811.20 Defense (M)/2088: Telegram

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

525. Department’s telegram No. 332, May 22, 7 p.m. I do not understand precisely what is meant by the phrase “must guarantee the responsibility of all negotiations”.

The Bank of Brazil is not yet in a position to buy or sell commodities and it would be some time before it could create machinery for this. As understood when the agreement took its final form and was signed, it provides simply that the Metals and Rubber Reserve Companies will buy (directly from the usual private sellers) materials available for export. The Brazilian Government and the Bank of Brazil or their agencies do not (and are not prepared to) enter into the buying except that they will be glad to give our buying agencies without responsibility such information and advice as they may have regarding exporters, et cetera.

The Brazilian Government has its regulations to prevent shipments of strategic materials to countries other than the United States already drafted, mimeographed and signed. But it will not issue them until our agencies are ready to make immediate purchases as necessary and I so inform it.

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Our Government will certainly have to begin buying some of the products in large quantities immediately when Brazil’s export restrictions are placed in effect especially diamonds, quartz, mica and certain ores.

The Germans are now again buying heavily here to load Italian ships in Brazilian ports especially since the announcement in Washington this week that the Federal Loan Agency is “going to” buy large quantities of Brazilian strategic materials. The same day the Germans are stopped from buying, Brazilian exporters will have to be able to turn to some one in Brazil ready to buy for the United States at the prices stated in the Department’s telegram No. 325, May 20, 6 p.m.

Has the Federal Loan Agency completed its organization mentioned in the penultimate paragraph of the Department’s telegram No. 325? Can it give the name and date of arrival of the representative mentioned in paragraph No. 4 of the Department’s telegram No. 294, May 14, 4 p.m.? Will it also have a diamond expert in Brazil offering to appraise and act on industrial diamonds? Or is Danforth expected to arrange all this and prepare to begin buying on behalf of the Metals and Rubber Reserve Companies requesting the issuance of commercial letters of credit in favor of specific sellers, arranging for the storage here of materials lacking cargo space or unwanted in the United States at present, appointing private traders as experts (the Government and Bank of Brazil have none) to inspect and accept materials bought et cetera.

If so he suggests preliminary procedure as follows: That orders covering available industrial diamonds be lodged with Harry Winston and Company Incorporated New York; that orders covering available quartz crystals be lodged with Western Electric or Electrical Research Products Company; that subject to prior approval by Metals Reserve and prior discussion with Watson an irrevocable letter of credit be opened in favor of Arthur Watson and Company Limited, Rio, covering available mica. Danforth is writing with reference to other products.