Foreign Relations of the United States Diplomatic Papers, 1940, The American Republics, Volume V

561.333D3/56½

Memorandum of Conversation, by Mr. Paul C. Daniels of the Division of the American Republics

[Washington,] July 25, 1940.

Mr. Penteado⁹ called at the Department this morning and stated that yesterday morning a meeting had been held at the Pan American Coffee Bureau in the course of which Señor Aguilar had brought up for discussion a plan providing for the cooperation of the United States in disposing of the surplus coffee production, since if the surplus problem were handled satisfactorily the question of allocating quotas for the United States market would be greatly facilitated. According to Mr. Penteado, this plan provided for the United States’ buying all the coffee surplus for the duration of the war, at the price prevailing in the American market, and then selling so much as possible in non-American markets. Mr. Penteado said this plan would undoubtedly be objectionable on various grounds, including the following:

1. So long as the war continued, there would be an accumulation of coffee stocks held by the United States.

2. With the accumulation of large stocks, the selling price in non-American markets would be immediately depressed at the termination of the war not only because of the need for disposing of these stocks, but also because the normal European trade of the producing countries would presumably be resumed.

3. In as much as the surplus stocks would be purchased at market value, there would be no check on over-production of coffee in the producing countries.

As an alternative to the above proposal, Mr. Penteado left with me a rough draft of an alternative plan which he thought would be more acceptable to the United States Government, assuming that this Government was prepared to extend financial assistance in financing the disposal of the surplus coffee. There is attached the draft left by Mr. Penteado, together with a rough translation which I have made.

I expressed to Mr. Penteado my personal view that if this Government is to assist in financing the disposal of the coffee surplus, the plan which he proposed seemed to me more reasonable than the one which he said was discussed yesterday at the Pan American Coffee Bureau.

[Annex—Translation]

1. An inter-American corporation representing the United States and all the coffee producing countries of the Americas would finance, with funds obtained from the Export-Import Bank, the storing of the surplus Latin American coffee production of the 1940 crop, up to a maximum of 8,000,000 bags of 60 kilos (132 pounds);

2. Each producing country would receive, for the coffee delivered to the corporation, 60 per cent of its current value on the New York market;

3. The corporation would be authorized to sell, outside of the United States, the coffee in storage, in an orderly manner, in the minimum period of five years, counting from the termination of the European war, such sales not to exceed 1,600,000 bags per annum;

4. With the proceeds of these sales the corporation would repay the Export-Import Bank, would pay the storage charges, insurance, et cetera, and would distribute the remainder among the countries producing the coffee which was sold, in the proportion established.

9. Financial Attaché of the Brazilian Embassy.