811.20 Defense (M) Brazil/219c: Telegram
The Secretary of State to the Ambassador in Brazil (Caffery)
242. As you know, one of the matters which Mr. Warren Pierson plans to negotiate while at Rio de Janeiro is a proposed financing by the Reconstruction Finance Corporation of the opening of the Itabira mine and the improvement of the rail facilities running from that mine to the Port of Victoria. The Itabira mine is located on one of the largest low phosphorous iron ore deposits in the world, but due to the lack of capital and lack of proper rail facilities, it has never been put into commercial production.
Mr. Pierson is also planning to negotiate with the Brazilian authorities and private companies a loan to enable the Central Railway to carry larger quantities of manganese and iron ore to the port of Rio de Janeiro and also to finance the improvement of the loading facilities at the port of Rio de Janeiro. This proposal with the Itabira plan constitute one unitary project.
Since Mr. Pierson’s departure, the Department has been studying these projects further and it has become apparent that the successful completion of these negotiations is of the utmost importance to the British-American war effort. It is hoped that if Mr. Pierson’s negotiations are successful, there will be made available in increasing quantities up to a total of 50,000 tons or more monthly of low phosphorous ore. At the moment the combined British-American supply of such low phosphorous ore is approximately 35,000 tons a month below current needs of United States and Great Britain. This low phosphorous ore goes into the making of high grade steels necessary for the construction of guns, tanks, armor piercing shells, and various other war weapons. The successful conclusion of the project with respect to the Central Railway would increase substantially the available manganese and iron ore from the mines feeding the Central Railway. This iron ore is used for a different purpose than the Itabira ore but it and the manganese are considered to be of an importance equal with that of the Itabira project.
The Department accordingly believes that it is necessary to strengthen the negotiations which Mr. Pierson is expected to carry on by establishing these negotiations at a high level where commercial considerations, methods of negotiation and questions of cost will be of minor importance. It is therefore suggested for your consideration that unless the Under Secretary of State89 or you have done so [Page 679] already, you speak to Foreign Minister Aranha about these two projects and inform him that in the view of this Government rapid and comprehensive development of the mines and communications under efficient management can only be secured by the direct intervention of the Brazilian Government. It is further suggested that you regard these two projects as of the highest importance and that you take an active and leading position in the negotiations with respect to them. In the meantime the Department will discuss the matter with Souza-Costa90 on his arrival in Washington.