1942: Argentina

Question of Neutrality.

Argentina's continued neutrality — that nation and Chile being the only countries in the Western Hemisphere to take no action against the Axis powers — has been the primary issue in internal politics as well as a limiting factor in the way of economic aid from the United States. A good portion of the Argentine public has pro-democratic leanings and would doubtless support a break with the Axis, but it is too loosely organized to combat the conservative elements in the Government and the articulate Fascist groups. Between these the Castillo administration pursues a middle course of 'prudent neutrality,' having taken no more positive step regarding the war than to grant the United States non-belligerent status. To a strong native isolationism as a consideration favoring non-involvement in the war must be added the continental European roots of Argentine culture, the traditional trade ties with Europe, the persistent suspicion and dislike of the United States, and, to a slight extent, the Italian and German elements in the population. The 'Peace Plebiscite,' an attempt of isolationists to round up signatures of the supporters of President Castillo's foreign policy, was laid aside in early summer, following the anti-Nazi sentiment aroused by the sinking of the Rio Tercero by German submarines: but, after Brazil's entry into the war, it was revived and presented to the President with over 2,000,000 signatures for 'peace and neutrality.' On Sept. 30 the Chamber of Deputies voted, 67-64, for a break in diplomatic relations with the Axis, but no action was taken by the Senate, which overwhelmingly favors the President's policy. Since Congress will be in recess until May 1943, and since President Castillo considers foreign affairs his prerogative, it is unlikely that any immediate change will occur in the Republic's neutrality status. The British Government made it clear on Dec. 31 that it deplored the policy of Argentina in continuing diplomatic relations with 'the enemies of humanity.' The Argentine Government was so disturbed and angered by this protest that it forbade newspapers to print any reference to it.

Illegal Axis Activities.

Political feeling continues to run high on the neutrality issue, however, as is indicated by the sharp reactions to the speech of Under-Secretary Sumner Welles made on Oct. 8 charging wide-spread Axis activity in the country (see CHILE). The state of siege instituted in mid-December 1941, police regulations forbidding newspaper comment on foreign policy, and other repressive measures of the Castillo administration have effectively muzzled the press and the expression of public opinion. Protest has been registered, nevertheless, against the official recognition of the German Federation of Cultural and Welfare Societies, successor to the illegal Argentine Nazi party, and the Federation of German Trade Unions, which continues the activities of the disbanded German Labor Front, with the result that the former was dissolved on Sept. 14. The Committee of the Chamber of Deputies investigating Nazi activities, which is now headed by the Socialist, Juan Solari, its original chairman, Raúl Damonte-Taborda, having resigned, has continued to function, and in September reported proof of extensive Nazi propaganda in the northern territory of Misiones.

The attack on Waldo Frank, North American writer and lecturer, following the Government's declaration of him as persona non grata for his criticisms of Argentina's isolationism, which attack has become something of a cause célèbre, has been attributed, whether rightly or not, to the Alianza de Jurentud Nacionalista, leading Fascist organization. On the basis of three memoranda on illegal activities of Axis agents in Argentina, resulting in German espionage on a large scale, which were delivered to the Foreign Ministry in November by the United States Ambassador, the Argentine Government has rounded up 38 Axis spies, some of them connected with the German Embassy, and will bring them to trial. Discriminatory action against the Axis was also taken in December when restrictions were imposed on the use of the wireless for code messages, since, unlike the Allied nations, Axis embassies can communicate with their governments only by wireless. On the other hand, two newspapers, the Critics and the Argentina Libre, which have ardently espoused the United Nations' cause, were suspended on Dec. 29 for violating the state of siege ban on public discussion of international affairs. The Chamber of Deputies voted on Sept. 20, 77-56, for immediate suspension of the state of siege but again found itself hampered by the Senate.

Politics.

The Congressional elections held in March, under conditions of fraud and duress, resulted in a plurality in the Chamber for the Concordancia, a coalition supporting the President. With the Socialists holding the balance of power, the anti-Castillo forces have a slight majority in that body, but President Castillo controls the Senate. With the resignation in June and the subsequent death (July 15) of President Roberto M. Ortiz, Ramón Castillo, who has been acting President since June 1940, became President, to serve until February 1944. Presidential elections will be held in 1943, and Gen. Agustín P. Justo, President in the early '30s and veteran politician, but one without a party, is becoming more and more the logical candidate. His election might very possibly alter Argentina's stand on the war as he has been outspoken in his support of the United Nations. In fact President Castillo, though once a follower of General Justo, broke with him over the isolationist issue. General Justo already controls three portfolios in the Castillo Cabinet. The Foreign Minister, Ruiz Guiñazu, on the other hand, has stubbornly advocated neutrality, has been outspokenly unfriendly to the United States, and has repeatedly been accused of pro-Nazi sympathies and behavior.

Economic Relations.

In spite of the attempt of the Rio Conference to secure unanimous action on the question of severing economic relations with the Axis (see BRAZIL) this has been handled by Argentina with the same ambiguity that has characterized its general attitude towards the Axis powers and their agents. Axis-controlled firms have been little hampered or Axis funds little affected. On the other hand, Government control over the importation and exportation of United States dollars was decreed in July, in accordance with a United States Treasury order designed to prevent United States currency from falling into Axis hands. Argentina has, on the whole, been more concerned with building up an economic bloc in South America, an attempt launched at the River Plate Conference last year but sidetracked by the war. This is evidenced by treaties, with Bolivia over transportation facilities to the latter's oil fields with Chile over the exchange of wheat, sugar and scrap iron for Chilean coal, steel, nitrates and copper, and other pacts with Brazil, Peru, Colombia and Venezuela. The similar neutrality policies of Chile and Argentina have tended to create a rapprochement between the two Republics.

Trade and Finance.

A barter trade agreement with Spain, newest in a series running over a 13 month period, was announced in March, by which $40,000,000 worth of cereals, hides, meats and milk products would be exchanged for Spanish manufactures, machinery and chemicals. In this way Argentina hoped to unload troublesome surpluses of wheat and corn. Figures for the first seven months of 1942 indicated a 12 per cent increase in Argentine exports. Therefore, in spite of shipping difficulties and the country's strict neutrality position, as in Latin America generally, the year shows a higher export balance, increased customs collections, and a further gain in gold and foreign exchange holdings of the Central Bank. Ordinary budget deficits and special expenditures for public works and national defense have considerably increased the Federal debt, however. Irreconcilable division in the Congress has meant unsanctioned budgets for several years, with the result that the 1939 budget, in modified form, still serves. A thorough reorganization of fiscal policies is needed especially in the direction of increased taxes, since income taxes provide less than 15 per cent of Argentina's total cash revenue. Important tax reforms are proposed in connection with the 1943 budget, which provides 1,243,000,000 pesos for ordinary expenditures and anticipates a deficit of 179,000,000 pesos, to which must be added a 45,000,000 peso war budget. As the shipping shortage increases, the national revenues, which are too heavily dependent on import duties, are likely to be seriously crippled.

According to a list published late in 1941 in the Diario de Sesiones of the Chamber of Deputies, foreign investments in Argentina total 9,056,573,000 paper pesos. Great Britain holds the largest stake (60 per cent), invested chiefly in transportation. The United States' share is just under 20 per cent, principally in Government bonds; the Belgian investment is 11 per cent of the total. Germany's total of 35,500,000 pesos, half in banking, half in commerce and industry, represents only 4/10 of 1 per cent of the entire foreign investment.

An International Wheat Agreement, signed in Washington on June 27 by Argentina, Australia, Canada and the United States as leading exporters and by Great Britain as an important consumer, set up a relief pool of 100,000,000 bushels for distribution to war-stricken areas. Its postwar significance lies in the provisions to stabilize production and prices, create basic export quotas and regulate maximum reserve stocks. The export quotas were divided into the following ratios: Argentina, 25; Australia, 19; Canada, 40; the United States, 16. It has been urged in some quarters that Argentine wheat and corn be used to feed the areas recovered from the Axis by United Nations' forces, a move which would solve the problem of the Republic's grain and corn surplus, which has been unofficially placed at 4,000,000 to 5,000,000 metric tons and 7,000,000 tons respectively as of October 25.

1941: Argentina

Neutrality.

The reluctance of Argentina to abandon a policy of strict neutrality after the United States entered World War II may be attributed to three factors: its remoteness geographically from North America; the long-standing coolness between the United States and the Argentine Republic; and the internal political situation of the country, marked by strife and the deadlock between Acting President Ramón Castillo and the Radical-dominated Chamber of Deputies, with both willing to utilize problems of foreign policy for political ends. Although Argentina has granted the United States the status of non-belligerency, which serves the practical purpose of conferring unlimited access to Argentine ports, it has not broken off diplomatic relations with the Axis powers, and has given instructions to the press to print nothing that might disturb its friendly relations with other countries or affect its neutrality. Moreover, on the strength of the national state of siege declared Dec. 16, which suspends all constitutional guarantees for an unlimited period, the Government cancelled a mass meeting scheduled by the pro-British and pro-democratic Acción Argentina for Dec. 20. This move intensifies the suspicion that the state of siege had been declared to protect the Castillo régime from its internal enemies rather than to meet the international situation. The delegation to the Conference of Foreign Ministers in Rio de Janeiro (see BRAZIL) early in 1942, was instructed, however, to 'place joint interests of all American nations above regional considerations' and, in general, to 'support any proposal for continental defense that does not affect Argentina's sovereignty or neutrality.'

The link between internal politics and Argentina's position toward the War is seen in the policies adopted towards Nazi activities in that country. The Radical party, which controls the Chamber of Deputies, has stood for an energetic anti-Nazi campaign, as have the four leading Buenos Aires dailies; and a Radical deputy, Raúl Damonte Taborda, has led the Congressional committee investigating anti-Argentine activities which was created June 19. Anti-Nazi sentiment has also been strong among the Buenos Aires public. On the other hand, the Castillo administration has adopted a negative attitude of avoiding embarrassing disclosures, and in the summer played a waiting game until Congress might adjourn at the end of September. The precipitation of the War into the Western Hemisphere has altered somewhat this inertia, if not outright obstructionism. In contrast is the expressed opinion of ex-President Justo, a likely choice as next president, that Argentina should place itself unreservedly by the side of the United States, even to the extent of declaring war. President Ortiz has also pledged Washington his whole-hearted support. The Army has been very pro-Nazi, however, except for a minority loyal to Justo, and the abortive army 'revolt' in September was associated by Crítica and other pro-democratic journals with the Nazis. An investigation of the armed forces was ordered by the War Minister in the spring when the Commander of the Fourth Division was accused of distributing totalitarian propaganda to the Army.

The Damonte-Taborda Committee, a prototype for similar investigating committees in other Latin American countries, has presented four reports of its investigations and pushed through the Chamber of Deputies, by overwhelming majorities, the following resolutions: (1) censuring the German Ambassador, Baron Edmund von Thermann, for overstepping his diplomatic functions: (2) demanding dissolution of German 'welfare and cultural clubs' as blinds for political activities; and (3) asking that the legal registration of the German Chamber of Commerce be withdrawn. Implicit in the first was a demand for the Ambassador's expulsion; his recall to Berlin late in December saved him the indignity of being expelled. The topheavy staff of the German Embassy and its mounting expenses since 1939, as well as the discovery of a portable short-wave radio set in a German diplomatic pouch, have led to charges of the abuse of diplomatic privileges. The fourth report of the Committee dealt chiefly with the relations between Berlin and the German language schools in Argentina. The life of the Committee was extended by the Chamber of Deputies before it adjourned Sept. 30. The Government has cracked down on the pro-Nazi, Yankee-baiting sheet, El Pampero, but this action was interpreted by its opponents as a smoke screen. The Minister of Interior has also forbidden all activities of a new political party formed by the Alianza de Juventud, an allegedly Nazi group. In the fall it was outlawed and civil proceedings were instituted against its head, retired Gen. Juan Batista Molina.

Political Situation.

Argentine politics have grown increasingly tense as Acting President Ramón Castillo has lost popular support. He has indicated a growing disregard before Congress of the President, Roberto M. Ortiz, inactive because of illness, and has been so out of sympathy with the Chamber of Deputies that important legislative action has been deadlocked. His own party, the National Democratic, controls the Senate. The high-handed dissolution of the Buenos Aires Municipal Council on charges of corruption, and the administration's tactics regarding the Buenos Aires Provincial elections, scheduled for Dec. 7, have been recent major political issues. The legislative boycott adopted by the Radicals in January, causing Castillo to announce rule by executive decree and the extension to 1941 of the 1940 budget, continued throughout the legislative session, and Congress closed Sept. 30 without completing action on the 1941 and 1942 budgets, without voting approval of the $110,000,000 loans negotiated in Washington and without legislating important tax increases.

The tax bills introduced by the administration would have raised the income tax rates, which are the lowest of any of the principal nations of the world, and would have increased the excess profits taxes and death duties. Without these revenue increases the Government is faced with a cash deficit of P. 274,343,000, following an actual 1940 deficit of comparable size. The sum needed for purchase of this year's corn crop adds a heavy financial burden. If this cannot be met out of the dollar loan from the United States it will greatly increase the debt already owed the Banco de la Nación for previous grain operations.

Trade Problems.

Disposition of agricultural surpluses (wheat, corn and linseed) constitutes a government problem of major importance. Meat presents no problem since Argentina consumes 75 per cent of its output; the rest goes principally to Great Britain. Normally, however, the country exports 68 per cent of its wheat crop and 90 per cent of its corn. The United States, which, in many respects, has been making up for the loss of the European market — in 1941, for the first time, replacing Great Britain as Argentina's best customer — is never likely to be a substantial market for the Republic's cereals. This remains a depressing factor in the nation's trade outlook. Wheat exports for the first six months of 1941 were 43 per cent below shipments in the corresponding period of 1940. The corn situation was even less encouraging. The government must, therefore, buy the grain surpluses but cannot market them, and the purchased crops rot in granaries. The net loss on Federal crop financing runs as high as P. 400,000,000. With the new surplus which the government will have to carry the nation's total indebtedness on grain purchases will exceed 1,000,000,000 pesos. A parley of the 'big four' wheat producers — Argentina, Australia, Canada and the United States — and Great Britain, in the summer, drafted an international wheat agreement to establish an 'Ever-Normal Granary' and to deal with the disposition of surplus stocks which, at the end of July, not counting the 1941 crop surplus, amounted to about two normal years needs. A pool of relief wheat to war-devastated countries was also discussed.

Trade with the United States increased markedly in 1941. In the first six months the United States took 35 per cent of Argentina's exports as against 17.5 per cent in 1940 and an average of only 12.6 per cent in the five-year period 1936-40. The change is due chiefly to increased purchases of certain critical materials: wool, hides and skins, quebracho extract. Argentina has had the best wool year in over a decade and the year showed a radical shift in the destination of wool shipments from Great Britain to the United States, which accounted for 82 per cent of them. Expansion of the armed forces explains the great increase in United States' wool requirements. The decision of the Roosevelt administration to permit the sale of Argentine canned beef to the United States Army improved United States-Argentine relations, as it not only provided Argentina with dollar exchange but indicated that a prejudice against Argentine meat had been overcome.

Hemisphere solidarity and the cause of Argentine cooperation with the United States were furthered by the conclusion of a reciprocal trade agreement in October. The unique features of this pact are (1) an escape-clause protecting the North American farmer; (2) the provision that United States concessions on Argentine products not normally supplied by that country (e.g. wines and cheeses) may be terminated after the end of the War on six months' notice; and (3) the denial to the United States of benefits from any special concessions granted to American neighbors.

Steps in the direction of a regional customs union (see URUGUAY for River Plate Regional Conference) were taken by Argentina and Brazil in concluding two trade agreements, one on April 9, the other on Nov. 21. Their immediate objective was to put the foreign trade of the two countries on a sounder basis by extending trade in Latin American markets. Eventually the new treaties are expected to promote the industrial development of South America by creating a unified market for the manufactured products of both nations. Politically, they might be expected to deepen the friendship of the two countries and, in the words of the Brazilian Foreign Minister, Oswaldo Aranha, 'suppress frontiers and bring nations closer together.' The two countries also mutually undertake the construction of an international bridge over the Uruguay River, thus connecting Entre Ríos Province with the State of Rio Grande do Sul.

Other hemisphere trade pacts signed by Argentina during 1941 include agreements with Canada, Bolivia and Cuba. Negotiations are under way for treaties with Chile, Paraguay and Uruguay.

In November, Argentina signed a contract putting its entire tungsten output for the next three years, up to 3,000 tons annually, at the disposal of the United States. As the hardening agent in steel, this strategic material is indispensable for defense production. The inaccessibility of the Chinese supply is now somewhat offset for the United States by Japan's loss of the Argentine source, for recently Japan has been taking nearly half the Argentine output. Attention is also being centered on other strategic exports from Argentina, chiefly beryllium, which is valuable as an alloy. In order to encourage increased production of nonferrous metals, the Banco de la Nación is authorized to grant credits to small producers of tungsten, beryllium, antimony, tin, lead and copper. See also PAN-AMERICAN AFFAIRS.

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.

1939: Argentina

After four years of preliminary discussion, the United States Department of State on Aug. 23 announced an intention to negotiate a reciprocal trade treaty with Argentina, and both Governments published lists of articles on which they proposed to discuss tariff concessions. Public hearings on the proposed agreement were held in both capitals in October, when objections were raised by the representatives of Argentina industries very similar to those voiced by North American wheat, livestock and dairy farmers. The need expressed for a high protective tariff and the outcry against concessions on imports indicate the difficulty of arranging a satisfactory trade pact between two countries whose economies are essentially competitive. The difficulty of resolving this fundamental conflict, particularly at this moment when the whole trade policy of Secretary Hull is under fire (see VENEZUELA), was recognized when the negotiations were suspended early in 1940.

Economic Problems.

The protest raised by our western cattle-country Senators when President Roosevelt tried to supply Argentine corned beef to the United States Navy is in line with the ban on Argentine frozen or chilled meat, excluded ostensibly on the ground of protection from foot-and-mouth disease but actually from a desire to keep out competitive meat products. The failure of the United States Senate to ratify the sanitary convention of May 24, 1935, permitting the entrance of Argentine meat from areas free from this disease, merely adds to the prevailing distrust of the United States in Argentina. Yet Argentina must find a market in this country for her food products and raw materials if she is to become the excellent potential customer for certain North American raw materials and manufactured articles that she might be. It is this need for an outlet for her own commodities that has committed her to bilateral trade pacts with Great Britain and Germany and to the measures controlling imports and exchange, adopted during the depression, which have not been intentionally discriminatory but have substantially cut down imports from the United States. Exchange control operations are, moreover, a source of considerable national revenue, the profit on them in 1938 amounting to 73,000,000 pesos.

The hostilities in Europe have altered trade channels somewhat. In November, North American exporters outsold British for the second successive month, and German sales to Argentina have come to a virtual standstill. Great Britain continued in the same month to be the leading purchaser of Argentine goods, however, a fact which, in trade terms, is reflected in the new import policy announced Nov. 21. This is designed to prevent purchases, as far as possible, from any countries except Great Britain and France, and was a reaction to the Allies' agreement to pool their purchases abroad. At the time the Director of the Exchange Control Bureau said that Argentina must continue to 'buy from those who buy from us,' and to increase its dependence on bilateral, compensated trade agreements, begun by the Roca-Runciman treaty of 1933. This is an outright rejection of the principle of multilateral trade. It looks, too, like a repudiation of the new system of import control announced in August, which established a 'horizontal control by commodities instead of a vertical control by countries.' Such a system would remove the 20 per cent price advantage British imports have enjoyed. A decree of Aug. 7 had eased the ban on 66 groups of North American merchandise on the import restriction lists adopted in November 1938, which had cut imports from the United States about 50 per cent. However, these relaxations of the restrictions on North American goods seem to have been only temporary. The controlling factor in Argentina's trade policy towards the United States is, of course, the unfavorable trade balance with this country, in the fifteen years from 1924-1938 amounting to an excess of $486,900,000 in North American exports over Argentine imports.

An International Wheat Advisory Committee, representing ten wheat-exporting countries and twelve wheat-importing nations, met in London on Jan. 10, 1939, to discuss problems of production and marketing in view of the falling price and world surplus of approximately 900,000,000 bushels of wheat. The Argentine Government refuses to accept a quota on the Republic's production, insisting on freedom of action to produce and sell as much as she can. The Government's holdings of wheat (approximately 158,000,000 bushels on July 1) are embarrassingly large, and the operations of the National Grain Board have entailed heavy losses, leading to rumors, denied by the Government, of an intention to devaluate the peso to offset them. The Exchange Control Board estimated a loss on wheat operations by the end of 1939 of approximately 100,000,000 pesos.

Finance.

On Aug. 20 the Argentine peso, which had been pegged to the British pound, was linked to the United States dollar in an attempt to avoid its continued fall, accompanying the drop in the pound. Congress has agreed to maintain the 1939 budget estimates in force for 1940, in order to help adjust Argentina's economy to conditions created by the war in Europe and to permit a day-by-day consideration of financial problems. Vigorous action has been taken to prevent profiteering and to protect the public against unwarrantably high prices. The last report of the Ministry of Finance shows the revenue in 1938 to have been higher than was estimated in the budget, with the result that the authorized deficit of 77,000,000 pesos was reduced to 15,090,000 pesos.

Political Affairs.

The publication of a secret document in Buenos Aires in March, called a forgery by the German Embassy, which indicated a plot on the part of the Third Reich to annex the six southern territories of Argentina, known as Patagonia, caused some concern over the question of Nazi penetration. In his opening message to Congress on May 11, President Ortiz attacked the introduction of foreign ideologies. Four days later a presidential decree was issued, making mandatory the dissolution of all political organizations directed from abroad. In the summer the Chamber of Deputies voted a thorough investigation of Nazi and Fascist activities, it being thought that the court investigation of Alfredo Mueller, acquitted of the charge of 'directing anti-democratic activities' in the country, had brought to light enough in the nature of subversive activities to warrant an inquiry. The growth of Nazi penetration in Latin America has been the source of anxiety to most of the American republics.

Claims to Antarctica.

In view of Admiral Byrd's expedition, financed by the United States Congress and intended to establish North American territorial claims in Antarctica, Argentina's preparation of a formal claim of sovereignty over the region between the 20th and 68th meridians, W. long. constituting more than one-fourth of the area over which Byrd intends to establish United States sovereignty, is of interest. Argentina maintains that this area is a natural geographic dependency of the South American continent; she also claims to be the only country that has actually occupied any Antarctic territory since she has maintained a meteorological observatory in the South Orkneys since 1904. France, Norway, Germany and Australia all claim parts of Antarctica, and Great Britain asserts a claim to part of the area claimed by Argentina. Whaling in Antarctic waters and potential coal and mineral resources give more than a scientific interest to Antarctica. Argentina has vigorously opposed any attempt to extend the Monroe Doctrine to this region of the southern continent. See also INTERNATIONAL LAW.

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.)