ARGENTINE RAILWAYS AGREEMENT (Hansard, 11 March 1947)

§ Colonel Crosthwaite-Eyre (New Forest and Christchurch)
I wish to take this opportunity to draw attention to matters which arise out of the Argentine Railways Agreement. When this question was raised earlier in this House, the Chancellor of the Exchequer, in reply to a Question which I put to him, said that this was a matter which must be judged in the light of the Agreement as a whole. Whatever one might feel about the particular terms 1292 granted to the railway companies, that was something which could only be taken in the full context of the agreement made earlier in the year. As I understand it, three things principally devolved from that agreement. The first was that the sterling balances would be funded at one-half percent., and that the interest accruing to the Argentine Government should be paid in either gold or dollars. That sum was equivalent to £625,000 a year. It was, secondly, agreed that £5,000,000 a year of the sterling balances should be made available to the Argentine Government in each year subsequent to the Agreement. It was thirdly agreed that a consortium should be set up, in order to manage the Argentine railways, and that this consortium should give a guarantee that instead of the average of £4,000,000 a year paid in the way of dividends to this country on the railways, a sum of £5,000,000 should in future be paid. Those were the main things laid down as a result of this Agreement.
Subsequently His Majesty's Government entered into further negotiations as a result of which the Argentine railways were sold out to the Argentine Government, for a sum of £150,000,000, of which £125,000,000 represented sterling balances and £25,000,000 represented presumably Argentine pesos, gold, dollars; or at any rate, some sort of hard currency. Therefore, the result of what His Majesty's Government have done is that, instead of having the sterling balance that was accumulated in a common war effort funded at one half per cent., and liquidated at a very gentle rate, one is now faced with the position 1293 in which the whole of this sterling balance has been redeemed by the Argentine Government in exchange for our most valuable asset in that country.
I think that it is also fair to say that at present we are, of necessity, bound to buy a great deal from the Argentine. The Chancellor of the Exchequer told me that the adverse balance of trade is somewhere in the region of about £50 million for 1946. He told me that before the sale of the Argentine railways, and their subsidaries, we managed to get something like £13 million, in the form of dividends, from the Argentine. Therefore, the crux of the situation is that under an agree-men made by His Majesty's Government we, now faced with an adverse balance of f5o million, have traded a certain income of £13 million per annum for £25 million in the immediate present, and surrendered something like £5 million per annum that we have received in the way of dividends.
One can only come to the conclusion that His Majesty's Government have failed to make any proper appreciation of the situation, that they have been willing to give up most valuable investments in the Argentine, that they have sold up our assets. All that has been swept away. They have definitely and completely ruined any immediate chance of striking a proper and fair balance of trade with the Argentine. Even if that was not enough, there are wider and further repercussions. One of the things that we on this side have been pressing the Government about is that in any settlement of sterling balances we must try to strike some sort of balance between the actual cost by any nation, and the actual effort made by any nation, in the common effort to win the war. The Argentine Government were neutral until the eleventh hour; in fact, victory was secure, at the time they joined the United Nations. If we are to face the future, crippled and burdened as we are, with all the debts we have accumulated, and all the difficulties of reconstruction of our industry, and trying once again to be a virile member of the world economic unity, one thing we must do is to make our situation, vis-à-vis sterling balances, one of reality. We have sent high-powered missions abroad, by which we hope to obtain a fair and just settlement, but, our negotiations are burdened from the very start 1294 with this most unjust settlement. If, in an attempt to pay out to the Argentine the whole 100 per cent. of their sterling balances, we pay them out in concrete British assets, without regard to any contribution that we and they may have made to the common war effort, then we have no cause whatever to complain when we come to discuss our balances with other nations, if similar hard bargains are demanded.
The charge which we must bring against His Majesty's Government on this occasion is that they have sold the pass for all subsequent negotiations, with other creditor countries in which it will be necessary to try to produce a just settlement, in which cost and effort are co-related. The Chancellor said, in answer to a Question by myself, that counter claims we may make must be considered in any final settlement. If he means any thing by that why has it not been done in the case of the Argentine? Why is nothing done in the case of the Argentine, which has profited so much in the last year, and has thought nothing of increasing the price of linseed oil by 100 per cent?
They have also increased the price of beef by 100 per cent. And as far as I could gather from last Friday's Debate, an existing contract has been increased by £7 million. What is that except a sort of blackmail of the Government? It proves that the Government are not prepared to fight this issue of the sterling balances which is vital if we are to preserve the hard currency situation and try to prevent this country from starving. If the Chancellor's statement meant any thing, why were the counter claims not submitted to the Argentine Government? Why, in the first practical test of Government policy, have the sterling balances been settled so incredibly in favour of the Argentine Government? I have no doubt that the Financial Secretary appreciates the differences between the market value of the shares and the value obtained by the Government. The Government have no doubt appreciated the point of view of that adverse balance of trade versus dividends. They no doubt appreciate that normally £10 million of exports were attributable to our interests in the Argentine. That £10 million, plus the £4 million dividends, has simply vanished in exchange for £25 million of hard currency.
1295 In conclusion, I would ask the Financial Secretary to answer three questions. First, is this settlement with the Argentine to be considered as something which has set the standard for other settlements? Second, is he satisfied that this agreement is in any sense equitable as compared with the war effort of the Argentine and our selves? Is it anything of which we can feel proud when we justify the cost between ourselves and the Argentine? Third, can we have an assurance that in no circum stances will this standard which has been set become a criterion for any other negotiations we may make? There may be reasons for making this settlement essential, but I ask the Financial Secretary to assure the House that in no circumstances will he allow us to be brow beaten by any other country over any other settlement. If we are to be saddled with this £3,600,000,000 of debt in the sterling area, and the Government are going to pursue this sort of policy, no matter how many debates we have on the economic policy, this country is bound to fail. I hope the Financial Secretary will be able to reassure us on that point.

§ The Financial Secretary to the Treasury (Mr. Glenvil Hall)
I have rarely listened to a speech which contained so many in accuracies. It was based on a misreading of the economic agreement made with the Argentine. If I understood the hon. and gallant Member's complaint aright, it was that in its attitude to the Argentine rail way agreement the British Government had in some way abrogated the Economic Agreement made with the Argentine Government in September, 1946. To begin with, the British Government have made no railway agreement with the Argentine Government. The shareholders have come to terms with the Argentine Government and have sold, as he correctly stated, their holdings in the Argentine railways for some £150 million sterling. It is true, as he said, that under the agreement to which he referred, a consortium was suggested between the Argentinian Government and this Government, under which the Argentinian Government would put a certain amount of capital into the Argentine railways; but if he had taken the trouble to read Part 3 of the White Paper to which he referred, he would have discovered that, under paragraph (i) on page 6, it is laid down that that agreement 1296 that is, an agreement for a consortium—was conditional upon the approval of the shareholders of the British companies being obtained in accordance with English law, and the approval of the Argentine Government being also obtained irk accordance with Argentine law. Those approvals to the consortium did not materialise. In their place, as I have already indicated and as the hon. and gallant Gentleman said, the shareholders have themselves come to terms tentatively with the Argentinian Government for the sale of their railway interests in the Argentine for a sum of £150 millions. The British Treasury cannot prevent a transaction of that kind from taking place. All the British Treasury can do is to see that, when a transaction of this kind is undertaken, the assets possessed by British shareholders abroad obtain a satisfactory price when such a sale takes place.

§ Colonel Crosthwaite-Eyre
Is it not true that actually it was a representative of the British Treasury who arrived at the global figure of compensation, that figure being subject to ratification by the shareholders, and that the whole negotiation was carried out by the British Treasury, and not by the stockholders?

§ Mr. Glenvil Hall
This is not British Government property. This is property of the shareholders and of companies with their headquarters in the City of London who have carried out the negotiations. It so happened that the sterling balances in London belonging to the Argentinian Government was £125 million, and what the British Treasury was asked to do was to liberate that sum in order to assist the Argentinian Government to buy the railways in its own country. As I say, the British Government has agreed to the transaction. I, for one, do not see all the ills which the hon. and gallant Gentle man envisages flowing from that permission. If he will consider the matter a little further, he will see that, under the Economic Agreement, the transaction which has taken place between the shareholders and the Argentinian Government was provided for in the White Paper. On page 2 of that document, under "Payments," among other things, it was agreed that the sterling balances accumulated up to the date of the Agreement could be used to repatriate British investments in the Argentine, 1297 If we put our signatures to an Agreement of that kind when shareholders and an other Government get together, and desire to repatriate capital of that kind, we can not, surely, go back on our word, unless the transaction proposed is grossly unfair to the national interest. In this instance, as I think the hon. and gallant Gentle man will agree, nothing of the kind occurred. In fact, so far as I know, the shareholders and the City—and I believe the hon. and gallant Gentleman has interests in the City, and will confirm this—feel that the arrangement arrived at is one that is eminently satisfactory to the share holders concerned.
The effect of this transaction will be that, instead of our owing the Argentine Government £125 million by way of sterling balances, we shall owe them nothing under that head. These will be, if the deal goes through, completely wiped out. In addition, we shall have £25 million in hand towards current trading deficit on our meat and other contracts which have been made with the Argentine. That is a nice little amount that we can well do with, and can use with benefit to the people of this country. In addition, the fact that we have agreed to this arrangement means that there will be no release of £5 million per annum of convertible sterling over the next four years. That will no longer have to be found from our resources, in order to comply with the terms of the White Paper to which reference has been made. It also obviates this country having to pay half-per-cent. interest on the accumulated balances, which would have amounted to the sum of about £625,000 per year.
I do not want at this late hour to pur sue this matter further, but I would briefly add that, of course, this does not set up a standard for all future transactions.
1298 Each transaction will naturally be taken on its merits, and this one must not be taken as a yardstick. We have made a commonsense arrangement which we think is one that is satisfactory to all concerned. Nor does it mean that, when settlements are made with States who hold sterling balances, the assistance received by them during the war should not be taken into account in any settlement arrived at. Cases must be taken on their merits, and everything relevant will be taken into account as each agreement is made

§ Colonel Crosthwaite-Eyre
Why was no counter claim made to the Argentine? is it not a fact that the Argentine joined the United Nations long after the eleventh hour—at practically two minutes to twelve —and why is it His Majesty's Government's policy to allow the Argentine to charge us these enormous sums, with a 100 per cent. increase on linseed oil, and so on, and no counter claim is made for the services we rendered to them during the war?

§ Mr. Glenvil Hall
The hon. and gallant Gentleman is again rather muddled. He is taking two different things and trying to contrast them. We make contracts with various countries to whom we go for various commodities this country needs. Those contracts are made on a commercial basis. Sterling balances are dealt with under agreements, and also under Article to of the Anglo-American Agreement. The hon. and gallant Gentleman should not mix up contracts made with various countries for goods which we need and the out standing balances known as sterling balances.