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Britain was intent on pursuing the Peruvian initiative, which kept the U.S. indirectly involved in the negotiations. Secretary of State Haig showed it to British Foreign Secretary Pym in Washington. The pair discussed the ideas for four hours, before Pym flew on to the U.N. After making some changes, they sent the proposal to London. Two days later, the British responded through their Ambassador to Washington Nicholas Henderson. The collective ideas were sent on to Lima, where representatives of the Argentine junta were waiting for them.
In order to keep U.S. support, the British were willing to make a number of significant concessions. As Pym informed the House of Commons after returning from New York City, a "vital ingredient of the ideas on which we are working is an early cease-fire and the prompt withdrawal of Argentine forces." That wording differed from previous British demands, which had called for the immediate and unconditional withdrawal of the Argentine forces from the islands before any other discussion could begin. The British also seemed willing to soften their insistence on self-determination for the Falkland Islanders, now saying only that their "wishes" had to be taken into account. Finally, the British said that they would find a U.N. administration acceptable, as opposed to their earlier demand for a "return to British administration" in the Falklands before any negotiations.
The sharpest point of British insistence was that any cease-fire be linked to a guaranteed plan for the withdrawal of Argentine troops. The alternative, Thatcher told the Commons, would play into Argentine hands. "It would be too easy to say 'no military activities during negotiations,' " she said in reply to a question from Opposition Leader Foot. "We should then be hamstrung. The people on the islands would still be under the heel of the invader, while Argentina increased its activities on the mainland, with supplies and reserves, to attack us at their will."
Argentina might well have had something like that in mind. The first response from Buenos Aires was to reject the Peruvian proposal out of hand. Then the junta seemed to reconsider. But on Wednesday, the Argentines informed Secretary-General Pérez de Cuéllar that they were examining the U.N. peace proposals with, as he put it, "great interest and a sense of urgency." A Foreign Ministry statement also declared that "the first step toward a solution must be an immediate cease-fire." There was no mention of military withdrawal. Britain's insistence on the opposite course of events, a Foreign Ministry spokesman said, meant that "there is no diplomatic solution for the moment."
At the same time, the Buenos Aires government announced a series of austerity measures designed to bolster the country's wartime economy during a prolonged conflict. The Argentine peso was devalued by 17% to boost exports, while a 7% tax was announced on important goods sold abroad, to help pay for the war effort. Additional taxes went into effect for gasoline, cigarettes and liquor.