The Chargé in Brazil (Donnelly) to the Secretary of State
[Received January 3—12:26 a.m.]
15. Velloso2 informed me this morning that he had just finished discussing the import control measure with Souza Costa3 in terms of the meeting reported in Embassy’s 4574 of December 29, 8 p.m.4 He stated that this and my previous conversations with the latter had resulted in a substantial reduction of the list of commodities and that Souza Costa told him that he would further recommend exclusion therefrom all electrical products and all chemical pharmaceutical products. At the same time, Velloso admitted that while they are both in agreement with me in principle and are opposed to the measure, they have no discretion in the matter because President Vargas himself has approved it and has instructed Souza Costa to put it into operation at once.
Velloso remarked that the Ministry of Foreign Affairs looks upon it as a war measure. He added that it appears to be the work of a strong industrial group in Brazil whose influence in Government circles is not unlike that of the cotton group in the United States.
I have informed the President and Directors of the American Chamber of Commerce and they are meeting today with the President of the Associação Commercial with a view to enlisting the cooperation of that organization in minimizing the effects of the proposal.[Page 715]
Souza Costa has just informed me that the modified list will be put into effect within a few days.