835.5034/3–1449: Telegram
The Secretary of State to the Embassy in Argentina
us urgent
268. Dept refers Art 40 Arg Constitution and commends your action conversations Pres and FonMin both prior and subsequent to [Page 496] approval Constitution emphasizing strongly unfavorable reaction this Article Amer business and Govt circles. Dept agrees your recommendation advisability representations in writing to Arg Govt (Emb A–134, Mar 14, 1949) and accordingly unless you recommend change for Dept’s consideration present note to FonMin as follows:
Excellency: I have the honor to refer to my recent conversations with President Perón and Your Excellency regarding Article 40 of the Argentine Constitution which became effective March 16, 1949. The President and Your Excellency have requested a note from this Embassy confirming the reasons for the concern of my Govt with respect to this Article and it gives me pleasure to comply herein with this request.1
The fourth para of Art 40 states: (Emb insert paragraph)2 My Govt is gravely concerned with this provision because of the harmful effects which it is having on Argentine-United States relations and because it lays a constitutional basis for legislation contrary to international law insofar as it authorizes the expropriation of certain property without prompt, adequate and effective compensation. Many United States citizens who have investments in Argentina and who believe their interests may be included among “concessionary organizations of public service” view the possibility of such confiscatory action against their property with consternation. Future United States investors will inevitably hesitate before investing in a country where they believe they may be forced to suffer heavy losses by official action. It would now appear that a United States citizen might be deprived of all his property in Argentina after years of prudent operation because he had amortized his original investment or because he had made a profit over the years in an amount retroactively declared to be excessive by legislation or decree. In these circumstances my Govt finds it necessary to reserve its rights with respect to the compensation provisions of Article 40.
The third para of Art 40 states: (Emb insert para)3 In a spirit of cooperation and in an endeavor to be helpful to Argentina in fulfilling the often expressed desire of President Peron to Amb Bruce and to me that foreign capital contribute to the economic development of Argentina, my Govt wishes to point out that this provision can be expected to discourage the investment of United States capital in Argentina because of the interpretation which current and prospective investors fear the Argentine Govt may put upon the words “public services”. While this para remains in the Constitution in its present form, United States enterprise can never be certain that some future congress will not broaden the interpretation of the provision to include a substantial proportion of United States investments in Argentina.
Permit me to stress, Your Excellency, that my Govt has instructed me to transmit this note in the hope that the observations made therein on a matter of primary importance in Argentina-United States relations will be useful in strengthening understanding, friendship and cooperation between our countries.4
- At the request of the Embassy in Buenos Aires, following a suggestion from Mr. Bramuglia who had seen the draft text of the note, this sentence was omitted from the final text. (Telegram 347, April 18, from Buenos Aires, and telegram 273, April 19, to Buenos Aires; neither printed, 835.5034/4–1849.)↩
- See the quoted section in the third paragraph of telegram 230, March 9, from Buenos Aires, p. 486.↩
- See the quoted section in the first paragraph of telegram 230, March 9, from Buenos Aires, p. 485.↩
- Mr. Ray reported in telegram 356, April 21, from Buenos Aires, not printed, that he had presented the note to Foreign Minister Bramuglia at noon on that day (835.5034/4–2149).↩