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

185. Memorandum of a Conversation Between the Adviser, Argentine Ministry of Economic Affairs (Juan Scarpati), and the Deputy Director of the Office of South American Affairs (Dearborn), Department of State, Washington, June 8, 1955¹

Washington , June 8, 1955

SUBJECT

• (1) Argentine-Eximbank Relations
• (2) Petroleum Developments
• (3) Remittance Problem
• (4) Argentine-Russian Relations

I invited Dr. Scarpati to call on me today principally for the purpose of impressing upon him the importance of Argentina’s fulfillment of Peron’s promise of action on the remittance problem.

I first asked Dr. Scarpati how his talks with the Eximbank were coming along. He said that he now believed that any misunderstanding in the procedure for arriving at a draft agreement on the steel plant loan had been cleared up and if fairly rapid progress continued to be made he expected to return to Buenos Aires a week from next Friday (June 17). He stressed again the Argentine Government’s urgent desire to sign the steel plant agreement with the Bank since further action on all other parts of the project had to be held up until this was accomplished. General Olano² was prepared to come to Washington on a moment’s notice when preparations for the signing were completed.

I then brought up with Dr. Scarpati the question of Argentine Congressional approval of the petroleum agreement with the Standard Oil Co. of California. I showed him an item that had appeared in the New York Times on June 6 in which it was noted that President Peron had urged the Argentine Congress to approve the agreement this week and asked for his comment. He said he had not heard of this development, but believed it showed that the President was showing the Congress again what a high priority he gives to this matter. I told Dr. Scarpati that we had just received a cable this morning³ from our Embassy stating that his Government had approached the Standard Oil Company’s negotiator in Buenos Aires as predicted by Dr. Scarpati in his conversation at the Department on June 2.⁴ He reiterated his belief that the changes which the Argentine Government desired would not be difficult to make from the point of view of the Company. He said he thought a considerable amount of the difficulty lay in the fact that the agreement was negotiated in English and that the literal Spanish translation appeared somewhat objectionable to Argentine readers.

I then brought up the remittance problem stating that while I was sure that our position had been fully explained to him by officers of our Embassy in Buenos Aires and while I was fairly sure that we understood through our Embassy the views of the Argentine Government, I wished nevertheless to take this opportunity to exchange views with him on the subject.⁵ Dr. Scarpati outlined in brief Argentina’s views. He mentioned President Peron’s letter to Mr. Holland on the subject and showed clearly that he recognized that President Peron had made a commitment. He said that the situation presently was that the President, having made the commitment, had instructed Gomez Morales to implement it and up to the present time Gomez Morales had not been able to find a way to do this. Dr. Scarpati described the serious exchange situation which Argentina faces and said that Argentina would face the end of this year without foreign exchange. He said that the main reason for this was that there had been crop failures in corn, sunflower seed and linseed. There would be enough corn for local consumption but none for export. By the end of the year Argentina would have used up all of her credits under her trade agreements. Considering this situation if Argentina were today considering the Eximbank loan for the steel plant, it would not be able to approve. He said that Argentina had felt that it could set aside $8 million annually to service this debt, but that as a result of the crop failures mentioned this decision would not have been made today. (I asked if Argentina still wanted to go ahead with the CADE application,⁶ and he replied ‘Oh, that is included in the $8 million.” I did not press him on the inconsistency of his remarks.) He also said that the remittances to the United Kingdom had been agreed upon some time ago when Remorino and Gomez Morales were in London, but that if conversations regarding them were held today Argentina’s financial situation would not permit her to agree to such an arrangement. He said the Swiss presently had a mission in Argentina attempting to come to some agreement on remittances but that the Argentines had not been able to do anything for them.

I told Dr. Scarpati that I was indeed sorry that Argentina’s economic position had suffered a set-back. I said that I hoped, however, that he would realize that we too had very definite problems related to the question of remittances. I said that we were very sincere in our desire to cooperate with Argentina to help her realize many of her economic objectives and mentioned assistance in the development of Argentina’s power facilities as an example and referred specifically to the CADE application at the Eximbank. I said, however, that it was becoming increasingly difficult for us to follow through on this cooperation principally because of the failure of the Argentine Government do something about remittances. No one here expected Argentina to make all profit remittances presently outstanding, but it was becoming practically essential for some token remittances to be made if we were going to be able to continue to obtain favorable action on a number of pending questions.

I remarked parenthetically that I was not referring to the steel plant loan since we considered that that was over and done with, and it was our objective to have the agreement signed as soon as possible. (I did not want Dr. Scarpati to think that the steel plant agreement was being held up because of the remittance problem since this is a firm commitment which we now have and the Argentines would almost certainly charge us with bad faith if we now tried to impose new conditions as a quid pro quo.) I stated that we were most anxious to have new U.S. capital enter Argentina to help develop the country and that it was also our objective to have U.S. capital now operating in Argentina satisfied and desirous of expanding. However, I pointed out that when businessmen came to us to discuss their operations in Argentina or prospects for investment there and when we outlined point by point the many phases in which our relations have greatly improved they always come back with the question “what about the remittances”. I said that until something was done about this it did not seem likely that new U.S. capital was going to enter Argentina in any substantial amount or that companies already there were going to expand their operations. Dr. Scarpati said that he appreciated the position of the U.S. and that he agreed completely with my observations on the connection of the remittance question with that of U.S. capital entering Argentina. He said he hoped that possibly it might help to have it understood among U.S. businessmen that Argentina had every intention of resuming remittances when that was possible but that nothing would be possible this year because of the crop failures. I reiterated my statement about the necessity for Argentina’s doing something even if only something that might be considered token remittances.

He also suggested it might be possible to reach an agreement that Argentine exports to the U.S. should reach a certain specified level and that any dollar exchange over that level should be devoted to remittances. (It is not clear to me whether all the excess or a certain percentage of it was to be applied to remittances.) I did not discuss this suggestion with him.

Among other things I asked Dr. Scarpati how Argentina’s trade with the USSR was coming along. He said that this presented Argentina with a good opportunity of which she was taking full advantage. He said he would tell me confidentially that Argentina was able to sell its poorest grade meat and its poorest grade hides to the USSR at excellent prices and in return receive much needed siderurgical equipment. I asked if Argentina was importing any machinery from the USSR, and he replied that it was not and he saw no future for Russian machinery in Argentina. He spoke of the Russian trade fair now in Buenos Aires and said that the automobiles and other machinery were years behind the products of the Western countries and he knew the Argentines would not want to invest in this equipment. Furthermore, the Argentines would be apprehensive lest they could not obtain spare parts. He said his country was fully aware that the principal objective of Russian trade with Argentina and of the Russian trade fair was propaganda. While the Argentines were under no illusions on this point, they were very glad to take advantage of the moment to sell certain otherwise unsalable products at high prices.

1. Source: Department of State, Central Files, 835.331/6–855. Confidential. Drafted by Dearborn.
2. General José Manuel Olano, Chairman of the Board of Sociedad Mixta Siderurgia, Argentina (SOMISA), the Argentine steel corporation with which the Export-Import Bank had been negotiating the proposed $61 million loan.
3. Apparently a reference to telegram 744 from Buenos Aires, June 7, in which the Embassy reported that on June 3 Gómez Morales requested a revision of the provisions on termination rights and compensation payments in the Argentine contract with Standard Oil of California in order to meet the objections of Peronista Congressmen. (Department of State, Central Files, 811.05135/6–755)
4. A memorandum of this conversation, drafted by Dearborn, is ibid., 835.331/6–225.
5. On April 15, Nufer met with Perón to discuss, among other matters, the problem of profit remittances. At that time, the Argentine President assured Nufer that he would approve the remittance of profits to old established U.S. investors and presented the American Ambassador with a letter for Holland which explained the Argentine position. A memorandum of that conversation, along with Perón’s letter to Holland, were transmitted to the Department in despatch 927 from Buenos Aires, April 15. (Ibid., 811.05135/4–1555)
6. The Compañia Argentina de Electricidad (CADE) was a Belgian-owned utility company which served the Buenos Aires area and provided approximately 50 percent of Argentina’s power and most of that city’s power.