310. Memorandum From the Assistant Secretary of State for Inter-American Affairs (Holland) to the Under Secretary of State (Hoover)1
SUBJECT
- Your memorandum to me dated May 52
Discussion:
The subject memorandum requested my assessment of the Brazilian situation, together with specific proposals for action of a type which may form the basis of discussion with Secretary Humphrey.
I believe our basic interests in the Brazilian situation are: (1) in having a new administration in Brazil which will be responsible and able to face and handle Brazil’s many problems; (2) in doing what we can to keep Brazil’s head above water until a new administration takes over; and (3) then helping Brazil regain some measure of economic stability. Until these three things happen, our relations with Brazil will be very difficult.
With respect to the first point, political maneuvers now taking place in Brazil indicate that Juscelino Kubitschek, Governor of Minas Gerais, is in the leading position. He is likely to pursue a rather nationalistic course if elected, particularly if ex-Labor Minister Goulart and the old Vargas crowd come in with him. Etelvino Lins, the other leading candidate, is weak politically and unlikely to win. Adhemar de Barros is expected to announce his candidacy with some military support on a progressive platform. A military candidate may emerge later on a conservative platform.…
With respect to the second point, I believe we should continue our present policy of helping Brazil keep afloat until a new administration takes over. Improvement in the last two months in Brazil’s dollar receipts has enabled them not to have to draw yet on the $75 million credit we extended in February. However, if coffee receipts drop off they may be forced to do so within the next few months. I believe we and Treasury should watch carefully Brazil’s export policies, the movement of coffee, and the balance of payments. If Brazil is forced to draw down the $75 million, we should consider granting an additional amount if necessary.
With respect to the third point, I believe it is not possible to work out with Brazil now any long-range plans to regain economic [Page 667] stability. The present Café administration will remain in power only a short time longer and is simply not interested or able to move in on Brazil’s basic problems. The new Finance Minister, Whitaker, will probably do what he can administratively but this will not be sufficient. We are forced to await the advent of a responsible administration before any real program can be achieved.
Meantime, we can pursue certain limited constructive objectives which include: (1) negotiation of atomic energy agreements, (2) limited military understandings, (3) continue to press the Brazilians regarding their internal credit policy, (4) maintain closest scrutiny of coffee policies and be prepared to discuss these at appropriate time, (5) overhaul of our FOA program in Brazil, (6) USIA efforts to mitigate anti-U.S. election propaganda, …, (8) training of labor leaders and other key people under our exchange program, (9) expanding our binational center program, (10) conclude a PL–480 agreement on wheat, and (11) arrange to provide coal in return for rare earth sulphates and cruzeiros through FOA.
Recommendation:
I believe our policy now should be to proceed with the projects outlined above pending the emergence of a group in Brazil with whom we can work with some degree of effectiveness on Brazil’s basic problems. Meantime, we can plan our approach to the new group.3