811.20 Defense (M)/2071: Telegram

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

325. Reference your 484 of May 17.3 The Federal Loan Agency is prepared to purchase all the materials named of all grades subject only to the limitation in quantities hereinafter set forth in this telegram. As to rubber, lead ore, and bauxite, the maximum annual quantities are 12,000, 900, and 100,000 tons, respectively. You are authorized to sign the supplementary notes which you refer to in your telegram.

Reference your 487 of May 18.3 The difficult situation of the Brazilian Government with respect to the agreement is recognized here by the Federal Loan Agency and the Department who further recognize the necessity of preventing a serious fall in prices from becoming associated with the agreement. The Federal Loan Agency accordingly has authorized us to advise you that it will undertake to buy any of the following commodities in not exceeding the following annual amounts at the prices hereinafter set forth. All figures are in metric tons except where otherwise stated:

Commodity Annual Quantity Price
Diamonds 300,000 carats Average $20.00 per carat
Manganese Ore 500,000 $15.00 for 46% grade.
Quartz Crystals 2,000 The price listed in the official price list of Brazil.
Mica 2,000 Latest prices worked out by Messrs. Wright and Pierson.
Ferro Nickel, 20% content. 600 $100.00
Rutile 800 $170.00
Chromite 6,000 $17.50
Beryl Ore 1,600 $35.00 with a premium of $3.50 per unit over 10% BEO.
Zirconium 1,600 $55.00 for 55% Zr02 and 55 cents a unit above 55% Zr02 content.

The annual quantities listed above are subject to a deduction as to each commodity for the amounts of such commodity purchased through the usual commercial channels by the trade in the United States.

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Bauxite is not included in the above list because it is understood that there is no possibility of obtaining ships for this material in the near future. It will be added to the list when shipping becomes available. Lead also is not included because we are informed that Brazil is an importer of lead. As to rubber, the Federal Loan Agency is not in a position to make an offer but will arrange with private rubber buyers to purchase in the Brazilian market and these buyers will call on you shortly.

The Federal Loan Agency is willing to maintain the offer set out above during the present international emergency with a maximum limitation however of 2 years, the situation as to prices to be reviewed by the Brazilian Government and the Federal Loan Agency at the end of each 6 month period. It is understood that the offer set forth in this telegram is a unilateral commitment on the part of the Federal Loan Agency, the purpose being to provide a floor for prices so that no criticism of the Brazilian Government may occur as a result of the agreement which it has signed with the Federal Loan Agency. There is no commitment on the part of the Brazilian Government to sell these commodities at these prices, the commitments of the Brazilian Government remaining in exactly the form set forth in the agreement which has just been signed. You are authorized to communicate this decision of the Federal Loan Agency to the Brazilian Government.

A further telegram will be sent to you shortly advising as to the organization which it is proposed shall be set up on behalf of the Federal Loan Agency to handle these arrangements. This telegram will also deal with the method of acquiring industrial diamonds and the proposed credit on the basis of which Danforth4 can begin his purchases of diamonds.

  1. Not printed.
  2. Not printed.
  3. Stephen P. Danforth of the Reconstruction Finance Corporation.