The Acting Secretary of State to the Federal Loan Administrator (Jones)

My Dear Mr. Jones: As you are aware Dr. Guilherme Guinle, President of the Executive Committee of the Brazilian steel plan, accompanied by Lieutenant Colonel Edmundo Macedo Soares da Silva and Dr. Ary Torres, arrived in New York on August 5. They have been sent to the United States by President Vargas of Brazil to enter into conversations with you and with other officers of the Government as well as with manufacturers and consulting engineers looking to conclusion of arrangements for the construction of a steel plant in Brazil.

The members of the Committee enjoy the complete confidence of President Vargas. Furthermore, they are leaders in their respective fields in Brazil. Enclosed you will find brief biographies.42

As you are probably also aware President Vargas, the leading members of his Government and the principal elements of the Army and Navy consider the Brazilian steel project by far the most important item on the program of economic and industrial development. In order to assure the success of the project the Brazilian Government would evidently be prepared if necessary to sacrifice everything else.

One of the understandings reached by this Government with Dr. Oswaldo Aranha, the Foreign Minister of Brazil, on the occasion of his visit to Washington in early 1939 was that this Government would cooperate in every way possible in the Brazilian development program.43 The Department feels that the steel project is of the utmost importance and would be pleased to see it undertaken through the cooperation of the appropriate governmental agencies and of American technical talent and manufacturers. In this connection it is pointed out that failure on the part of this Government to assist [Page 610] the Brazilians in this matter will in all probability according to the American Ambassador to Brazil result in the immediate acceptance by Brazil of a German offer to build the plant, which the Germans are prepared to do on terms which they will allow the Brazilians to write themselves. Germany’s predominance in Brazilian economic and military life would thereby be assured for many years.

A memorandum was sent to you yesterday describing the current situation of the project. Should you require further details prior to the arrival of the Committee I shall be glad to have them sent to you.

Sincerely yours,

Sumner Welles