178. Memorandum From the Assistant Secretary of State for Inter-American Affairs (Rubottom) to the Under Secretary of State for Economic Affairs (Dillon)1
SUBJECT
- Argentine Military Assistance
Continued support of Frondizi by the Argentine military services is vital to the carrying through of his economic program in the face of expectable public restiveness and frontal opposition by Peronista-dominated labor with an assist by the Communists. This was a determining factor in our support of special credit terms designed to aid the equipment-starved Argentine Armed Forces in moderate purchases of [Page 558] aircraft and Army vehicles and in the securing of naval rehabilitation services. Your letter of March 62 to Assistant Secretary of Defense Irwin stated approval of a program totalling approximately $10 million.
Because of poor coordination among the Argentine Armed Forces, and the Frondizi Government’s difficulties in setting firm limits as to what each service may have vis-à-vis the others, there have been misunderstandings on the Argentine side as to what we are prepared to do in principle. Consequently we find now that current Argentine military aspirations exceed the $10 million level to which you have given approval.
As a result of several frank talks which I have had with the Argentine Ambassador, who is extremely disturbed about the situation, he has stated his willingness to try to pull the requests of all three services together. He is urging, however, that he needs some financial room for maneuver if he is to succeed. Although present desires of the three Argentine services total some $20 million, the Ambassador believes that he can negotiate an acceptable program if a $13 million credit can be considered in place of the $10 million. Apparently this would involve a credit of $1.2 million for the basic rehabilitation of two submarines available to Argentina under the Ship Loan Bill; possibly $5.9 million for a reduced number of F–86 jet planes with five years’ spare parts for the Argentine Air Force; and a matching $5.9 million for equipment, principally trucks, for the Argentine Army. The special credit terms envisaged would cover three years, with no, or purely nominal, payments during the first two years, and the bulk of the payment in the third and final year.
The additional $3 million which it appears will result in general satisfaction of Argentine military desires represents a comparatively limited increase which might almost be brought within the original financial approximation if given liberal interpretation. The advantages to be derived from satisfaction of Argentine military aspirations, in terms of support for the Frondizi Government against strong efforts to undermine it, are significant ones. I have just received a communication from Ambassador Beaulac urging our accommodation of these aspirations.3 We have a distinct stake in the outcome of Frondizi’s efforts; if they fail, current Argentine support of economic freedom will be discredited; if they succeed, we have a powerful example to use in our economic dealings with other Latin American nations.
[Page 559]Recommendation:
That you approve in principle an Argentine program whose cost may exceed the $10 million previously estimated, provided that every effort is made to hold expenditures as close as possible to $10 million, and that $13 million is not exceeded in any case.4
- Source: Department of State, Central Files, 735.5–MSP/4–2959. Confidential. No drafting information appears on the source text. A copy was also sent to Bell.↩
- Document 171.↩
- No such “communication” has not been found in Department of State files, but this may possibly be a reference to Ambassador Beaulac’s letter of April 17, supra.↩
In an April 29 memorandum to Snow attached to the source text, Dillon responded to Rubottom’s recommendation. The memorandum reads:
“In response to Mr. Rubottom’s recommendation of April 23 on this matter, ARA may proceed in negotiations with the Argentine Ambassador looking toward an Argentine submission of a priority listing of military items. Such a list would constitute a formal, coordinated Argentine request to purchase equipment and services on a credit basis, and would be prepared on the understanding that the items might cost a total of more than $10 million, but no more than $13 million.
“This authorization is based on the assumption, as set forth in Mr. Rubottom’s memorandum of April 23, that within the above limits a credit sales program can be agreed upon which satisfies Argentine aspirations and meets U.S. objectives.
“It should be understood that the financing of this program may require the diversion of a substantial portion of the funds required therefor from other Western Hemisphere military assistance programs. The Department of Defense has clearly indicated the funding problems which such a program would create for the already strained MAP budget.”
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