Foreign Relations of the United States, 1949, The United Nations; The Western Hemisphere, Volume II

623.3531/2–2849

Memorandum by Mr. Edgar L. McGinnis of the Division of North and West Coast Affairs²

confidential

[Washington,] February 28, 1949.

Last December the Embassy Lima informed the Department (Despatch 1061, Dec. 14³) that the much discussed Peru-Argentine wheat-meat-petroleum barter deal was again under active consideration. On January 20 (Embtel 29³) the Embassy indicated that the proposed commodity exchange had expanded to include sugar, cotton, coal, petroleum and metals and that the Government, spurred on by the poor Peruvian food outlook was “prepared to take drastic action.” The Embassy pointed out that Peruvian exporters were opposed to dealing with Argentina because of the tendency toward a state trading monopoly in Peru but recognized that through some such arrangement Peru could obtain necessary food stuffs without the immediate outlay of dollars. These exporters suggested that if the U.S. offered wheat to Peru on a long term credit basis, the latter would most likely accept. The Embassy requested information as to the Department’s attitude.

In Washington a representative of the Esso Standard Oil Company handed the Department an “Aide-Mémoire”³ dated January 14, 1949 referring to the proposed barter arrangement and pointing out that Peru did not have sufficient petroleum under its direct control to complete the deal. The Company also mentioned that Jersey affiliates, in an effort to cooperate, had offered to arrange delivery of about 500,000 barrels of oil products during 1948 ex Aruba, but that the offer was not accepted. The Company asked whether Peru could obtain her wheat requirements from the U.S. and whether the U.S. was planning to make the wheat available through “special credit or loan facilities.” They added that should this be the case, there was little likelihood that the barter arrangement would go through.

In reply to Embassy Lima’s inquiry, the Department (Instruction 32, Feb. 3⁴) informed the mission that it would be a matter of concern to this Government should the proposed exchanges materialize since they might lead to a state trading monopoly in Peru which would restrict private trade in the articles covered by the agreement. It was suggested that the Embassy might, in its discretion, informally discuss the matter with the Peruvian authorities drawing their attention to Article V of the Trade Agreement between Peru and the U.S.⁵ (on according fair treatment to private traders in the event a monopoly is established) and to Article XVII of GATT⁶ which is somewhat broader in scope than the corresponding TA Article. The mission was also informed that wheat and flour are in ample supply here for Peruvian needs and reference was made to the International Wheat Conference in which Peru is participating. Respecting a wheat credit, the Embassy was told that, while prospects therefor were rather remote, the Department would like to hear of any Peruvian suggestions along these lines. The instruction expressed the view that it was improbable that Peru had sufficient petroleum of her own to take care of its part of the proposed bargain and mentioned the concern of Esso Standard over the prospect that the International Petroleum Company might be required to furnish the necessary supplies in exchange for local currency.

On February 10 (Embtel 74⁴), the Embassy told the Department that the Argentine-Peruvian negotiations had been discussed with the Foreign Minister and that the Embassy had left an informal memorandum with him (Despatch 179, Feb. 14⁴). The memorandum expressed our concern that the proposed agreement might shut out private trade between the U.S. and Peru in certain commodities and cited the provisions of the Trade Agreement and the General Agreement on Tariffs and Trade on trading monopolies. The memorandum closed with the statement that the U.S. is interested in supplying wheat to Peru, and referring to the International Wheat Conference, indicated that, with the present outlook Peru should not be concerned about the import availability of wheat.

The mission at Lima informed the Department on February 18 (Embtel 87⁷) that Peruvian sugar interests had told the Embassy that the Peruvian cabinet had decided to abandon the barter proposal which “may now be considered dead.” The Embassy stated that its informal memorandum to the Foreign Minister was before the cabinet during the discussion “with good effect.”

2. Addressed to Mr. Robert Woodward, Deputy Director of the Office of American Republic Affairs and Mr. Sheldon Mills, Chief of the Division of North and West Coast Affairs.
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5. Dated May 7, 1942. The text of the agreement is printed in Department of State Executive Agreement Series No. 256, and 56 Stat. (pt. 2) 1509. For documentation on the negotiation of the agreement, see Foreign Relations, 1942, vol. vi, pp. 674 ff.
6. The text of the General Agreement on Tariffs and Trade (GATT) is contained in TIAS 1700, or 61 Stat. (pts. 5–6). Documentation on U.S. participation is contained in volume i.
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