1940: Argentina

Foreign Trade.

Negotiations for a reciprocal trade pact with the United States broke down Jan. 5, this being the first defeat of the Hull trade agreements program in Latin America, which has been extended for a further three-year period, until June 1943. The whole inter-American trade problem, insofar as it can be viewed as a single problem, is epitomized in this breakdown. The loss of European markets can be offset, in part, by the expansion of United States markets in Latin America, but this means an increase in North American purchases of Latin American commodities, which cannot be confined to non-competitive products. One of the chief reasons for the failure of the reciprocal trade pact negotiations lies in the similarity of economic structure of the Argentine Republic and the United States. Between 75 and 85 per cent of the value of Argentine exports in recent years has consisted of cereals, linseed, meat and wool. Since the United States absorbs little of Argentina's largest export, corn, and practically no wheat, and since it has embargoed all meat imports from that country, except canned beef, Argentina has had an unfavorable trade balance with the United States of almost a half billion dollars in the fifteen years ended 1938. In the first nine months of 1940 the United States bought $60,000,000 worth of goods from Argentina and sold it $91,000,000 worth.

On the other hand, the United Kingdom has maintained very close relations with the Argentine, offering an important market for its cereals and absorbing about 50 per cent of its pastoral exports, and trade with Great Britain has resulted in a large export surplus. The European war has necessitated heavy British imports of foodstuffs and raw materials, but the necessity for cash payment by Great Britain for war supplies in the United States has created such a demand for sterling exchange that, even while these reciprocal pact negotiations were going on, a 'blocked' sterling agreement with the United Kingdom was concluded whereby sterling paid for Argentine products could be spent only within the sterling bloc of the British Empire. This necessarily limited the bargaining possibilities of both countries. Similar unilateral agreements elsewhere have bogged down the entire Hull program. A trade agreement with Brazil, signed in October, providing 'in principle' for an exchange of surpluses, and expansion of Argentina's trade with other South American countries and with Mexico point to a growing hemisphere trade.

Compensatory Measures in Economic Crisis.

Such compensatory measures have not been adequate to meet the growing economic crisis which, at the close of 1940, is the worst in Argentina's history. Millions of tons of grain remain unsold; the wheat crop for 1940-41 is officially forecast at 8,000,000 tons, compared with an average for the past five years of 5,910,500 tons; unemployment is growing; and the budget for 1941 is unbalanced by 23 per cent, which will add 260,000,000 pesos to an already huge government deficit. (Total expenditures in 1940 were calculated at 1,062,343,000 pesos.) The Pinedo recovery plan, approved by the Senate Dec. 18, provides for government purchases of agricultural surpluses, a nation-wide low-cost housing program and official stimulation of Argentine industries. Originally the plan called for a further restriction of imports, but this may not be necessary in view of the $110,000,000 transaction with the United States, which marks a long step forward in the policy of economic cooperation with the American republics. The agreement for a $50,000,000 Currency Stabilization loan, advanced by the United States Treasury and similar to the recent loan to China, was formally signed Dec. 27. Its purpose is to promote stability between the United States dollar and the Argentine peso through the purchase of pesos with dollars in the open market. United States Treasury officials described it, in the document consummating the agreement, as 'another practical proof that the Good Neighbor policy is a living force among the American republics.' The money can be recovered only by selling Argentine pesos later, thus demonstrating the confidence of the Treasury in Argentina's recuperative powers.

Export-Import Bank Credits.

In addition, the Export-Import Bank has granted Argentina credits to the amount of $60,000,000, which should increase imports from the United States, restricted because of acute shortage of dollar exchange, a stringency indicated by the arrival in New York, in November, of $16,000,000 in Argentine gold. This credit includes $20,000,000 which had been made available earlier in the year for the purchase in the United States of industrial and construction materials and transportation equipment. The increase in the capital of the Export-Import Bank from $200,000,000 to $700,000,000, to assist in the orderly marketing of Western Hemisphere products, will make an additional half billion dollars available for the economic defense of the Americas against totalitarian commercial domination. Restrictions on the amount to be loaned to any one country, formerly limited to $20,000,000, have now been removed. How much of the expanded credit facility is to be used to buy up surpluses, as in the abandoned 'cartel' scheme, is not clear. Argentine livestock breeders and grain men were opposed to the cartel proposal as a 'big stick' in the hands of North American producers, 'our direct competitor.'

The Export-Import Bank credits will temporarily alleviate the exchange situation, but the only real solution lies either in a substantial increase in North American purchases of Argentine goods or in Argentina's return to principles of multilateral trade, both of which alternatives are doubtful of realization. A fundamental answer to its country's commercial difficulties was among the items proposed by the Argentine economic mission that visited Washington in November. This might take the form of a customs union, which would give Argentine products permanent preference in the United States market and would admit competitive products under lower duties and generous quotas. A tripartite arrangement between Argentina, the United States and Great Britain was also suggested, which would help 'unfreeze' Argentine credits held in London and, at the same time, release dollars for Argentine imports from the United States.

Other Trade Transactions.

The largest meat contract in the history of the Argentine packing industry was announced in November, under which Great Britain, in the second year of the war, would purchase £40,000,000 of Argentine foodstuffs. The transaction would not provide any exchange, as payment of any balance due Argentina would be effected by repatriating London-held Argentine sterling bonds, of which approximately £46,000,000 remain in the hands of British investors. An informal trade agreement was signed with Japan, to take effect from March 15, by which the two countries agreed to fix their mutual trade at 30,000,000 yen each annually, an increase of 33 per cent over 1939.

Political Affairs.

A serious political crisis was precipitated in August over Congressional exposure of the 'Palomar land scandal,' in connection with the purchase of an airdrome site, in which important government officials, including the War Minister, were implicated. Although President Roberto M. Ortiz was not involved, he put his position to a test by submitting his resignation, which Congress voted down 170-1. The Vice-President, Ramón S. Castillo, has been acting as head of the nation since mid-summer, owing to the president's illness. In his new Cabinet Argentina's largest single political group, the Radical party, is not represented, except for the Minister of the Interior who belongs to the Ortiz Anti-Personalista wing of the party. With the largest bloc in the Chamber, the Radicals, to which President Ortiz formerly belonged, have more representatives than the Concordancia, the coalition of Conservatives and Anti-Personalistas which elected Ortiz in 1938, and are now stronger than at any time since the revolution of 1930.

Irregularities and charges of fraudulence in connection with gubernatorial elections in two provinces, charges substantiated in the case of the Province of Buenos Aires elections of Feb. 25, have resulted in Federal intervention. Rule by the Federal interventor supersedes the locally elected government until new elections can be held. The Province of Buenos Aires has a disproportionate number of electoral votes and its governor can wield great influence in a national election. Hence these provincial election results are important as likely to affect the outcome of the presidential elections in 1943.

An anti-totalitarian organization, the Accion Argentina, was formed this year. It claims a nation-wide membership of 300,000, drawn from many different political parties. Clashes between it and Nazi groups were reported in October in the northern territory of Misiones, which is bordered on three sides by south Brazil, an area with large German colonies which is supposedly a center of Nazi activities. A number of German language schools in Misiones have been closed. The Chamber of Deputies has approved the presidential public order bill aimed at the control of 'fifth column' activities. A plan contemplating national control of airlines now under Italian and German control is being worked out by the National Aeronautical Bureau.

Plans for Defense.

On July 25 the Chamber approved a large defense program, calling for the expenditure of 600,000,000 pesos. A special session of Congress, called for November to discuss rearmament and economic problems due to the European War, considered a project to build up a merchant marine capable of transporting Argentine meat and wheat, since less than three per cent of the Republic's exports are carried in Argentine bottoms. In accordance with the Act of Havana (Article XV), the Foreign Ministers of Argentina and Uruguay met in December to discuss complementary and cooperative defense measures. See also WORLD ECONOMICS.