632.6231/57: Telegram

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

139. My 138, May 30, 2 p.m. Macedo Soares today handed me the following informal memorandum:

“The provisional agreement for one year proposed by the Brazilian Government to the German Government, taking into consideration the necessity for interchange between the two countries goes into effect on June 1.

Quotas to be granted by the German Government: cotton 62,000 tons; meat 10,000 tons; Brazil nuts 4,000 tons; bananas 4,000 tons; tobacco 18,000 tons; oranges 200,000 cases; coffee 1,600,000 sacks; with an agreement not to increase the last named commodity.

The following products to be exported to Germany without restriction: cereals, mineral, lard, wool, hides, and skins, rubber, oil bearing seeds, matte, cocoa and raw materials for industry. A special clause is included in the agreement to the effect that no increase in the commercial interchange should prejudice commercial relations with countries which deal in international currency, this clause being drafted as follows: ‘It is agreed the following articles, automobiles and accessories, typewriters and accessories, gasoline, oil, sewing machines and accessories, and carbon paper, may be imported from Germany in maximum quantities equal to those of the last 12 months previous to the entry into force of this agreement, with an increase of 10%.’

As concerns commerce carried by German vessels the maritime freight shall be paid in compensation marks”.

The foregoing has been transmitted to Aranha.

I had a clear explanation with Macedo this morning and fortunately saw him just after he had received a visit from the Minister of Finance who had expressed himself somewhat vehemently as to the plan to sign the agreement without waiting for full consultation with us. Macedo said that he was under heavy pressure from the German Government but that he would be glad to wait and take into account the views of the Department; that he did adhere to our policy of combatting trade barriers and that he hoped he [we?] would examine this whole question in the lights of Brazilian difficulties inherent in the [Page 258] existence of the compensation mark system. He stated that he would like you to know that he had taken a decided stand against German insistence on a totally different arrangement which would have put every product under a quota and which would have left Germany practically unrestricted competition against us with the advantage of her compensation mark system and that having, as he felt, assured American interests against unfair competition he was acceding to the rest only because he felt there was no alternative.

Although there has apparently been a rather curious attempt to rush through the signature of this agreement I think that Macedo is persuaded, rightly or wrongly, that he has not contravened the letter or spirit of our trade agreement and that he was, therefore, justified in going ahead. He has apparently made it clear to the German Government that he does not relish this agreement which was practically signed under duress because he had no other choice.

He stated the Germans had adopted a very truculent and threatening attitude and that Hitler had personally made a strong fight for the exclusion of automobiles from the list of articles limited to the 1935 figure as it is a personal hobby of his to foster the German automobile market abroad. He states that he had included rails and railway equipment on the list but that the Germans had made such a determined stand that he had been obliged to give way.

I am endeavoring to secure the text and hope to telegraph pertinent parts later today.

I trust the Department will accord early consideration to this whole matter and give me its views particularly as to how the proposed agreement would affect the letter and spirit of our own trade agreement.

I would also suggest the Department’s views be communicated to Aranha in order that he may reenforce what I am saying here.