308. Memorandum by the Officer in Charge of Brazilian Affairs (Cottrell)1
BRAZIL—STATUS REPORT
Summary
Brazil’s dollar deficit, internal inflation, and political turmoil are the outstanding characteristics of the present Brazilian situation. The present caretaker government refuses to institute necessary economic reforms, and political jockeying prior to the presidential elections this October prevents efforts to check the deteriorating situation. Primary U.S. objectives are to maintain Brazil’s political orientation towards us, prevent Communist growth, and have Brazil reestablish economic stability. Alternative policies to achieve these goals include: (a) working out a “package” program with the Café administration setting forth what Brazil should do now and what the U.S. would be prepared to do; (b) going behind the present administration to the military leaders with a comprehensive program which the military should force upon the Café administration; (c) providing “stop-gap” assistance to keep the Café administration afloat until a new group takes over, either through elections in October or by a military coup. Then approach the new group with a comprehensive plan. Conclusion: Plan (c) is preferred in view of all factors involved.
Report
[Here follow sections I and II containing a detailed discussion of Brazil’s economic and political problems.]
III—U.S. Objectives and Alternative Courses of Action
Our basic objectives in Brazil are to maintain a political orientation toward the U.S., to prevent Communist growth, and to have Brazil regain economic stability. Our immediate objective, in view of Brazil’s deteriorating economic situation, is to prevent an economic breakdown. Our secondary objective is to promote economic rehabilitation. Alternative courses of action which we may pursue could be the following:
- (1)
- Prepare a “package” which would include what Brazil must undertake in order to reestablish its economic stability together with what assistance the U.S. is prepared to give concurrently. We would insist that the Café administration abandon its caretaker policy and start immediately to take those measures necessary to meet the [Page 663] situation. Comment: It is believed that this approach would be unsuccessful because the present administration is not politically prepared to carry forward a comprehensive program and the Brazilian Congress is not prepared to approve one during an election year.
- (2)
- Establish liaison with the military figures behind the Café administration. These men would be told that strong measures are necessary now to prevent collapse and that the U.S. Government is prepared to assist if the military agree to force a comprehensive, constructive program at this time. Comment: This approach is also impractical because the military is primarily concerned with the defeat of Kubitschek and will not force a program which would certainly alienate many groups whose support is considered essential in the election. This measure would be a thinly veiled form of intervention in which we would underwrite the military in assuming control through extra-constitutional means. The repercussions and criticism of such a course could be disastrous to the reputation of the U.S. in Brazil.
- (3)
- The U.S. should be prepared to provide additional credit if it
is needed to enable Brazil to meet its dollar commitments this
year and stay afloat despite rising internal inflation. In
addition, the U.S. should provide any other kinds of “stop-gap”
aid which may appear possible and desirable. This might involve
supplies of agricultural products on credit, such as in the
PL–480 proposals. Then the
U.S. should prepare a comprehensive economic reform program to
discuss with the new Brazilian administration immediately upon a
change of government. Comment: This
appears to be the best policy because:
- (a)
- It would provide the only effective immediate help the U.S. can offer to prevent a breakdown;
- (b)
- It would offer a better chance to help Brazil to reestablish economic stability when it is politically possible to make the program effective; and
- (c)
- It would avoid moral censure of intervention and avoid the shifting of direct responsibility to us for Brazil’s economic recovery.
- Source: Department of State, Central Files, 732.00/3–2255. Secret.↩