Memorandum of Conversation, by the Chairman of the Inter-American Coffee Board (Cale)

Participants: Arthur Souza Costa, Brazilian Finance Minister.
Mr. Carlos Martins, Brazilian Ambassador.
Mr. Eurico Penteado, Brazilian Delegate, Inter-American Coffee Board.
Mr. Valentim Bouças, Head of the [Brazilian] Commission for the Control of the Washington Agreements.
Mr. Ivan B. White, Second Secretary, American Embassy, Rio de Janeiro.
Mr. James Delafield, War Food Administration.
Mr. Hawkins, ECA.19
Mr. Walmsley, BA.20
Mr. Cale, CD.21

Mr. Hawkins opened the meeting by stating that we had requested the meeting in view of our belief that it would be desirable for us to take advantage of the presence of the Brazilian Finance Minister in Washington to discuss certain coffee problems of mutual interest to the United States and Brazilian Governments.

Mr. Delafield then reviewed the difficulties which have been experienced in purchasing coffee in Brazil during the last six months and [Page 151] indicated that we had been compelled, because of an absence of assured cargoes of Brazilian coffee, to divert some 20,000 tons of shipping from Brazil in June and approximately 30,000 tons in July. He also pointed out that in many cases coffee has not been ready for delivery at the time shipping has been scheduled for it and that it has been necessary to schedule the shipping a second or even a third time for the same coffee. He stated that American importers, including the Office of the Quartermaster General, are having considerable difficulty in obtaining delivery of coffee on the dates scheduled, and that, on the basis of records filed with his office by United States importers, there are at present sales contracts for the shipment of only 68,000 bags of coffee from Brazil during August. He said that the amount of shipping allocated to Brazilian coffee for June and July, even on the reduced basis, was considerably in excess of assured coffee cargo and that he felt it would be exceedingly risky at a time when shipping is scarce to allocate any considerable tonnage to Brazilian coffee for August, unless a definite assurance could be given that the coffee would be available when the shipping arrived.

The Finance Minister stated that he understood and sympathized with the position taken by Mr. Delafield regarding the matter. He stated that Brazilian growers and exporters are withholding coffee from the market in the hope of obtaining better prices at a later time, that he does not favor such withholding because of the importance which he attaches to maintaining the position of Brazilian coffee in the United States market, and that the Brazilian Government is resolved to take the necessary action to force a resumption of trade, although such action is sure to arouse strenuous opposition.

Mr. Cale inquired as to action which might be immediately taken by the Brazilian Government in this connection. He called attention to his understanding that coffee of the 1944–45 crop on which a bonus of one bag would be paid for each ten bags exported, would not begin to become available for shipment from Brazil until some time in September. He said that if this understanding were correct, the action which might be taken by the Brazilian Government would seem to be limited to sales which it might be prepared to make out of its own stocks. In this connection he called attention to the fact that a recent report from Brazil (no. 511, of June 10, 1944),22 regarding the composition and distribution of coffee stocks in Brazil, indicated the DNC23 owns approximately 15,000,000 bags of coffee of which about 7,000,000 bags are pledged against the São Paulo coffee loan and the remaining 8,000,000 bags is perhaps unsuitable for the United States market.

[Page 152]

The Finance Minister agreed that a large part of the unencumbered coffee is of types not commonly used in the United States.

Mr. Cale then stated that the same report to which he had referred said that the 7,000,000 bags pledged against the São Paulo coffee loan are not available for export. The Finance Minister and Mr. Bouças both said that the only condition necessary to the sale of such coffee was the purchase and retirement of the bonds and that no “red tape” or delay need be involved in this action. The Finance Minister indicated, furthermore, that the Brazilian Government was willing to sell such coffee in order to force a resumption of trade.

He raised the question, in view of the foregoing, whether the United States delegate to the Coffee Board would support a resolution for an increase in the quotas under the Inter-American Coffee Agreement. Mr. Cale stated that the question of such an increase was under consideration, as the Finance Minister was aware, and that this was one of the reasons why we had asked for the appointment to discuss coffee problems with representatives of the Brazilian Government. He then summarized the information regarding coffee supplies and requirements between now and October 1 as follows:

[Here follow a table of statistics and a discussion on coffee supplies and needs.]

The Finance Minister inquired whether, if large quantities of coffee were afloat as of October 1, it would be necessary to have an inventory of 3,900,000 bags on that date. Mr. Delafield stated that he would be prepared to see the inventory drop slightly below this figure, provided there were large shipments on the way to the United States on October 1 and provided there were assurances in the form of completed sales contracts that coffee would continue to be forthcoming in satisfactory volume for several months. The Finance Minister indicated his willingness to sell 1,000,000 bags of coffee to the Army for shipment during August and, by implication, that he was prepared to assure large shipments for both civilian and military requirements in ensuing months. Mr. Cale stated that even under these conditions he felt that the inventory on October 1 would be unsatisfactory. The Finance Minister stated that he thought we had no problem as he was prepared to sell 1,000,000 bags to the Army for August shipment and to assure shipment of large quantities of coffee for a period of several months.

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  1. Office of Economic Affairs.
  2. Walter N. Walmsley, Jr., Chief, Division of Brazilian Affairs.
  3. Commodities Division.
  4. Not printed.
  5. Brazilian National Coffee Department.