823.6363/2–1648

Memorandum of Conversation, by Mr. George H. Owen of the Division of North and West Coast Affairs

confidential
Participants: Señor Alfredo Ferreyros Ayulo, Peruvian Ambassador
Mr. Norman Armour, Assistant Secretary of State
Mr. James Espy, Acting Chief, NWC
Mr. George H. Owen, NWC

After a brief exchange of politically indifferent remarks, Ambassador Ferreyros referred to the views recently expressed to him by the Secretary of State regarding the development of oil resources* and stated that he had reported his conversation with the Secretary to his government. The Ambassador said he would cooperate fully with the United States government in accordance with the Secretary’s views. [Page 721] He said that the Peruvian government was fully aware of the need for undertaking development of oil resources, that the difficulties encountered in the instance of the Sechura concession were due to the fact that it was “badly handled.”1 He said that, as the Secretary had remarked, questions of oil concessions are subject to the “cross currents” of domestic politics, that factions exploit these transactions for political ends and that his government realized it was essential to divorce the matter of the concession entirely from politics. He said that in his opinion it would have been better for the Peruvian government to settle the question of “the law” first, and then proceed with the Sechura contract. (This was apparently a reference to the revision of basic petroleum legislation which is now being considered by the Peruvian Government.)

The conversation then turned to the Peruvian Government’s interest in obtaining an increased quota of United States wheat. In this connection Mr. Armour pointed out the extremely difficult world situation with respect to wheat distribution, in particular the critical shortage of wheat in several European countries. Ambassador Ferreyros then said that Peru had found it onerous to seek to fill its wheat requirements from Argentine supplies, because Argentina linked the supply of this commodity to other economic transactions in the interest of Argentina. He referred to the Peruvian-Argentine trade agreement, which, he said, has not yet been signed, and under which Argentina promises loans for economic development, in particular the Chimbote coal development project. He said he believed Argentina would finally not grant the loans anyway. In exchange for wheat Argentina desired right of preemption of Peruvian oil production.

Mr. Armour brought up the connection between Argentine economic policies and the European Recovery Program by pointing out that if countries like Argentina participated more effectively in aiding Europe by supplying the direly needed commodities at reasonable prices, there would be less of a strain on United States resources, and the United States would be in a position better to supply the needs of other American republics. Mr. Armour went on to say that as soon as the exact terms of our Marshall Plan for European recovery2 are [Page 722] determined, we may find many instances where this plan will provide relief for special economic situations in Latin America, such as, for instance, providing export markets for Peruvian sugar.

The Ambassador then indicated the desire of his government to receive assistance for economic development from the United States. He mentioned the consideration now being given to loans from the Export-Import Bank for needed equipment, in particular for the Chimbote coal development. He said he had not yet approached the Export-Import Bank on these matters. Mr. Armour said that the Department would be glad to consider the question of these loans and take it up with the Export-Import Bank.

The conversation returned to the subject of oil when the Ambassador also indicated the desire of Peru for such financial assistance in connection with oil development. At the close of the meeting Mr. Armour clearly stated and Mr. Espy reiterated to the Ambassador that it would be extremely unlikely that any Export-Import Bank; financial assistance could be given in connection with oil development, since loans for this purpose were against the policy of the Bank, in view of the risks involved in oil development and since the utilization of private capital appeared to be the most expedient form of development of oil resources.

Ambassador Ferreyros then turned to his government’s request for an increase in Peru’s quota of sugar imports into the United States. He had brought with him a lengthy and elaborate note on this point which he left with Mr. Armour. He said that his government’s complaint was directed against the Act of 1947 under which Peru’s share of United States sugar imports is 15,000 tons, as against 50,000 to 60,000 tons of Peruvian sugar imported annually into the United States before the war under the Act of 1937. Mr. Armour said he would direct that the matter be studied. Mr. Armour mentioned the agreement negotiated last week for the purchase of 33,000 long tons of Peruvian sugar by the United States government for the Army for use in the occupied areas. The Ambassador said that Peruvians had been extremely pleased by the news of this transaction. He added that the request of his government related to a somewhat different, aspect, namely, Peru’s permanent share in the United States domestic sugar market.

The Ambassador finally referred to his government’s interest in the Peruvian fish canning industry which was of relatively recent creation, thanks to United States assistance during the war. He said that a considerable amount of capital, United States as well as Peruvian (including [Page 723] Gildemeister interests), was invested in this, industry. He said that under United States Government classification (Food and Drug Administration) the fish canned in Peru was mostly bonito rather than tuna. His government took no issue with this classification, but did object to the unfavorable tariff treatment given to bonito. He said the United States tariff duty on tuna is 22½% ad valorem, as against 30% ad valorem on bonito.§ He said that Peruvian canned bonito was shipped to the United States unlabelled and sold here under various brand names. Mr. Armour said that he would have the situation with respect to these tariff duties ascertained as well as the possibility of modifying existing duties in accordance with this Peruvian, request.

  1. Memorandum of conversation (NWC) between Secretary of State Marshall and Ambassador Ferreyros. [Footnote in the source text.]
  2. In 1947, in the Peruvian Congress, approval of a concession to International Petroleum Company (Standard of New Jersey) for the development of oil resources in the Sechura Desert was defeated by the opposition. The Government favored the concession, but political opposition thereto was sharpened because the Apra Party supported it (Memorandum of October 15, 1948 by George H. Owen, 711.23/10–1548).
  3. The Ambassador’s remarks in connection with Argentine-Peruvian trade negotiations are borne out by U.S. Embassy Lima Telegram 904, Dec. 31, 1947 and especially OIG report SO 11260. [Neither printed. Footnote in the source text.]
  4. For documentation on this subject, see volume iii .
  5. Note of Peruvian Embassy to the Secretary of State, dated February 16, 1948. [Not printed. Footnote in the source text.]
  6. The duty rates mentioned by the Ambassador are correct. The rate for tuna was reduced to 22½% ad valorem by the Trade Agreement with Mexico. The rate for bonito (valued at under 9¢ per lb.) was reduced from 44% to 30% ad valorem by the Geneva Agreement of October 30, 1947. The rate for bonito could be further reduced without congressional action, by modification of a Trade Agreement, for instance our Trade Agreement with Peru. However, the rate for bonito valued at over 9¢ per lb. was reduced by the same action from 30% ad valorem to 21% ad valorem. In view of the Ambassador’s request it would appear that Peruvian bonito is valued under 9¢ per lb. [Footnote in the source text.]