811.20 Defense (M)/2088: Telegram

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

375. Reference Department’s 358 of June 2. The Brazilian rubber situation was again discussed this morning with Goodyear officials in the light of latest information available regarding current prices in Para and current discussions taking place in Brazil.

The elements of the problem would seem to be as follows: From the Brazilian point of view, the desire of the producers and the Government to secure a fair return for their rubber, and the further desire to assure the continued operation of the manufacturing plants in Brazil; from the American point of view, the desire to provide a reasonable price for Brazilian rubber production not required in Brazil or any other of the American republics, and a further desire identical with that of Brazil to assure the continued operation of the manufacturing plants in Brazil on the basis of using Brazilian rubber.

It appears to us that this problem could be handled to the greatest mutual satisfaction on either one of the two following bases: First, the Brazilian Government through the Bank of Brazil would arrange to procure all Brazilian rubber production, and to make whatever quantity is necessary available to the manufacturing plants in Brazil at a reasonable price (adjusting the duty on manufactured products to whatever extent might be necessary in the light of the price of crude rubber that is determined), and to sell the rest at the price and pursuant to the arrangement which Buck has brought with him. Second, should the Brazilian authorities not be willing to carry out this arrangement, a satisfactory alternative would appear to be (a) enforcement of export control by the Brazilian Government; (b) action by the Brazilian Government to form a pool out of the Brazilian crude rubber production in amounts necessary for the Brazilian manufacturers for resale to them at a reasonable price (with any necessary duty adjustment as mentioned above), accompanied by an agreement in the form and at the price which Buck has brought with him to buy all other Brazilian rubber becoming available.

Will you as promptly as possible discuss this with the Brazilian authorities with a view toward effecting an immediate arrangement.