169. Memorandum From the Assistant Secretary of State for Inter-American Affairs (Rubottom) to the Under Secretary of State for Economic Affairs (Dillon)1
SUBJECT
- Military Equipment for Argentina on Credit
Discussion:
I refer to our conversation of January 29,2 in which I informed you, in general terms, of the interest of President Frondizi of Argentina in obtaining military equipment for anti-subversive control purposes under credit arrangements within Argentina’s capacity to handle in its present straitened economic circumstances. President Frondizi’s emissaries have had frank and detailed exploratory discussions with officials in the Bureau and in the Department of Defense on this subject. Since our conversation one of these emissaries has made a personal report of these discussions to Frondizi and informed us of the latter’s reaction.
Although the Argentine President and his military advisors had been hoping to obtain five-year credit terms, they are prepared, if there is no alternative, to limit their request to the standard three-year credit arrangement, provided that its impact can be minimized by deferring the bulk of the payment to the third and final year of this period. The Argentine Ministry of the Army is in a position to make a down payment of $500 thousand, which would represent 10 percent of $5 million worth of equipment, principally surplus tanks and trucks, which the Department of Defense has informally indicated would be available upon application and which the Argentine authorities view as the practical minimum contribution to the obtaining of increased ground mobility by their military forces.
I mentioned a total figure of $10 million in equipment is the realistic Argentine goal in my conversation of January 29. The balance would be taken up by a purchase by the Argentine Air Force of 28 F–86F jet airplanes, with spare parts and equipment, at a total cost of approximately $4.5 million. A formal offer in this regard was made by the Department of Defense to the Argentine Embassy on January 15. While recent conversations have focused on the Army items and their possible financing, similar purchase arrangements would clearly be necessary and acceptable from the Argentine point of view in securing [Page 538] this Air Force equipment to modernize the superannuated Argentine military air arm to meet current training and stand-by domestic tactical requirements.
It is my impression that the sale of these planes and of the Army equipment would probably have to be accomplished by use of MAP funds under the provisions of Section 103c of the Mutual Security Act, as amended,3 but the possibility of the Air Force’s being able to handle the sale of the planes on a loan basis under the provisions of Section 106, should be investigated.4
As you are aware, the Frondizi Government has shown a large measure of political courage in taking bold steps which coincide with U.S. foreign economic objectives. Its promotion of private enterprise and foreign capital investment and its adoption of a financial stabilization program have encouraged Peronist, Communist, and other anti-American groups to align themselves against the Frondizi program. The tactics employed by these destructive forces have included the calling of strikes in strategic industries, attempts to mount a general strike, street demonstrations, and rioting. The Government has countered by taking vigorous action to control the situation. Emergency powers have been voted the Executive by the Congress, strikers have been mobilized in some instances, and strike leaders and agitators who have flouted legal restrictions have been jailed. The Government has been assisted in its efforts to dominate the situation by clear voting control in the Congress and, most importantly, by the affirmative support of the Armed Forces, whose present orientation is democratic and anti-Peronist.
The Argentine Army, which continues to play a key role in maintaining political stability and counteracting subversive movements, has understandable professional aspirations to achieve some degree of modernization. It recognizes with a sense of responsibility, however, that there is no external military threat to justify a major build-up in its potential, and that Argentina’s present economic situation does not permit substantial military expenditures. The Army consequently prefers to concentrate on the more modest and practical goal of achieving greater capacity for anti-subversive-control activity by organizing small but highly mobile striking forces and locating them strategically throughout the country. Such units would need tanks and improved truck transportation to achieve true effectiveness. It is my understanding that the Department of Defense can make tanks available from excess at reduced prices and that possibly other excess items may be [Page 539] found when a detailed pricing and availability study is made on the basis of a specific Argentine request. Thus a basic program could be carried through at comparatively small cost.
President Frondizi endorses the obtaining of this equipment, and during his recent visit asked our cooperation in supplying it.
Although planes for the Air Force are not as directly related to the actual operation of an anti-subversion program as is the Army equipment, there are psychological and political factors to be taken into account. Improvement in the capabilities of the Argentine Air Force can be expected both to act as a general deterrent to physical moves by subversive elements and to maintain morale in the Air Force. Continued firm support of the Frondizi Government by all their Argentine services is highly important. Since the Argentine Navy has obtained an aircraft carrier from Great Britain and has been offered three vessels (two submarines and a destroyer) on a loan basis by the United States Navy, the needs of the Argentine Army and Air Force would appear to deserve priority.
I am of course aware of the obstacles to providing military equipment to Argentina at this particular time on credit terms that deviate somewhat from standard practices regarding loans to Latin American countries, and I have been apprised of the well-reasoned views of W/MSC in this regard. There is more at stake for the United States in the Argentine situation, however, than the mere obliging of the Argentine military, and I believe that due weight should be given to this circumstance. Argentina has not, of course, been a recipient of any large measure of military cooperation from the United States because of past political considerations and the absence of a bilateral military agreement. Negotiation of such an agreement continues to be politically difficult for Argentina, and might in part be embarrassing to us, too, from the financial point of view, at this time. The sale of a reasonable amount of military equipment on easy terms is a practical alternative. The amount sought by Argentina is quite modern in terms of that nation’s comparative importance and the extent of our cooperation in the military field with other nations, including Latin American nations.
You are aware of the resounding success which attended President Frondizi’s recent visit here. This success should be exploited. The constructive policies adopted by the Frondizi Government have had a substantial impact on Argentina’s hitherto statist economic orientation and on the course of U.S.-Argentine relations. The realistic approach to solution of present economic difficulties in Argentina taken by the Frondizi Administration has not only provided a basis for close and practical cooperation between the two Governments, but has also provided the United States with an example which it can fruitfully use in supporting the thesis of national self-help in its economic dealings with the other nations of Latin America. The favorable publicity obtained [Page 540] by Frondizi and his administration during the course of his recent highly successful visit here enhances this opportunity. The United States has a hemispheric as well as bilateral stake in contributing to the success of the present Government in Argentina. Insofar as provision of reasonable military assistance on terms within Argentina’s capabilities advances this, it would appear to be clearly in U.S. interest to provide that assistance.
Recommendation:
It is requested that you take the foregoing considerations into account in giving approval in principle to the proposal to make approximately $10 million in equipment available on special three-year credit terms to the Argentine Army and Air Force. Given such approval, further discussions would be held with Argentine officials to iron out details preparatory to the making of a formal request by the Frondizi Government for the equipment sought.5
- Source: Department of State, Central Files, 735.5–MSP/2–459. Secret. Drafted by James F. O’Connor.↩
- Apparent reference to the conversation reported supra.↩
- For text of the amended Section 103c of the Mutual Security Act of 1954, see 71 Stat. 355.↩
- For text of Section 106 of the same act, see 68 Stat. 836.↩
In a February 9 memorandum attached to the source text, Charles S. Whitehouse wrote to Bernbaum:
“I am returning this memorandum on military equipment for the Argentine. You will recall that I told you on the telephone Saturday that Mr. Dillon did not think this justification was adequate and urged that you discuss this problem with W/MSC, Mr. Bell, in order to ascertain what would have to be done to have such a program.” (Department of State, Central Files, 735.5–MSP/2–459)
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