The Ambassador in Brazil (Gibson) to the Secretary of State
[Received 6:05 p.m.]
120. Department’s instruction 479, March 13;51 my 985 March 26 and later correspondence.
I have been pressing in almost daily interviews for the abolition of the 2 per cent social welfare tax on all American imports. The Department will recollect that this tax has not been collected on articles on schedule I of the treaty because of the Brazilian contention that this question was governed by article III of the treaty.[Page 304]
The Minister for Foreign Affairs shares our views fully and has repeatedly expressed them in definite terms (see enclosure No. 4 to my despatch No. 993 of April 1).51a
The real difficulty is the organized opposition of subordinate officials in the Ministry of Finance who maintain that only the articles on schedule I can be exempted from this tax whereas the Minister for Foreign Affairs maintains that the question is governed by article VII. The matter has developed into a fight against the contention of Macedo Soares that in cases like this he will decide Brazil’s treaty obligations rather than leave that function to subordinate officials in the Ministry of Finance. Opposition is further strengthened by the knowledge that if this concession is made to us under the most-favored-nation clause similar concessions must be made to other countries. The Minister of Finance himself, is well-intentioned but weak and although he has repeatedly given definite assurances to Macedo Soares, he has not summoned up the courage to sign the necessary orders.
Although the Minister for Foreign Affairs clearly recognizes that this is a violation of the treaty, I am beginning to question whether he can enforce his views unless we furnish him with some ammunition. I would suggest, therefore, that the Department, after examining the question, authorize me to make definite and pointed representations as to this manifest violation of our treaty. Such representations would not be taken amiss by Macedo Soares who already shares our views and I believe he would welcome them as strengthening his hand in dealing with the Minister of Finance.
Once these instructions have been despatched to me, I would suggest that the Department go into the matter with Aranha52 and express to him the desire that the Department’s views, as conveyed by me, be confirmed by him in order that the Government here may realize the seriousness of the matter.