832.24/7–1344
The American Ambassador in Brazil (Caffery) to the Brazilian Minister of Transportation and Public Works (Mendonça Lima)2
Your Excellency: 1. Beference is made to your letter addressed to this Embassy under date of May 9, 1944,1 in which you considered the proposal set forth in my letter addressed to you under date of March [Page 587] 21, 1944,3 setting forth certain very broad and general considerations in connection with the transfer of repaired construction equipment to your Ministry on behalf of your Government.
2. Much consideration has been given to plans which were initiated prior to the receipt of your letter of May 9, and it is now considered important that we arrive at a more specific procedure in order that this entire transaction may be consummated in a manner satisfactory to both our governments. I now propose that the entire project be divided into three (3) phases as follows:
- a)
- The United States Government will establish a complete heavy
construction equipment repair shop in the city of Rio de Janeiro
in the location which you have determined as proper. Your
Government will be expected to pay for all direct charges in
connection with the establishment of this shop, for instance;
- 1.
- The equipment which has been selected and prepared for shipment in the United States and the cost of transportation of this equipment from the United States to Rio de Janeiro. (List of this equipment and all other lesser tools, hand tool kits, and general shop appurtenances can be presented to you promptly for your consideration.)
- 2.
- The cost of construction of adequate office space and facilities for office personnel.
- 3.
- The installation of all the equipment referred to above, including the extension of electrical power lines and other necessary connections.
- 4.
- The construction of all spare parts bins, partitions, work benches, etc., required for a shop of this size.
- 5.
- Transportation of American personnel, exclusive of Army officers, from the United States to Rio de Janeiro.
- 6.
- The compensation for American personnel, exclusive of Army officers, who participated in the above shop alterations and the installation of the machinery and equipment.
- 7.
- The cost of all Brazilian labor employed on this project of establishing this shop.
- It is reasonably estimated that the above preparations of the shop cost will not exceed $300,000, but the actual reimbursement expected from the Brazilian Government would be actual cost records of which would be maintained and kept and vouchers presented with sufficient detail so that those costs could be verified at your convenience.
- b)
- The establishment of the price at which the equipment would be turned over to your Government. It has been determined that this transfer of equipment should be on exactly the same basis as a similar transaction would follow in the United States. The equipment will be repaired and placed in operating condition satisfactory to your inspectors, and when this has been accomplished, title will be transferred [Page 588] to your Government at 85% of the list price of the equipment f.o.b. Rio de Janeiro. This, in simpler form, is 85% of the sum of the f.o.b. factory list price in the United States plus transportation to Rio.
- c)
- The operation of the shop would continue until all items of equipment that are possible of repair would be repaired and turned over to your Government. Assuming that the shop so established would have a life expectancy of 10 years, my Government, on its last voucher to you, would credit your Government’s account with an amount towards the amortization of that shop equal to the percentage that the time of operation is to the period of 10 years. After our withdrawal from the operation of the shop, there would remain a stall of trained Brazilian nationals capable and competent to continue the repair of your Government’s equipment.
3. At the completion of the shop operations under the supervision of United States Army officers all new spare parts and materials remaining in stock will be turned over to your Government at Rio list prices, all used spare parts and salvaged materials will be turned over at no cost to your Government. It is anticipated that there will not be more than fifty American nationals, exclusive of Army officers, who will at any time be employed in this shop. The policy will be to terminate the services of American mechanics as rapidly as Brazilian nationals can be trained to take their places. The motive of this is not only to leave your Government with a complete shop but also with a trained staff.
I have been informed of the very satisfactory meeting which took place on the 12th of this month between Your Excellency, Dr. Fiuza5 and General Balph H. Wooten, Colonel John T. Knight, Jr. and Mr. Theodore Xanthaky of the Embassy. Moreover I have been informed that Your Excellency concurs in principle with the above proposal, as well as with the method of payment suggested below and which is satisfactory to the Brazilian Government:
- (1)
- The first payment which the Brazilian Government will make to the American Government will be for the installation of the shop mentioned in item (a). This payment will be made as soon as the installation of the shop has been completed and approved by Your Excellency’s experts.
- (2)
- The payments in connection with the equipment will be made every three months, after it has been completely repaired and accepted by the Brazilian Government.
I shall be very grateful to receive, as soon as possible, confirmation that Your Excellency concurs in the above proposals and avail myself [etc.]