832.796/853a: Telegram

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

686. Your recent telegrams on Condor. In view of your references to the requisitioning by the Brazilian Army of the remaining stock of gasoline belonging to Condor, Lati, and Air France the thought arose at an interdepartmental meeting March 16 that this may have been a stratagem adopted by Gomes for the purpose of removing the gasoline in question from the licensing control exercised by this Government. Such a subterfuge obviously would be inconsistent with Aranha’s professions contained in your 878 of March 14, 7 p.m.1 In addition it is felt that in the event of an unsatisfactory reorganization of Condor such a development would seriously complicate the situation. An expression of your views will be appreciated.

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As you and Hardin and the Brazilian authorities appear to be in agreement regarding the total elimination of German influence, the Department feels that the following conditions should be met before it recommends Condor’s removal from the Proclaimed List.

1.
All citizens of the Axis powers be removed and only loyal native-born citizens of the American republics be employed in the reorganized Condor. This might be modified on your recommendation in meritorious individual cases.
2.
No direct or indirect control over the financial, technical and management functions of the company be exercised except by citizens of the Hemisphere who subscribe to the principles set forth in the Declaration of Lima.2
3.
An entirely new corporate structure be established as a substitute for that of the present Condor company. This could be substantially accomplished through the separation of Condor’s principal assets from its liabilities to Lufthansa. The assets would form the basis of the new company and the liabilities would remain frozen and be removed from the books. Any payments for Condor’s assets to be effectively frozen except those accruing to entirely satisfactory persons.
4.
Agreement to adopt a new name as soon as possible.

If it would be of immediate assistance in reducing attempts to have Condor delisted; and if you feel steps being taken to de-Germanize Condor warrant such action and would facilitate future negotiations, we would recommend that the Treasury grant licenses for the sale of specific amounts of gasoline approved by you. It should, of course, be clearly understood and agreed to by the Brazilians that the granting of any such licenses is based on the assumption that the complete de-Germanization of Condor is proceeding. We strongly hope, however, that it will be possible to avoid the licensing stage.

As a final step after delisting, an arrangement could be made whereby Condor’s successor would obtain such needed equipment as is possible to secure for it provided at least one JU–52 is surrendered for each new airplane furnished, and provided that a sound technical and financial basis is established. In this connection, the Defense Supplies Corporation has a firm commitment from the War Department that the seven DC–3’s recently taken away from it by the War Department will be replaced beginning in June or July. You may assure the Brazilians that the Defense Supplies will be able and willing [Page 777]to provide the new company new equipment beginning in June or July provided that the conditions mentioned above are fulfilled by that time.

In other words, there could be three steps; the first to consist of specified and limited licensing of gasoline on the basis of progress already made and satisfactory commitments for the future; second, formal delisting when the points enumerated above have been met; and third, whatever equipment and financial assistance may be needed after the company has operated on the new basis for a few months. It should be understood that step 1 would not be taken unless the Brazilians agreed to take the succeeding measure leading to delisting, and that step 3 (financial assistance and equipment) could only be undertaken on the basis of securing a JU–52 for each new airplane furnished, and on the basis of a reasonably satisfactory financial and technical set-up for Condor’s successor.

Your 700, March 5, 2 p.m.3

The Department feels that it would be highly desirable if Condor’s identity and services were to be completely absorbed by N.A.B.4 The above is conditioned on the assumption that you and Hardin will consider the above acceptable from your standpoint and the standpoint of the Brazilian Government.

Welles
  1. Not printed.
  2. Declaration of the Principles of the Solidarity of America, known as the “Declaration of Lima”, approved December 24, 1938, Report of the Delegation of the United States of America to the Eighth International Conference of American States, Lima, Peru, December 9–27, 1938 (Washington, Government Printing Office, 1941), p. 189.
  3. Not printed.
  4. Brazilian National Air Force.