632.6231/53: Telegram

The Ambassador in Brazil (Gibson) to the Secretary of State

134. In conversation with Macedo Soares this morning I conveyed to him the substance of the Department’s 74 and 75.

He authorized me to say that the only problem which has held up conclusion of the agreement with Germany has been finding some method of giving adequate protection to American products; that as the matter now stands he has submitted to the Germans a considerable list of essentially American products such as automobiles, typewriters, adding machines, gasoline, et cetera, described as “commodities habitually purchased from countries dealing in international exchange”.

The latest draft is now being written up and Macedo tells me he will furnish me with a copy tomorrow for the information of the Department.

Macedo is obviously greatly troubled by the problems presented. He is, I believe, honestly concerned to do nothing in violation of the letter or the spirit of the agreement with us; on the other hand he is under heavy pressure from Germany and from influential Brazilian interests particularly in São Paulo which stand to benefit from a broader arrangement with Germany. At the same time he recognizes that any extension of transactions with Germany means a proportionate lessening of the amount of exchange available to the Brazilian Government to meet its purchases and obligations abroad.

The problem presented is difficult and if the Department can furnish me any suggestions as to how it should be met I am confident they will be welcomed by the Minister for Foreign Affairs.