The Secretary of State to the Ambassador in Brazil ( Caffery )
319. There follow for your information the texts of the letters agreed to by Guinle and Jones on United States cooperation with Brazil in the Brazilian steel project. The Department will cable you promptly regarding plans for signature and public announcement:
“Dear Mr. Jones: With regard to the extensive discussions of the project to construct an iron and steel mill in Brazil, which have taken place between representatives of my government and the Export-Import Bank, I have the honor to inquire whether the Bank is in a position to make available to Brazil and to Brazilian interests, and on what terms, the credit necessary for the purchase, in the United States, of materials and equipment for the construction of the mill, which the Government of Brazil considers of paramount importance to its economic progress.
It is estimated that we will need $20,000,000 United States funds to cover these purchases, $10,000,000 of which will be required during the next 12 to 18 months, and the balance, up to a maximum cumulative total of $20,000,000 thereafter as the work progresses. It will probably require 2½ years to complete the mill.
If the credit is available, we will establish an office in Pittsburgh or other suitable center with a corps of engineers and executives to handle the task of the design of the mill, the purchase of the equipment, and the construction of the plant. This organization will be composed of Americans and Brazilians acceptable to both parties. We will, if you think it advisable, establish a supplemental or consulting office in Washington or New York. All of this, of course, will be at our expense, and become a part of the cost of the mill.
The Brazilian Government, in conjunction with certain Brazilian savings banks and investors, is prepared to invest milreis to the value of $25,000,000 in this project in the form of equity money or otherwise represented by securities junior to the Export-Import Bank’s loan. We would expect the plans, specifications, et cetera, and the construction and operation of the mill to be satisfactory to you, and for you, if you wish, to have your special representatives to inspect the work as it is being carried on.
I should be very happy to hear from you at your early convenience. Sincerely yours.”
“Dear Dr. Guinle: Receipt is acknowledged of your letter of September . ., 1940, in which you state that the Brazilian Government desires that an iron and steel mill be constructed in Brazil and that the Brazilian Government, together with certain Brazilian savings [Page 613] banks and other investors, is prepared to invest milreis to the value of $25,000,000 in the enterprise, but desires to borrow up to $20,000,000 for the purchase in the United States of materials and equipment for the construction of the mill.
In line with our several conversations on the subject and conditional upon the investment of milreis to the value of $25,000,000 as above provided in the form of junior money, I am pleased to advise you that the Export-Import Bank now confirms the tentative commitment of $10,000,000 heretofore approved by the Bank for this project, and agrees to increase the sum, as the work progresses to a cumulative total of $20,000,000.
The loan will be made by the Export-Import Bank to the company which is to own and operate the mill, and endorsed by the Bank of Brazil, and guarantied by the Brazilian Government. The loan will be payable in 20 semi-annual instalments, the first of which will become due in 3 years from the date of the first advance. Interest, payable semi-annually, at 4 percent will run from the date each advance is made.
Satisfactory provisions will be required to assure that the loan will constitute a first claim against the mill, and all legal matters in connection with the loan shall be subject to the approval of the Export-Import Bank. We should also want the privilege of concurring in the selection of the managerial officers of the mill company, the engineers, and contractors, and the purchase of materials.
The Export-Import Bank will expect continuing assurances from the Bank of Brazil and the Brazilian Government that the mill will be completed from the proceeds of the loan and funds to be supplied in Brazil and that the mill company will have ample working capital.
In view of the fact that the experience of Brazilians in the manufacture of steel on a large scale has been limited, the management of the enterprise should include managerial officers and engineers experienced in the manufacture of steel in the United States until successful operation has been assured to the mutual satisfaction of the Export-Import Bank and Brazilian investors. I have every confidence that with sufficient experience Brazilians will be able successfully to manufacture steel, and I am in thorough sympathy with your President and your people in their desire to build this industry. Very truly yours.”