ARGENTINE COMPANIES (BRITISH ASSETS) (Hansard, 31 May 1957)

§ Mr. William Teeling (Brighton, Pavilion)
Over the last ten, if not twelve years. I have been asking a series of Questions about the problems of the shareholders of this country in Anglo-Argentinian Tramways and, a little later on, the Primitiva Gas Company. In addition to these Questions, about eight years ago I was fortunate enough to be able to initiate an Adjournment debate on the same subject. I am pleased to see that the representatives of the Foreign Office who answered on those two occasions remain in the same family. Today we have the Joint Under-Secretary answering, and in 1949—

§ Mr. Teeling
As I was saying—the interesting fact is that it was the Joint Under-Secretary's brother-in-law, who is now the hon. Member for Woolwich, East (Mr. Mayhew), and who was Under-Secretary in the Labour Government, who was then answering, on what I am afraid was the same lines as the Joint Under-Secretary will have to answer on today. He pointed out that the Government were in the fullest sympathy with people in this country who have suffered very considerably by the fact that their properties have been taken over and that there has been no form of compensation. In those days I tried to get the compensation linked up with the different trade agreements that were then being negotiated, and up to a point that was done. We received endless promises, but in the end nothing came of them.
I am bringing up the subject once again today because at this moment discussions are proceeding at what is called the Paris Club with regard to the payment of debts due to different countries in Europe by the Argentine and with regard to various 861 arrangements that might be made for the future. Requests are also being made by the Argentine Government to the World Bank for loans which would get the Argentine on its feet. Negotiations are also proceeding, through Baring Bros., the bankers, in this country, with regard to the opening of a further credit for the Argentine.
Therefore, and I think rightly, the very large number of people in this country, the Colonies and the Dominions who are shareholders in both companies and who have received absolutely nothing, are quite determined that their case shall be brought forward and that it shall be known throughout the world before any fresh decisions are made on the question of money for Argentina's development.
I take first the question of the Primitiva Company's position. I quote from a letter from the Primitiva Holding Company, which says: I should, perhaps, add that throughout the Company has received strenuous support from the Embassy"— that is, the British Embassy— from the Foreign Office and from the Treasury, Then come the important words: but it is fair to say that their actions on our behalf have to some extent been hampered by the desire of the Board of Trade and the Export Credits Guarantee Department to facilitate exports—to Argentina—even by extending credits to defaulting debtors. That is a point to which I shall return later.
The Primitiva Company has been in existence in Buenos Aires since 1855—over 100 years ago. The present company was formed by the amalgamation in 1910 of three gas companies then operating in Buenos Aires. The Company operated under various municipal contracts and, generally speaking, was on good terms with municipal authorities. Then, suddenly, the assets were expropriated by the Argentine Government—Peron's Government—in March, 1945, on the authority of an expropriation decree dated April, 1944.
The company is not complaining about this because an expropriation law was passed in Argentina in about 1866, which the company knew all about. Its grievance is not in that regard, but because of the fact that nothing has been paid for its property. The deposit paid 862 by the Government was even declared by the courts to be inadequate and, as everybody knows, there have been many political changes in the Argentine Government since then.
The Primitiva Company has always held that Argentina's political and internal affairs were nothing to do with the people of this country, and that all the time we were dealing, as we considered it, with the Argentine Government, no matter which one, and irrespective of the people represented in it. Therefore, whatever Government is in power must take over the responsibility for the dealings of the previous ones. Primitiva's properties were expropriated without any payment, and it is a straight issue without any complications. The facts are not disputed. In an endeavour to avoid lengthy legal proceedings with consequent heavy costs, and based on official promises of good will which were not only given in the Argentine and in this country, Primitiva has been trying to negotiate an out-of-court settlement for many years.
The first promise of good will, with a view to arriving at a settlement, was made in the Protocol dated 23rd April, 1951, to the Anglo-Argentine Agreement dated 27th June, 1949, and the last was given by the then Finance Minister, Dr. Blanco, to the Chairman of the company, and one of his colleagues who visited Buenos Aires on 19th July, 1956. Other promises of favourable consideration were also given which led to hopes of a settlement, but still nothing has happened.
A formal offer for an out-of-court settlement was submitted to the Argentine Government in June, 1956, and in July, 1956, the chairman and one of his colleagues visited Buenos Aires in order to follow it up. They were received quite courteously by the applicable Ministers, but neither then nor since has an answer been received to the company's official communication of a year ago. Although conversations both in these and previous negotiations have always been friendly, it is fair to say that no Argentine Government have ever tried to implement Argentina's promises. In fact, when Dr. Mendez Delfino resigned from the leadership of Argentina's Financial Mission to Europe, he is reported to have said in his letter of resignation that whilst these problems cannot be solved 863 as quickly as desired, the countries concerned have only received from Argentina expressions of good will but without concrete results, and it is difficult to destroy the belief that dilatory tactics, incompatible with expressions of good will, are used as a means to disguise such difficulties. There is something like £5 million of money involved in this particular Primitiva case. When the chairman and one of the directors went out, it was rather unfortunate, I think, that when they were putting forward the great difficulties of the people who were the owners of the £5 million in this country, many of them poor people who are very hard up these days, at the same time, there was also a representative of Barings Bank in Buenos Aires trying to come to some arrangement about further credits in this country for the Argentine. Therefore, one can hardly say that the Argentine Government would feel at that time that we were really being very serious about the matter.
I now switch over to the Anglo-Argentine plans. I am not going into details about them, but anyway one who wants to know what they are should read the Adjournment debate on 19th October, 1949, on the subject. The case has gone on ever since with further promises from time to time, but no one has done anything.
My only criticism of the Anglo-Argentine company is that never once since the start has its chairman, Sir Bernard Docker, ever bothered to go out to the Argentine to see what the problem is. We often read what Sir Bernard and Lady Docker are doing for the Daimler Company and about their activities in other parts of the world. It is rather sad that they did not take the trouble to go in their yacht to Buenos Aires and do something for the Anglo-Argentine company there. However, they did not do so and it has been left to the lawyers in the Argentine. I am sure the difficulties of the Primitiva Company and of the Tramway Company are a godsend to the lawyers and that it will be a financial heartbreak to them when agreement is reached.
In the meantime, like the Primitiva Company, the Tramway Company is also trying not to have to go through all the formalities of the law courts and to come 864 to some arrangement with the Government. I am fully aware that since the Peron Government has been turned out, the situation in the Argentine has not been too easy. It is not for us to criticise what is going on internally in the Argentine. All we know is that they more or less came into find that the till had been pretty well robbed and that the credit of the country was bad. The development of the transport and hydroelectric facilities of the country was absolutely essential, but there was no money. The present Government there are not at rest. Every few weeks and months there are changes in its Ministers, and no one knows whether one day there may not be a further revolution. We do know that there is a constitutional election coming on in July, to be followed by a presidential election in the following February. There are many who think that we shall get no solution to this problem until these elections have been held. All the same we think that in the two years something might have been done.
I gather that hard cash is not asked for by these countries, for what they are claiming. They are merely asking for some promise of deferred payment, some kind of bond, which could be given and paid over a period. Were that done, it might well be possible to get even further credits from this country. There I come bank to the question of how far the Foreign Office, which I have already mentioned from the Primitiva point of view, are working with the Board of Trade in this matter. No doubt in the next few days and weeks we shall get clear how far the Board of Trade and Foreign Office work together over the question of the lifting of the trade ban on China. That would be an interesting point which no doubt we shall be discussing in the near future.
Regarding this question there is no doubt that the Board of Trade and the Export Credits Guarantee Department seem to be determined at all costs—forgetting about the debts owed to this country—to try to get fresh markets or, if not fresh markets, to get back to the old markets and to ignore all that has been done. This so-called Baring credit is wrongly understood and misinterpreted. What happened was that when the change of government took place people in this 865 country, big manufacturers, rushed to Barings saying that there was the possibility of all sorts of developments, and in the end Barings found the demands of British industry for some kind of capital were something in the nature of £150 million. The Argentine said they could not pay, and indeed we know that. But they said they would pay over a period of years, and from different countries they have demanded longer credits. I believe that the period for this country is something like five or six years. It was therefore to Barings that these people went—because Barings has a great interest in the Argentine—to see whether they could obtain credit.
A merchant bank cannot do that, and so they went to the "Big Five" and the grand total obtained was about £25 million. I believe that it would have been a great deal more, had there not been the matter of the Primitiva and the Anglo-Argentine problems. Then, uncertain how to divide up £25 million into the demand for £150 million, they passed it on to the Argentine Government to see what they would say and they passed it back to us. The important thing about the problem is that even if the £25 million is produced in this country, it is guaranteed by the Export Credits Guarantee Department so that, so to speak, they cannot go wrong. Were the Argentine to fail to pay, nobody would be affected in the Argentine. They would get all they wanted. It would be the taxpayer in this country who would have to pay for this sum of money guaranteed through the Board of Trade by the Export Credits Guarantee Department.
I believe that a wrong thing to do at the time when we are claiming and trying to get through the Foreign Office and the Treasury, sums which amount to something like £15 million or £16 million back from this one country. That is how I feel about it and certainly how a number of my constituents feel about it, many of whom have consulted me about it because I have taken up this matter.
It is not only this country which is worried. I will quote from one or two other countries which also are worried. Here, as my correspondent says are extracts taken at random. Here is a quotation from the Neue Zuericher Zeitung of 23rd May, 1957. It is a report 866 on the meeting of the Swiss Chamber of Commerce in Buenos Aires, and it states: The Chamber welcomed that this year's annual report expresses in a very outspoken manner the disappointment of wide Swiss circles with the unjust treatment of old foreign investments in Argentine, especially of Swiss origin. Referring to the statement by the Argentine Central Bank that on December 31st, 1955, P. 1.68 milliard Swiss capital was invested in Argentine the report points out that per capita the Swiss showed the highest investments in Argentine. The capital concerned is mainly middle-class (as it is in the U.K. Sp.) capital which was invested in public utilities, mainly electricity enterprises, brought into Argentina with the hope of commensurate return and maintaining its value. Both hopes have been badly disappointed. The investments and their return have been blocked for years and their value, owing to continuous inflation and devaluations in Argentine had declined, at the end of 1956, to 5.5 per cent. of the Swiss franc amounts originally invested. The confidence of Swiss investors has been further shaken by recent attacks of certain nationalistic circles and political parties against the still existing public utility companies; these attacks as well as demands for nationalisation based on the cost price in pesos (since devalued to a fraction of the value at the time the investments were made, Sp.) are a painful reminder of the events in 1943. These enterprises are reproached for insufficient services although the whole world knows that the reasons for this development are outside the scope of these companies (caused by the treatment meted out to them by successive Argentine Governments and the threat of nationalisation at a fraction of their investment costs). The person who writes to me adds: This report gives really a good description of what is wrong with Argentina. The country needs badly more electric power and a thorough overhaul of its transport system. However, as regards the first one it makes it impossible for the existing enterprises to raise new capital for investments in their plants by forcing them to keep tariffs down to an uneconomic level and by threatening foreign capital already invested in public utilities as well as by refusing fair compensation to public utility enterprises taken over in the past …". That, of course, refers to the two I have already mentioned. In a Buenos Aires paper of April, 1957, there is yet another example: Evidence of the not unnatural concern prompted in other quarters by the Government's failure to date to proceed realistically vis-à-vis urgent matters of national, and, at the same time, international interest, is seen in the decision of the Compañia Italo Argentina de Electricidad. S.A. to institute legal proceedings against the Federal Government and the Municipality of Buenos Aires for non-fulfilment of contractual obligations, in regard to tariffs, to 'the detriment of the Company's interests. 867 I will not quote for too long from all, these documents, but they show that Italian, Belgian and Swiss companies are feeling the same sort of draught as are the English ones. It cannot possibly do the Argentine any good that this should be going on at a time when it is absolutely essential that they should have fresh money in order to develop their gas industries, their electricity industries, and all the other things they want.
What can the British Government do? I would ask the Foreign Office whether they could come to some kind of arrangement with the Board of Trade and the export credits organisation so that those loans will not be developed until some kind of strings are attached to help the people who have already put their money into that country. It is really the British taxpayers' money which is being risked and which the export credits organisation is guaranteeing. Surely we could, somehow or other, get the different Ministries to co-ordinate their efforts and to point out that even if there is a law case in progress in both these matters, even if it is possible that legally, because the companies were confiscated and were not allowed to increase their tariffs, so that they became bankrupt, and thus they are not in a position to repay, at least morally everybody all over Europe knows that they should be paid.
I think that that would help the Argentine very much. Lastly. there is the organisation of the World Bank, of which Mr. Black is the well-known and greatly respected head. It is well known that he feels that money ought not to be paid out to those countries where debts are due and unpaid. I ask the British Government if they feel that it is at all in their power to let him know of the position in connection with these companies. If they will not do so, then the shareholders of these companies will have to do it for themselves. They will have to go round to every place and every area where an effort has been made to try to raise money, to warn those concerned of what has happened on previous occasions.
That cannot be good for Argentina's credit or pride. It is a great country which is now grappling, admittedly, with appalling difficulties left by the Peron regime. The present Government must take responsibility for what the Peron Government did. The present Govern- 868 ment should do whatever they possibly can, not to pay out £15 million or £16 million, but to issue some kind of bonds that will be paid over 20, 30 or 40 years —nobody cares how long. They will then find that it will be far easier for them to raise money and that people will be far more willing to lend. Countries will not have to use their own export credit systems and organisations to underwrite any money that is lent.

§ The Joint Under-Secretary of State for Foreign Affairs (Mr. Ian Harvey)
I am obliged to my hon. Friend the Member for Brighton, Pavilion (Mr. Teeling) for informing me before the debate of the nature of the case that he was going to deploy. Those who are deeply interested in this matter will be grateful to him for the way in which he has deployed, with perfect fairness and in considerable detail, this whole problem.
Her Majesty's Government recognise fully the problems of these companies. We have backed the attitude that the companies have taken in the past and we shall, in the future, give their case our fullest support, in so far as it is the affair of the Government so to do. We realise that the negotiations have been going on for an interminable period; the fact that the matter was raised with my predecessor in office in the Labour Administration is proof of that statement. Perhaps it is some consolation to my hon. Friend to realise that on this aspect of matters there is at any rate a bipartisan policy.
As my hon. Friend clearly indicated, Argentina's economy is not in a strong position. We have to take that fact into very careful consideration in these negotiations. I want to deal, when I talk about the policy of the Board of Trade, with some of the observations which my hon. Friend has made about it. We realise, too, that the Argentine Government, as my hon. Friend has been at some pains to state, is a provisional Government. Nevertheless I would assert definitely—and I hope that the assertion is of assistance to my hon. Friend—that the failure on the part of the Argentine Government to meet its clear liabilities does Argentina no good in this country. That consideration should seriously be taken into account by the Argentine authorities over these particular cases.
869 The fact that the Argentine Government is a provisional Government has no bearing on the case whatever. Having taken over authority and having been recognised as in authority, they inherit from their predecessors, under international law, all their predecessors' obligations. Those obligations include obligations to these two companies. There is nothing provisional about international responsibility. As Her Majesty's Government are not a party to these cases, our position therefore is one in which we are concerned with the interests of citizens of this country who are obviously affected.
My hon. Friend referred to the Paris Club. He knows that the negotiations there have been held up by a failure to agreement between the Argentine and Germany, where there is a particular problem of great difficulty. If that problem is settled I should have thought that the Primitiva case would be strengthened; and if it is settled, we shall again press, in the light of those circumstances, for a speedier settlement of this particular case of the Primitiva Company.
My hon. Friend referred to the Baring credit transactions and to the policy of the Board of Trade. I cannot accept the criticisms of the Board of Trade's policy in this matter, and I cannot accept the suggestion that my hon. Friend has made that we are not in close contact with the Board of Trade on this subject, as on all other subjects, but here I think he will appreciate that there is a clear problem. The ability of the Argentine Government to pay and to settle these problems must depend very largely upon the increased strength of the Argentine economy. If measures were taken along the lines that my hon. Friend suggested the tendency might well be to weaken the Argentine economy and, therefore, in a sense it might turn out to be a policy 870 of cutting off one's nose to spite one's face. There is that danger.
There is also another aspect of the case. Even if we took the action which is suggested, the Argentine, with whom we do a considerable amount of export trade—and it is important that we should strengthen and develop our export trade —will turn elsewhere to seek trade relations. That, of course, would not be in the general interest of this country. So the position is not quite so easy as my hon. Friend has made out.
With regard to the Anglo-Argentine Tramways Company and other companies we recognise that, as my hon. Friend said, those companies have indicated their willingness to settle their problems out of court. We think, from what we have seen of the proposals which they have put forward, that they are just and reasonable proposals, and that the Argentine Government should deal with them and try to reach a settlement at the earliest possible date.
I should like to endorse what my hon. Friend said with regard to the prestige and reputation of the Argentine in this whole matter and to join with him in expressing the view that it ought to be settled if the good name of the Argentine in trading relations is to be maintained.
I sympathise very much with the position of those to whom my hon. Friend has referred this afternoon. I should like to give him an assurance that we do sustain the position that I have outlined, and that we shall do all we can to assist, in so far as we are in a position to assist, those companies with their problems in the near future.