Memorandum of Conversation, by the Acting Chief of the Division of Brazilian Affairs (Braddock)

Participants: Col. Macedo Soares, Brazilian Minister of Transportation and Public Works
Sr. Frederico Roxo, Assistant to Col. Macedo Soares
Sr. Benedito Silva, Adviser to Col. Macedo Soares
Sr. Roberto Campos, Second Secretary, Brazilian Embassy
ED—Mr. Fetter,9 Mr. Scanlan10
Mr. Nestor Ortiz, Financial Expert, American Embassy, Rio de Janeiro
BA—Mr. Braddock

At the Minister’s request the members of the Department’s working group met with him in his apartment at the Shoreham at 3:30 p.m., May 1. The discussion was in many respects similar to that which had taken place in the Minister’s meeting with Mr. Clayton and in the first meeting of the working group.

Mr. Fetter introduced the discussion by explaining the relationship of the State Department to the Export-Import Bank and stated that while the Department could not speak for the Bank, questions which the Bank would inevitably raise in the course of any discussion [Page 493] of a loan to Brazil would be (1) whether the Brazilian Government had explored the private capital market, and (2) what part of the loan was to be devoted to development as distinguished from replacement, since replacement would normally be considered a deferred import need to be paid from accumulated foreign exchange.

The Minister expressed understanding of this situation but said that he was not at this meeting speaking as a borrower to a lending agency but rather as a representative of the Brazilian Government to the United States Government. He went on to say that Brazil had projected a program of economic development which had political, economic and social aspects. On the political side he recalled the close ties that united the two countries and referred to the avowed intention of the United States to assist in the development and industrialization of Latin America. He stated that in Brazil the response of the United States to Brazil’s development program would be understood by the Brazilian people as above all political, and that for this reason it was impossible to overlook the political factor in these discussions.

He reviewed briefly Brazil’s slow progress toward economic development and its need for assistance if it were to attain better living conditions for its people and a position where the country would be an asset rather than a liability. Questioned by Mr. Fetter on the latter point, he replied that he was thinking in terms of military potential.

Colonel Macedo Soares then took up the question that had been previously raised as to why Brazil could not use its accumulated foreign exchange to help finance its program. He said that this exchange was required to meet many needs including: (a) to purchase gold to back Brazilian currency; (b) to pay off certificates of credit held by coffee exporters whose money had been tied up in the United States; (c) to discharge Brazil’s new responsibilities to the International Bank and the International Fund; (d) to provide funds to help establish Brazil’s Central Bank. Much of the exchange, he said, was frozen, and he mentioned in particular about 45 million pounds in Great Britain. Of the free reserves left after meeting these needs, and the Minister estimated the amount at $100,000,000, the major part would be required to finance purchases of new machinery. This would leave at the most, he said, some $35,000,000 to initiate the development program, a sum which he thought fell far below the amount needed.

Mr. Fetter raised the point which had already been made in previous meetings and which he himself reiterated several times during the course of this discussion, that the United States regarded the International Bank as the primary source for development capital. The [Page 494] Minister said that he knew about the Bank, but he came to talk not to the Bank but to the United States Government. Mr. Fetter explained that because of the position taken by the United States Government in its lending policy, he only wanted to emphasize that the Minister, in fairness to himself, should keep in mind the importance of the Bank to any loan discussions. Mr. Campos stated that Brazil had no objection in principle to dealing with the International Bank but that it did have some misgivings as to (1) the interest it might be charged by the Bank, (2) whether the Bank could lend money in time for the contemplated development program, and (3) whether certain imponderables might not work against Brazil’s receiving the lean it required.

On the subject of private capital, the Minister stated that the Government was perfectly willing to consider private loans but doubted whether any could be had on interest and other conditions that would be acceptable to his Government.

The Minister in conclusion stated that Brazil had been led to believe that immediately after the war would be a most favorable time to undertake its development program, and that conversations with industrialists in this country had tended to bear out this imprecision. He said that in the course of his official discussions it seemed that Brazil, however, had been mistaken. To the “new” lending policy of the United States, representing what he considered a departure from the principles expressed in the Resolutions signed at Mexico City,11 his Government, of course, had no objection, but he stated that he would have to make this new policy clear to the Brazilian Government so that it could re-orient its own economic foreign policy. His Government had hoped, lie said, to be able to carry out its development program with American capital, and purchasing only American equipment. This, lie felt, under the “new” policy, to be impossible, Mr. Fetter objected to the description of the U.S. lending policy as “new” and said that in fact for the pas’ two years the role of the International Bank had been a consistently important factor in our lending policy.

Mr. Braddock stated that he hoped that the Minister would understand that if it should not be possible for the United States Government to assist the Brazilian Government in exactly the way that the latter had desired, this was not due at all to any lack of willingness on our part or wish to help, but rather because of the multitude of demands with which this Government was confronted, which as a national policy it had decided to meet by using as far as possible the instrumentality of the International Bank.

  1. Frank W. Fetter, Director of the Office of Financial and Development Policy.
  2. William Scanlan, Assistant Chief of the Division of Foreign Economic Development.
  3. For texts of the resolutions, see Pan American Union, Final Act of the Inter-American Conference on Problems of War and Peace, Mexico City, February–March, 1945 (Washington, 1945).