Memorandum by the Acting Chief of the Division of Brazilian Affairs (Braddock) to the Assistant Secretary of State for American Republic Affairs (Braden)

The prospects for Brazil’s getting the loan it has requested are not at all bright, I gathered in a talk this afternoon with Mr. Fetter, Director of the Department’s Office of Financial and Development Policy. I had called on him to find out the current status of negotiations, and to get his reaction to the suggestion made to Mr. Braden by Ambassador Martins14 yesterday that Brazil be granted a loan sufficient to finance the first two years of its economic program, or $150 million.

Mr. Fetter made the following observations on the subject:

The Directors of the Export-Import Bank feel that before they can seriously consider any new loan to Brazil, that country should carry out the terms of the Export-Import Bank loan for the Vale do Rio Doce Company. The Government has apparently declined to complete the railroad specified in that loan contract and the Directors of the Bank think it almost scandalous that Brazil should now be requesting more money for railroads when it has not even finished building this one railroad.
The Bank’s fund for lending is now down to about $200 million, with so many applications pending that it would be impossible at best to consider Brazil for any large amount. While it is true that the Bank is requesting an additional one and a quarter billions of dollars from Congress this request, according to Mr. Fetter, is not going to be pushed.
The economic divisions of the Department feel that while Brazil’s development program is desirable and deserving assistance, it has not the same claim of urgency that several of the war-devastated countries of Europe have.
It would be very difficult for the Bank to justify a loan to Brazil as long as Brazil has large gold holdings in this country which it is apparently unwilling to spend. Mr. Fetter said that Brazil’s gold exchange, including sterling which was not presently usable, amounted to about $750 million.

For the foregoing reasons, Mr. Fetter thought it unlikely that Brazil would be able to get even as much as $50 million, at least unless and until the Export-Import Bank funds were replenished.

Daniel M. Braddock
  1. The Brazillian Ambassador, Carlos Martins.