832.24/368: Telegram

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

460. Department’s telegrams numbers 145, March 26, 8 p.m.94 and 253, April 30, 4 p.m.95 and mimeographed circular instruction of April 1, 1941,96 entitled “Control of Exports.”

Brazilian officials have determined that they are unwilling to enter into definitive contract for sale of strategic materials in which prices are fixed in fear that such action will be politically unpopular…On the other hand they have consented to restrict exports of strategic [Page 539] materials to the United States which action they state can be explained on the ground that this is being done in return for United States materials needed for domestic industries.

They have now definitely agreed to an exchange of notes between the two Governments reading as follows:

1. “The Brazilian Government undertakes for a period of 2 years through the issuance of export licenses and other adequate control regulations to restrict to the United States of America the exportation of strategic materials that meet the specifications in exhibit A attached hereto.

2. The Government of the United States undertakes to continue to facilitate as it is now doing, the shipment to Brazil of materials essential to Brazilian industry, the exportation of which is dependent upon Government permits and other formalities.

3. In case purchases by private American industries do not absorb all of the merchandise covered by paragraph 1 above, Metals Reserve Company or Rubber Reserve Company97 undertakes to acquire all of the surplus existing in Brazil at prices to be agreed upon between these companies and Banco do Brazil.

In determining prices consideration shall be given not only to world quotations for these materials but also to their cost of production and the price of American products covered by paragraph 2 above.”

Exhibit A referred to in paragraph 1 will contain a complete list of materials in which we are interested together with appropriate specifications.

We have explained to them carefully that we understand paragraph 2 to mean that we will do everything consistent with our defense program to facilitate shipments to Brazil and they have agreed to this, I intend to write an accompanying note insisting on this.

The proposed arrangement appears to be favorable to our Government and its approval is recommended.

If the proposal is approved the Brazilian Government expects the separate Export-Import Bank credit for 12 million dollars already arranged for. The Bank of Brazil says it will probably not need the credit but wants it available at least until June 30, 1942.

Pierson98 approves the purchase part of the proposal pointing out that it obligates Metals and Rubber Reserve Company to buy only if prices are satisfactory. In this connection he recommends that immediate credits be opened authorizing limited purchases in Brazil at market prices of such materials as are urgently needed in the United States. He is of the opinion that with the exception of diamonds the shutting off of exports to Axis countries will result in the purchase [Page 540] by private American firms of substantially all available Brazilian materials.

I also approve the proposed exchange of notes in the foregoing terms. However, I should like to have the Department’s approval of them before signing. I assume that the Department can give its approval quickly since authority to make the various commitments involved is implied practically in full in the instructions cited at the beginning of this telegram. I hope it will instruct me in the premises today or tomorrow since Pierson must leave here early Thursday morning and Aranha99 is impatient to have the matter completed.

  1. Ante, p. 528.
  2. Ante, p. 153.
  3. Ante, p. 151.
  4. These two organizations were United States Government corporations operating under the Reconstruction Finance Corporation as its purchasing agents.
  5. Warren Lee Pierson, president of the Export-Import Bank.
  6. Oswaldo Aranha, Brazilian Minister for Foreign Affairs.