Memorandum by the Economic Adviser (Feis)

Upon instruction of the Brazilian Ambassador, Mr. Muniz came in to see me to get a statement of the American proposals in regard to the treatment of the exchange control situation in the commercial treaty with Brazil. I explained to him the general American attitude as summarized in the memorandum presented to the Brazilian Ambassador, explaining the nature of the provisions to be written into the agreement, and the nature and purpose of the joint declaration. In regard to the provisions to be written into the agreement, I explained that they would leave Brazil a choice. If Brazil decided not to enter into any special agreements providing immediate exchange (such as has been under discussion with Germany) this country would ask no such treatment; if however Brazil would enter into agreements conferring special exchange opportunity to the trade of any other country, Brazil would be pledged to accord the same treatment to American trade. Mr. Muniz professed to understand the whole approach, to consider it very fair, and to favor it.

He then stated that he understood that we had proposed to the Brazilian Government that they end the exchange control and had said that if they did we would arrange any financial support that was necessary. I stated that such was not my understanding. We would not want to accept the responsibility of taking the initiative in this matter. Our hope was that the course of Brazilian affairs and the drift of decision on the part of the Brazilian Government would lead to the termination of the exchange control. If the Brazilian Government wished to take such action and wanted to ask this Government to facilitate the action, I was sure we would be glad to examine the possibilities with care.

Since this different emphasis continued to puzzle him, I checked the statement over with Mr. Welles in his presence, and Mr. Welles, confirmed it saying, however, that as a matter of fact in conversation with the Brazilian Ambassador during the past day or two he had gone a bit further and stated he had felt hopeful we would be able to give financial facilitation. This I told Mr. Muniz. The matter was left that he would communicate with me as soon as decision had been reached by his Government.

H[erbert] F[eis]