Argentina

on the World Today

EARLY in June, Juan Domingo Perón passed the halfway mark in his six-year term in the Argentine presidency. Under his administration no brutal tyranny has been instituted such as occurred in the worst Latin American dictatorships. The jails are nominally free of political prisoners; and the working masses, instead of being persecuted and economically exploited, are precariously enjoying the highest wages, the broadest social benefits, and the best living conditions in their history.

But, in subtle ways, the Perón regime controls the life and activities of the people as effectively as crude dictatorships of terror ever have done in more backward countries.

No business operation of any consequence can be launched or pursued in the republic without enough presidential favor to assure it of bank credit and necessary supplies. No group or individual in a labor union can oppose a program laid down for it by the government without risking a black-listing from Perón bosses in labor union politics.

No professional man can fight the regime in the open. If he does, he exposes himself to discriminatory treatment from the courts, or even disbarment, if he is a lawyer; to loss of his teaching job if he is an educator; to whispering campaigns against his practice and his professional standing if he is a physician; and to shrinkage of his newsprint supplies and advertising revenues if he is a journalist.

By these means, a kind of creeping totalitarianism has taken possession of the republic. In business, intellectual activities, and politics, Argentine life tends to become increasingly a competition for the regime’s favor. And where the government directly manages major national interests — as in the case of agricultural exports, foreign exchange, imports, transportation, and wages — the very size of the responsibilities it has undertaken forces it to more and more desperate and adroit political expedients to overcome economic and administrative errors.

This is the situation behind the virtual collapse of American-Argentine trade in 1949, the increasing difficulties of American capital investors in doing business in Argentina, and the Perón regime’s climactic conclusion, on June 27, of a bilateral trade agreement with the British.

Utopia in five years

The republic came out. of the war with dollar reserves of upwards of 750 million dollars and with a ravaged, half-starved world presumably waiting to be succored by Argentine grain and meat shipments. When Perón became president on June 4, 1946, both the dollar account and the demand were still relatively intact. Argentina was in a position to profit abundantly by the world recuperation process simply by going along with it.

Instead, the presidential imagination decided that the Argentine economy was to be dynamically revolutionized for the better, and in October a typically totalitarian Five-Year Plan was announced.

1. An immense expansion of Argentine industry was to be brought about, mainly by the purchase of foreign-made machinery.

2. The Argentine railways were to be nationalized and operated for the benefit of the economy through purchase from their British owners, and a nationalized merchant marine was to be established through forced purchase from private interests.

3. Agricultural mechanization was to be stepped up by huge purchases abroad of motorized farm implements and of trucks and jeeps for more adequate crop haulage.

4. Wages and social security benefits of industrial, white-collar, and agricultural labor were to be raised and kept above parity with controlled inflation prices.

5. And all this was to be paid for by the government, which would buy up the export surpluses of the country’s agricultural products — grains, meat, hides, wool, linseed, cotton, sugar — and sell them at bonanza profits to a scarcity-plagued world.

An organization called the Argentine Trade Promotion Institute (IAPI from the initials of its Spanish title) was set up to administer the program, with Minister of Economy Miguel Miranda, one of Perón’s big-business backers, in charge. By the end of 1946 the Five-Year Plan was functioning.

Few of the projected benefits have been realized. IAPI Chief Miranda threw away most of Argentina’s dollar reserves during the first year on purchases, in the United States, of obsolescent machinery and motor vehicles whose scandalous condition and cost reflect both the graft-ridden nature of IAPI’s operations and the connivance of certain American quick-sales agencies. Comparatively little of this material has been used, and most of it has been exposed to the weather so long that it is no longer usable.

The railways were bought and nationalized on schedule but promptly began producing operating deficits for the government. Nationalization of the merchant marine, completed with the government’s forced purchase of 382 vessels of the Alberto Dondero lines in May, has happened too recently for any certain trend toward operating profits or losses to be detected.

Forced wage increases have been maintained, but. during the first half of 1949 the government appeared to be slowly losing the battle to keep purchasing power above rising living costs. In the meantime, small business proprietors and (in spite of IAPI’s purchases of export crops) small and large landowners were gradually impoverishing themselves meeting their payrolls.

The grain market breaks

But the worst collapse of the Five-Year Plan occurred in the scheme for financing the program with export crop profits. Argentina began finding difficulties in moving her farm exports at scarcity prices as early as the summer of 1947. From then on her troubles have simply deepened.

Two bumper grain crop years, 1948 and 1949, in the United States, Canada, and Europe have removed all prospects of scarcity prices on wheat, corn, oats, and barley. The International Wheat. Agreement, which Argentina refused to enter because the Perón regime did not wish to commit itself to anything less than gouge prices, has lowered the wheat selling levels still further. As a result, at the end of the harvest season last April, the republic’s totalitarian speculators found themselves holding close to 1½ billion dollars’worth of export surpluses, most of them stored for dangerously long periods or rotting on the ground.

Some of the surpluses were moving, of course — well above a million tons of wheat annually, for instance, to Brazil, Peru, Italy, and Spain. But most of it moved on barter arrangements. Consequently when, in order to create the impression that it was getting bonanza prices, the government marked up the values of the import goods and commodities received in exchange for the wheal, that, in turn, tended to create trouble in the domestic price structure. Meat, too, moved in sizable quantities to England, but at prices fixed by an agreement made before the Five-Year Plan and too low to count toward paying off the mounting costs of IAPI’s operations.

Dollar starvation

Except in meat, no Argentine export commodities moved in volume enough to stop the accumulation ol surpluses, and none of the barter trade operations produced dollars. Nor were dollars to be had by other means. After 1948, meat credits in England could not be exchanged for dollars because Great Britain was running out of dollars. Because of Argentina’s uncoöperative attitude on prices and international grain agreements, the European Coöperation Administration (ECA) passed up Argentine exports in its buying operations, so there were no dollars to be had from that source.

An increasingly acute dollar starvation was added, then, to other economic headaches. In the spring and early summer, Argentine industries were desperate for fuel oils and replacement parts which they were accustomed to buy from the United States. Wholesale and retail businesses languished for manufactures they must import. Unpaid — and for the time being unpayable — debts of more than 500 million dollars piled up in the United States account of this South American republic.

United States commercial credits dried up to a trickle, and American-Argentine trade fell away to a gesture. Unless export outlets were improvised quickly, the unsalable surpluses after the 1949-1950 harvests would climb well above 2 billion dollars and the import shortages would become really calamitous. In the late spring, then, conversations over the Anglo-Argentine trade agreement were formally launched.

British fuel for Argentine grains

The agreement which finally emerged in Buenos Aires on June 27 is much more of a face-saver than a life-saver for the Perón regime in its economic embarrassments. Actually, only on a very few points is it a “firm” agreement.

Britain is to take at least 300,000 tons of Argentine meat during the first year at a price substantially 40 per cent higher than she has been paying. In return, the British have specifically agreed to supply Argentina with 1.8 million tons of crude petroleum. 4 million tons of other liquid fuels, and 1.5 million tons of coal, which should pretty well overcome the republic’s fuel shortages.

The agreement is chiefly a stale ment of good intentions. Great Britain is to take larger quantities of Argentine corn and other grains for livestock forage, and in return is to supply more heavy machinery for Argentine industries, more railroad equipment and motor vehicles, more mechanized farm equipment, and large stocks of mechanical household gadgets, previously bought chiefly from the United States. The minimum objective in trade volume is set at 500 million dollars a year each way for five years.

Instead of relieving Argentina’s dollar shortages, the pact, with its exclusive pound-peso exchange restrictions, is actually a long step for both countries toward secession from the international dollar economy.

Barriers to U.S. trade

The embarrassment to the United States in its Argentine economic relations is obvious. The British pact has shut American exporters out of the markets where their products were popular.

American investors in Argentine business and industry can get no dollar exchange out of the country to pay either themselves or their stockholders, whatever their profits. If they protest too vigorously, the threat of expropriation hangs over their heads. If they are expropriated, they will not be paid tn dollars, and there is little prospect that they will be adequately paid even in pesos.

A bilateral trade st udy commission which began work in midsummer is trying to do something about American-Argentine relations. But before Argentina can acquire the dollars necessary to put its trade on a flourishing basis, export speculations under the Five-Year Plan must be liquidated and the prices of Argentina’s potential exports to the United States lowered enough to attract buyers.