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

The Brazilian Ambassador4 called to see me this morning at his request. The Ambassador commenced the conversation by saying that he was leaving next week for a short vacation in Brazil and that he expected to be back in the United States in September when he would be accompanied by the newly-married daughter of President Vargas and her husband.

He then went on to state with great seriousness that he had received instructions by cable from his Government to inform this Government that although the Brazilian Government had appointed its full list of delegates to the cotton conference to be held in Washington in September and to which Brazil had been invited, the Brazilian Government now felt it impossible to be represented at this conference because of the policy which the United States was pursuing with regard to the exportation of American cotton to the world market under a system of export subsidies. The Ambassador said that when the question of the cotton conference was first brought up and fully discussed with Dr. Aranha during the time of the visit of the latter to the United States,5 Dr. Aranha had received the definite impression from Secretary Wallace that the Government of the United States would not subsidize cotton exports, and, in any event, that no such policy would be pursued which would prove detrimental to the cotton interests in Brazil until after the conference on cotton had been held in Washington and an opportunity afforded all of the participating governments [Page 23] to present their points of view as to the means of finding a solution of the problems with which cotton growers were faced and as a means of affording each producing country the chance to present its arguments and to show the way in which a policy of export subsidies by the United States would prejudice its interests. The Ambassador then went on to say with increasing gravity that Dr. Aranha, as a result of his conversations with Secretary Wallace, had assured his Government upon his return to Rio that this Government would not undertake a policy of export subsidies without prior notification to Brazil and without affording Brazil an opportunity of talking over her situation with the Government of the United States. The Ambassador stated that now, as a result of the fact that it was public knowledge that the Government of the United States intended to embark immediately upon a policy of export subsidies, Aranha was being attacked, particularly by the cotton interests in the State of São Paulo where German interests were very strong and where the latter could most effectively use as a means of attacking the argument that Aranha had deliberately deceived his Government and was under the complete control of the United States Government. As a result of this situation the Ambassador said he thought it inevitable that Aranha would be forced out of office, and the Ambassador said that he knew I realized better than anyone else what this would mean in the way of interrupting or perhaps blocking the very friendly and close relationship which both Governments had been striving to build up within the past few years.

I said to the Ambassador that what he had said to me of course gave me great concern and was the occasion of great regret on my part. I said, however, that I wished to lay certain considerations before him. The Ambassador had said that the policy adopted by this Government was a serious threat and an effective blow to the very great cotton interests which existed in Brazil. I said that of course I recognized that these interests were very important and represented a material feature in the national economy of Brazil, but that Brazil had only recently brought its cotton production up to any considerable figure and I said that the Ambassador would realize without my emphasizing the point that Brazilian cotton had increased in importance in the world market as United States cotton had decreased in importance in the world market. I said that as a result of this fact the United States Government had a surplus of approximately eleven million bales of American cotton on which Government money had been advanced in the nature of loans and that it seemed to me clear that the Brazilian Government could not question the valid and legitimate right of the Government of the United States in diminishing in considerable part the burden upon it which this extraordinary surplus represented. I said that I was not [Page 24] bringing this question forward as an argument but merely as a point which merited the consideration of the Brazilian authorities. With regard to the determination of the Brazilian Government not to attend the cotton conference to be held in Washington in September, I said that I regretted this information particularly because it seemed to me a very sterile gesture on the part of Brazil and that it was not an action which was in any sense constructive or helpful. If Dr. Aranha had received any assurances from Secretary Wallace in the sense indicated, I remarked that I was confident that those assurances would be scrupulously maintained because of my personal friendship for Secretary Wallace and my realization that he was incapable of offering assurances that would not be carried out. I added that it seemed to me that the constructive thing for Brazil to do would be to send her delegates to the conference in order that the Brazilian position might be fully explained and the prejudice to Brazilian interests which the Brazilian Government feared as a result of the policy which this Government had undertaken be fully ventilated with the thought that if the point of view of Brazil as so set forth was convincing remedial measures could be undertaken. I called the attention of the Ambassador to the great success which had resulted from the international conference on sugar held in London last year6 and the success which we hoped for from the international conference on wheat which was now going on in London,7 and I said it seemed very clear that there was a very admirable opportunity afforded at the cotton conference in September for all of the cotton producing countries to set forth their positions and by common accord reach an agreement which would provide for a solution of the problem with which they are in a greater or lesser degree confronted.

With regard to the possible resignation of Dr. Aranha from the Brazilian Cabinet, I said to the Ambassador that he well knew that no one would deplore such a possibility more profoundly than I. I had not only the greatest admiration for Dr. Aranha but I considered him as a close personal friend in whom I had the greatest confidence and whose policy of close cooperation with this country had already been productive I thought of very concrete and material benefits to both of our peoples. I said that I hoped his resignation would not take place and that it certainly would not take place as a result of any misunderstanding which might arise with regard to the policy of this country in connection with the exportation of American cotton.

In conclusion I stated that as a result of our conversation I would talk the whole subject over with the Secretary of Agriculture and possibly [Page 25] with the President if the President so desired and that I would then hope to have the opportunity of talking further with the Ambassador early next week.8

S[umner] W[elles]
  1. Carlos Martins.
  2. See letter of February 27 from the Under Secretary of State to the Brazilian Minister for Foreign Affairs, p. 20.
  3. The conference was held April 5–May 6, 1937; see Foreign Relations, 1937, vol. i, pp. 931 ff.
  4. See p. 27.
  5. In view of the decision of Brazil on August 2 to attend the forthcoming conference, no further communication on the subject appears to have been made to the Brazilian Ambassador.