Foreign Relations of the United States, 1958–1960, American Republics, Volume V

185. Memorandum of a Conversation Between the Ambassador in Argentina (Beaulac) and President Frondizi, Buenos Aires, June 10, 1959¹

Buenos Aires, June 10, 1959

I congratulated the President on the press report of the Cabinet meeting on June 3,² and especially on his own remarks. I said that if the Government persisted in the policies enunciated there would be no doubt of its success.

The President said the Government would persist. He said there were two serious problems: 1) the budgetary deficit and 2) wages.

With reference to the budgetary deficit, he said that the railroad problem was the toughest. He was appointing General Lambardi, who is in charge of the mobilization, to be intervenor of the railroads. With the help of military men in active service he will reorganize the railroads drastically. The object will be to improve service and lower costs. I asked if this meant that persons would be discharged. He said it did. Secretary Constantini’s comments in this connection had been misinterpreted in the press.

The President also said that regulations under Article 13 of Law 14,794 would be issued very soon and discharges in the regular Government services would begin immediately thereafter.

With reference to wages, the principal problem was the provision for automatic wage increases in some contracts based on living costs. The bank strike had been won by the Government. This was an important victory. Perón had been unable to defeat the bank employees. The Provisional Government had been unable to win over them. When the bank employees’ strike under the Provisional Government had ended, the troops were made to give honors to the jailed employees when they were released.

The Government now will have to face a strike of the light and power employees. Like the bank employees, these employees have a provision for automatic wage increases in their contract and they will fight to retain it. However the Government will insist on its elimination. It will offer the employees a small increase such as the 800 pesos granted to the bank employees. I asked whether the Armed Forces could keep the power plants going. The President said that they could keep some going but not all.

The President said that the social problem was serious and the Government would need support. He referred to the conversation he had had with Messrs. Rubottom and Mann;³ to the conversations Ambassador Barros had had in the State Department,⁴ and to the conversation that I had had with Minister of Economy Del Carril.⁵ He said he would be grateful for what support we could give him.

I said I was glad he had mentioned this subject because I wanted to talk to him about it. I said the State Department and other agencies of my Government, as he knew, were very anxious to give all possible support to the Argentine Government. With that in mind, the Department is doing everything possible to inform itself concerning the situation here; through the Embassy, through the Monetary Fund, and through the banks.

My interpretation of the conversations he had referred to was that they did not constitute loan requests. Rather, they were conversations looking to possible future cooperation in ways that might be possible and appropriate, I referred to the suggestion that the Export-Import Bank might finance the drilling contract with Kerr-McGee. I said this was an example of a difficult operation for the Export-Import Bank to engage in. I doubted that the Export-Import Bank had the authority to engage in this kind of operation.

The President said that my interpretation of the conversations was correct. They did not constitute requests for new loans or credits.

I said I thought it was important that Argentina maintain this technical position of not having requested loans. I said, in addition, that if I were in his position I would not ask for further loans or credits until I had 1) arranged for utilization of existing loans, including the 1956 loan which had not yet been fully utilized, 2) taken steps to eliminate or at least greatly reduce the fiscal deficit, 3) arranged for YPF not to obligate itself to pay dollars it does not have and will not have in the near future. I said that this meant making great use of the private companies.

The President said that this sounded fair enough to him. As far as petroleum was concerned, he wanted private companies to build the pipelines and refineries. They, of course, would want the tariff paid in dollars so that they could cover their investment. He would like it paid in pesos, if possible. He does not care whether YPF ever acquires these installations. He would be content to leave them in private hands.

With reference to oil production, he said that the trouble with the kind of contract Argentina has at the present time is that Argentina has to pay for petroleum in dollars, so that although there is a dollar saving there are still heavy dollar costs which the Government is having a hard time to meet. To that extent, therefore, there was not a great difference between the drilling contracts and such contracts as Loeb, Rhoades’, for example. He said the kind of contract the Government likes is with Standard and Shell. Since these companies have their own processing and distribution systems there is no immediate dollar cost to the Government involved in their activities.

I asked whether the answer was not to induce Standard and Shell to increase their activities. He said he would be happy if they would.

The President said that the Government plans to open up the central area of the country to exploration and exploitation. He has no doubt that from the Argentine point of view it is better to purchase petroleum produced in Argentina than petroleum produced abroad, but if the petroleum produced in Argentina still has to be paid for in dollars there remained a dollar problem for the Government.

1. Source: Department of State, Central Files, 835.00/6–1259. Confidential. Transmitted in despatch 1842 from Buenos Aires, June 12.
2. Telegram 1888 from Buenos Aires, June 4, transmitted a summary of press accounts of the June 3 cabinet meeting. (ibid., 835.00/6–459)
3. Document 179.
4. Document 181.
5. Reference is presumably to a conversation between Beaulac and Del Carril on June 15 concerning the stabilization program reported in telegram 1977 from Buenos Aires, June 15. (Department of State, Central Files, 835.10/6–1559)