The Secretary of State to the Ambassador in Brazil (Caffery)
2186. It is highly desirable from the viewpoint of this Government that the commitments of the Brazilian Government regarding the sale and delivery of coffee contained in the memorandum of understanding signed at Bretton Woods on July 4 by the Brazilian Finance Minister and Assistant Secretary of State Acheson10 be fulfilled promptly and without alteration. You are therefore requested to take the matter up as soon as possible with the Foreign Minister, and, in your discretion, with President Vargas, with a view to obtaining [Page 634] speedy fulfillment of the understanding. It is understood that the Finance Minister discussed the matter with the Foreign Minister before signing the memorandum of understanding.
The commitments, as you are aware, were that the Brazilian Government through the National Coffee Department of Brazil would offer for sale to the Office of the Quartermaster General through regular trade channels one million bags of Brazilian strictly soft solid bean coffee, grading from Santos 2s to Santos 5s, inclusive, for shipment during August, at prices that would permit resale within the United States at prices that are equivalent to Office of Price Administration price ceilings; that the foregoing offer would be made and the contract completed prior to July 15, 1944; and that the Brazilian Government would in addition assure the sale of coffee of the same types, through similar channels, and under the same conditions as to price in the amount of 500,000 bags for August shipment and 1,000,000 for shipment each month from September through December 1944.
You should say that this Government considers it extremely important that the commitment regarding sale of coffee to the Army be fulfilled in view of the fact that it is highly improbable in the absence of such a sale that it would be possible even if the coffee quotas are increased at this late date, to prevent the requisitioning of civilian supplies by the Army and a return to coffee rationing in the very near future. Since the time limit on the sale of the million bags of coffee to the Army will have expired before you discuss the matter with officials of the Brazilian Government, you are authorized to postpone the date on which the contract for sale to the Army is to be completed until not later than July 22, 1944. You are also authorized, subject to agreement by the Brazilian Government, to change the time of shipment of the Army coffee from 1,000,000 for August shipment, as now specified, to 500,000 bags for August shipment and 500,000 bags for September shipment. In view of the very serious supply position which is threatened in this country, we can not make concessions regarding any other feature of the commitment.
It is essential that both Army and civilian supplies be assured, especially in view of the fact that the mild coffee producing countries are reported to be organizing for the purpose of forcing a revision of United States price ceilings by limiting coffee shipments to the United States.
The quality of coffee offered by Brazilian exporters since the signing of the memorandum of understanding has been much inferior to that provided in the memorandum and therefore unacceptable.
For the Embassy’s strictly confidential information the Army’s stocks position is unsatisfactory, and the quantity of coffee that it needs to buy in order to establish a safe inventory is large. About [Page 635] the middle of June the Office of the Quartermaster General had definite offers from Colombia which would have permitted the Army to purchase substantial quantities of strictly soft Colombian coffee. Since purchase of the coffee would have involved an increase in the quotas and since the Brazilian Government indicated that it was prepared to supply the Army with coffee in the event the quotas were not increased, the Department persuaded the Office of the Quartermaster General not to press for purchase of Colombian coffee or for an increase in the quotas. Failure of Brazil to deliver coffee to the Army in accordance with the memorandum of understanding will, therefore, not only jeopardize the Army’s supply position but will be extremely embarrassing to the Department, since the offer of Colombian coffees has been withdrawn and it is doubtful that it will be renewed.
You are requested urgently to discuss the foregoing matter with the proper authorities and urge compliance in the most vigorous terms with the recent memorandum of understanding.
Please report promptly concerning the results of your conversation.