The Neutralization of Fritz Mandl: Notes on Wartime Journalism, the Arms Trade, and Anglo-American Rivalry in Argentina during World War II^*

To followers of the North American tabloid press toward the end of World War II, Fritz Mandl of Buenos Aires was one of the era’s best-known mystery men. An inveterate pursuer of glamor and show girls, Mandl, a multimillionaire, had bought into a small Hollywood company, Gloria Pictures, and was an investor in the fledgling Argentine film industry. His notoriety owed much to the fact that his second wife had been the film actress Hedy Kiesling, then approaching the height of her Hollywood career as Hedy Lamarr. A frisson rippled through café society when it learned that Mandl’s entourage in Buenos Aires included, among other moonlit ruins of the old Middle European nobility, Count Rüdiger von Starhemberg and Rudy’s wife Nora Gregor, formerly of the Burgtheatre in Vienna. But Mandl’s prominence owed even more to the accusation, endlessly embroidered in the columns and radio broadcasts of Winchell, Heatter, Pearson, and their like, that he had brought his trade with him to Argentina: that of “Merchant of Death.”

The opening of British and American archives in the 1970s now makes it possible to reconstruct Mandl’s world; perhaps even to do him modest justice. Further, a biographical essay offers glimpses of as-yet poorly mapped historiographical terrain: European and American participation in Latin America’s new industrialization of the 1930s; emergence of the Argentine steel and arms industries; Nazi Germany’s intentions and connections in Latin America; contention during wartime between Great Britain and the United States for influence in Argentina; and the central role of weaponry, after 1945, in drawing Argentina into a U.S.-dominated hemispheric economic and defense system.¹

On August 27, 1944, the Allies blacklisted Mandl’s business interests: henceforth Allied or friendly neutral companies were forbidden to deal with them.² In the North American press, a campaign of vilification rose to a crescendo in early 1945. A Collier’s article placed Mandl at the center of the Nazi hierarchs’ schemes to escape the collapsing Third Reich with new identities and as much loot as they could carry, and to find in Argentina not only sanctuary but also a military-industrial base from which to resume their nefarious conspiracy.³ An even more irate piece, “Poison From Europe,” by Francis Rufus Bellamy, appeared in the February 1945 Reader’s Digest. Bellamy’s article, “derived from confidential sources and authentic documents,” denounced Mandl as “one of the most sinister figures of the Western Hemisphere . . . Menace Number One to the peace of the Hemisphere . . . Weapons of destruction fascinate him.” Bellamy revealed: “he goes into raptures over new land mines which tear off the feet of advancing soldiers.” Bellamy described how Mandl had removed his fortune from Austria before the Anschluss of March 1938, and had then made a deal with the Nazis which allowed him to keep his non-Austrian holdings, as well as a share of the proceeds from the forced sale of his Hirtenberg munitions factory to the Hermann-Goering-Werke. In return, Mandl allegedly carried private funds belonging to Goering, Ribbentrop, and other Nazi Bonzen to Argentina and invested the money there in their behalf. This enormous capital and his own expertise were now at the service of the military junta that seized Argentina in June 1943. Mandl’s goal was to create an indigenous Argentine arms industry— “alarmists say that this is part of a deal worked out with the Nazi Party as far back as 1938 to take over Argentina.” Bellamy’s prose took flight: “[W]ar and death are his allies . . . peace and democracy are unintelligible to him . . . Mandl is a menace which will sooner or later have to be faced.”⁴ The sneering anti-Semitism near the surface of Bellamy’s prose is suggested also in the crude satyrlike drawing of Mandl that heads the article. Understandably then, Bellamy does not repeat one item often cited in others’ catalogues of Mandl’s misdeeds: that Mandl, whose father was a Jew, was himself the most indefatigable of anti-Semites.⁵

When, however, the State Department presented its case concerning Argentine complicity with the Axis in the famous Blue Book of February 1946, Fritz Mandl’s name was not mentioned anywhere.⁶ Readers in the United States would have been even more puzzled had they learned of a judgment handed down in London in November 1950 by Mr. Justice McNair of the Court of King’s Bench. By reprinting the Bellamy article in its March 1945 issue, the British Reader’s Digest had, it seems, exposed itself to the stiff British libel laws. Mandl’s British solicitors duly launched an action, and Justice McNair found in his favor. The libel consisted in the Digest’s description of Mandl as being a traitor to his country of origin, Austria; a close supporter of Hitler and the National Socialist regime; a Nazi agent; a promoter of war; and a danger to Argentina and the peace of South America. These allegations, said the judge, were wholly without foundation. The British Digest agreed to publish an apology and to pay Mr. Mandl “a substantial sum.” The magazine’s editors expressed their regrets and acknowledged that they now knew these stories to be untrue.⁷

Since the “confidential sources and authentic documents” on which such writers as Ross and Bellamy based their work were leaked to them by agencies of the U. S. government, specifically the State Department and FBI, the slovenliness of their journalism cannot be ascribed simply to wartime pressures. The smear of Mandl was in fact covertly initiated by the British Foreign Office, which had feared since the beginning of the war that the United States would strike a deal with the Austrian, who had numerous powerful Wall Street associates, to assure their own participation in Argentine arms making. To neutralize Mandl, British diplomats adroitly manipulated the FBI and the anti-Mandl faction of the State Department; these Americans in turn manipulated public and official opinion in the United States. The campaign was successful: by mid-1945, Mandl had been swept from the board. At that time, the American officials involved rationalized their activities as necessary to prevent the development of an armaments industry in an Argentina that was, with Spain, the last surviving fascist remnant, and an uncontrolled trade in weapons throughout South America. By mid-1947, however, the cold war and commercial imperatives had created a rousing trade with Argentina in new and surplus weapons and weapons-making equipment—an Argentina whose recent undemocratic aberrations the wartime Allies were hastening to forgive and forget. American pretensions to a complete monopoly of the Argentine and Latin American arms market had failed, and the two nations shared that trade equitably.

The Emergence of Fritz Mandl

Fritz Mandl was a child of the century. He was born in 1900 to the arms trade, the family-owned Hirtenbergwerke in Lower Austria. In Austria’s post-World War I disorganization, the arms plant went bankrupt and his father, Alexander, lost control. However, under bank supervision, young Fritz became the firm’s managing director; he later regained possession of the plant for the family patrimony with a brilliantly timed short-term loan. He rapidly developed his talents as a bold and ruthless international arms maker and dealer. By the early 1930s, he had negotiated agreements with arms manufacturers in France, Germany, and Italy, and controlled arms plants in Poland, Switzerland, Austria, and the Netherlands. The latter factory, at Dortrecht, produced weapons for the secret rearmament of the German Reichswehr.

In 1927, his craving for acceptance by “The Best People” led him into Austrian right-wing politics, when he scraped acquaintance with Count von Starhemberg, scion of one of Austria’s illustrious noble families. Starhemberg was then organizing the Heimatschutz, a rightist movement which later evolved into a private militia called the Heimwehr. After the count had run through the family fortune, Mandl assumed financial support of the Heimwehr (and of Starhemberg) and supplied its weapons. The Heimwehr and its principals, Starhemberg and Mandl, earned the undying hatred of the Austrian and international left for their bloody role in the suppression of Vienna’s Socialists in February 1934. Later the same year, the two men, alarmed by the Nazi machinations that culminated in the murder of Chancellor Dollfuss, made contact with Benito Mussolini. The Italian dictator, alarmed also by Germany’s threatening moves against Austria, covertly underwrote the Heimwehr by paying a premium on the munitions Italy purchased from Mandl’s factories for the Abyssinian campaign (and later gave Mandl a medal). In the 1930s, Mandl also sold arms to Bolivia during the Chaco War and—reportedly—to both sides in the civil war in Spain.⁸

Mandl’s first Latin American arms deal was apparently the sale of precision tools to the Argentine state-owned Fábrica Borges in 1926-27. In the late 1920s and early 1930s, much of the Dortrecht factory’s output not destined for the Reichswehr was sold on the Latin American market. Mandl learned to do business with many Latin American officers serving on their countries’ military purchasing missions in Europe; their venality at times surprised even him.⁹ In 1937, he made his first trip to Argentina.

He was drawn there by hopes of participating in construction of the nation’s first arms complex. Army engineers had drafted plans for such a project during the world war, but it languished until 1935, when the administration of General Agustín P. Justo revived it. In 1936, it was taken up by Dr. Max Ilgner of the German combine, I. G. Farben, who made a survey trip around Latin America in that year. Ilgner was a vigorous proponent of German participation in Argentine industrialization, and pressed the project on Dr. Mueller of Dynamit Nobel, a Farben affiliate, who had earlier been unenthusiastic when approached by the Argentines. In 1937, German engineers were at work surveying prospective sites for a powder mill at Villa María and an artillery-shell factory at Río Tercero, both in Córdoba Province; an Argentine mission was in Germany to negotiate with the Wehrmacht high command and the sales and economic-political directorates of Farben. After prolonged dickering, Farben (with a German government guarantee of financial backing) agreed to coordinate the manufacture or purchase of materials in Europe; its subsidiary Köln-Rottweil would undertake the construction work in Argentina. Alfredo E. Moll, director of Anilinas Argentinas and of the American General Anilines and Film, both Farben affiliates, hastened to the United States to purchase additional materials before the looming European war should break out. He was unsuccessful, however, and construction was halted after September 1939. The Germans continued to assign the project a high priority, and (with British assent) shipped additional materials through Bilbao in March 1942 and May 1943, but the plants remained incomplete at war’s end.¹⁰

Mandl never participated directly in the Villa María and Río Tercero projects, but he found other possibilities to interest him. He had been removing assets from Austria for some time in anticipation that his homeland would be absorbed into the German Reich; in 1937 he reportedly had 20 million Swiss francs available for investment. In Argentina he bought La Mazaruca, S.A., a rice-producing property, and other large tracts of land and set up a holding company, SAFINA, to manage them; Dr. Pedro M. Ledesma of the Consejo Nacional de Educación and Ledesma’s son figured as SAFINA’s principal officers. Mandl later acquired interest in Las Flores, S.A. (cattle ranching), Cometa, S.A. (a bicycle factory), a coal mine in Mendoza, LAR (a Buenos Aires building-and-loan society), and Sedalana in Uruguay and Stamptex and Sotego in Argentina (artificial silk and other textiles). All but Sedalana passed to control of SAFINA, of which Mandl owned more than 90 percent. SAFINA was also listed as owner of his Swiss and U.S. properties; a holding company named Monte Carlo owned his properties in France. Mandl obtained a one-fourth interest in Mihanovich Shipping in partnership with Alberto Dodero, and his name would be linked to other prominent industrialists such as Fritz Thyssen, Alfredo Fortabat, Richard Staudt, and the Matarrazzos in Brazil.¹¹

But the creation of an integrated Argentine arms complex continued to bemuse him. He was thus drawn into planning for Argentine steel making, for Argentine administrators were persuaded that in the absence of a soundly based multipurpose steel industry, a nationally controlled weapons industry was neither technically nor economically feasible. Argentina as a developing country between the wars required great quantities of steel imports in, for example, the form of motorcar, truck, and railway equipment, and reinforcements for heavy construction. In developing an indigenous production capacity, the country was gravely handicapped by the lack of high-grade iron ore and of indigenous energy sources; through the 1930s steel fabrication continued to depend on scrap metal and coal from Cardiff, Wales. As the world crisis deepened, however, military planners grew concerned over the vulnerability of overseas communications: in May 1937, the army took control of the import and export of scrap iron. In the short term, they contemplated using Brazilian, Spanish, or Japanese (i.e., Manchurian) ore; on strategic grounds, however, this was clearly unsatisfactory. They hoped that in time natural gas or hydroelectric power, particularly in Córdoba Province, would resolve the energy problems, and that continued exploration would eventually turn up suitable mineral deposits under Argentine soil. With the beginning of the European war, they turned their attention to Chilean and especially Peruvian sources of coal and minerals; the Peruvian connection would be elaborated—by Mandl, among others—after 1945. The calamitous events of April, May, and June 1940 in Western Europe impelled Argentine senior officers to demand a billion peso authorization from Congress for accelerated plant construction and weapons build up. Aware, however, of the financial strain this would place on the state, planners such as Colonel Manuel Savio advocated bartering Argentine foodstuffs for imports of fuel and mineral ores, which would be stockpiled. Savio contemplated private capitalization within the frame of state protective legislation, a gradual (rather than a crash) phasing in of civil and military steel production, and (once the war ended) a major recruitment of skilled European technicians and workers. All these ideas would come to pass over the next two decades.¹²

Once the munitions factory was under way, a steel-rolling plant was to be the next project. A formidable competitor was already in the field, however: a combine headed by Argentaria, S.A. de Finanzas, a subsidiary of the J. Henry Schroeder Bank of New York City (which was in turn a partner of Schroeder, Rockefeller and Company, Investment Bankers; its owners were Avery Rockefeller, Bruno von Schroeder in London, and Kurt von Schroeder in Cologne); it also included the consortium of British railways and the old-line Buenos Aires investment houses of Otto Bemberg and Federico Bracht.¹³ Technical plans had already been commissioned. Forcing his way into this combination was beyond Mandl’s immediate resources, so he returned to Europe at the end of 1937 in search of support. He then entered into a sequence of frenetic negotiations and travels which would include stays in London, Paris, Vienna, Zurich, Monaco, Buenos Aires, New York, and Washington. It ended only when he took up permanent residence in Buenos Aires toward the end of 1940.

Forewarned, he left Vienna two days before German troops entered the city in March 1938. His personal fortune was already out of the country. The Hirtenbergwerke could not be removed, but he had thoughtfully transferred the Hirtenberg securities to a Swiss holding company, Hubertus AG, of which he was sole owner, and had placed the firm’s working capital, 15 million Swiss francs, in French and Swiss banks. He then formed a syndicate of Hirtenberg security holders in Paris, and transferred to it his own beneficial interest in the firm. And as chief stockholder, he retained power-of-attorney.¹⁴

Shortly after Anschluss, the Nazis seized the Hirtenbergwerke, ousted Mandl as president, and demanded possession of the firm’s assets outside Austria. Litigation followed in the Swiss courts; as the outcome was uncertain, both sides were amenable to compromise. The negotiations were carried out by Johann Wehrli of Zurich, a specialist in such matters,¹⁵ who obtained the assent of German Foreign Minister von Ribbentrop to a deal. The Germans offered Mandl 170 thousand British pounds and 1.24 million reichsmark; Mandl’s personal property and estates in Austria were to remain inviolate. In return, he delivered his Hirtenberg shares and the firm’s liquid assets to a Nazi party holding company, the Wilhelm Gustloff Foundation, headquartered in Switzerland. Operational control of the Hirtenbergwerke passed to the Hermann-Goering-Werke in Berlin. A month later, the Gestapo, ignoring the “Dolder Pact,” as the deal was known from the Zurich hotel where it was concluded, seized Mandl’s Austrian real estate, including a famous old castle at Schwartau.¹⁶

Nevertheless, the deal gave rise to lurid rumors and speculation. President Kurt Schussnigg and Foreign Minister Guido Schmidt were bitterly criticized for allowing Mandl to remove his assets from Austria. Worse, his enemies chose to believe that his relatively generous treatment at the hands of the Germans could only be explained as a quid pro quo against his agreement to carry the personal funds of Goering, Ribbentrop, Wilhelm Keppler (former special commissioner for the acquisition of raw materials for the Reich economy), and other Nazi leaders to the New World, there to invest them in property and securities. These stories, the ostensible basis of later Allied proceedings against Mandl, have never been substantiated.

Mandl, accompanied by a picturesque aviary of family, employees, and hangers-on, set up living quarters and offices in Buenos Aires at the end of 1939;¹⁷ then returned to Europe. His activities there, particularly his conversations with Wehrli, who had excellent contacts within the Third Reich, aroused further suspicion. Moreover, when Mandl returned to Buenos Aires in August 1939, he brought with him one Joseph Peter Hatting, a highly qualified metallurgical engineer formerly employed by the German arms firm of Rheinmetall. Before the end of that year, Mandl and Hatting turned up in New York. Mandl placed part of his personal fortune in American holdings (the Liebmann Brewery of Brooklyn, Gloria Pictures of Hollywood), and negotiated loans with the New York banking firms of Schroeder¹⁸ and Loeb, Rhodes for his Argentine industrial ventures. His conversations with Brown Brothers, Harriman aroused anger in British circles, for it was reported that Mandl proposed an approach to the United States government to persuade the latter to press the British to sell off Unilever and other Argentine properties at “fire-sale prices.” As other American financiers were thinking along similar lines at the same time, it is possible, as Mandl later insisted, that the initiative had come from his American associates.¹⁹

Hatting, meanwhile, joined forces with Hermann Brassert, another German metallurgist, whom Mandl and the Argentaría firm had commissioned to do an appraisal of the steel-plant project (why the German government permitted these valuable technicians to wander about was never made clear). The two completed the report, for which Brassert was paid 10 thousand dollars, early in 1940. Shortly thereafter, however, Mandl and Brassert fell out; the latter, playing for higher stakes, attempted to sell to the Argentine minister of agriculture a “Survey of the Possibilities for the Establishment of an Iron and Steel Industry in Argentina” for 150 thousand dollars. He proposed an integrated industry which “shall serve your military as well as commercial requirements and form the basis for the successful industrial development of your country . . . so planned . . . that it will be capable of future extension in any direction.” He claimed to have the backing of the U. S. Export-Import Bank “for the major portion of the capital required.”²⁰

In May and June of 1940, Brassert held conversations in Washington, D.C. with Lawrence Duggan and other Latin American specialists of the State Department. He revealed that the Hermann-Goering-Werke was eager to construct integrated steel plants for Argentina or Brazil or both, and would accept raw materials in partial compensation. Mandl, his erstwhile patron, proposed to participate by importing scrap metals, he said, but did not yet have the backing of the Argentine officials who allocated import quotas. The State Departments interest in Brassert’s information is surely related to the interest that American steelmakers, particularly Armco, had shown in the rolling-mill project since 1938. But in the world emergency, the department could only urge caution on the steelmen; American overtures were temporarily shelved.²¹

In Argentina, lack of capital and wartime material shortages brought the steel-plant project to a standstill after September 1939. German interest was reawakened in the euphoria of victory in the spring of 1940. On June 26, Mandl cabled Guido Schmidt, now a Hermann-Goering-Werke executive, to propose reviving the steel-plant project now that France was defeated and Britain virtually out of the war. The Germans responded favorably; 16 cables were exchanged before the end of the year. In great secrecy, Mandl sent Schmidt the two-volume report that Brassert had prepared. On April 21, 1941, Hermann-Goering-Werke’s directors cabled their approval-in-principle. By that time, however, Mandl had concluded that peace was not about to break out, and did not reply.²²

His change of heart was entirely straightforward. In June 1940, he had believed that Germany would dictate the peace. “I, having important interests in Europe and especially in Germany and Austria”—he later wrote to H. B. Auburn at the British Embassy—“had to take this possibility into consideration.” But he also persuaded his associate Alberto Dodero, the shipping executive, to show Auburn a letter Mandl had written to him in April 1941: in it Mandl declared himself, “. . . now at the disposal of Great Britain . . . only after British victory there exists the possibility of my going back to my country and recovering my important property in Austria.”²³ The reaction of Auburn and his associates can easily be imagined. In any case, it made little difference: the British Embassy had already made up its mind about Mandl.

Among some Americans, attitudes were also hardening. Mandl traveled to the United States in the fall of 1940. There he was much impressed by Franklin D. Roosevelt’s victory in the presidential election, against the best efforts of the isolationists, and by the growing ability of the United States to supply war materials to Great Britain. His chief purpose, however, was to solicit the support of Secretary of State Cordell Hull and Coordinator of Inter-American Affairs Nelson A. Rockefeller for Export-Import Bank loans for his various Latin American enterprises. He had scant success: Henry Morgenthau at the Treasury Department was apparently instrumental in blocking the loans. Worse: the FBI was now actively investigating him. J. Edgar Hoover believed that Mandl was liquidating his U.S. assets with a view to tranferring them to Argentina, and for several years cited this as evidence of Mandl’s defeatist, if not actively pro-Nazi, attitude. However, whether by accident or design, the FBI had gotten the matter backward: Mandl, fearing an increase of Nazi influence in Argentina, was transferring assets to the United States.²⁴

He also squirreled away assets in Uruguay. In March 1941, he organized a Uruguayan holding company, SAFU, which was part owner, along with SAFINA, of the giant textile firm Sedalana, S.A. To conform to law, the directors of SAFU were Uruguayan nationals. Each was required to own stock in the concern; there is no indication they paid Mandl anything for it. The board chairman was Montevideo’s police chief, Juan Carlos Gómez Folie. Mandl obviously believed this nomination would strengthen his position. He would learn otherwise in due course.²⁵

Cometa prospered until early 1943. Mandl became an Argentine citizen and occupied himself with money making. Melodramatic rumor continued to wreath his activities, but nothing could be proven. For example, on August 27, 1941, Acción Argentina, organ of the pro-Allied lobby of the same name, reported that Cometa could shift its production from bicycles to machine-guns within 24 hours, presumably by using bicycle-frame tubing for gun barrels.²⁶ The British and North Americans succeeded in suborning a number of Mandl’s dependents and employees. On joining Cometa as technical director in 1941, Franz Klein, an exile Hungarian Jew, became an informer for the British Embassy.²⁷ The FBI’s “legal attaché” in Buenos Aires established contact with several of Mandl’s employees, including his social secretary, Count Max von Thurn (whom Mandl had fired after the count failed to secure his membership in the Jockey Club), and his private secretary, Herbert Mittler.²⁸

The FBI’s activities began to cause nervousness among Mandl’s New York associates; they inquired at the State Department whether Mandl was on the U.S. blacklist. They learned that “[Mandl] has been regarded with suspicion on the basis of information received from another branch of government [i.e., FBI] . . . that [he] has been acting as a contact man between the National Socialist government and a revolutionary party plotting the overthrow of the present regime in Argentina”; he was considered “a representative of the German Government and pro-National Socialist, and was “definitely not recommendable for commercial relations with U.S. firms.”²⁹ Unfortunately, however, evidence against him was lacking. A number of powerful New York friends—Norbert Bogdahn, Carl Loeb, Frank Altschul, Donald Bloomingdale, the officials of Brown Brothers, Harriman, and Bankers’ Trust—spoke to Washington in his behalf, as did the United States ambassador in Buenos Aires, Norman Armour; in mid-1941, the State Department grudgingly conceded that U.S. firms might do business with Mandl.³⁰ Similarly, in June 1942, over the vehement objections of Hoover, Adolf Berle, ex-Minister to Austria John Wiley, and others, the American military permitted Count Rudy von Star-hemberg to rejoin his family, which was living on Mandl’s bounty in Buenos Aires.³¹

In October 1942, the United States representatives to the joint British-U.S. blacklist committee in Washington refused to place Mandl on the Proclaimed List. They maintained that until the United States entered the war, in December 1941, many American as well as neutral businessmen had done extensive business with the Axis nations;³² they insisted— ignoring the FBI’s admonitions—that Mandl had behaved no differently. The British would have preferred to place him on their own Statutory List, but were unwilling to do so without parallel U.S. action; so he remained unlisted. His enemies were somewhat mollified in January 1943, when Henry Morgenthau at Treasury, who took a fiercely antifascist line in foreign operations, declared Mandl a “Specially-Blocked National.” His and SAFINA’s assets in the United States were frozen, U.S. banks were forbidden to deal with his South American holdings (in dollars, at any rate; peso transactions were permissible), and he was placed on the List of Unsatisfactory Consignees. He was undoubtedly on the unofficial, unpublicized blacklist.³³

The Argentine Menace and its Ramifications

The military coup of June 4, 1943, that overthrew Ramón Castillo’s civilian regime, unsettled the policy lines of the Allied missions in Buenos Aires; the British and North Americans reacted very differently. So long as Great Britain’s investments remained unthreatened and her access to foodstuffs and materials of war open, Whitehall viewed Argentine neutralism with equanimity. British diplomats concluded relatively quickly that the new junta would not alter relations. By the end of 1943, the junta’s second foreign minister, General Alberto Gilbert, had ceased to be a “wild man.” “Contact with realities,” as Ambassador Sir David Kelly put it, had made him “very obliging.”³⁴ The British also, like the Germans, concluded that the coming man of Argentine politics was Colonel Juan D. Perón; it would be prudent to cultivate him.³⁵

Washington, on the other hand, made notoriously heavy weather of the situation. The attempts of the Cordell Hull/Spruille Braden faction of the State Department to cajole or coerce Argentina into “hemispheric solidarity” led the Americans ever farther on an extraordinary romería through unreality. Having sought for some years a military strongman to back who would bring stability to Argentina, when one finally appeared in the person of Perón they rejected him.³⁶ An international propaganda campaign, waged both officially and semiofficially through the uncritical print media of wartime, accused the military junta of 1943 of becoming a New World client of Nazi Germany, and with nurturing ambitions to create not only a fascist Argentina but also an Argentine-led, anti-American bloc of Latin American states. Unrelenting State Department pressure—to which the Foreign Office contributed reluctantly and from the noisier and clumsier aspects of which it held itself aloof—succeeded in forcing the junta to break diplomatic relations with Germany and Japan in January 1944, and to declare war in March 1945.

The British and North Americans could agree on one point, however: an autonomous Argentine arms industry was a threat which they would have to confront decisively. Their reasons were, of course, different. For the British, it was likely that such an arms complex would, in the short run, cut into their weapons sales in Argentina and the region; in the longer term, it could well have a pathbreaking function in the industrialization that they and their associates of the landowning oligarquía had so long resisted. The State Department feared, as ever, extrahemispheric influences in Argentine arms making; at the same time, it also feared the autonomy it would permit the Argentines in their regional foreign policy. In any event, there was no place in postwar Argentina for Fritz Mandl and his projects. That Mandl was a brazen opportunist who sought only to profit from the epic struggle between democracy and totalitarianism—also an obnoxious Jewish parvenu and despoiler of presumably virtuous womanhood—made him vulnerable to the artfully aroused fury of public opinion. Presumably, however, had he been as saintly as Gandhi or Albert Schweitzer, the outcome would have been the same.

The denouement began in March 1943, when Mandl held a far-reaching discussion concerning Argentina’s future arms policy with General Manuel Savio, whom Castillo had named head of the Dirección General de Fabricaciones Militares on October 16, 1941. Mandl, to his misfortune, was accompanied by Franz Klein, who would keep the British Embassy apprised of the developing relationship between his employer and the officers’ clique that was about to take power.

At the time, armaments were the chief concern of senior Argentine officers. In June 1940, shaken by the fall of France, they had undertaken a major expansion of the nation’s military capability;³⁷ they had since grown deeply alarmed at Brazilian military expansion under the stimulus of U. S. lend-lease materiel. On several occasions since 1941, they had turned to Washington with requests that the United States redress the regional balance of power. So long, however, as the Castillo regime persisted in its neutralism, the United States would make no concessions. By early 1943, it was widely felt in military circles that Castillo had placed the nation in jeopardy and must be removed.

But there was little consensus beyond this point. Broadly speaking, one military faction proposed conciliation with the United States, thereby to gain access to U.S. weapons (also capital and consumer goods, all in increasingly uncertain supply). This was perhaps to acknowledge that the United States was replacing Great Britain, if only temporarily, as Argentina’s principal economic partner; it was, however, a continuation of the liberal internationalism that had historically served the nation so well. The opposing faction, the party of authoritarian nationalism, sought far greater autonomy—beginning, of course, with sources of armaments not vulnerable to Great Power pressure. Its leaders were the ideologues of a secret lodge of senior officers called the GOU (Grupo Obra de Unificación; commonly, Grupo de Oficiales Unidos). Many had served or studied in Germany, Italy, or Franco’s Spain; in the uncomplicated view of the United States Embassy in Buenos Aires, their ideas and associations made them accomplices, if not potential puppets, of the Axis. This, however, was to miss the intensity of their nationalism: they sought rather to adapt European techniques of mass mobilization and development planning to their vision of a strengthened, independent Argentina. Although many civilians on the Argentine right shared this ideology, the soldiers nurtured a deep mistrust of civilian politicians. It was unclear who was to carry out the surgery of iron; perhaps, in the end, the military themselves. This was the faction that would triumph in the confused and prolonged aftermath of the 1943 coup. From it, with the addition of young civilian politicians, small- and medium-scale entrepreneurs, and above all a syndicalist labor movement, would emerge Peronism in 1945.

In March 1943, all this lay in the future. Mandl believed the moment to realize his vision of an integrated Argentine arms complex had come. The key was a firm called IMPA, which he was about to acquire. Its output, containers and miscellaneous items of plastic, was less significant than its leading personnel: IMPAs president was J. Mario Sueiro, two of whose brothers, Benito and Sabá, were admirals—both would sit on the junta that took power in June. Mandl proposed to double IMPA’s capitalization through loans and stock subscriptions through Loeb, Rhodes, Bank of Boston, Banco d’ltalia, and Schroeder. He would merge IMPA with Cometa, and devote their combined facilities to military production. With Savio, Mandl made use of his skills as a salesman and promoter; his shortcomings as a technician would show up later. He made promises he had only a punter’s chance of keeping: 100 plywood training planes for the air force (the engines, he assured Savio, could be imported from the United States); the import of iron ore from Sweden and copper from Chile (no problem, said Mandl); a brass foundry (he would use his connections with Siemens-Schuckert Argentina to have its subsidiary, SEMA, put up the foundry. The Allied blacklisting of SEMA? That could be dealt with . . .).³⁸

Savio made no commitments at the time, but after the June coup he introduced Mandl to Ramírez, Farrell, and other leading junta members.³⁹ Mandl’s reputation for opportunism had preceded him, and his relations with the junta remained mistrustful throughout. His relation to Perón was especially uneasy, for he made the serious error of backing the extreme nationalist faction headed by Colonel Perlinger, which was defeated by the more pragmatic Perón and his followers in May 1944. By that time, however, Mandl’s projects appeared the only alternative remaining to the junta in its quest for arms. Consequently, in May 1944, it awarded him military contracts worth 56 million pesos, or about 14 million dollars.⁴⁰

Sniffing the contrary winds kicked up by the coup, Mandl in mid-1943 had offered his facilities to the Allies for munitions making. He is reported to have observed that, as almost all Latin American regimes were controlled directly or indirectly by the military, diplomatic negotiations, to be effective, must necessarily also be conducted through military channels. No change of regime, he said, had ever caused a Latin American government to rescind a munitions contract.⁴¹ Later, in the excitement caused by the publication of the Hull-Storni correspondence, Mandl assured Savio (according to Klein) that the militarists needn’t be overly concerned at the refusal of the United States to supply arms; his projected arms complex would make Argentina self-sufficient in weaponry in a few years. “After the war,” he is said to have written to Savio, “Argentina will be in the camp against the democracies. This is where Germany and I can help you.”⁴² These statements have the authentic Mandl ring; whatever their authenticity, they were widely circulated among the Allied missions.

But the junta feared, or claimed to fear, war with Brazil, and remained preoccupied with the immediate acquisition of arms.⁴³ Ambassador Armour’s hectoring of Provisional President Ramírez and Hull’s humiliation of Storni silenced those who wished to come to terms with the United States: the North Americans had made the price too high. Parallel talks were going on with the British and Germans. Contacts with the British in Lisbon led nowhere; those with the Germans in Buenos Aires set in motion the Hellmuth Mission, the comic-opera failure of which was a principal cause of Argentina’s diplomatic break with Germany in January 1944.⁴⁴ The junta’s failure to obtain arms from the North Americans, British, or Germans should have left the game in Mandl’s hands.

Toward the end of 1943, however, the Allies decided that Argentina must be spared the “scourge of the arms race.”⁴⁵ They did not wish to offend Mandl’s powerful Argentine colleagues in and out of the junta; they remained baffled, moreover, by the problem of discrediting him under the rules they had themselves promulgated for neutral businessmen. For the time being, therefore, they worked covertly to isolate him from associates such as Sueiro and Bracht, and from his patron, Perón; they increased efforts to suborn his household and social entourage; and through bland obstructionism, they aggravated his already considerable difficulties in obtaining machine tools, raw materials, high-technology components, and capital.⁴⁶

The neutralization of Mandl was made tortuous also by the Allies’ mistrust of each other. Although Mandl had powerful enemies in Hoover’s FBI and Morgenthau’s Treasury, a faction within the State Department maintained its position that he had done nothing impermissible under the rules of laissez-faire capitalism, and continued to oppose blacklisting him. His British enemies came to fear that Mandl, with the backing of Wall Street associates, would do a deal with Washington—if not during the war, then in the postwar period, when his projects might more easily find technical and financial support in the United States. In 1944, finally, the British devised a means of blackening Mandl’s reputation in such a way that open collaboration between him and the Americans thereafter became unthinkable—indeed, American foreign-policy makers became far more vituperative toward Mandl than the British themselves had ever been.

As often happened, Mandl contributed to his own misfortunes. On December 7, 1943, Sir David Kelly reported to London that Mandl had recently received “drawings for making munitions from the Hirtenbergwerke.”⁴⁷ This is perhaps not quite correct: it is more likely that, in order to impress the junta, Mandl had simply pulled out of a bottom drawer his copy of the two-volume steel-plant appraisal that Brassert had prepared in 1940. He did, however, boast that he had just received them from Berlin via the Argentine diplomatic pouch, and implied that he had powerful German backing. The British had known about the original negotiations with the Hermann-Goering-Werke since 1941—almost certainly, in fact, since June 1940;⁴⁸ Mandl had told Ambassador Armour about them at the United States Embassy in 1941.⁴⁹ Whatever the gesture’s effect on the junta, it suggested to his enemies that he had reopened negotiations with the Germans—or if not, it could be made to appear he had done so.

By early 1944, the IMPA/Cometa merger was complete, and the combined facility was preparing to build light plywood airplanes. Mandl had retired debts to the blacklisted Banco Germánico and Banco Francés e Italiano by borrowing from the First National Bank of Boston and the Banco d’ltalia. He had raised one million pesos from Federico Bracht’s Buenos Aires investment house; Argentaria, backed by Loeb, Rhodes in New York and Schroeder’s in London, was prepared to subscribe an additional four million.⁵⁰ However, the World Trade Division of the State Department rebuffed Mandl’s request to be allowed to come to Washington to “clear himself,” and obstructed his attempts to import U. S.-made aircraft engines for IMPA’s light planes.⁵¹ The British Embassy also refused him aircraft engines, and blocked a joint munitions deal he was attempting to work out with Stewart and Lloyd of Glasgow. It did so at American request and also in the interests of Metropolitan-Vickers, which was planning its own sales campaign for the near future.⁵² Robert Hadow, recently transferred from the British Embassy in Buenos Aires to the mission in Washington, reported on April 5 that he was slowly persuading his American counterparts that “any help to Mandl means the destruction of the peace in Latin America.” At the Foreign Office, Gallop agreed that “the rearmament [sic] of Argentine civil aviation might well help strengthen the Germans in Argentina and assist a defeated Germany to establish an economic and technical bridgehead in South America from which to ‘win the peace.’”⁵³ But in London, the problem of evidence remained.

The North Americans also remained in a quandary. Early in May, Mandl visited the U.S. Embassy to request unblocking of his assets in the United States and approval of his plans for IMPA, including the takeover of SEMA. In the course of conversations with the financial control officer, Daniel V. Ryan, he discussed his settlement with the Nazis in June 1938. Ryan notified Washington that “[Mandl’s explanation] is fully supported by documentary proof. The Embassy is of the opinion that [it] is plausible and is not per se suspicious . . . furthermore, Mandl obtained only a small portion of the true value of his Hirtenberger interests.. . .” The most that could be alleged against him, according to Ryan, was that in 1940 he had been convinced of German victory, and had proposed a joint armaments project with the Hermann-Goering-Werke; that he was “vinculated” with the present Argentine junta, and proposed to make munitions for them; that he owned securities in Germany; that in 1940 he and Dodero had made a financial killing on the sale (with approval of the U.S. Maritime Commission) of an interned German merchant vessel to the Japanese; and that he had “a penchant for surrounding himself with persons of questionable political sympathies.” It was scarcely “sufficient concrete current evidence” to warrant blacklisting.⁵⁵

Franz Klein had been dropped from Mandl’s employ when IMPA absorbed the Cometa bicycle factory. He had retained contacts within Mandl’s organization, however, and he was now providing information on his former patron’s activities to both Britain and the United States. He reported that Perón’s goodwill flowed toward Sueiro, not toward Mandl. This caused the latter much concern, since until Perón’s triumph over the Perlinger faction he had treated Sueiro as little better than an office boy; he had now become apprehensive lest Sueiro should turn on him. Perón’s highest priority was to get IMPA into military production; if placating the Allies should require it, he was quite capable of forcing Mandl to resign from IMPA without permitting him to withdraw his capital from the firm.⁵⁶ Mandl’s enemies in the Allied missions began to pursue the strategies so obviously suggested.

Klein also helped them suborn Herbert Mittler, Mandl’s private secretary, and was apparently involved in a curious flap that overtook Mandl’s private household in April. For two or three days, Mandl was beside himself with rage and worry because the Hirtenberg documents and the correspondence with the Hermann-Goering-Werke had disappeared from their hiding place. In the stormy aftermath, two or three servants were discharged. It appears, however, that Frau Berthe Mandl had abstracted the documents to photocopy them—for what purpose is unclear.⁵⁷ But Klein’s greatest coup was to bring Mandl’s private banker, Hugo Marton, into the Allied camp. Marton, whom Mandl had rescued from a German concentration camp at the time of the Anschluss, was nevertheless carrying on a “vendetta” against his employer.⁵⁸ He repeated a variant account of the 1938 settlement: this involved 10 million dollars in Hirtenberg funds on deposit with Chase Manhattan Bank in New York, the personal mediation of Guido Schmidt, and a 55/45 split in Mandl’s favor. This story had already gone the rounds of the Allied missions⁵⁹ but now, in September, Marton embellished it to suggest that additional funds—purportedly belonging to Nazi Bonzen—had become available in 1940. He also suggested that the truth lay buried in the books of SAFINA, SAFU, and a sterling account in Paris in the name of the Monte Carlo firm, “Daisy Roque.”⁶⁰

On June 10, 1944, Colonel Perón—vice-president, war minister, and by now the most powerful politician in Argentina—spoke at the inauguration of a Chair of National Defense at the University of La Plata. His speech was a reply to continuing American diplomatic pinpricks and economic sanctions. The text was variously reported; Washington interpreted it to mean that the junta saw no difference between Allied and Axis victory. Infuriated, Secretary of State Cordell Hull undertook—against the advice of Armour, Duggan, and Berle, not to mention the Foreign Office—to increase pressure on Argentina until the junta must either come to heel or be overthrown. At the end of June, Armour was withdrawn from Buenos Aires “for consultations”; as an afterthought, Hull requested London to withdraw Ambassador Kelly as a gesture of Allied solidarity. With misgivings, and over Kelly’s objections, the Foreign Office acceded. On July 26, Hull—once more against the advice of senior counselors and without notifying London beforehand—issued a thunderous denunciaton of Argentina for “deserting the Allied cause,” and “openly and notoriously giving affirmative assistance to the declared enemies of the United Nations.”

One prong of Hull’s antijunta campaign was a renewed assault on Mandl. As late as July 6, the U.S. members of the joint blacklist committee had again refused to act: the evidence against Mandl was still inconclusive, they held, and any attack would be construed as an attack on the junta’s profoundest concern, the sovereign control of weapons.⁶¹ During July, however, the State Department was finally persuaded to blacklist the Austrian. In doing so, they and the British reversed the policy they had until now firmly maintained: Mandl would be blacklisted on strategic grounds, i.e., not because of what he had done but because of what he might do.⁶² At the embassy in Buenos Aires, Economic Counselor Mervyn K. Bohan drew up an indictment based largely on Klein’s revelations (“Klein hates his former employer,” wrote Bohan, apparently with a straight face, “but the Embassy has no reason to doubt . . . his reliability”). According to the counselor, “[Mandl’s] all-consuming dream of a munitions kingdom in Argentina and his war-mongering propensities constitute a menace to the peace and welfare of the South American continent. Listing now would drive him out of the munitions business and, if maintained, in the postwar for a long time.. . . He is undoubtedly a sinister and dangerous influence to the peace of Argentina and the neighboring republics.”⁶³ On August 27, Mandl’s private accounts and business concerns (except IMPA, dear to the sensitivities of junta members) were placed on the Proclaimed and Statutory Lists. Allied firms were forbidden to deal with him under penalty of the Trading With the Enemy Acts; neutral firms which remained in commerce with him would be cut off from Allied contracts, supplies, and capital.⁶⁴

Mandl, in great agitation, offered again to come to Washington to “clear himself.” Bohan suggested he be given a visa to enter the United States, then be refused permission to leave again until the matter should be resolved to the department’s satisfaction—the idea clearly had merit. Mandl offered to open his books to the Proclaimed List Committee, and asked that, if they showed nothing compromising, he be reinstated. The committee complained that Mandl was resorting to “bargaining” and refused him flatly.⁶⁵ In Buenos Aires, his friends—Marton, Mittler, the Ledesmas, IMPA’s minority stockholders—began to desert him. On August 28, the Uruguayan government seized the books of SAFU. For the moment, Perón did not abjure him, but the obvious threat that IMPA would also be blacklisted if Mandl remained active must soon cause official Argentine support to melt away. On October 7, Auburn cabled the Foreign Office: “. . . at last we have him on the run without a friend to help him.” On the 20th of that month, the Allies gave the screw another turn: IMPA went onto the blacklist.⁶⁶

In Washington, however, the British Embassy caught wind of Bohan’s suggestion to the State Department: Robert Hadow believed it was being considered seriously. He wrote to Sir Evelyn Shuckburgh in Buenos Aires, on October 12, that “the U.S. plan to bring Mandl to the States” could lead to his turning “King’s Evidence,” hence implicating the Argentines in a “NAZI PLOT [capitals in original].” This would be fed to a “gullible” North American public by a “sensation-loving press.” Mandl would thus rehabilitate himself; the Argentines—recently denied access to U.S. consumer goods, replacement parts for industry, and their North American assets—would get no hearing. Hadow therefore proposed that the Argentines be informed that Mandl had been linked to the mounting evidence of the removal of the Third Reich’s leadership, with as much booty and technical resource as they could carry, to South America, especially Argentina. The enormity of this charge, he was sure, must soon cause the junta to abandon Mandl. “No shrewder blow,” he wrote, “could be dealt at the unwanted Argentine armament industry.” But indirect channels should be used: “it would be inadvisable to let the Americans get wind of our motive. . . .” Shuckburgh’s reply, and the Foreign Office’s position, have been withheld by the Public Record Office.⁶⁷

By the spring of 1944, the notion that the Germans would attempt to create a “Fourth Reich” in South America was common currency in Allied missions in Buenos Aires. A flood of new reports concerning clandestine arrivals and masked transfers of funds from Europe began in September of 1944 and continued in full spate until March 1945. The FBI’s “legal attachés” and the embassy’s intelligence unit worked diligently to track these stories down, but came up empty handed. Grown suspicious at last, they learned in April 1945 that they had inadvertently stumbled across a British black propaganda operation, one designed by its author, Sefton Delmer, to persuade the average German soldier or civilian that his leaders were deserting the hard-beset Volk. No one had told the Americans about it. Neither ally ever acknowledged the embarrassing failure of liaison.⁶⁸

A suspicion that Mandl was associated with this sinister movement had long been abroad in the Allied missions; it was not difficult to tie him firmly, if falsely, to it.⁶⁹ However, not everyone in government joined the hue and cry. In December 1944, Republican Congressman Joseph C. Baldwin of New York City questioned the State Department about the “persecution” of the Austrian. On the 27th, the new secretary of state, Edward R. Stettinius, justified Mandl’s blacklisting by citing his correspondence with the Hermann-Goering-Werke in 1940; his alleged promotion of war between Argentina and Brazil; his earlier association with Hatting, and his more recent relations with junta officers. Insubstantial as this is as a bill of indictment, it notably fails to include allegations that Mandl was fronting for Nazi funds or aiding Nazi fugitives.⁷⁰ Nevertheless, the anti-Mandl factions in State, Treasury, and the FBI continued their campaign, which culminated in Bellamy’s article—“raptures over new land mines” and all—in the Reader’s Digest in February 1945.

Shortly after its publication, Sir Andrew Noble, British chargé d’affaires in Buenos Aires, suggested to Perón that now was an opportune moment to get rid of Mandl. Perón said he could not see that Mandl had done anything very heinous. The question, replied Noble, was “not what Mandl was doing here, but what people thought he was doing here [italics in original].”⁷¹ That same month Franz Klein appealed for help in resettling to Britain. Mandl, he said, had seen the Digest article, the penny had finally dropped, and Mandl had threatened to kill him. Auburn endorsed Klein’s petition to the Foreign Office: “we are in some measure in moral debt to Mr. Klein.” London, however, turned him down flat; Klein could fend for himself.⁷²

Following Hull’s replacement by Stettinius in the fall of 1944, much responsibility for Latin American affairs passed to the new assistant secretary of state for Latin America, Nelson A. Rockefeller. Although Argentina was excluded from the hemisphere foreign ministers’ meeting in Mexico City in February 1945, and stood threatened with exclusion from the founding meeting of the United Nations Organization as well, under Rockefeller a more conciliatory Argentine policy began to emerge. On February 3, the Buenos Aires embassy was ordered to institute a more placatory economic policy, though as unobtrusively as possible. The following month the good-will mission led by Avra Warren of State and Lieutenant General George H. Brett of the Caribbean Defense Command met Argentine leaders in Buenos Aires. At the end of March, Argentina declared war on Germany and Japan.

Fritz Mandl was to be sacrificed to United States-Argentine rapprochement. Perón had become persuaded that no Argentine arms industry could be developed with Mandl’s participation; on this the Allies were obdurate. As a way out of the impasse, President Farrell ordered the nationalization of IMPA on April 3 (surely the British and Americans would not continue to blacklist the state arms firm of a comrade-in-arms, however belated?). The previous evening, Mandl had been ordered to place himself at the disposal of the council newly created to administer enemy firms, a form of arrest which allowed him to attend to his daily affairs. He would be a gift of welcome to the new United States ambassador, Spruille Braden.⁷³ The Argentines had not, however, reckoned with the vagaries of factional politics within the U.S. diplomatic establishment, nor the heights of unreality which the anti-Mandl campaign had achieved in the U.S. media. Their offer of Mandl would throw Washington’s foreign-policy establishment into a small uproar.

In a bizarre reversal of the conciliatory policy but recently instituted, Braden, who retained intact the crusading fervor of the Hull clique, made clear his intention to eliminate the last Axis remnants from the Argentine government, chief among them Farrell and Perón. He embarked on his mission in part by exposing the junta’s real and fancied relations with the Axis, and in part by rallying the Argentine domestic opposition to Perón, the stronger of the pair and by now the caudillo of an emerging populist movement. The Mandl affair was one of the first items to confront him when he arrived in Buenos Aires in April 1945. Braden wrote in his memoirs:

The reality was more delicate, as Braden’s colleagues in Washington soon appreciated. If Mandl were brought to the United States, he must either be released or placed on trial; exit permit or no, he could not be detained indefinitely. Unfortunately, grounds were lacking on which to prosecute him under the Trading With The Enemy Statute or any other, and it would not do to allow him to return to Argentina with the allegations against him unproven. If he remained in the United States, however, his Wall Street friends might come to his defense. All things considered, it would be better if the Argentines prosecuted him.⁷⁵ This, however, Farrell and Perón were unwilling to do, especially as every day they were finding fewer reasons to accommodate Braden.⁷⁶

Braden protested vigorously. If Mandl were released, he wrote on June 9, Argentine fascists would take heart; the public would see this as evidence of the U. S. Embassy’s weakness. “Insofar as internment in the U.S. is concerned [Mandl] admits to being an Austrian (i.e., German) citizen, and while he is probably Jewish he has, I understand, sworn he is not, in fact, due to his mother’s pecadillo which resulted in his birth.. . . Of course,” Braden added thoughtfully, ignoring Mandl’s many petitions to come to the United States, “his refusal to go voluntarily might in itself be an indication of previous National Socialist connections to justify holding him for a thorough investigation.”⁷⁷ Braden’s grotesque venture into jurisprudence failed to reverse the State Department’s decision: the hierarchy held that the anti-Mandl campaign, and the Reader’s Digest article in particular, had tied the department’s hands. For appearances’ sake Mandl should remain blacklisted, but “[if] we cannot furnish sufficient evidence to return him to Germany, then it is up to the Argentine authorities.”⁷⁸

On July 27, the Argentines released him, and he flew immediately to the Uruguayan city of Colonia. He appears to have hoped that Gómez Folie, the police official he had installed as chairman of the board of SAFU, would arrange an Uruguayan residence permit for him, but he was speedily disabused. On landing, he was arrested and hustled off to Montevideo for questioning. Gómez Folie sent word that if he remained one more day in the country he would be charged with “anti-national activities.” The U.S. Embassy learned that the previous November, when Sedalana, S.A. had been threatened with blacklisting, Mandl had transferred his Sedalana stock to Gómez Folle at a nominal price. Instead of acting as custodian, however, Gómez Folle had promptly resold it at a profit of 70 thousand dollars—clearly, he did not wish to discuss the matter further with his erstwhile patron. Mandl returned to Buenos Aires by the nightboat on July 28. He was ordered to leave Argentina within 48 hours, and was placed under surveillance; he moved on to Chile. On August 13, one Ricardo Santiago Caporale, “a well-known university leader,” filed a petition in a Buenos Aires federal court to revoke Mandl’s citizenship on the grounds that he was an “undesirable” immigrant.⁷⁹

Mandl’s movements in the next few months are unknown, but at some point during his wanderings he struck a deal with Perón. In December, the denaturalization proceedings against him were quashed, and Perón personally barred further investigation of the Austrian’s affairs. Perón’s quid pro quo was the money—between three and five million pesos, or three-quarters and one and one-quarter million dollars, by one informed estimate—that Mandl contributed to the general’s drive toward the presidency, which would culminate in the electoral triumph of February 1946.⁸⁰

This history has two codas.

Arms in the Postwar Era

In Washington, the State Department had taken the initiative as early as the fall of 1943 in proposing to the War and Navy Departments a “truly Inter-American foundation” for postwar multilateral hemispheric agreements: these would permit the United States to play “an important role in that defense to which its resources and world responsibilities entitle it.”⁸¹ There existed a clear need to head off “third countries,” especially Great Britain, as arms purveyors; one evident, though very ambitious, solution was to “standardize” the Latin American arms inventories on U. S. models. In December 1943, the Joint Army and Navy Board endorsed the use of lend-lease as the means to achieve standardization.⁸² During the great North African, European, and Pacific campaigns, Latin America had remained a minor sideshow to United States military chiefs; now, however, the interest of senior officers, notably those of the air corps, was awakened. In September 1944, State learned that General H. H. Arnold was pushing for “packaged” sales of surplus military and civilian aircraft tied to expanded missions of active-duty and released air corps personnel; the airmen were also thinking of an Inter-American Air Force under U. S. command.⁸³ At the same time, the multinational Inter-American Defense Board, in its first years a stepchild of the U.S. military establishment, was converted at the Chapultepec Conference (Resolution Four) into the implement by which the army and air corps proposed to retain the bases and influence they had won in Latin America since 1939. Under its aegis, staff talks continued through the summer of 1945; planners prepared drafts of a peacetime hemispheric defense treaty.

Concerned by the vast stocks of surplus weapons that would come onto the world market at war’s end, as well as by the U.S. military’s growing ambitions in Latin America, the State Department’s position hardened: peace and stability, it now said, required the restriction of arms. First, international buccaneers like Mandl had to be suppressed. In March 1945, the signatories to the Declaration of Mexico City agreed, in Resolution Five, that complete control over the production, distribution, and international traffic of armaments should be reserved to governments, “thus eliminating the profit motive in the traffic of arms.”⁸⁴ Then, in May 1945, to control governments, the United States unilaterally imposed an embargo on the shipment from anywhere of arms to its former Latin American allies.⁸⁵ The British government followed suit shortly afterward, but saw the ban merely as a stopgap, pending detailed discussions with the United States on the future of the Latin American arms trade. Britain’s economic recovery, the diplomats pointed out, depended heavily on resumption of export sales and earnings; for the moment, the leftover materials of war were among the most lucrative items in the nations inventory. In December 1945, however, the State Department formally requested the British to stay out of the Latin American arms marketplace. The motives of the United States were, it said, to prevent a regional arms race and to allow time for structuring of a Western Hemisphere defense program. As the United States offered no quid pro quo for British agreement, the Foreign Office “reserved an answer pending study.”⁸⁶

The Inter-American Conference for the Maintenance of Continental Peace and Security, at which a hemispheric defense treaty was to be hammered out, was originally to take place in Rio de Janeiro in March 1946, but had to be repeatedly postponed because of the continuing difficulties the United States was having with Argentina. In May 1946, President Harry S. Truman sent the Inter-American Military Cooperation Act to the Congress: it authorized the supply, repair, and maintenance of U.S. military equipment in Latin America; the pooling of airbases; and other measures of joint planning, training, and operations. Generals Eisenhower and Arnold and Admiral Nimitz spoke in its behalf, but the bill was not reported out of committee before Congress adjourned in August; in the following session, it encountered heavy opposition from both liberals and conservatives. Liberals argued that its provisions would divert meager Latin American public revenues from social projects, and enable dictators more effectively to oppress their own people; conservatives were chary of the treaty commitments it implied, and of the subsidies most governments would require. Few believed the military defense of the hemisphere would thereby be strengthened.⁸⁷

The exclusion of foreign arms suppliers, however, remained a desideratum. The worst fears of British diplomats in Washington were confirmed in July 1946: “standardization” was to be based 100 percent on U. S. prototypes. On July 31, the secretary of war, Robert Patterson, replied to an aide-mémoire from the British ambassador.

Though the navy had never shared the enthusiasm of the army and air corps concerning Latin American capabilities, Secretary Forrestal now supported his colleagues.⁸⁹

Argentina was the key. Military chiefs argued that without Argentina a hemispheric defense organization would be crippled militarily and diplomatically; unfortunately, however, U. S. opinion was believed to be unprepared to accept Argentina as an ally. In mid-1945, Argentina had come under the general Allied ban on the sale of surplus weaponry in Latin America.⁹⁰ Spruille Braden’s brief and tumultuous incumbency at the embassy in Buenos Aires did not allow for forthright negotiations between British and Americans on the arms issue; in the latter half of 1945, when Braden had departed for Washington and confirmation as under-secretary of state for Latin America, the race for the postwar Argentine market was on. The enormous sterling balance Argentina had accumulated through wartime sales to the United Kingdom loomed large in British calculations; the Argentine military regime, for its part, remained avid for armaments with which to redress the regional balance of power with Brazil. Arms sales represented an obvious means to offset British obligations; Washington was asked to consider British requirements. However, at that time, Lord Keynes’s mission was in the United States to negotiate vast questions concerning direct U. S. aid to postwar Britain; British trade with Latin America was assigned a low priority, and the matter fell temporarily into abeyance. In October 1945, the Foreign Office agreed somewhat unhappily to a “Gentlemen’s Agreement,” under which neither ally would, for the time being, sell arms to Argentina. The ban would be lifted, the British were led to believe, as soon as the Argentine regime “behaved itself.” On April 8, 1946, however, Secretary of State Byrnes declared that Argentina was not complying with her Chapultepec engagements, and the embargo continued.⁹¹

The antijunta propaganda campaign in the U.S. media, culminating in the State Department’s Blue Book of February 1946, had been too successful in inflaming public opinion; an immediate rapprochement was unthinkable. But in 1946 all manner of straws drifted in the wind. From Buenos Aires the new U.S. ambassador, George Messersmith, who was less concerned with liquidation of Argentina’s recent unhallowed past than with expansion of U. S. trade and investment and recruitment of Perón into the great anticommunist coalition then emerging in the Americas, reported progress in urging “compliance” on Perón—i. e., liquidation of Axis-owned businesses, suppression of schools and other institutions of the German and Japanese communities, and deportation of Axis “agents”— “so that we can then be in a position to take up with them other important matters of mutual interest.”⁹² In June 1946, General Carlos von der Becke, once a fervent admirer of Nazi Germany, made a “private” visit to the United States. General Brett greeted him with an abrazo in Miami, and General Eisenhower and other War Department officials received him cordially in Washington. However, the State Department remained chilly and unaccommodating.⁹³ In August, The New York Times reported a secret agreement: in return for vigorous action against German firms still under investigation and a cooperative Argentine attitude at inter-American conferences, the United States would supply “reasonable” military equipment. Predictably, a few days later, Perón issued a solemn warning against the spread of communism in the Americas.⁹⁴ In November, North American and Latin American officers held staff talks in Rio: the United States insisted that growing tensions with the Soviet Union made Argentine participation in hemispheric defense imperative—without Argentina, control of the South Atlantic could not be assured. Under the auspices of the “World-Wide Development Corporation” of New York, Major General (ret.) Royal H. Lord and Rear Admiral (ret.) Henry C. Flanagan led a technical mission to Argentina in late 1946 to survey projects contemplated under Perón’s five-year plan. Along with hydroelectric and other civil-engineering projects the group also discussed Argentina’s naval-building program with Perón. Flanagan reported to State that bids for an escort carrier, a cruiser, eight destroyers, and sundry lesser naval craft would have to be submitted by February 15, 1947— the British, Italians, and Swedes, he added thoughtfully, also intended to submit bids.⁹⁵ In March 1947, Olin Industries of New Haven was negotiating to put up a smokeless-powder mill for the Argentines, and Chambersburg Engineering was working out a three-year technical-service contract for the same project. In May, it was announced that Armco, which had been interested in the steel-mill project since 1938, would erect a primary mill in collaboration with the Argentine government.⁹⁶ (The mill remained unbuilt until the early 1960s, however.)

The impasse began to be overcome in December 1946, when the new British ambassador, Sir Rex Leeper, told Messersmith that “Great Britain must have the arms trade to feed itself.” On January 27, 1947, the British gave the requisite ten days’ notice for withdrawal from the Gentlemen’s Agreement. In Buenos Aires, agents swiftly took orders for a 30 million pound sterling Vickers contract, the sale of civil and military aircraft, and construction of a dozen warships.⁹⁷

In December 1946, Perón deported more “dangerous Nazis,” and ordered more German firms liquidated. Messersmith traveled to Washington in January for conversations with outgoing Secretary of State Byrnes and his designated successor, George G. Marshall. Byrnes had assigned Latin America a low priority in the gathering cold war, and, on Braden’s advice, had resisted the military’s grandiose plans for the hemisphere. Marshall, however, as army chief of staff, had favored standardization, and more recently in congressional hearings had emphatically supported “Pan American solidarity.”⁹⁸ In April, State’s Frederick B. Lyon reported on his visit to the Buenos Aires embassy: “few people [including North American businessmen] realize that our relations with Argentina are completely normal short of selling arms. . .. The Ambassador is confident some sort of compliance will be forthcoming soon. He will shortly start preparing us to accept deportation of a relatively small group of National Socialist agents. . ..” [Italics in original.]⁹⁹ In May, eight more “spies and undesirables” were expelled from Argentina. This, the last such expulsion, coincided with Marshall’s announcement of his decision to sell arms to Argentina, and preceded Braden’s resignation by a few days.

At the end of 1947, the hemispheric defense structure, including Argentina, was formalized in the Rio Treaty. However, during 1947, increased emergency commitments to cold war trouble spots such as Greece, Turkey, Iran, and the Philippines increased awareness of the long-term demands the cold war would place on U.S. financial and industrial resources, and a sharply increased estimate of the costs of military standardization in the hemisphere—perhaps one billion dollars—removed impetus for passage of the Inter-American Military Cooperation Act. It was quietly withdrawn from congressional consideration and never resubmitted.¹⁰⁰

So far as Argentina was concerned, token shipments of surplus weapons appear to have begun during the summer of 1947 under presidential authority. War Minister General Humberto Sosa Molina declared on July 6 that Argentine arms factories were prepared to participate in the hemispheric standardization project. “The Argentine Revolution,” he said, “gave a vigorous impulse to the armaments production industry to produce what was necessary for our defense.”¹⁰¹ In Buenos Aires at the end of 1947 for defense talks, Lieutenant General Willis Crittenberger was taken aback by the Ministerio de Guerra’s list of requirements, which had a dollar value of 9.2 million. Two million dollars’ worth could he made available from surplus stocks, but the remainder was beyond the immediate capacity of the United States.¹⁰² A famous photo of 1949 would show Sosa Molina reviewing, in company with U.S. General Matthew Ridgeway, a parade of Argentine armored units; surplus U.S. Shermans.¹⁰³

The Later History of Fritz Mandl

Postwar investigators in Western Europe and the Americas could find no new evidence derogatory to Mandl.¹⁰⁴ Although his name did not appear in the State Department’s Blue Book of February 1946, he remained blacklisted. In reply to a query from Representative Baldwin, Braden wrote that “Mandl’s case unfortunately is one of the worst in Argentina”¹⁰⁵—which from Braden’s point of view was undoubtedly true. Even after the British and North Americans simultaneously abolished their blacklists in July 1946, Mandl found it difficult to do business in either country. The British would not comply with the wish of the United States to continue working against blacklisted persons, but made an exception for Mandl: “Mandl is a particularly obnoxious person . . . we should put spokes into his wheel."¹⁰⁶ He was not allowed into the United States to look after his holdings there until sometime in 1947. He had by then found another champion: Ambassador Messersmith, who, as U.S. Minister in Vienna in the 1930s, had been favorably impressed by Mandl’s efforts “in defense of Austrian independence.” On September 11, 1946, Messersmith wrote a nine-page brief to Dean Acheson. Citing his own “passion for fairness and justice,” the ambassador denounced “the legend [which] has been built up around [Mandl] which has no basis in fact. . .. We shall have to face the matter sometime,” he predicted, none too accurately. It is difficult not to agree with Messersmith that Mandl remained banned solely because of the bureaucracy’s fears of a popular outcry against its failure to destroy the international villain whose myth it had done so much to create.¹⁰⁷

Chastened by the arrest, betrayals, and shakedown of 1945, Fritz Mandl lived in quiet obscurity until his departure from Argentina ten years later. Shorn of part of his fortune and forced out of IMPA, he remained nevertheless an active and prosperous entrepreneur. It was common gossip that he managed Perón's personal investments in Dodero Shipping and in firms with names such as IMPAR and BROADWAY.¹⁰⁸ More importantly, he also remained unobtrusively involved in planning for Argentine heavy industry. His views and Savio’s had diverged. Savio’s requirement of autonomy in steel and weapons making conflicted with U.S. plans for hemispheric defense and standardization of weaponry; an autonomous arms industry would leave Argentina, relative to her neighbors, with expensive and inferior equipment. Mandl now aligned himself with General Sosa Molina, Colonel Rudi Jaeckeln, and Industry and Commerce Minister Rodolfo Lagomarsino in holding that, because Argentina desperately needed advanced equipment and technical experts, such a steel industry could be founded only in collaboration with a major U.S. steel firm. Joseph Baldwin, acting for U.S. Steel Corporation, and Edward Stettinius were interested; detailed conversations were under way in late 1946.¹⁰⁹

Early in 1946, the Allied authorities allowed the Starhembergs (whom they considered “useless people”) to return to Austria. Mandl himself was non grata in Vienna, but kept a close eye on Austrian affairs. In August 1949, when Starhemberg regained his estates, the Socialist minister of interior, Oskar Helmer, declared roundly that Mandl would be thrown out forthwith should he ever set foot on Austrian soil again. In May 1955, the Western powers and the Soviet Union signed the Austrian State Treaty which restored sovereignty to a “perpetually neutral” Austria. Four months later, a military coup drove Mandls Argentine patron, Perón, into exile. At the end of October, Mandl appeared in Vienna for the gala reopening of the State Opera, and for conversations with Interior Minister Helmer.¹¹⁰

In the end, he regained the Hirtenberg arms complex (which had been under U.S. administration until 1955) and all his other properties. The government granted Hirtenberg exclusive contracts to equip the new Austrian Army and extensive credits with which to start production. The firm remained busy and prosperous until 1965; then, having supplied Austria’s domestic wants in weaponry, it began to experience slackening demand, layoffs, and annual losses. In 1972, Hirtenberg, under a new management team, branched out into civilian production and increased its export sales of arms. Among its clients have been Bolivia, Uruguay, Guatemala, and the United Arab Emirates.¹¹¹ Fritz Mandl died in September 1977; the English-language press failed to mark his passing.

The circumstances of Mandl's birth and those of his trade combined to make him the quintessential outsider. Many persons whom he touched, he corrupted; he was himself betrayed many times, often by the “Best People,” to whose station he aspired. Like Othello, he did the State (several States, in fact) “some service.” Like the Moor, he was dismissed— but kept on call—when the State put on the raiment of righteousness. Perhaps, however, Mandl's natural playwright is not Shakespeare, but Bert Brecht.

The neutralization of Mandl's Argentine enterprises was part of the State Department’s extraordinary effort, between 1942 and 1947, to eliminate foreign influences from Argentina, and to coerce the Argentines into acceptance of U.S. political, economic, and military hegemony in the Western Hemisphere. It was an effort remarkable for its crudity, lavish commitment of bureaucratic resources, corruption of the press, and embarrassing gaffes; nevertheless, by virtue of American force majeure in the postwar world, it was largely successful. The attack on Mandl was facilitated by the inexperience of U.S. diplomats and thus their susceptibility to British manipulation; by the gullibility of the North American press and thus its susceptibility to manipulation by the U.S. foreign-policy establishment; and by the North Americans’ simplistic public morality and their receptivity to a lightly-coded anti-Semitism. In the imperial America of the 1980s, it is presumably unthinkable that these things should recur.