Foreign Relations of the United States: Diplomatic Papers, 1943, The American Republics, Volume V

835.50/108

Memorandum on Aid to the Axis Through Use of Argentine Financial Facilities⁸⁵

May 1943

At Rio de Janeiro in January of 1942 and at Washington in July, 1942, the nations of this hemisphere bound themselves together to sever all financial and commercial relations with the aggressor nations and nations dominated by them and to take appropriate steps to eliminate from the economic life of the respective countries of this hemisphere persons and firms who are deemed to be engaged in inimical activity. Argentina at those conferences bound herself to take appropriate action along these lines. To say that Argentina has not complied with her obligations in the financial field arising from the recommendations of the Rio de Janeiro and Washington Conferences is in itself a serious charge, and it can be substantiated. However, a much more serious charge, if it can be substantiated, is that Argentina has allowed her financial facilities to be used for the aid and comfort of the aggressor nations and the nations dominated by them.

The charge is not here made that Argentina has deliberately attempted to aid the Axis to the detriment of hemispheric security; the charge is that Argentina is allowing her financial facilities to be used to the benefit of the Axis. It is true that Argentina may say that she is a neutral country and free to carry out any commercial transactions which she chooses. That thought may give comfort to some Argentines and to the Argentine Government, but it must be remembered that aid to the aggressor nations does not necessarily take the form of a contribution to Axis propaganda or subversive activities. It may take the form of a commercial transaction as that term would be used by one indifferent to the war and indifferent to the benefit accruing to the aggressor nations. Commercial transactions must be analyzed on more than a quid pro quo basis. If a commercial transaction benefits Argentina and at the same time benefits the Axis, Argentina cannot expect the United States and the other Americas to remain indifferent when that benefit accruing to the Axis may be measured in terms of the lives of United States soldiers and in terms of detriments to the national security of each of the other Americas.

In fairness it must be said that Argentina has taken some measures designed to decrease the aid given to the aggressor nations and the nations dominated by them. The Banco Central has on paper an extensive control of financial transactions involving the aggressor nations, the nations dominated by them and persons or firms situated therein.

When those measures are viewed as a peace time exchange control, little fault can be found. But when those measures are studied from the point of view of hemispheric security, practically nothing has been done to prevent the aggressor nations and the nations dominated by them from obtaining aid from Argentina. It must be admitted that if the Banco Central enforced to the fullest extent existing measures, much would be done to fulfill the obligations which Argentina contracted at Rio de Janeiro and at Washington, and much would be done to prevent the aggressor nations and the nations dominated by them from obtaining aid and comfort from Argentina.

One form of aid which Argentina has given to the Axis is that accruing through remittances from Argentina to the Axis countries and the nations dominated by them. The many remittances of free funds from Argentina to the aggressor nations or the nations dominated by them can only be viewed by the United States Government and the Governments of the other Republics in this hemisphere as an outright contribution to the extent of the amount of the remittance to the Axis war machine.

One of the many cases in point is the remittances which have been made to the Dresdener Bank since the Rio de Janeiro Conference. These remittances have been protested by this Government to the Argentine Foreign Office. The last of these remittances, and there have been others, occurred on or about January 10, 1943, and roughly was in the amount of 700,000 Swiss francs. That remittance was made through the Banco de la Provincia de Buenos Aires pursuant to Central Bank authorization, to the Credit Suisse in Zurich, Switzerland, for the account of the Dresdener Bank, Berlin, Germany. Such remittance when reduced to its simplest terms means nothing less than that the German Government was presented with free Swiss francs in the approximate amount of 700,000. The difference between making this remittance and not making it is the amount of materials which the German Government can purchase for its war machine from other neutral countries with 700,000 Swiss francs for use against the United States, its Allies, and against the interests of the other countries of the Western Hemisphere. Remittances of this character are not open to argument as to whether the aggressor nations are aided to the detriment of the Allied cause. Such remittances, as stated above, are outright contributions to the Axis war effort and there can be no doubt about it.

This Government would indeed be ill-advised to attempt to enumerate in amount the remittances which have gone from Argentina to the aggressor nations and the nations dominated by them since December 7, 1941, or more particularly since January 28, 1942, or even to attempt to name all of the most important of them. However, this Government is in a position to point to certain general categories of remittances and to confront the Argentine Government with the accusation that such remittances have inured to the benefit of our enemies in the present war. However, it should be clearly understood that while certain particular remittances are mentioned herein, these specific cases are merely cited as examples. This memorandum is not an attempt to enumerate the many specific remittances which have been found objectionable or which have been formally protested. Such remittances for rent, interest, other income, communications, insurance and an infinite number of other purposes are all remittances which benefit the Axis. They make available to our enemies exchange or funds which can be used against the United States and the Western Hemisphere. Information as to the amounts, purposes and recipients of such remittances as well as the surrounding circumstances of each remittance is all known to the Argentine Government through its agency, the Banco Central.

A type of remittance which, while highly objectionable, is not as much so as the types above mentioned but which nevertheless gives aid to the aggressor nations and the nations dominated by them, is the socalled family aid remittance. At the Washington Conference it was realized that each of the nations of this hemisphere had citizens abroad in those countries ravaged by the aggressor nations and citizens who were there not by their own choice. There has been no desire on the part of any of us to see these citizens starved. However, their welfare was secondary to the major objective of continental defense. With this thought in mind, the financial authorities of the various countries of this hemisphere, including Argentina, devised a formula which would provide for the needs of those citizens and prevent aid going to the aggressor and aggressor-dominated nations. That formula is set forth in Recommendation I of the Washington Conference.⁸⁶ However, the Argentine Government thus far has not seen fit to restrict the family aid remittance to the conditions set forth in that formula. So far as this Embassy has been able to ascertain, any person in Argentina can remit for “family aid” 500 pesos per month to any person in the aggressor nations or the nations dominated by them, 1,000 pesos per month if the remittance is of income from investments in Argentina, and in “exceptional” cases, amounts in excess of that limit. This has been brought to the attention of the appropriate authorities of the Argentine Government and they have responded that in most cases the Axis and Axis-dominated countries only acquire blocked funds and that these funds can only be used for certain purposes in Argentina. Technically speaking, these funds are not free funds but they are funds which aid the enemies of the United States. Without going into detail as to the use to which these funds may be put, it is sufficient to cite only one instance. Those funds can be used for the purpose of diplomatic representation and consular services for the aggressor nations and the nations dominated by them. Were these funds not available, those nations in most cases would be forced to send to Argentina free funds to defray the expenses of their Embassies and Consulates and to that extent the free exchange available for war materials to be turned against the United States and hemisphere defense would be lessened. Thus there can be no doubt that this is an aid to the Axis and the Axis occupied countries.

In the minds of the twenty other American Republics, Argentina today by its failure to sever commercial relations with the aggressor nations and nations dominated by them, remains the one outlet for funds from this continent and the one channel into the continent from which funds may come from those countries. So long as this channel remains open it is possible for the Axis and Axis occupied countries to send to Argentina funds which may be used for propaganda and espionage activities and otherwise directed against the security of this continent. The accusation is not here made that Argentina knowingly permits the entrance of funds for such purposes. However, it is possible for these funds to enter Argentina through so-called legitimate commercial channels and be used for purposes aiding the Axis and Axis occupied countries and inimical to the security of the continent. Suppose, for instance, that a totalitarian firm in Argentina owes a debt to a bank in Argentina, It is the understanding of this Embassy that if the debt is considered large in proportion to the capital of the firm the Argentine monetary authorities will permit a remittance from the parent company to liquidate this debt. Innocent as the transaction may seem to those who choose to forget its effect on hemispheric security, it has the effect of furthering the credit of the German firm so that it may borrow other funds in Argentina and if it so desires put these funds to use for subversive activities, espionage and Axis propaganda. A remittance of this type which served to unblock funds in Argentina was made in March 1942, whereby the Siemens Company of Germany remitted $250,000 pesos to pay debts owed by “INAG” Fábrica Reunidos de Utiles Sanitarios. This Government is informed that this transaction freed 250,000 pesos which were blocked in Argentina in the name of the German Reichsbank. Decreasing the debt may be an aid for the Argentine economy by bringing money into Argentina but it is also an aid to the Axis, and is a detriment to the interests of the other nations of the continent. Other instances of remittances from Europe of equal potential danger could be cited.

In connection with the thought that Argentina today remains the only channel of communication between the Western Hemisphere and the Axis and Axis dominated countries, the charge must be presented that by the policy which it has pursued, Argentina has made it possible for persons and firms in the other countries of the hemisphere to deposit their funds and assets here to evade the controls of their own Governments and to effect remittances which aid the enemy countries. Furthermore, it must here be noted that Argentina has in the past opened its doors to refugee funds, but what steps has Argentina taken to discover the real owners of those funds and what surveillance has been placed on their use? In the past Argentina by her lack of controls which could uncover cloaking activities, has encouraged our enemies to send their funds to Argentina for safekeeping until after the war.

In addition to aid through remittances, there are many other ways in which Argentina aids the Axis financially. Argentina has been and remains a market for currency and securities looted by the aggressor countries. American currency seized by German “brigands” in the conquered countries can today be bought in Buenos Aires. It is true that the Banco Central under the authority given it by the Executive Power has done much to cope with this situation. The Banco Central has practically closed the looted currency market in so far as the authorized exchange shops are concerned but nevertheless the black market flourishes. From the Axis and Axis dominated countries looted currency is sent to Argentina and from Argentina it is sent to the other countries of the hemisphere. The same is true of securities looted in the invaded countries. The Banco Central had adopted stringent measures to stop this bootlegging and to stop the inflow but notwithstanding this action, an investigation by the Argentine Government will show that such securities have been brought into Argentina for sale in order that the proceeds may be used to further the Axis war machine. If this market were closed, it would be practically impossible for the Axis to realize funds from this loot which could be used against the interests of this hemisphere.

Argentine financial facilities are freely used by local totalitarian firms. As a matter of fact, there is really no need to list specific aid given the Axis in this connection by Argentina. Probably it is sufficient to say that the totalitarian firms in Argentina operate as they please. The Committee for Political Defense of the Hemisphere has previously shown in a memorandum to the Argentine Government, some of the espionage activities which are being carried on in Argentina. That propaganda of the most blatant type is being carried on in Argentina is in itself proof that it is financed. There is no need to search for such propaganda—it can be obtained at any newsstand.

In this connection it must be mentioned that the Government of the United States has investigated certain of those firms functioning in the economic life of Argentina and has determined that a great many of them are engaged in activities inimical to the security of the hemisphere and directed against the war effort of the United Nations, Argentina has done little if anything to determine whether those firms are engaged in such activity, nor has the Government of Argentina, in reality, done anything to prevent propaganda and subversive activities being carried on by local totalitarian firms. Interventors have been placed in a very few firms, but this type of intervention has been little more than a ceremony. It is true that probably many man hours have been expended, that accounts of a few of the German firms have been audited, that German firms have been told not to contribute to propaganda organs such as El Pampero. But what has this accomplished? El Pampero and other propaganda organs are still being published (and it may be added that they are being published with Government aid in obtaining newsprint); espionage activities continue; and except for niceties of bookkeeping, nothing tangible has been accomplished. The Banco Central and the Ministry of Finance may be powerless to act without the police. Then why hasn’t the Executive Power directed the police to investigate the totalitarian firms to determine whether they are engaged in activity inimical to the interests of hemispheric defense? Investigations in other countries of this hemisphere of those same totalitarian firms operating in Argentina have proved without a doubt that those firms were, in the countries investigated, engaged in activities inimical to the security of the twenty-one American Republics. For instance, investigation in Brazil has shown that Chimica Bayer Ltda. had made a loan approximately of the equivalent of US$500,000 to the German Embassy. Investigations of the totalitarian firms in the other American Republics has revealed numerous instances of such firms fostering activities which are inimical to the security of the hemisphere. It is highly unlikely that a different determination would be made if such investigations were made in Argentina. That such investigations have not been made in Argentina can only be attributed to inability to make them or to no desire to make them, and certainly the United States and the other American Republics would not attribute the lack of such an investigation to the former.

Thus far Argentina has shown no disposition to investigate or control those persons and firms which the United States Government considers to be engaged in activities inimical to the security of the Hemisphere, and even in many cases where there has been a blocking of funds, it has not been used in such a way as to prevent benefits accruing to the aggressor nations or the nations dominated by them. For instance, between December 11, 1941 and March 31, 1942, the Banco de la Provincia de Buenos Aires made payments of 72,000 pesos to the Japanese Domei News Agency to “cover expenses”. Under the Argentine control, such payment had to be made pursuant to Banco Central authorization.

On or about February 5, 1943, the Argentine Government paid approximately 1,100,000 pesos to the Italian Government for fuel and lubrication on the ex-Italian ships, Comodoro Rivadavia and Río Blanco, which previously had been taken over by the Argentine Government. This money was placed in a blocked account, but it was provided that the Italian Government might draw 75,000 pesos per month from that “blocked” account for the purposes of paying the maintenance expenses of ex-Italian crew members residing in Argentina. This arrangement adds to the wartime resources of the Axis since it makes it unnecessary for the Italian Government to provide funds from free exchange for the purpose of supporting these Italian seamen and to that extent aids the Italian Government in its war effort.

In 1941 the Argentine Government took over the above-mentioned ships and thereafter paid the sum of 6,400,000 pesos to the Delfino Company, Nueva Compania General de Navegación S. A. in free funds. Such payment was made in free funds notwithstanding that this Government had previously determined that A. M. Delfino and his company were engaged in activities inimical to the security of the Hemisphere and notwithstanding that such payment was vigorously protested unless it should be made into a blocked account. Today, Delfino continues to have the free use of such funds without Banco Central supervision. Is it the position of the Argentine Government that the payment of such funds is not a transaction which should be subjected to appropriate control?

As a matter of fact, the financial facilities of Argentina have been used to aid those firms which the United States Government considers to be engaged in inimical activities. The attention of the Argentine Government is directed to the fact that on November 30, 1942, ten months after the Rio de Janeiro Conference, the government-owned Banco de la Nación Argentina, had outstanding loans and overdrafts to firms, which the United States Government had determined were engaged in activity inimical to the security of the hemisphere, to the extent of 7,253,835.97 Argentine pesos. On October 31, 1943, nine months after the Rio de Janeiro Conference, the semi-official Banco de la Provincia de Buenos Aires had outstanding loans and overdrafts to firms which the United States Government considers to be engaged in activities inimical to the security of the continent, to the extent of 4,971,308 Argentine pesos. To say that Argentina has done nothing to curb the inimical activities of these firms is in itself a serious charge, but it is a much more serious charge that Argentina through an official and a semi-official banking institution is financing activities which aid the enemies of the western hemisphere. But the aid extended on behalf of the official banks of Argentina is not the only aid granted in this manner, for not only has the Argentine Government allowed the totalitarian banks to continue their operations, but it has taken no measures to restrict their financing other firms engaged in inimical activity. Actually, the totalitarian banks are “authorized institutions” of the Banco Central and have delegated to them certain authority to approve financial transactions, including remittances to the aggressor and aggressor dominated nations. As of March 31, 1943, the totalitarian banks had the following outstanding discounts and overdrafts:

Banco Alemán Transatlántico	30,019,000	pesos
Banco Germánico de la América del Sud	30,478,000	”
Banco Francés e Italiano para la América del Sud	24,723,000	”
Banco de Napoli	5,178,400	”

Thus the totalitarian banks have outstanding more than ninety million pesos in loans and overdrafts, and it can fairly be assumed that a large proportion of this amount represents loans to totalitarian firms in Argentina.

At the outset of this memorandum it was stated that Argentina had not complied with her obligations in the financial field under the recommendations of the Rio de Janeiro and Washington Conferences, and that fact which clearly could be substantiated was a serious charge. It was stated, however, that a much more serious charge, if it could be substantiated, was the fact that Argentina was allowing her financial facilities to be used for the aid and comfort of the aggressor nations and the nations dominated by them. That charge has been substantiated. Argentina is remitting funds to the Axis, which benefit the Axis war machine. Argentina is receiving funds from the Axis which may be used to finance propaganda and espionage, not only in Argentina but in the other republics of the hemisphere. Argentina today remains the clearing house for Axis transactions with the continent. Argentina is permitting her markets to be used for the purchase and sale of securities looted by the Axis. Argentina is sheltering property of Axis firms and individuals which have sought refuge within her boundaries. Argentina has shown no disposition to investigate effectively or to control firms within her boundaries believed to be engaged in activities inimical to the defense of the hemisphere. Argentina, through government and semi-government owned institutions, is financing the activities of firms engaged in activity inimical to the security of the hemisphere—activity which Argentina has bound herself to eliminate. Argentina is allowing totalitarian banks organized under Argentine laws to freely finance the activities of persons and firms engaged in activity inimical to the security of the hemisphere.

85. Prepared by James H. Mann, Special Assistant in the Embassy, and transmitted to the Department by the Ambassador in his despatch No. 10263, May 24, 1943; received June 7.
86. This recommendation provided for the immobilization of funds, securities, and property held in an American republic for the account of a person or firm resident in an Axis country. For text, see Pan American Union, Congress and Conference Series No. 39: Final Act of the Inter-American Conference on Systems of Economic and Financial Control, Washington, D.C., June 30–July 10, 1942 (Washington, 1942).