561.333D3/1538
The Brazilian Financial Attaché (Penteado) to the Assistant Chief of the Division of the American Republics (Daniels)
Dear Paul: Your letter of March 18th, in reply to mine of the 12th, is acknowledged. I greatly appreciate your restatement of the [Page 692] nature and purpose of the purchase agreement, and the assurance that the Brazilian Government will be consulted prior to the disposition of any coffee to be acquired by the U. S. Government pursuant to such purchase agreement.
However, in view of the crucial importance of this question to the economy of Brazil, I believe that the rather general terms of such clarification must, for purposes of mutual confidence, be supplemented by a specific restatement of the underlying realities. This is particularly essential in view of the possibility, and even probability, that final disposition may be undertaken by individuals not fully informed as to the nature and purpose of the agreement, and under circumstances which may tend to obscure the ultimate objective at which the agreement is aimed.
For these reasons the situation requires that the assurance of consultation prior to disposition of such coffees be strengthened by the understanding that the purpose of such consultation must be to safeguard and preserve the economic benefits for which the purchase agreement was originally intended; thereby assuring that disposition of such coffees by the United States Government will be in a manner which would protect the Brazilian coffee economy at the later date from the disastrous conditions, which it has been agreed should be remedied now.
It is, of course, hoped and expected by all concerned that post-war conditions will permit disposition of such coffee stocks and other surpluses without difficulties or complications, and there is certainly no reason to doubt that under any circumstances the type of consultation indicated would result in other than the most complete agreement. Obviously, however, failure to clarify the fact that the assurance of prior consultation as to disposition includes the assurance that the purpose of the consultation will be to arrange for disposition which would not harm the Brazilian coffee economy, might result under unfavorable post-war circumstances in recreating the conditions which the agreement was designed to correct. In fact, in view of the possible cumulative total quantity which may be involved there is danger of even graver and more disastrous economic, political and social consequences under such adverse circumstances.
The Brazilian Government recognizes, as it has from the beginning, the difficulty of endeavoring to anticipate future developments by means of a specific commitment now as to the disposition of coffees acquired by the U. S. Government. It believes, however, that the present situation requires recognition by the U. S. Government that the purchase agreement will not only have failed of its purpose, but will have violated its intention, unless it is definitely acknowledged that disposition of the coffees acquired is not merely a matter of most [Page 693] advantageous commercial arrangements, but rather a matter for mutual consultation, in order to protect the same economic interests, which the agreement was intended to support.
Otherwise, it is obvious that the purchase agreement would become tantamount to a mere loan agreement, and serve as temporary assistance for Brazil in bearing the burden of the unshipped balances of its quotas under the Inter-American Coffee Agreement. Obviously also such was not the aim of the respective governments, in view of the fact that the loan alternative was rejected in favor of what was intended to be a broader and more beneficial purchase agreement.
Certainly, without the assurance we request the purchase agreement cannot be considered as compensating even partially for the substantial sacrifice made by Brazil in accepting reduced coffee shipments to the United States, below its quota established by the Inter-American Coffee Agreement, while agreeing to substantial increases in quotas for other coffee producing countries, and for the considerable contribution made by Brazil in devoting its merchant marine to the requirements of the wartime economy of the United States.
It should be apparent that hesitation on the part of the Government of the United States to give the requested assurance, under circumstances when our sacrifices and contributions are currently aiding the serious emergency problems of this country and are fresh in the minds of the officials of the U. S. Government and the public generally, must naturally cause the Brazilian Government the gravest concern as to the future when the nature and circumstances of these sacrifices and contributions may become obscured or forgotten.
With personal regards,
Sincerely yours,