The Ambassador in Brazil (Berle) to the Secretary of State
[Received September 22—6:13 p.m.]
2938. Brazilian FonOff is proposing to cancel tire and tube purchase agreement prevailing between Brazil and US. They are also proposing thereafter to enter arrangement to sell some 60,000 tires to Argentina at rate of 5,000 tires per month. In respect of this last of course they have not consulted us nor indeed are they bound to do so since, once tire and tube agreement is cancelled, they are free to do what they choose.
Department will recall that RDC believes it is to its best interest to cancel this agreement. Department will likewise recall that Embassy and McLaughlin, RDC, consulted both Department and Braden89 pointing out that cancellation of agreement would permit sales to Argentina, and that such sales undoubtedly would take place, and asking whether in view of this fact and Argentine situation, Embassy and RDC should delay termination tire agreement and thereby prevent Argentina from receiving tires. Answer both from Braden and Department was that there was no political objection to termination tire and tube agreement. Under these circumstances we informed FonOff that we were prepared to cancel tire agreement and that their sales to Argentina thereafter were strictly Brazilian business and not ours.
We are presently advised that Brazilian FonOff is proceeding along these lines, namely, cancellation of tire agreement with US and thereafter sale of tires to Argentina, of course without our intervention. Bouças is worried about this and raises question whether we ought not to maintain tire agreement.
Embassy and RDC are bound by previous instructions. We now [Page 711] ask whether Department sees reason to change them.90 Obviously all other countries are free to ship tires to Argentina and maintaining agreement solely to prevent Brazilian shipment is not very effective gesture of economic sanctions. Ambassador thinks that Argentine situation is now not going to solve itself on minor issue like rubber tires though if maintenance of tire agreement would assist in solution he is quite prepared to change the line.