maintaining and increasing exports to Argentina.
South Africa has shipped to Argentina since October 1st such products as bichromates, acids, coal, coke, tanning specialities, asbestos fiber, Karaya gum, graphite, chrome ore, calcium carbide, manganese ore, gum Arabic, and magnesite.
During the first 10 months of 1944, Argentine imports from South Africa were valued at 21,246,341 pesos as compared with 9,070,516 pesos for the same period in 1943. September, 1944, imports were 2,715,058 pesos; October 2,979,929.
[Page 373]3. The European neutrals are expanding their shipments to Argentina.
Since October 1st, Spain and Switzerland (via Portugal) have exported to Argentina the following items: iron and steel semi-manufactures, hardware and tools, pharmaceuticals, crude drugs, aniline dyes, DDT insecticide, essential oils, drugs, herbs and roots, iron oxide, chemicals, metal working machinery.
4. The British through their shipping and navicert controls, have approved such South African, Spanish, and Swiss shipments.
5. Mexican exports to Argentina are higher today than in any previous period.
Since October 1st, Mexico has exported to Argentina pig iron, iron sheets, zinc sheets, mercury, calcium carbide, ferromanganese, ferrosilicon, pyrethrum flowers, turpentine, tragacanth gum, white arsenic, and drugs, all of which are uncommon items in Mexican-Argentine trade.
During the first 10 months of 1944, Argentine imports from Mexico were valued at 13,328,026 pesos as compared with 5,849,942 pesos for the same period in 1943. September, 1944, imports, were 2,737,178 pesos; October, 2,965,417. Imports for these two months thus equalled ten months of 1943.
6. Brazil is increasing exports to Argentina to a tremendous degree.
Since October 1st, Brazil has exported to Argentina such rubber goods as hose, bicycle tires, belting, tubes, combs, heels, shoes in quantities greatly in excess of previous years; shellac, bichromate of soda, iron strip, pig iron, iron pipe, welding electrodes, bauxite, caffeine, bicycle spares and accessories, graphite, abrasives, electric wire, and cable, ferrosilicon, sewing machines, and cooperage materials.
During the first 10 months of 1944, Argentine imports from Brazil were valued at 284,209,864 pesos as compared with 160,577,019 pesos for the same period in 1943. September, 1944, imports were 28,993,974 pesos; October, 41,455,204 for a 42% increase since the establishment of the September policy.
7. Chile is maintaining its export trade with Argentina.
Since October 1st, Chile has exported to Argentina sulphur, iron sheets, pig iron, concrete bars, iron strips, wire, coal tar, formaldehyde, barium chloride, copper, wire, ferrosilicon, calcium carbide, copper sulphate, tinplate, coal, and such commodities as aspirin and essential chemicals via the Andean passes.
During the first 10 months of 1944, Argentine imports from Chile were valued at 39,023,360 pesos as compared with 30,789,449 pesos for the same period in 1943. September, 1944, imports were 8,251,073 [Page 374] pesos. October 6,754,296. October imports from Chile for 1944 exceed October, 1943, imports by 5,028,914 pesos.
8. During the first 10 months of 1944, Argentine imports from the United States were valued at 123,385,803 pesos as compared with 156,105,753 pesos for the same period in 1943. September, 1944, imports were 13,067,648 pesos; October 13,716,161. Such imports comprised drugs and medicines for the public health of Argentina, tinplate and packing house supplies, railway and public transport equipment, and products essential to industries producing goods for the United Nations. The United States has consistently rejected export licenses since September 9th that did not come within the scope of that policy. Moreover, further contrast is found in the fact that no United States-flag ship has brought merchandise to Argentina since such policy was announced.
Observations
- A.
- The September policy rested on the theory that the Argentine public health, the essential public services of the country and those of its industries contributing to the United Nations war effort, could be maintained and sufficient pressure nevertheless exerted upon the remainder of the Argentine economy to accomplish some objective of value.
- B.
- The Embassy believes that such a policy might have had a reasonable chance of success had the cooperation of the British and other American Republics been immediate, honest, and effective. Reference again is made to its Telegram 2303, September 6, 6 p.m.
- C.
- Such cooperation today is non-existent.
- D.
- The Embassy possesses no information which leads it to believe that the maintenance of the policy will produce greater cooperation in the future.
- E.
- The Embassy believes, therefore, that the September policy is a failure and that its maintenance is contrary to the best interests of the United States in Argentina.
Today the United States is supplying the essential needs and services of Argentina while the British and the other American Republics are filling, to the extent of their respective capacities, the desires of the remainder of the Argentine economy. The Embassy cannot ignore the consequences of this curious and harmful situation. Today the United States—in the face of the apparent British refusal of cooperation—is supplying and maintaining the bases of British influence in this country, the railroads, the frigoríficos, and the public utilities, and at the same time sacrificing the position of American business, predominantly in what is now called the “non-essential” field, often to its British competitors. Nor can it be claimed that such [Page 375] exports are appreciated locally. Today the policy of the United States is popularly understood to be one of sanctions against Argentina. In the light of British and other shipments, there is no public resentment against the Government as the responsible party for present restrictions, but only against the United States. No nation today enjoys less popularity in Argentina than the United States, a reputation purchased with no critical effect upon the Argentine economy, with a decided psychological and material increase in the local British position, and with grave prejudice to present and future American business. The Embassy is increasingly aware of the fact that of all the interested parties, the Argentine Nationalists, the British traders, and the rising commercial interests of other American Republics, it alone, as the representative of American interests here, has reason to object to the prolongation of such a situation.
Suggestions
The Embassy believes that British cooperation is the nub of the problem, a cooperation applicable both to its own export trade and through shipping and navicert controls, where appropriate, to the other exporting countries. Once British cooperation is assured, the Embassy feels that the problem presented by the exports of the other American Republics will become less significant and more capable of solution. The Embassy most strongly urges that representations again be made to the British for complete and effective unity of policy toward Argentina. Such a representation, the Embassy feels, should be distinguished from former requests by the willingness of the Department to adopt, in the event of a delayed or partial response, one of the following alternatives.
I. Effective Unilateral Action
The instruction contained in the Department’s 1746, December 5 [4] 8 a.m. [p.m.], indicted that the Department and the FEA are endeavoring to find a small group of commodities important to the Argentine economy over which strict United States export control can be exercised. There is such a group, but it is protected by the present umbrella policy of the United States which shields both the heart of the Argentine economy and the bases of the local British position from the effects of restrictive economic policy. That group of commodities is coal, coke, petroleum products, tinplate, and maintenance supplies for the transport and utility systems. The United States is the principal or exclusive supplier of these commodities today. A policy which excludes such commodities from economic action partakes more of the nature of an irritant than a cathartic. So long as the United States is willing to undertake the unqualified supply of such products, underwriting as they do the stability of basic Argentine industry and local British investments, the Embassy does not believe that British [Page 376] cooperation will be forthcoming. The Embassy would further emphasize that their supply permits the devotion of local fuels and lubricants to other industries and provides accordingly a secondary stability of Argentina’s economic structure.
The Embassy therefore recommends that the Department undertake a new appraisal of the Argentine supply situation. If it is apparent that the United States is compelled to pursue its policy unilaterally, then the Embassy feels that respect for the reputation of the United States in South America and for the position of American business in Argentina compels that policy to be made as effective as possible. This would involve the total cessation of exports from the United States of coal, coke, petroleum products, tinplate, and maintenance supplies for the transport and utility systems. Either tacitly or openly, the future of such supplies should be presented to the British as the condition for their full cooperation.
The position of drugs and public health supplies in the current Argentine situation is now being reviewed by the officers of the Embassy in charge of this work. A full report with the Embassy’s recommendations will shortly be forwarded to the Department.
II. Protection of the Interests of the United States
If the Department is unwilling to adopt the severe restrictive measures contemplated above, even as a basis for negotiation with the British, there is an alternative course. This would involve trade competition and protection. The United States should proceed to license for export to Argentina all merchandise available and should especially encourage the exportation of those items from the United States which, now in the hands of the British and Latin American traders, are presently sabotaging the September program. The obligation of the United States to maintain a program whose only significant effect is to displace the position won over a period of years by American business is assuredly not without limit. The political implications of such a course may be held to preclude its acceptance. However, the Embassy wishes to emphasize that if the full economic recognition of the present Argentine administration by Britain and the other American republics cannot be altered, the absence of political recognition rests on an extremely uneasy basis. If either the present anomaly should continue, or the diplomatic front be suddenly broken, the interests of the United States in Argentina will suffer an injury whose permanent effects in terms of economic discrimination cannot be calculated.
It seems apparent that any representations to the British with regard to Argentina, not buttressed with the alternative of independent United States action, are futile. Neither alternative presented here is entirely satisfactory. Both, however, have the merit of consistent [Page 377] and effective action, advantages which it is difficult to claim for the present situation.
The Embassy earnestly solicits the attention of the Department to the foregoing and requests an early instruction governing the considerations outlined. So that the effects of possible action may not, be impaired, the Embassy proposes to defer the processing of all Certificates of Necessity which would be recommended for approval under current policy, pending receipt of the Department’s instruction.
It will be greatly appreciated if the Department will inform the Embassy promptly, by cable, of any decision which will involve a change in the current policy in order that Certificates of Necessity may be properly processed without necessity for delay or revision.