367. Telegram From the Chargé in Brazil (Wallner) to the Department of State1
Rio de
Janeiro, October 4,
1957—3 p.m.
462. Embassy has prepared analysis of present situation in Brazil covering economic, political, psychological fields which is going forward as despatch 3792 by tonight’s pouch. Conclusions, which were reached only after careful consideration of all available data, have Embassy-wide concurrence.
These conclusions are:
- 1.
- Serious economic difficulties face Brazil during the next 2 or
3 years:
- a)
- The balance of payments outlook is critical, with a
probable deficit for 1957 of as much as $250 million and
a worsening situation thereafter.
- i)
- No significant improvements are foreseen in exports.
- ii)
- As most luxury items have already been eliminated from imports, little further compression is possible except at the expense of economic development.
- b)
- Internally inflation continues, though at a slower rate in the first half of 1957 than in 1956.
- c)
- Combined effects of payments trouble and inflation exacerbate an imbalance in the economic growth of Brazil.
- 2.
- Foreign financing will be needed, such as:
- a)
- Public and private standby credit lines.
- b)
- Relief when requested on Eximbank and other existing obligations.
- c)
- Further IMF assistance.
- d)
- New public credits (Eximbank and IBRD) to continue basic economic development.
- e)
- Continued flow of private US and European investment, encouraged by US Government confidence in Brazil.
- 3.
- The political structure and psychological climate … could set in motion a sequence of political developments basically contrary to the interests of the US.
- 4.
- It would seem in the broad, long-term interests of the US to assist Brazil through its coming international payments difficulties and foster more balanced economic growth, based on a mutually agreed program aimed at correcting the conditions which have led to the present situation. At the same time it is important to continue and intensify our efforts to promote effective cooperation with Brazil in the political and military fields.
Wallner