832.24/1740: Telegram
The Ambassador in Brazil (Caffery) to the Secretary of State
[Received 4:23 p.m.]
2815. The Rio de Janeiro press published yesterday a despatch from Washington that the Board of Economic Warfare has announced it will consider applications for export licenses covering merchandise not included in positive list published by Bank of Brazil, despatch No. 11339, May 21, 1943.64 It appears that this action will be taken without consulting the Bank of Brazil or the Embassy. Dr. Vidigal informed Donnelly65 and Winans66 last night that issuance [Page 152] of such licenses for nonessential merchandise not covered by preference requests67 constitutes a violation of the Decentralization Plan between the two countries. It is possible that the Foreign Office will consider the agreement without effect if the Board of Economic Warfare proceeds with the plan. This would establish a dangerous precedent and weaken our strategic materials agreements with Brazil, and imperil the effectiveness of the Brazilian export controls administered by Vidigal’s office. Dr. Vidigal informed the Minister of Foreign Affairs68 of his opinion and requested the Foreign Office to instruct Brazilian Consuls in the United States not to certify consular invoices on shipments of merchandise to Brazil that are not included in the Bank’s positive list. At Donnelly’s suggestion Vidigal telephoned the Foreign Office to postpone its instructions to the Consuls pending the receipt of information from Sarmanho. Vidigal pointed out that the list of essential merchandise is provided for in the Decentralization Plan and that he reluctantly published it only after repeated recommendations by representatives of the Department and the Board of Economic Warfare.
The Embassy is satisfied that unless a satisfactory formula can be worked out with Vidigal within the terms of decentralization agreement the Foreign Office will instruct Brazilian Consuls in the United States to limit visas to invoices covering articles on the positive list. Sarmanho told Vidigal on the telephone last night that the position taken by the Board of Economic Warfare at a recent meeting in Washington was contrary to the decentralization agreement and indicated that the Board was prepared to abandon the agreement if necessary. Sarmanho is sending Vidigal a letter and the latter states he will await receipt of it before acting.
Vidigal is very disappointed.