Foreign Relations of the United States: Diplomatic Papers, 1942, The American Republics, Volume V

811.20 Defense (M) Brazil/2045½

Memorandum by Mr. Arthur A. Compton, Division of the American Republics, to the Adviser on Political Relations (Duggan)

[Washington,] December 1, 1942.

Mr. Duggan: At your request I have gone over the attached material¹ relating to the arrangements we have under our various rubber agreements to supply the needs of the other American republics for raw rubber or rubber manufactured goods. Although incomplete, the attached material reveals a story somewhat as follows:

1. Immediately after the basic rubber agreement of March 3 with Brazil, the United States was compelled to purchase all of the existing stocks and future output of manufactured rubber from Brazil in order to prevent a big boom in Brazilian rubber maufacture and indiscriminate export to the other American republics. In the specific negotiations for this purchase and contract, it was agreed that exportable surpluses of tires, tubes, and miscellaneous rubber goods should be used (at least in part) for supplying the essential requirements for these items to the other American republics as agreed in the contracts made with other rubber producing countries in the hemisphere. In consideration of this provision, Brazil agreed to reduce its rubber manufacture and its internal consumption of manufactured rubber goods in order to leave more raw rubber for export to the United States.

2. It was then agreed that the method of supplying the essential needs of the other American republics for raw and manufactured rubber from both the United States and Brazil would be as follows:

(a) The United States would determine, on the basis of the statistics available to it, the quarterly allocations of manufactured rubber goods to supply the essential needs of the other American republics.

(b) Brazil would announce these allocations, and

(c) the other American republics could then proceed to purchase (within the allocation announced) from either the United States or Brazil, their essential manufactured rubber goods through the regular commercial channels.

(d) Control over these purchases is to be maintained through clearance with the Rubber Reserve Company in Washington of all purchases from either Brazil or the United States (the actual granting of the certificate permitting export being in the hands of the government of the country from which the rubber is to be exported.)

3. The foregoing procedures have given rise to the difficulties outlined in the Ambassador’s telegrams 4325 of October 22, 3 p.m.² and 4721 of November 12, 7 p.m., directed to you personally. It is my feeling that although both internal Brazilian politics and politics played by the other American republics have a large part in these difficulties, the major problems would be solved if we could accomplish two things:

(a) It is necessary to make available to the Brazilian Government the information used in arriving at the allocations established by us for the other American republics in order that the Brazilian Government may be in a position to defend these allocations (which they announce) against the inroads of political pressure from the other American republics.

(b) It is further of the greatest importance in reducing the political pressure from the other Americas (which thrives and grows on misunderstandings and delays) to provide for the complete and definite understanding (as far in advance as possible) by each of the other Americas of the quarterly allocations applying to them, and to provide to the greatest extent possible for the rapid and efficient delivery of the rubber purchased by each of the other Americas under these allocations.

4. Although I am not in a position to recommend the specific technical details of how these ends should be accomplished, I would recommend by way of suggestion that every consideration be given to the following possibilities:

(a) The establishment in Washington of a joint Brazilian-United States rubber commission, which among other things would serve the following purposes:

i. It would serve as a source of information to the Brazilian Government on the statistics and considerations involved in arriving at the final rubber allocations so that the Brazilian Government would be in a position to defend these allocations which they are now obliged to announce, and

ii. It would serve also as a body which could arbitrate any difficulties or differences of opinion as to these allocations which may be raised in Brazil by any of the other American republics. (In this connection any statistics available to Brazil which do not coincide with ours would be useful in bringing to light any possible misinformation on which our own statistics may be based.)

(b) The careful consideration is strongly urged of the possibility of consulting the governments of the other American republics as to what they believe their essential rubber requirements are. These estimates and their justifications could then be examined in the light of the information available to the United States (supplemented by any information available to Brazil) and altered or cut down accordingly. This procedure would, to my way of thinking, put us in a much firmer position as regards our justification for “dictating” to the other Americas what their needs are. They would then at least feel that they had had a chance to present their story. This, to me, seems most important.

(c) The working out of a clear procedure for the joint announcement by the United States and Brazil (perhaps by the suggested joint commission) of the quarterly allocations applying to each of the other Americas in such a way that no misunderstanding will be possible as to the actual amounts of these allocations and as much explanation thereof as may be possible in order to satisfy any complaints which may be received with respect to these allocations.

(d) The provision in so far as possible of a clearly understood and efficiently operating delivery service both from the United States and from Brazil for the rubber goods purchased under these rubber allocations.

Note: The foregoing comments are intended to apply to the ultimate ironing out of the long-range difficulties which seem to be involved in the present rubber arrangements. As regards the specific problems of Uruguay, Venezuela, Chile, etc. raised in Ambassador Caffery’s wires to you, I believe they will have to be ironed out as well as may be possible by whatever specific action can be taken immediately.

In this connection it is interesting to note that we are not even sure that all of the announcements of the fourth quarter allocations have yet been made even though we are now entering into the last month of the fourth quarter. It is further pointed out that deliveries have not yet been made on all of the third quarter allocations. Such delays have lent fuel to the present flare-up and serve to emphasize the necessity of immediate and farsighted action to apply to the announcement and prompt delivery of the allocations for the forthcoming year. Actually these announcements should already have been made and each day that goes by creates increased potential difficulties for next year.

1. Not attached to file copy of memorandum.
2. Not printed.