Memorandum by Mr. Richard F. O’Toole of the Division of Brazilian Affairs


I discussed with Mr. R. K. West, of Export-Import Bank, the above-reported visit of Ambassador Martins and learned from Mr. West that the Ambassador was accompanied on his visit by Messrs. Mello19 and Garcia of the Embassy staff and that the conversation was with William McChesney Martin, President and Chairman of the Board and Mr. West.

The difficulty over the Itabira transaction was brought up during the conversation and Mr. West mentioned the refusal of the Minister of Finance to advance further monies to complete the project and told the Ambassador that he would like to see this question settled, not only in the interest of good relations between the Brazilian Government [Page 500] and the Bank, but to insure that no question over fulfillment of obligations could arise when the new loan contract is presented to the Bank’s Board of Directors. Ambassador Martins took umbrage at this statement and remarked that the United States Government did not always fulfill its own obligations alleging, by way of illustration, that during the war Brazil had leased a number of ships to the United States Government at a dollar a year, that many of these ships had been sunk but that the United States Government had neither replaced them nor reimbursed Brazil for their value. The Ambassador then added that he could not sit by and listen to criticism of Brazil’s Minister of Finance without objecting.

Mr. West observed to me that both the statements and attitude of the Ambassador were so preposterous that he made no attempt to answer him.

At this point Garcia of the Embassy referred to a telegram from the Finance Minister to Macedo Soares (while the latter was in Washington) in which the Finance Minister had stated, substantially, that Brazil would not fail to comply with her obligations under the Itabira contract but without mentioning when and how compliance would be made. A copy of this telegram had been given to the Export-Import Bank, to which fact Garcia then alluded and asked whether this wasn’t sufficient assurance for the Bank. Mr. West replied that it was not sufficient because it did not cover the equally important question as to the amounts and time of payments since stoppage of the work, through lack of funds, very materially increases costs. “In other words, if the Brazilian Government does not furnish written assurances along the lines indicated then the current loan contract will not be signed?”, asked Garcia. Mr. West told me that Mr. Martin thereupon intervened in the matter and said that business matters are not handled in such a manner and that if Brazil did not wish to proceed with its obligation to finance the Itabira project the Bank should be so advised and added that the responsibility for use of the Bank’s funds before Congress, was his and that while he did not wish to see the new loan agreement delayed there could be no final action on it until this Itabira matter had been properly settled.

  1. Edgard de Mello, Commercial Counselor of the Brazilian Embassy.