Foreign Relations of the United States: Diplomatic Papers, 1943, The American Republics, Volume V

561.333D3/1510

The Brazilian Financial Attaché (Penteado) to the Assistant Chief of the Division of the American Republics (Daniels)

New York, March 12, 1943.

Dear Mr. Daniels: Pursuant to our conversation of yesterday, I am writing this letter to acquaint you with the instructions I received from Brazil, in connection with the U. S. A.–Brazil Coffee Purchasing Agreement,⁷⁴ and to give you a résumé of our thoughts on the negotiations.

After the meeting of the Inter-American Economic and Financial Advisory Committee, held yesterday afternoon, I had an opportunity to mention this matter to Mr. Sumner Welles,⁷⁵ who was kind enough to show an interest in the affair, and requested me to give you full details, so that I would have some definite news for my Government by the middle of next week.

The instructions I received may be thus condensed:

“Delay in the execution of the Coffee Purchasing Agreement is creating an extremely unpleasant atmosphere, and arises from the fact that the American Embassy here, alleging necessity for an exchange of notes on the fulfillment of the Agreement, wishes to incorporate therein the following conditions, which would involve substantial changes:

1. —As soon as Brazil has exported its basic quota of 9,300,000 bags during the quota year of 1942–43, the CCC⁷⁶ will be free to export during said quota year, any amount of its stocks, without any obligation to replace an equivalent amount by new purchases.

This, of course, restricts the meaning of the fourth item of the Agreement, and is tantamount to precluding exporters in Brazil from exporting any amount allocated to Brazil by the Inter-American Coffee Board, in excess of the basic quota.

2. —The CCC will be free to dispose, at any time, of the coffee purchased in Brazil, provided such coffee be exported to countries other than the United States, and be destined for consumption by armed forces of the United Nations, Lend-Lease,⁷⁷ or purposes of assistance.

This condition does not prevent coffee from being shipped under Lend-Lease to countries that are actually our customers, thus resulting in loss of corresponding markets.

3. —After the quota year 42–43, the CCC will have full liberty to dispose of coffee bought here, including its sale in Brazil.

We entered into discussion of an Agreement with the understanding that it was the intention of the United States Government not to sell for export to the United States any portion of the coffee purchased, nor to sell such coffee to other countries in competition with our trade. Otherwise, it is obvious that it would have been unnecessary to work out any Agreement, since it would be reduced to a simple credit operation, merely involving a burdensome temporary transposition of surpluses without any other economic advantage.

4. —Deduction from total CCC coffee purchases of any purchases to be made in Brazil by other official agencies of the U. S. Government.

This concession will make it possible to deduct coffee that such agencies may acquire for resale in Brazil. As an instance, we refer to the recent case of coffee purchased by the Rubber Reserve⁷⁸ for resale in the Amazon region. It is thus proposed to resort even to our domestic consumption for disposal of stock which the CCC may purchase under the Agreement.

5. —Purchases by the CCC will be ample at ports of Santos and Rio, while quantities purchased at Vitória and Paranaguá will depend on adjustments to be effected later by mutual agreement.

This condition restricts item 5 of the Agreement and is contrary to the objective repeatedly stressed by us when the Agreement was discussed,—namely, to protect the economy of all coffee producing States, an objective that was recognized by the United States delegates as indispensable to the Agreement.

“We refer these details to your attention, in order that you may discuss the matter with the proper authorities, bringing to their knowledge the difficulties which have arisen in the execution of the Agreement, the objective of which may not be attained under the procedure now being proposed. We trust that your action in the United States will result in benefit to the interests of our two countries.”

As you see, it is obvious that the CCC representatives in Rio completely misunderstand the real purposes behind the Coffee Purchasing Agreement, and intend to handle the matter on a strictly commercial basis. If that be the case—as pointed out in the instructions I received—there was no need to spend months in working out a very elaborate agreement between our two Governments, because the whole thing would be reduced to a simple, ordinary commodity financing operation, which, with adequate guaranties, could have been easily carried out through any commercial bank.

You are, of course, well aware that Brazil is decidedly getting a raw deal in the present coffee situation. In the last quota year we were able to bring to the United States market only 52% of our quota. For the present quota year, after a lapse of five months, the prospects for Brazil are even worse, because so far we have put only 13.7% of our quota in this market. While this situation exists insofar as Brazil is concerned, the other Latin-American coffee producing countries are shipping to the United States their entire quotas, and even more. Nevertheless, Brazil has consistently cooperated with the Inter-American Coffee Board, and has voted for all Resolutions increasing the quotas and permitting advance shipments,—all intended to bring to the American consumer coffee from our competitors, while Brazilian crops are piling up in our ports and warehouses. May I also point out, here, that Brazil is, I believe, the only Latin-American coffee producing country with a sizable merchant marine, and that we are using most of our bottoms to bring essential war material to the U. S. A., whereas coffee from other countries is being brought into this country mostly in American ships.

I feel sure that these facts, and the recognition of Brazil’s unselfish and wholehearted cooperation, prompted the United States Government to negotiate with the Brazilian Government for the Coffee Purchasing Agreement, for the purpose of assisting the Brazilian economy, so profoundly affected by conditions arising from the war and from our position in it. It seems obvious to me that the stand taken by the CCC representatives in Rio can only defeat that purpose.

I believe you will understand my writing you so frankly, but I still think that among good friends this is the best way for getting results.

Sincerely yours,

E. Penteado

74. For a résumé of the agreement, see p. 690.
75. Under Secretary of State.
76. Commodity Credit Corporation, a United States Government instrumentality which became a part of the War Food Administration on March 26, 1943.
77. For negotiation of the Lend-Lease Agreement between the United States and Brazil, see Foreign Relations, 1941, vol. vi, pp. 528 ff.
78. The Rubber Reserve Company, a United States Government instrumentality. For documents on its activities, see Foreign Relations, 1942, vol. v, pp. 691 ff.