Foreign Relations of the United States, 1955–1957, American Republics: Central and South America, Volume VII

221. Memorandum of a Conversation, Export-Import Bank, Washington, August 13, 1956, 10:30 a.m.¹

Washington, August 13, 1956, 10:30 a.m.

SUBJECT

• Loans to Argentina

PARTICIPANTS

• For the Eximbank: Messrs. Waugh, Sauer, Blowers, Brand, Stambaugh, Rowntree, Cady, Pollack
• For the Department of State: Messrs. Prochnow, Holland, Rubottom, Vaky, Blodgett

A meeting between officials of the Eximbank and the Department of State took place at the Eximbank on August 13 at 10:30 a.m. The purpose of the meeting was to discuss recent developments in the Argentine situation and prospects for Eximbank participation in loan assistance to Argentina.

Mr. Waugh opened the meeting by briefly summarizing recent developments. He stated that the Argentine delegation returned to Washington from New York on August 7 after an apparently fruitless effort to obtain commercial bank loans in New York. Dr. Coll Benegas has visited the Bank and indicated Argentina’s interest in loans in the power and transportation field, particularly for railway rehabilitation. Mr. Waugh has discussed the Argentine problem with Mr. Black of the IBRD who stated emphatically that the IBRD would be unable to make any commitment until a full scale mission had been sent to Argentina, probably not before October 1, and had presented its report. Mr. Black also indicated that it would not be possible to issue any urgent loans in the interim or to take over loans which might be authorized by the Eximbank. According to Mr. Waugh, Dr. Coll Benegas had indicated his desire to return to Argentina immediately but has now arranged to remain in Washington “indefinitely”.

Mr. Waugh went on to say that during conversations held last week with Henry B. Sargent and William B. Stafford of American and Foreign Power Company, Inc., Mr. Sargent advanced the suggestion that his company might be interested in getting into the Buenos Aires power picture through a contribution of its claim against the Argentine Government for previously nationalized properties as an equity investment in a new company to take over the assets of CADE and ITALO. The new company would presumably include an Argentine Government contribution, either on an equity or debt basis, of its claim against CADE, plus possible additional new investment. This would be so organized that American and Foreign Power would have a 51% voting interest in the new company. Mr. Brand added that A.&F.P. would also sell to the Argentine Government its assets outside of the Buenos Aires area.

While this suggestion has not been discussed with the Argentine Government, Mr. Waugh expressed the view that it would offer an ideal solution to A.&F.P’s claims, CADE’s debts and the reorganization of the Buenos Aires power setup, which is a political liability so long as CADE continues in control. It would also give the Eximbank an opportunity to confine its new lending in Argentina to a private American corporation with which it has already had extensive dealings. He added that solely from the banking point of view, the Eximbank would not feel justified in increasing its present loan balance with Argentina ($76 million outstanding plus $60 million committed). He also felt that it would be unwise for the Eximbank to embark on a new loan program with the Argentine railways because (1) the Bank’s contribution could not be sufficient to provide more than a shot in the arm, (2) Eximbank participation in railway lending might indefinitely delay a more logical IBRD participation, and (3) the railways (unlike the power companies) are operating at a deficit.

Mr. Prochnow expressed the view that the proposed concentration of Eximbank lending in the power field appeared reasonable and logical but that it did not solve pressing problems in the transportation field and did not yield the kind of immediate benefits which railway loans might be expected to yield. In reply Mr. Waugh pointed out that the Argentines might meet pressing needs in the transportation field through the utilization of proposed IMF drawings totalling $75 million. Mr. Rowntree mentioned also that Argentina had recently negotiated a 20 million pound loan from the U.K. (An Embassy Buenos Aires despatch reported that the loan amount was 30 million pounds.²) There was every evidence, according to Mr. Waugh, that the IBRD would eventually authorize loans needed by Argentina in the transportation field and in the power field outside of Buenos Aires.

Mr. Prochnow then raised the question of what answer was to be given to the Argentine delegation and suggested that if the Eximbank were to send a mission as soon as possible to Argentina coincidentally with the return of Dr. Coll Benegas, it would solve the latter’s problem of not returning empty handed and would provide an opportunity for getting the Eximbank power loan proposal on the table for discussion in Argentina with the Argentine Government. Mr. Brand mentioned that Mr. Sargent is now in Chile and, if invited by the Argentines, could go to Buenos Aires to discuss possible investment in the Buenos Aires power network. Mr. Waugh emphasized the importance of leading the Argentines in such a way that the suggestion for the new private power company would appear to come from them rather than from A.&F.P. or the Eximbank. Mr. Sauer mentioned the total amount of investment involved as about $450 million of which the dollar costs (i.e. Eximbank contribution) would total between $100 and $150 million.

Mr. Holland indicated his strong view that any new Eximbank loans to Argentina should be part of a package deal including a solution not only of the problems of A.&F.P., CADE and ITALO, but also those of the American meat packers in Argentina who are being squeezed between high minimum prices of cattle and low ceiling prices for meat. Mr. Waugh replied that the Bank would undoubtedly take occasion during its conversations to bring up this problem, but that it did not appear desirable to make a solution of the meat packers’ difficulties a necessary condition to the negotiations. Mr. Holland agreed, but expressed his assumption that no actual disbursements would be made by the Eximbank until the packers’ problems were solved.³

1. Source: Department of State, Central Files, 835.10/8–1456. Confidential. Drafted by John Q. Blodgett, Economic Development Division, Office of International Financial and Development Affairs, on August 14.
2. Apparently a reference to despatch 74 from Buenos Aires, July 27. (Ibid., 735.00(W)/7–2756)
3. In despatch 137 from Buenos Aires, August 16, Ambassador Beaulac enclosed four separate memoranda concerning his recent talks with the Argentine Ministers of Commerce and Industry, Treasury, Labor, and Agriculture. “It will be seen”, he noted in part in his covering note, “that the ministers concerned with the meat packing problem state that the Government will proceed promptly to reach a settlement with the meat packers and that the ministers concerned with the power problem say that they will reach a prompt settlement with American and Foreign Power. The CADE problem is seen as more difficult of solution, but the ministers recognize the seriousness of this problem and the need of taking appropriate steps to solve it.” (Ibid., 835.00/8–1656) Beaulac was appointed Ambassador on May 10; he presented his credentials on June 1.