The Acting Secretary of State to the Ambassador in Brazil (Caffery)

No. 801

Sir: In recent months the Department has been giving close attention to the commercial aviation situation in the other American republics, having in mind, first, the necessity of protecting in every possible way the maintenance and development of United States international services; second, the probability that the majority of the other American republics will desire ultimately to have their respective domestic and feeder line services undertaken by genuine national companies; and third, the possibility of cooperating with such governments in the establishment of national companies through credit arrangements for the purchase of aircraft and equipment and perhaps also for initial operations. In the last connection consideration has also been given to the possible participation, as minority stockholders in such domestic companies, of United States carriers—either the operators of present international services or other United States aviation interests. The program under discussion obviously has military, political and economic factors of great importance both to the United States and to the other American republics.

Consideration has already been given to urgent situations involving national defense aspects both in Colombia and in Ecuador. There is enclosed for your confidential information a memorandum84 outlining the steps taken in Colombia preliminary to the establishment of Avianca (Aerovias Nacionales de Colombia), as a new Colombian national company to replace both Scadta (Sociedad Colombo-Alemana de Transportes Aéreos), and Saco (Servicio Aéreo Colombiano),85 and on the development of the negotiations which are now in progress with the Government of Ecuador with a view to the elimination of Sedta (Sociedad Ecuatoriana de Transportes Aéreos).86

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In the light of what has been accomplished in Colombia and of progress already made in Ecuador, the Department believes that the Brazilian aviation situation, which is obviously the most important on the continent of South America, should now be explored. The Lufthansa ownership of Condor and the large turnover of German pilots on Brazilian domestic airlines, the apparent delay in the enforcement of the native pilots provisions of Brazilian legislation, the interests of Brazil in hemisphere defense, and so on, make it desirable that consideration be given the problem as soon as possible. At this end the Department is already beginning discussion with Pan American Airways of the discharge of Germans from its Brazilian operations, which we regard as urgently desirable in any case and as a condition precedent to undertaking the general program.

Your views are therefore sought on the following points:

The propriety of the Embassy’s approaching the Brazilian authorities on the matter at this time.
The probable reaction of the Brazilian Government toward a proposal from the United States or Pan American Airways, or a combination of both, aiming to facilitate solution of
the financial problems involved in eliminating European (German in particular) influence (ownership, management, personnel, et cetera) in internal Brazilian air services,
the technical administrative problems which would arise from discharge of European pilots and technicians, and the conversion to American equipment, and
the problem of training Brazilian personnel to take over the technical positions.
The most feasible working plan for an air network offering service and facilities as good as, if not better than, what the German-controlled lines now make available.

In studying these suggestions and in any informal confidential conversations you may have thereon with Brazilian Foreign Office or other officials, you may properly give due weight to the obviously great advantage to Brazil accruing from national ownership and ultimate complete national management of the country’s airways now owned by Europeans, as well as the outstanding leadership and prestige which Brazil will thereby gain in the field of aviation.

Under specific directives of the White House, the Federal Loan Agency would be authorized to make to an American carrier the credits needed for the formation of Brazilian or Brazilian–American companies (with or without the participation of the Brazilian Government, at its option) to take over the German companies. The credits would be available for the initial cost of the acquisition and transfer, and would be reimbursable from Post Office Department [Page 660]funds paid to the American carrier receiving the technical administrative operating responsibility for the de-Germanized services from the Brazilian Government or from the newly formed company or companies. By the same decision of the President, the Civil Aeronautics Board and the Post Office Department are instructed to revise upwards mail subsidies payable to the American carrier in accordance with the new circumstances, sufficiently to cover, if necessary, operating losses on routes obviously not commercially promising for the years in the immediate future. (For your strictly confidential information: There is also under study the possibility of using in some cases nonreimbursable funds toward the attainment of some of the objectives envisioned in the aviation program.)

It is suggested that your preliminary telegraphic report on the specific points mentioned be followed by a more detailed airmail report.

Very truly yours,

Sumner Welles
  1. Not printed.
  2. See pp. 723 ff.
  3. See pp. 831 ff.