File No. 832.61333/100.

The American Ambassador to the Secretary of State.

No. 15.]

Sir: As of possible interest to the Department I have the honor to enclose herewith, accompanied by a partial translation, a clipping from the Jornal do Commercio of the 15th instant containing a portion of the annual message addressed by Dr. F. de Paula Rodrigues Alves, the President of the State of São Paulo, to the Congress of that State.

This clipping will give the Department a fair idea of the real attitude of the Government of the State of São Paulo in connection with the American investigation into the matter of coffee valorization.

I have [etc.]

Edwin V. Morgan.

Message of the President of the Brazilian State of São Paulo to the State Congress.

The high price of coffee, which is clue to natural causes, has been attributed to the stocks which the State of São Paulo holds. Commercial and political pressure exerted in certain quarters has caused distrust of these deposits and of the intentions of the São Paulo Government.

The State of São Paulo was not led into valorization through the wish to speculate or to make money. Its object was the patriotic one of saving large sums of money invested in the cultivation of a product on which to a large extent State credit depended. The Government has always explained its attitude frankly and the markets of the world have accepted it without suspicion. We have always maintained the best of relations with the United States, and it was not right to expect that our intentions would be misunderstood or misinterpreted.

It will be remembered that at the beginning of last year the American Government wished to be informed of the conditions under which valorized coffee was sold in the month of April. Representative Norris of Nebraska, in the House of Representatives, asked whether the tariff laws afforded a means of retaliation against Brazil, which, “acting in conjunction with American and European capitalists, had raised the price of coffee from 40 to 50 per cent, thereby causing an annual loss to the United States of 35 million dollars.” He also inquired “if the Department of Justice could not institute legal proceedings, under the Sherman law, against the American members of this trust.”

Omitting, as one would expect between friendly powers, this allusion to Brazil, the Department of Justice began the investigation which the House of Representatives recommended regarding the sale of coffee in the month of April.

The State Government was not apprehensive during the work of investigation, which, however, revealed a certain lack of confidence regarding our attitude, when all at once came the report that one of the New York courts was taking action against the members of the committee of valorization, jeopardizing, in a very strange fashion, the legal status of the deposits of our coffee.

And we deeply regretted to learn the terms of the petition presented in the name of the American Government to the District Court of New York. From a perusal of that document, it is plain to be seen that great fear is felt lest we might be instrumental in upsetting the great principles which political science has created for the complete administration of justice among nations.

So as to be able to state that the members of the valorization committee had violated the provision of the law of July 2. 1890 (the Sherman law), there was [Page 56] presented to the tribunal a lengthy memorandum of which I am at this moment able to give you only the general lines:

“The suit was brought before the District Court of New York by the United States of America against the members of the valorization committee.

“It was alleged that the persons interested in maintaining the price of coffee at the highest possible figure had conceived a plan with a view not only to maintaining that price but to increasing it through artificial means which would, directly and illegally, result in a restraint of trade throughout the entire world and therefore between Brazil and the United States.

“For the purpose of carrying out that plan, the members of the committee, and others who are cited in the petition, entered into agreements, contracts, combinations, and conspiracies (these are expressions used in the Sherman law), and purchased, received, stored, and sold coffee, and manipulated the market in various ways.

“Inasmuch as three-fourths of the world’s supply of coffee is produced in Brazil, the conservation of the high price would not be possible without the cooperation of the Government of Brazil and of the States, the State of São Paulo being the largest producer. Therefore various laws were passed at the suggestion of interested parties.” (The Federal laws and those of the State, as well as sur-taxes on our coffee, exportation, loans, the Convention of Taubate, and, in fact, every law which can have any connection with the valorization plan, are cited at length.)

It is then affirmed that the law for the protection of industry and commerce against restrictions and monopolies (the Sherman law) was violated, and the petition recites the following views:

  • “a) The valorization plan was organized by individuals who would be benefited by the maintainance of the price of coffee above the level which would prevail if the law of supply and demand were allowed to pursue its natural course;
  • “b) These individuals induced the State of São Paulo to decree laws and to enter into contracts which materially reduced the quantity of coffee exported from Brazil;
  • “c) Inasmuch as the United States consumes forty per cent of all the coffee used in the world, and inasmuch as coffee is a staple article of food, any law which restricts its importation into the United States in normal quantities, or which in any way tends to elevate its price, constitutes a direct restraint of foreign inter-state trade. Therefore, the valorization plan was organized in contravention of the principles incorporated in the Sherman law, and the agreements and conspiracies of the several individuals, who obtained from the State of São Paulo laws and contracts in this connection, are in disagreement with its provisions;
  • “d) The fact that the said agreements and conspiracies are not illegal in Brazil and the fact of their being participated in by a foreign State can not justify the committee in the perpetration of acts committed within the United States. The several contracts and agreements were, it is true, concluded outside the limits of the United States, as were the meetings of the committee. Nevertheless, one of the defendants, Mr. Sielcken, resides in the southern district of New York, where he deals in coffee.”

The writer concludes, by saying that “the laws, contracts and agreements from which the valorization plan originated violate the American law of July 2nd and they should be declared illegal,” requesting that there be at once appointed a depositary to take charge of our coffee, which was there warehoused, and that it should be sold under the court’s orders.

No course was left open to this Government in defense of our rights except categorically to reaffirm them to the Federal Government, which was personally informed by the Secretary of Finances of the State as to all of the elements which entered into the formation and execution of the plan, which was given due publicity and which, after being so many years in operation, has only now produced the alarm which so greatly offends us.

I can not refrain from saying to you, with my most profound thanks, that the Federal Government and the Honorable the Minister for Foreign Affairs have been sincere champions of those rights, which are, above all, rights of the Brazilian nation. And everything leads us to believe, in view of the first decisions made public and in view also of friendly manifestations between the two countries, that the incident will not affect the cordiality of ancient relations with the great American nation and that the question will be settled in a dignified manner.

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The example of the United States not unnaturally produced effects in Europe. In the French Chamber of Deputies, Mr. Briquet, a socialist, proposed a motion against coffee, attributing the high price of that product to the action of the São Paulo valorization committee, and requesting that the Government adopt measures designed to put a stop to speculation. For this purpose, he suggested an increase in the import duties, and the concessions of favors to coffee from the French colonies and other producing countries. The Minister of Commerce was opposed to this action, and he loyally stated just what had occurred in Brazil in connection with the valorization of coffee, adding that it had been proposed that France should pursue the same course with a view to raising the price of wheat. He stated that he could see no legal means of attacking the acts of an independent State. As a consequence of this clear and just intervention, the motion of the illustrious deputy did not succeed in impressing public opinion in France.

One should reap from these facts the lessons which they naturally suggest. The United States is the largest consumer of our coffee, which enters that country free of duty. Large amounts of capital are invested in the coffee business in the United States, and there is within the country and in the neighboring coffee-producing territory a current of opinion favorable to the levying of an import duty on the product. No advantage is to be gained by the great American people through the taxation of a product which to-day forms a part of its daily bill-of-fare, but the exigencies of the administration, and the pressure upon politicians and people interested in commerce, the insistence of small producers of coffee, may result in other complications, for which it is said in the United States that the amplitude of the Sherman law is admirably adapted. The coffee producer should be vigilant and not deposit excessive confidence in the action of public authorities nor in the sentimentalism of friendly peoples when the pressure of great commercial and revenue-raising interests begins to become intense.