163. Telegram From the Embassy in Argentina to the Department of State 1

887. Frigerio invited me his house Sunday for private discussion Argentine problems and Argentine-US relations. In two hour meeting following principal points of interest: Frondizi Government firmly convinced Argentina should align itself publicly and squarely with US and free world in political and economic policy. Believes Government has shown faith in democratic process by acts already on record. Will continue efforts unite people Argentina divided and misled for twelve years under Peron but acknowledges it will be necessary prove democracy can produce tangible benefits without which such policy cannot prosper.

Said Communists will make every effort prevent success and will exploit grievances which will inevitably attend austerity program. Said Government intends take energetic measures against Communists.

In economic field said Government program designed achieve most rapid possible self sufficiency in oil and measurable improvement in electric power coal and steel production. Said confidently believes Pan-American contract alone (which is going forward faster than company agreed) expected produce one-third present YPF production by next June and should equal total YPF production in less than three years. Said Government deliberately sought contracts with smaller companies at outset to minimize calculated risk public opposition which would have been greater had big companies been involved that stage. Believes ground now prepared for important contracts with big companies. Links development power coal and iron with policy encourage development interior. Believes rural electrification and industrial development will encourage emigration from Buenos Aires.

Said Government policy is to “industrialize” agriculture and livestock production to achieve greater yield. Lamented backward state agriculture owing lack machinery. Indicated policy will not neglect agricultural development in favor of industrialization feeling they are complementary.

Said Government estimates excess workers in state-operated enterprises 45,000 will be dismissed. When remarked mass dismissals might create another problem said plan was to dismiss all such employees who have another job (this would embrace considerable number). [Page 526] Plan is to dismiss them with benefits salary payments over twenty months from time of separation during which salaries would be reduced 5% per month. This would avoid economic distress and stimulate employees to find jobs with private enterprise.

Frigerio said Government frankly committed policy economic rehabilitation but speed with which program can be carried forward depends upon extent support and aid which US able and willing to give. Added that Frondizi determined balance budget and would be able do so.

I said that I felt sure US Government sympathetic Frondizi’s objectives and would give friendly consideration any proposal. Added that if climate is right private industry would be interested and able do more eventually than government in providing capital goods and equipment. I also remarked that foreign investors always are encouraged invest abroad when domestic capital demonstrates its confidence in its own government and economy.

Frigerio feels time is important and that government must make it clear to its people that democracy can produce tangible results or there is real danger that forces opposed to democratic practices will obtain upper hand. Next three years are therefore vital. Said for better or worse Peronists are numerous have been nurtured on myth and educated in falsehood. Added however that these people believed they were better off under justicialism because they could not recognize that such well-being was possible only under a government with relatively large financial resources. Said this was hard fact and must be reckoned with since people are now going to be asked to do with even less. If measurable improvement under new policy too slow government could not retain broad enough support to ensure its stability.

Asked whether Frondizi should discuss problem in US remarking that such visits normally are protocol affairs and discussions might not be indicated.

I replied that such visits do not normally result in concrete announcements of financial programs since undesirable precedents would be created affecting all future visits. I said however believe President might appropriately discuss broad objectives and measures proposed to achieve them together with general outline areas in which he believes US might be helpful.

Frigerio requested frank opinion measures thus far taken and any suggestions I might be willing offer regarding problems ahead. After repeating more or less what I said to President Frondizi (Embtel 846 December 13)2 I said two problems now outstanding which I believe should be adjusted and which I hoped could be done before President’s departure. First was problem Resolution 18 and proposed new [Page 527] regulation of civil aviation affecting regional traffic.3 Told him present US position and said we hoped Resolution 18 could be lifted so far as applicability US carriers concerned and issuance proposed regulations be delayed until fair chance had been given negotiate satisfactory bilateral agreement. Frigerio requested memo on subject (which he appeared unfamiliar) and promised early attention. I am handing him unofficial memo today.4

Then called his attention longstanding packers’ problem now made apparently worse by restrictions on non-Argentine packers which give Frigorifico Nacional obviously preferential treatment. Frigerio apparently well informed on problem said he recognized inequality treatment but that we might dismiss that problem since government had plans divest hotels entirely of ownership and management Frigorífico Nacional which would remove inequality automatically. I asked when such action might be expected to which he replied “prior departure President Frondizi”.

Timberlake
  1. Source: Department of State, Central Files, 611.35/12–2258. Confidential; Priority. Also pouched to Rio de Janeiro.
  2. Document 162.
  3. In February 1958, Argentine aviation authorities issued Resolution 18, designed to limit nonregional foreign airlines with respect to the number of passengers and amount of cargo they could carry between Argentina and neighboring countries.
  4. Not found in Department of State files.