Foreign Relations of the United States Diplomatic Papers, 1934, The American Republics, Volume IV

611.3231/726

Memorandum Handed by the Brazilian Ambassador (Aranha) to the Economic Adviser (Feis), Circa December 18, 1934

circa December 18, 1934

[Translation]³⁷

I —The study of the present situation of constantly increasing reduction of world exchange shows that it is necessary to attempt another policy than the one which is being practiced for the purpose of reestablishing commercial life between countries.

II —The reduction of the purchasing power of the nations, with under-consumption, the anarchy of currencies, together with exchange problems, the lack of credits, together with the paralysis of business, and many other factors have already compelled the making of 142 compensation agreements between the European nations and some American nations.

III —These agreements contemplate the establishment of a regime of barter for the purpose of bringing commercial balances as well as payments to an equilibrium at the expense of countries which have balances or have credits.

IV —Various countries harassed by the reduction of the value of their commerce or by their financial necessities began by adopting high tariffs, favors granted to exports, quotas for imports, exchange discriminations, currency devaluations, domestic measures regarding production, some countries even going so far as a practical monopoly of foreign commerce.

V —No country failed to fall more or less into a policy of emergency or of expedients, both with regard to domestic commerce and with regard to foreign commerce. England, the traditional free trade country, made the Ottawa agreement,³⁸ allowed the pound sterling to fall, created tariff duties, and made various compensation agreements, including, in America, one with Argentina.³⁹

The United States of America, always protectionist, made the tariff of 1930,⁴⁰ lowered the value of the dollar, intervened in agriculture and regulated industry. There is not a single country which, more or less, under these circumstances, has not tried experiments in the sense of giving a direction to its economy and to its domestic and foreign commerce.

VI —This emergency policy, which, as we see, caused the further aggravation of the universal situation, by reducing the volume and value of commerce, threatens to change from being a mere expedient into becoming a true and almost unanimous rule, norm, or basis of exchange between peoples.

VII —The United States of America, seeing the injuries which that rule is causing to international relations and in its own relations, now wishes to make an effort to eliminate from commercial practice all and every expedient involving a derogation from the so-called liberal policy. It expects to count on Brazil whose situation in world commerce is, in many respects, the same as her own, and which has balances in its commerce with the United States of America.

VIII —It is necessary first to emphasize the diversity of position of our countries, which diversity is of capital importance in the problem:

a) Brazil is a country in formation, while the United States of America has reached the saturation point of progress;

b) Brazil is a debtor country and the United States is a creditor country.

IX —Even so, Brazil views the American proposal with sympathy, for its whole effort is made and shall be made in the sense of return to the liberal policies and of the closest understanding with the United States of America. However, she wants the consequences of this attitude to be evident in her economy and in relations with other countries.

X —The adoption of the inflexible liberal policy, such as is traced in the projected treaty, will involve, as it has already involved, in practice, the suspension of our commerce with those countries which, like Germany, Italy, and many others, on the basis of domestic measures, upon which measures it is impossible to bring any influence to bear, only purchase from Brazil in order to sell.

XI —Now, Brazil has, with those countries, 57 percent of her global commerce and is not able, because of domestic reasons, to renounce that commerce, either altogether or in part. The United States of America, for her part, can do so, but with inevitable repercussions at home which we are already feeling in the case of cotton and in other cases.

XII —Trade of the United States of America with Germany:

Year	Export	Import	Total
1931	$166,050,000	$127,039,000	$293,089,000
1932	$133,668,000	$73,572,000	$207,240,000
1933	$140,024,000	$78,185,000	$218,209,000

Trade of the United States of America with Italy:

Year	Export	Import	Total
1931	$54,815,000	$62,659,000	$117,474,000
1932	$49,135,000	$42,403,000	$91,538,000
1933	$61,240,000	$38,571,000	$99,811,000

Trade of Brazil with Italy:

Year	Export	Import	Total
1931	$9,480,000	$5,547,000	$15,027,000
1932	$6,763,000	$4,390,000	$11,153,000
1933	$7,560,000	$5,310,000	$12,870,000

Trade of Brazil with Germany:

Year	Export	Import	Total
1931	$22,090,000	$13,697,000	$35,787,000
1932	$15,922,000	$9,716,000	$25,638,000
1933	$14,525,000	$16,810,000	$31,335,000

XIII —Besides this consequence of loss to the production of the United States of America and of Brazil of exports to the approximate value of 210 millions of dollars, there is a more serious fact: the business which ceases to be done between our countries is going to be done with other countries on the basis of compensation.

XIV —It is, therefore, beyond dispute that, by ceasing to sell to those countries, we shall be fortifying the policy which we wish to condemn, since we shall furnish a greater margin of exchange—that which we cease to effect—to feed the compensating countries.

XV —Everything being considered, our thought is as follows:

1) The adoption of a liberal policy, for such a policy is the one which favors our tradition, our future, and the universal interest;

2) The establishment, nevertheless, of norms to be adopted during the period of transition so as to prevent the simple doctrinaire adoption of orientation from effecting the opposite of our purposes.

XVI —The norms would be those of an aggressive sales policy in order to destroy the constantly increasing bloc of countries parties to compensation treaties. This policy, with the direct participation of the Government, would be carried out through banks or domestic credit operations or even combinations between banks or firms of the interested countries.

It would disappear with the return to commercial normality, with multi-angular exchange, with the inevitable adherence of other countries to these purposes.

XVII —If this action appears anti-liberal—something which does not so appear to me in view of the universal situation—the attitude of the United States of America might be maintained for some time but that of Brazil could not last, since Brazil has no reserves and does have debts.

XVIII —A practice such as the liberal practice which has been virtually renounced by almost all countries cannot be reestablished offhand. It does not depend on an idea, on a declaration, on an attitude, on a treaty between two countries. In order to be reestablished it is necessary for it to pass through the crisis of all reconstructions. It will have to be a patient work of effort and of action, sometimes using old material and sometimes using new material.

XIX —It cannot, therefore, be done by fiat. It is necessary that we should join action and idea, that we should organize a program, that we should follow a method, that we should mobilize resources without which the failure of our effort will weigh upon the destinies of our countries without shaking off the depression but rather aggravating the depression of world trade.

37. File translation revised by the editor.
38. British and Foreign State Papers, vol. cxxxv, p. 161.
39. For representations regarding the exchange provisions of the Anglo-Argentine (Roca) Agreement of May 1, 1933, see Foreign Relations, 1933, vol. iv, pp. 722 ff.
40. 46 Stat. 590.