Foreign Relations of the United States: Diplomatic Papers, 1945, General: Political and Economic Matters, Volume II

S/AE Files

Memorandum by Mr. S. Maurice McAshan, Jr., and Colonel John Lansdale, on the Staff of the Commanding General, Manhattan Engineer District (Groves)

[Rio de Janeiro,] July 10, 1945.

Report on Negotiations in Rio de Janeiro, June 27–July 10, 1945

1. McAshan, Lee,³⁴ Vance and Lansdale had lunch with Bouças at his office on 27 June 1945. We did not broach the subject of the proposed discussions because we had not had sufficient time to discuss the matter among ourselves. Bouças, however, asked us out of a clear sky whether we were here to discuss monazite sands. (At the next morning meeting he told us that the President had authorized him to conduct negotiations on this matter before he went to Mexico City.³⁵) We told him that monazite sands were the purpose of our visit but that we were not prepared to discuss details at that time. A meeting was arranged for the following morning. The five of us (McAshan, Lee, Volpe,³⁶ Vance and Lansdale) spent the afternoon and evening preparing for the meeting with Bouças.

2. Because of Brazilian records of exports of monazite sands during the past few years and because we were using credit for private transactions, we decided not to attempt to start with a figure as low as 750 tons but rather 1500 tons. It was also agreed that it would be inadvisable to attempt a 99-year term for the agreement.

3. On 28 June at 9 A.M. we had a general discussion with Bouças. McAshan, Lee, Vance and Lansdale were present. We called attention to Lee’s presence as a representative of the British Government, and explained that while the British were jointly interested with us in the negotiations, the agreement would be solely between the United States and Brazil.

4. We advised Mr. Bouças that thorium, of which monazite is a carrier, might have appreciably [appreciable] military significance although we had no definite knowledge of its potentialities at this time. We gave him no further details and Bouças was uncurious about the matter. At one point Bouças said that if the matter were a military secret, he did not want to know about it because there were certain persons in Brazil who could not be trusted.

5. The discussion covered the points of interest to us and was kept on a commercial basis. Agreement in principle was reached as to the points to be covered. In discussion of the necessary secrecy involved, he asked if we could not include some provisions for military participation by Brazil in end uses since it would then be easier for him to handle the matter with the required secrecy. We told him we were not in a position to discuss this aspect of the matter.

6. Mr. Bouças suggested several points to be covered in the agreement:

a. That Brazil be bound not to increase taxes or official fees during the period of the agreement.

b. That the United States might have to educate Brazilian inspectors if they were needed.

c. That the ports of shipment be specified by Brazil in order to facilitate export control.

7. Bouças also wanted annual renegotiation of price and quantity with a ten per cent increase per year in quantity. He finally agreed, however, on the three-year term with renegotiation of price every three years and a floor on quantities. He also agreed on successive options and gave the impression that he would agree to an indefinite series of options. Bouças also requested that some provision be made indicating an intention of the United States to continue to buy monazite sands from Brazil on an equitable basis as to quantity after the Indian market was reopened. He expressed the opinion that the agreement should be executed by the Brazilian foreign minister and by Mr. Berle.³⁷

8. The balance of the morning and afternoon was spent in making a preliminary draft of the agreement. Mr. Lee contributed materially in the work of drafting.

9. In the late afternoon, McAshan and Lansdale called again on Bouças with the preliminary draft.³⁸ Bouças went carefully over each provision. After due consideration, we called Bouças’ attention to the indefinite term of the agreement as drafted and asked his advice as to the best way to handle the matter. He clearly had missed this point and stated that the agreement must have a definite limitation. He was of the opinion that five terms of three years each was all he could get Vargas to approve. At our insistence he agreed to try to obtain approval for ten terms. At the same time he insisted on a provision for the purchase of grades under six percent thoria; he gave as his reason the danger of a weak government refusing to enforce the export control if another foreign buyer offered a good price for lower grades. He cited the difficulty with Argentina on pyrethrum.

10. Bouças also insisted on including in the agreement clauses for provisional payments. Furthermore, he wanted six months’ notice of the exercise of the option rather than the sixty days we had proposed, to enable producers to handle the labor problems involved in case of discontinuance of the agreement.

11. He asked also for a rewording of the non-discrimination clause to cover all amounts shipped under the agreement whether the shipments were to the United States or to another country by designation.

12. Bouças completely balked on paragraph 6 of the first draft which had to do with the limitation of use in Brazil. He insisted that the point was sufficiently covered in the reservation to Brazil of material for normal use and that it was politically impossible to insert any provision indicating that Brazil must first ask the United States before using within Brazil their own product.

13. Bouças left about seven in the evening with a copy of the draft to see the President. He later called McAshan and requested us to meet him at the train just before his departure for Sao Paulo. He told us at that time that the President had approved the agreement in principle but that the President had insisted on a commitment during the initial three-year period for the purchase of 3000 tons per year. We agreed to consider this point and to redraft the memorandum to cover the other points under discussion and to meet with him on Wednesday³⁹ on his return to Rio. Bouças voluntarily returned to us the copy of the memorandum we had given him, for security reasons.

14. Vance, Volpe and Lansdale had called on Berle on Tuesday afternoon, 26 June and had advised him of the nature of our mission. On the morning of the 27th, McAshan, Lee and Lansdale called on him again. Friday morning, 29 June, McAshan and Lansdale reported to Mr. Berle the events to date and discussed the non-discrimination clause at length with him. On Friday morning the 6th of July, McAshan called on Berle and discussed the formalities of execution. Mr. Berle suggested that the execution should be by exchange of notes referred [referring?] to the initialled memorandum rather than by notes incorporating the text of the memorandum. Mr. Berle was thoroughly and constructively cooperative at all times. He gave us good advice on procedure which we followed as closely as changing circumstances permitted.

15. The intervening period until our next meeting with Bouças (delayed until Friday, 6th July) was spent in redrafting the arrangement. We determined to meet Bouças’ request to include grades under six percent thoria in order to strengthen export control but with a limitation to twenty percent of the quantities purchased and at a substantial discount in price. Lee participated fully in the redrafting and concurred on all points. No material changes were made subsequent to Lee’s departure on 4 July although the final draft was written the afternoon of 5 July.

16. The afternoon of 6 July McAshan, Vance and Lansdale met Bouças with the final draft. Bouças insisted on 3000 tons. We attempted to secure an increase in the number of options to fifteen, Bouças, however, would not budge. He warned us that failure to meet the President’s request for 3000 tons or an insistence on an increase in the periods might result in the President requiring a complete reworking of the agreement and placing it in foreign office channels. He pointed out that the agreement would not be published and that nothing would be done to stimulate Brazilian production unless we wanted it, so that in point of fact, we would probably not find much in excess of 1300–1400 tons per year available for purchase Bouças suggested that the memorandum be signed at that time in order to strengthen his hand in securing the final approval of the President, This was done.

16. Bouças took the original signed memorandum to the President. He telephoned McAshan at 8:30 P.M. on 6 July to say that the President had approved the agreement without further change but that he had not been able to get in touch with Velloso who had just arrived in Rio. At the same time Bouças expressed profuse thanks for the priority that we had secured for his son, George.

17. Saturday morning at 10 A.M., McAshan and Lansdale visited Mr. Berle who prepared the draft of a covering note to be exchanged in identical form between Velloso and Berle. Our signed memorandum in English was incorporated in the note by reference. A copy of this draft was handed to Bouças at 11 A.M. Bouças took this draft together with his copy of the memorandum of agreement and a résumé of the agreement and course of negotiation to Leon Velloso. The résumé which was in Portuguese was dictated by Bouças to his confidential secretary, Beatrice Brandão.

18. At 9:30 A.M. on 9 July, Berle’s office reported he had an engagement with Velloso at 12, noon, at which time it was hoped that the signed notes would be exchanged. Bouças reported that he would be there and wanted Mr. Berle to insist on keeping the agreement out of the Brazilian Foreign Office document registry system which would take time and cause a loss in security.

19. Berle met Velloso at 12, noon, and found Velloso’s “amour propre” wounded over the fact that President Vargas had not sent Velloso direct authorization to conclude the agreement. Velloso even kept Bouças waiting outside until 1:15 and then did not see him. Velloso also wanted to obtain the concurrence of Ministro Antonio Ferreira Braga (Foreign Office Chief of Economic Affairs) before exchanging notes.

20. Bouças went to work on the President’s military aide to get Velloso direct instructions from Vargas and requested us not to take the matter up with Braga as suggested by Berle since he might not have been brought into the deal. Bouças reported about 5 P.M. that Velloso had a date with Vargas on Tuesday morning, 10 July, to secure authorization to conclude the exchange of notes. At noon, word was received that Velloso would not be able to see President Vargas before 4 P.M. at the earliest.

21. At 5 P.M. Velloso requested Mr. Berle to call at the Foreign Office at 6 P.M. presumably to exchange notes. At 5:25 P.M. Bouças advised that the Foreign Office required a Portuguese translation of the memorandum of agreement to be signed by McAshan and Bouças, the same persons who signed the English duplicate originals and further said that the Portuguese version would not be ready until Wednesday or Thursday since it was being made confidentially by Ministro Braga and an official translator in Itamariti.

22. At 6 P.M. Berle and Velloso exchanged notes in identical language, except that Berle’s was in English and Velloso’s was in Portuguese, both ratifying as an act of their respective governments the agreement of 6 July. Braga was the only other Brazilian present. Immediately thereafter, Berle handed Lansdale the original note from Velloso, the duplicate agreement of 6 July and a covering letter to the Secretary of State, Washington.

23. McAshan and Vance will handle the Portuguese translation 11 July or 12 July and Vance will bring a copy of it to Washington with a copy of Berle’s note in English.

Throughout our negotiations Bouças was fully cooperative and stated that as far as he was concerned, the agreement must be handled on a basis of mutual trust because of its confidential nature. While he gave the impression of being in sympathy with us and of trying to assist us in writing an agreement which would obtain ready approval from President Vargas, Bouças skillfully used the fact that the agreement was being handled “out of channels” as a means of trading hard and driving a good bargain for his government. We feel, however, in view of the present political situation, a great deal more time would certainly have been required and it is very questionable whether the 33-year period or the same type of export control clauses would ever have been obtained through regular Brazilian channels.

We feel that Bouças is entitled to full recognition by the U. S. Government for his constructive assistance in this matter.

S. M. McAshan, Jr.
John Lansdale

34. Frank Lee, member of the British Treasury delegation, Washington.
35. To attend the Inter-American Conference on Problems of War and Peace, February 21–March 8, 1945. For documentation on this Conference, see vol. ix, pp. 1 ff.
36. First Lt Joseph Volpe, on the staff of General Groves.
37. Adolf A. Berle, Jr., Ambassador in Brazil.
38. Not printed.
39. July 4.