1938: Argentina

The New Régime.

The inauguration of Dr. Roberto Ortiz as President, on Feb. 20, ushered in a civilian régime after seven years of military presidencies, but the new President, who was Minister of Finance in the government of his predecessor, has not substantially changed the policies of General Justo. His support comes essentially from the conservative political elements in the country, representing the great landowning families, backbone of this primarily agricultural country, and the business interests. The largest opposition daily, La Critica, was suppressed during the campaign which resulted in the Ortiz election, the legality of which was questioned even by the great conservative newspapers.

In his inaugural address President Ortiz reaffirmed his faith in democratic institutions, assured free functioning to political parties, and promised to restore civil rights guaranteed by the Constitution, such as free exercise of the vote and freedom of speech, which had been in abeyance during much of the previous administration. The new government announced the end of the secrecy and censorship surrounding the Justo government, and promised full cooperation with the press.

At the celebration of the 128th anniversary of independence, on May 25, there was a great popular demonstration in favor of democracy and a public repudiation of Fascism, led by students belonging to the American University Federation. Nevertheless, Argentina is not without its Fascist organizations, notably the Legion Civica, with some 150,000 members, its offspring, the Nationalist Youth Alliance, an anti-Semitic and anti-Yankee movement of from 500 to 600 members, and the Guardia Argentina, combining seven smaller Fascist groups. The Germanic Union of Argentina reported in the autumn 43,626 Nazis among the 230,755 Germans in the country, and an increase in Nazi groups, until there are now 102 in all. With roughly one-third of the population Italian, totalitarian influence here is more Fascist than Nazi. La Critica conducts an active anti-Fascist campaign; there is also an anti-Nazi daily, largely supported by Jewish elements.

Harmonious relations have been established during the year between the ABC powers. The new Foreign Minister, Dr. Jose Maria Cantilo, who succeeds Dr. Saavedra Lamas, is persona grata to both Brazil and Chile. In fact, his appointment has been attributed to a desire to improve relations with Brazil, strained by his predecessor's attempts to prevent the lease of six United States destroyers to that country. Negotiations are in progress between Argentina and Chile for settlement of outstanding problems in the Straits of Magellan area. A good impression was created by the flight of six giant United States Army bombers of 'flying fortress' class to the inauguration of President Ortiz. But Argentina has consistently opposed the hegemony of the United States in the Western Hemisphere, and suspicion of this ambition has made it traditionally hostile to the United States, just as Brazil is traditionally friendly. This attitude emerged clearly in the discussions at Lima over American solidarity (see PERU; PAN-AMERICAN UNION). Moreover, Argentinians, like most Latin Americans, are culturally oriented towards Europe, and find it difficult to substitute New World sympathies for Old World ties. Trade animosity also lies behind the prevailing antagonism towards the United States. As in Brazil, moreover, there seem to be indications of Germany's fostering this anti-American sentiment as a part of its Nazi propaganda.

Economic Problems.

The most serious problems of the Ortiz government have been economic, since serious crop damage has caused a falling off in the great prosperity enjoyed in 1937. The year 1938 showed a marked decline from the high import and export levels of the year previous which, as one of the most prosperous in Argentine economy, brought a phenomenal increase of almost 40 per cent over 1936 in the value of Argentina's foreign trade. The sharpest drop came in exports (40.5 per cent in the first six months of 1938 compared to the corresponding period in 1937), threatening the nation with an adverse trade balance. This is in depressing contrast to the situation in 1937, which showed an active balance of 750,610,281 pesos, some 350,000,000 more than the Central Bank normally considers sufficient to maintain equilibrium in the general balance of international payments. The 25 per cent increase in United States imports in the first half of the year, resulting in a temporary replacement of Great Britain as chief supplier of Argentine's imports, has enhanced the advisability of putting all import trade on a quota basis. A discriminatory exchange rate, which increases the cost of nearly half the American merchandise by 20 per cent, is already in effect. Since the United States only occupies fourth place as an export market for Argentinian products, and since Argentina is committed to a two-way trade policy, designed to balance its trade with each country, irrespective of the trade balance with other countries, the unfavorable balance with the United States seems to call for further restriction. The institution of quotas would ensure British manufacturers 28 per cent of the Argentine import market, while the United States quota would be fixed at around six per cent. Since trade talks louder than Good Neighbor utterances, the prevailing anti-American feeling is not likely to be liquidated until the United States becomes a better customer of the Argentine republic. According to a barter agreement signed with Germany in December 1937 that country will purchase 50,000 tons of frozen beef annually in 1938 and 1939. By a commercial treaty signed in March 1937, Italy agreed to purchase various Argentinian products to the value of 458,000,000 liras in 1938. Relaxation of trade restrictions was indicated by a decree of Jan. 29, 1938, reducing from 20 to 10 per cent the exchange surcharge on the payment of goods imported without official exchange permit. (See also WORLD ECONOMICS.)

Wheat.

A project, reported in November, for the sale of 15,000,000 bushels of United States wheat to Brazil under the export subsidy policy of the Department of Agriculture caused hostile reaction in Argentina, which ships about 35 per cent of its wheat exports to Brazil and controls 50 per cent of Brazil's flour mills. Fear that the subsidized wheat would undersell Argentine wheat motivated the condemnation of the project as contrary to the spirit of the Good Neighbor policy. The menace of increased competition from Argentine grain, due to crop estimates for the coming year suggesting the second largest yield on record, is considered all the more serious in the United States in view of the fact that the American wheat stock by the end of 1938-39 is expected to surpass most previous records.

Petroleum.

In December 1937 the committee appointed in 1936 to investigate the petroleum industry recommended that the entire industry be placed under the supervision of a National Petroleum Council, with supply and distribution controlled by the YPF (government-organized Yacimientos Petrolíferos Fiscales). A three-year truce has been arranged with the Standard Oil Company of New Jersey, which, in 1936, was ready to sell out to the Government, a purchase never realized because of failure to appropriate the money. The Standard Oil Company's estimated investment in Argentina is $50,000,000. In 1937 the foreign companies produced about 52 per cent of the Argentine's total output, YPF the rest.

Finance.

The national budget for 1938 estimated receipts at 944,889,700 pesos, expenditures at 944,534,000. One of the first commitments of the Ortiz administration, which was rendered necessary by the decline in revenues, was a reduction in the budget rushed through the Congress by the Justo régime just before the inauguration. In his message to the Congress, President Ortiz predicted a deficit of at least 57,000,000 pesos for 1938, the first in five years. The Government has declared a policy of caution in the launching of new Government bond issues to ease the transition when the moratorium on a large number of mortgage obligations ends this year. The final step in the program of refunding the republic's high coupon-dollar debt was taken when, in the spring, Argentina made a loan offering in the United States of $35,000,000 of 4 per cent conversion bonds. The Argentine Government borrowed in New York, in the post-War period, about $305,000,000, mostly at 6 per cent. Of this amount only $154,000,000 will remain outstanding after the completion of this operation. The City of Buenos Aires withdrew its offer, also made in the spring, of 4½ per cent refunding dollar bonds to the amount of $13,500,000, deciding to borrow the money at home where it could secure more advantageous terms. (See also INTERNATIONAL BANKING.)