632.6231/168

Memorandum of Conversation, by the Under Secretary of State (Welles)

The Brazilian Ambassador called to see me to advise me of a telephone conversation which he had had yesterday with his own Minister of Finance and with regard to another conversation which he intended having with him early this afternoon. The Ambassador had been informed that, due to the insistence of President Vargas, the existing commercial agreement between Germany and Brazil had been denounced within the past three days by the Brazilian Government and Germany had been notified that, at the expiration of the ninety-day denunciation period, the treaty would not be renewed.

The Ambassador had been told by the Minister of Finance that there would now appear to be two alternatives as to the policy to be pursued by Brazil: (1) to attempt, during these coming three months, to work out an understanding with Germany which would result in the elimination of all the objectionable articles in the existing agreement, particularly those which were proving detrimental to American trade interests, and then negotiate a new agreement with Germany in this revised form, which will amount to little more than giving Germany a continuation of the most-favored-nation treatment; (2) to abandon the new agreement with Germany entirely.

The Ambassador said that he would like to discuss the questions raised by the first alternative with this Government during the coming weeks, and I said I would be very happy to do so. He asked particularly if we would instruct our own Embassy in Rio to make immediate representations to the Minister of Finance, not based so much on the material loss caused to the commercial interests of the United States by the conditions arising as a result of the present German-Brazilian agreement, but more on the political and moral side, namely, that we had first negotiated a trade agreement with Brazil under this Administration, that we had looked to Brazil to support our liberal trade policy in the rest of the world, and that the Brazilian Government, while undoubtedly animated by the best disposition and the most friendly spirit, had nevertheless on repeated occasions let us down because, due to certain temporary exigencies, special agreements with Germany and Italy23 had seemed momentarily advantageous. I told the Ambassador that we would be happy to do so.

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I then took occasion to ask the Ambassador to read the aide-mémoire 24 calling the attention of the Brazilian Government to the clearing arrangement between Italy and Brazil effected by an agreement signed by the Bank of Brazil and the Italian National Institute for Exchange Abroad on February 15, 1937. I said that it was clear that the agreement referred to was in very definite contravention of the assurances officially given us by the Brazilian Government on July 1725 and on August 7,26 last. The Ambassador was emphatic in assuring me that no general agreement had been entered into; that he had happened to be in Rio on February 15 and that he had been informed on that day that this agreement envisaged solely the purchase by Brazil of three Italian submarines and the method of providing compensation therefor. At my request, he said, however, that he would ask full information and advise me accordingly.

I then asked the Ambassador if he had any further word on the Central Bank proposal, and he said that he would talk about this matter with the Minister of Finance by telephone this afternoon and advise me of the intentions of his Government.

I advised the Ambassador of the President’s approval of the proposed contract for the leasing of United States destroyers to Brazil27 and stated that, as soon as the three points concerning which the Navy Department and this Department were still in disaccord were agreed upon, which I hoped would be in the immediate future, I would advise him accordingly.

S[umner] W[elles]
  1. See Foreign Relations, 1936, vol. v, pp. 247 ff.
  2. Not printed.
  3. See telegram No. 167, July 17, 1936, 5 p.m., from the Ambassador in Brazil, Foreign Relations, 1936, vol. v, p. 273.
  4. See telegram No. 179, August 8, 1936, 11 a.m., from the Ambassador in Brazil, ibid., p. 280.
  5. See pp. 149 ff.