The Ambassador in Brazil (Gibson) to the Secretary of State
[Received June 7—7 a.m.]
146. In the course of a conversation this morning Macedo Soares handed me the following memorandum14 intended as a reply to the aide-mémoire handed by the Department to Aranha on June 1st.
“Memorandum. 1. The Brazilian Government received with pleasure and examined with the most detailed and friendly attention the memorandum which the Embassy of the United States presented to it in the name of its Government on Thursday of information furnished by the Minister Macedo Soares to Ambassador Gibson regarding the commercial negotiations under way between Brazil and Germany.
2. In this document the American Government drawing attention at the start to the fact that ‘the precise text of the proposed agreement between Germany and Brazil has not yet been received’—which moreover it could not have been as the matter had not yet reached the point of a definite formula—gives immediate [ly] to understand that its comments are not intended to express any opinion as to the practical effects that such an agreement might cause to the prejudice or benefit of American commerce in Brazil which obviously places the comment offered upon a theoretical basis of principle.
3. It is extremely agreeable to the Brazilian Government in these conditions to hasten to affirm to the Embassy of the United States for information of the American Government the fullest explanations best calculated to dissipate any apprehension which may have arisen or which it would involve from any ill-founded interpretation as to the consequences of the negotiations now under way between Brazil and Germany might have for the maintenance and development of the policy of free commerce endorsed in the Brazilian-American treaty of February 2, 1935.15
4. Under these conditions the Brazilian Government desires, before that the return to the broadest liberal principles for equality of opportunities and of treatment for the commerce of all nations combined with the reduction or gradual elimination of the many restrictions which now asphyxiate it, is the only sure way if not the only way to bring about return to the prosperity of international commerce; and finally seeing in these principles more than the mere everything else to reaffirm here once again its unalterable conviction that as the American [Page 265] Government so well says in the memorandum under acknowledgement it is in the system of compensation and of narrow bilateralism that we find one of the principle obstacles to the restoration and expansion of international commerce so urgently needed by the world, Furthermore the Brazilian Government shares without reservation the conviction [of?] the importance of a simple commercial policy. The Brazilian Government continues to believe as does the Government of the United States that from the application of these principles based on a broader view there is bound to result not only for the prosperity of the world but also and above all for universal peace, the most brilliant hope.
5. Consequently it is without hesitation that the Brazilian Government once more affirms its fidelity to these ideas not only in the limited field of commercial activity but also and chiefly in the broader domain of general international policy.
6. Once these basic and essential points have been thus clarified the Brazilian Government feels disposed to declare that in its negotiations with Germany its purposes have not gone beyond what is clearly defined in the following terms by the American memorandum: ‘In the existing exigencies of trade and international payments there may be room for barter transactions for the exchange of specific commodities on fair terms offering mutual advantage. Such transactions negotiated between non-governmental producer or distributors of merchandise even though facilitated by governments though obviously an inefficient procedure suitable only when normal monetary facilities are unavailing may not be objectionable in principle.’
7. It was precisely upon conception of this character that the Brazilian Government based its present negotiations with Germany allowing herself to proceed with these because of the imperative requirements and the real necessities of its international commerce and seeking to confine them within a provisional formula which without violating the general policy which it has adopted and from which it does not propose to deviate, would permit it to meet the needs of certain immediate interests.
8. The determining factor in these negotiations was the necessity for the sale to Germany of a part of the Brazilian cotton crop. The Germans definitely require this product. If we were not to meet their request we ran a serious risk of not disposing of certain of our other articles (among them coffee) in that important market. In order to insure the German market for these products the Brazilian Government agreed on the basis of payment in the same exchange in which other articles had been paid for, that is in compensation marks, to deliver a quantity of cotton equivalent to 62,000 tons annually. In exchange for this concession the German Government was prepared to give certain specified facilities to our export trade in general. The intervention of the Brazilian Government consists therefore barely in agreeing to recognize the purchasing power of compensation marks for the financing of a provisional agreement of this character applying chiefly to cotton, an arrangement the execution of which will be entirely in the hands of the interested parties.
9. Under such conditions the Brazilian Government can unhesitatingly assure the American Government that in conformity with its wishes and hopes the American Government may rest fully assured [Page 266] that the provisions of any commercial agreement into which the Government of Brazil may enter with Germany will prove to be in complete accord with the principle of the policy above mentioned and will not permit the impression to be created that the Government of Brazil is in any sense compromising the position which it has so helpfully and resolutely maintained.”