561.333D3/6–2744: Telegram

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

2116. The understanding regarding the sale of Brazilian coffee outlined in Department’s telegram no. 2069 of July 731 was designed for the dual purpose of acceding to the wish of the Embassy and the Brazilian Government that the Brazilian Finance Minister be not embarrassed in view of his recently announced policy of making coffee freely available for sale under Office of Price Administration price ceilings (last paragraph of Embassy’s telegram 2332, June 2732) and of assuring a supply of coffee which will be critically needed in the United States by October 1.

Unless the flow of Brazilian coffee is resumed in accordance with the understanding it will undoubtedly be necessary within a relatively [Page 158] short time to ration coffee again in the United States. Such a development would undoubtedly arouse serious criticism in this country and might have very harmful consequences for the Inter-American Coffee Agreement and inter-American relations generally. It is therefore imperative that all possible steps be taken to assure that Brazilian commitments under the memorandum are fully and promptly fulfilled.

What is contemplated in the memorandum is that coffee pledged as security for the bankers loan should be used promptly and in such volume as is necessary up to 5½ million bags, to supply immediate needs in the United States and to force a resumption of private coffee sales.

The Finance Minister has stated that the coffee will be used for this purpose. The description of the coffee to be made available under the memorandum is such, in fact, that the banker’s stock will undoubtedly have to be used. The Finance Minister has stated further that all that is needed to make the coffee available is repurchase of the bonds and that this would involve no delay.

The United States would have no alternative other than to recommend a quota increase immediately if it should become apparent that Brazil will be unable or unwilling to fulfill her commitment, for we cannot afford to return to coffee rationing with quotas in effect which would limit the importation of coffee from any source.

Please keep in constant touch with the situation for the purpose of assuring that the DNC is offering coffee both for military and civilian consumption in accordance with the understanding.

Please keep the Department fully and promptly informed of developments, including the Embassy’s opinion as to the extent to which the Brazilian Government will be willing or able to fulfill its commitment.

  1. Not printed, but for substance of Memorandum of Understanding of July 4, see telegram 2048, July 3, 10 p.m., to Rio de Janeiro, p. 155.
  2. Not printed.