832.6363/3–3045: Telegram

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

971. There are indications that the Brazilian Government may be prepared to reopen the question of admission of oil companies to oil exploration rights in Brazil. This is partly due to the Act of Chapultepec33 and to the military obligations to be assumed in the current staff conversations34 since it is plain that mechanized military operations involve a continuous and readily available supply of oil in the country.

In his conversation with Minister Velloso35 the President indicated an interest in this and the possibility that a joint Brazilian American oil exploration company might be formed. Heretofore the attitude of the Department has been substantial insistence on the opening of Brazilian exploration rights under conventional royalty arrangements, [Page 679] and the attitude of the companies has been that unless they can get concessions in the usual sense they cannot be expected to take the risks involved in oil exploration.

The Embassy is studying the whole question but would appreciate a statement of the present attitude of the Department and any suggestions it may have. Of course, before definite recommendations are made to the Government the Department will be consulted.

The importance of the subject is very considerable. The combined problem of transport and industrialization revolves in large measure around the development on the one hand of electric power and on the other of fuel, especially oil. The terms on which this development takes place are therefore of first importance to the country. It seems reasonably plain that oil is available.

In this connection we are informed that the Brazilian Government has retained the services of De Golyer and Co. of Dallas, Texas as oil consultants paying a retainer of $60,000 per year. The advice is said to be the best obtainable.

  1. For text, see Department of State, Treaties and Other International Acts Series No. 1543, or 60 Stat. (pt. 2) 1831; for documentation on the Chapultepec Conference on Problems of War and Peace, see pp. 1 ff.
  2. For documentation on these conversations, see pp. 600 ff.
  3. Pedro Leão Velloso, Acting Minister of Foreign Affairs.