832.796/452: Telegram

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

550. Your 823, July 10, 5 p.m. The Department has understood that, although the setting up of a Brazilian national company was to be explored by Burden and Russell to the extent that you deemed advisable, Vasp was to be given primary consideration. Department has recently obtained from R.F.C. the view that administratively it would be more practical to deal with Vasp, Varig66 and Condor as a single transaction than to make piecemeal approach to the undertaking. Thus, there would be one problem for decision and one general settlement to be made. R.F.C. is very anxious to reach a satisfactory solution of the matter since it feels that the entire situation in Brazil is much more difficult than the one handled in Bolivia and that the success or failure of the R.F.C. program will depend largely upon the course pursued in Brazil.

Department is impressed by the reasons given by the R.F.C. for wishing to deal with the three companies as a single transaction, and it would appear that this plan would tend to prevent a successful attempt by opposing interests to interfere with the general program as might conceivably result if each company should be dealt with separately.

To recapitulate, the viewpoint held here by R.F.C, as stated above, strongly favors the nationalization of Vasp, Varig, and Condor in either of the following ways: the first, by combining the three companies into one strong national organization, and the second, by simultaneously and separately reorganizing the three companies under bona fide Brazilian auspices. It is felt by R.F.C. that under either or both of the plans the stock could be so apportioned between the Brazilian Government and its citizens as to result in an advantageous, practical solution of the problem. Also, it has been suggested that under either of the above plans, the participation of United States [Page 523] interests could be taken into consideration provided the Brazilian Government should indicate that such participation would be desirable.

The R.F.C. has indicated its willingness to provide such equipment, finances and technical aid as would be necessary to establish a first rate Brazilian national air system.

The Department would appreciate a full statement of your views in the premises.

  1. Empresa de Viacao Aerea Riograndense Varig.