835.5151/344a

The Secretary of State to the Ambassador in Argentina (Weddell)

No. 117

Sir: The Department has been receiving numerous inquiries regarding blocked peso accounts in Argentina held by Americans. These inquiries seek some intimation from the Department as to the probable future policy of this Government with respect to these accounts. Specifically, two questions have been asked repeatedly:

(1)
Does the Department intend to seek a solution of this problem, or an improvement of the situation, in connection with the negotiation of a reciprocal trade agreement with the Argentine Government?
(2)
Is this Government considering or will it consider extending assistance to Americans holding these accounts through the Reconstruction Finance Corporation or an Export-Import Bank?

The desire of holders of blocked accounts to learn something of the proposed future policy of this Government with respect to this matter is quite understandable. These people must determine whether to hold their peso accounts in the hope that this Government [Page 526] will come to their assistance, directly or indirectly, or whether it is wise for them to clear their accounts, either through taking their losses by purchase of exchange on the open market, or through acceptance of bonds which may be offered by the Argentine Government.

Up to the present time the Department has taken no position regarding blocked accounts in the Argentine and it has, of course, carefully refrained from offering advice as to the disposal of blocked balances by the American holders. The Department desires, however, to give further careful consideration to this problem in the light of recent developments, and for this purpose it has formulated the following questions for its own consideration. It will be appreciated if you and Mr. John H. Williams will bear these questions in mind during the latter’s visit in Argentina, and give the Department the benefit of your advice with respect to them:

(1)
Should it be the settled policy of this Government to remain aloof from this situation and to allow American holders of blocked balances to shift for themselves, acting through private agencies only?
(2)
Or should the Department watch for and seize every opportunity of assisting these Americans to secure foreign exchange?
(3)
As a modification of (1) should the Department and representatives of this Government in Argentina do everything possible to assist individuals or private organizations in their negotiations with the Argentine Government?
(4)
Should this Government emulate the Italian and British Governments in joint action with private interests in the formulation and presentation to the Argentine Government of specific plans for freeing the blocked accounts?
(5)
If this Government is to be active in this situation, how should it be guided with respect to the relation of blocked accounts to the other requirements for foreign exchange, i. e., current exports to Argentina, bond service, interest and dividends on American investments, private remittances? Is it desirable to clear the blocked accounts by some other means than the use of dollar exchange currently available?
(6)
If the answer to the latter part of the previous question is in the affirmative then should the expected offer of Treasury bonds by the Argentine Government, similar to the offer recently made to the Italians, be considered the best available method of clearing these accounts?
(7)
Should this Government cooperate with private American interests in making this bond issue available, in particular by assisting directly or indirectly in finding a market for these bonds or in discounting them? Should the Reconstruction Finance Corporation aid a private group to discount the bonds, or in the event that an export-import bank be created with sufficiently broad powers, should it discount such bonds directly?
(8)
If Governmental agencies are to assist in the discount of these five year Treasury bonds, should this assistance be extended also to the holders of the fifteen year Treasury notes issued in 1933?
(9)
If the Government is to assist in any respect Americans holding accounts should any differentiation be made between the holders of large accounts and the holders of small accounts?
(10)
If any Government action is to be taken in assisting these Americans, should it be taken in the near future, or only later, perhaps in connection with the negotiation of a reciprocal trade agreement?
(11)
If this Government plans to assist Americans in the clearance of blocked accounts in Argentina, should such assistance be withheld until there is a reasonable expectation that such accounts will not continue to accumulate?
(12)
Most of the large American firms with blocked accounts in Argentina have been reported as unwilling to accept five year two percent Treasury bonds similar to those issued to the Italians. If this Government should offer to discount such bonds or by some other means to make them acceptable to Americans holding blocked accounts, might this action lead the Argentine Government to make certain concessions, with respect to exchange control or to American trade, either now or in connection with the negotiation of a trade agreement?
(13)
If it be considered desirable to discount the Argentine bonds which may be issued to clear blocked accounts, through an agency of this Government, or through such agency to make a dollar loan to the Argentine Government partly for the purposes of clearing peso accounts held by Americans, to what extent would it be necessary to take into consideration similar situations with respect to blocked accounts in other Latin American countries? In particular, to what extent should the Brazilian desire to secure a dollar loan be considered?

Two copies of this instruction are enclosed for your use and for the use of Mr. Williams.

Very truly yours,

For the Secretary of State:
Sumner Welles