The Brazilian Ambassador ( Martins ) to the Secretary of State
Excellency: Following instructions of my Government, I have the honor to solicit the kind attention of the United States Government to the baffling situation in which is found a considerable segment of the Brazilian economy because of the maintenance in this country of controls bearing heavily on coffee import prices.
- As your Excellency is well aware the Brazilian economy still rests in large part upon coffee, despite the efforts that lately have been made towards industrialization as well as diversification of agricultural production. However, coffee still remains the main concern of the Brazilian Government not only because coffee prices have a [Page 506] large bearing on the foreign exchange surplus necessary to meet international obligations but also because they have been hit with particular severity by the depression.
- Unless prices obtained by the exporters and producers are allowed a reasonable increase, the exporting countries, chiefly Brazil, will find that the deadly price schism between industrial imports and agricultural exports that prevailed during the depression will, in this prosperity period, be replaced by an equally painful situation namely a squeeze between rigid selling prices (stabilized since 1941) and increased costs of production.
- The impact of World War II, bringing about a closer economic cooperation between the two countries, has also served the purpose of alleviating our dependence, for both external obligations’ settlements and monetary stabilization, upon the returns afforded by the exports of that commodity. Yet, these wartime changes in the structure of the trade between the United States and Brazil are in their final process of liquidation with the gradual termination of the agreements entered into aiming at the purchases of strategic, critical, and essential materials.
- Therefore, to fill the gap in part already left by the disappearance of our wartime exports to this market we have to undo the modification in the composition of our war trade with the United States by giving more emphasis to exports that normally figure in the balance of trade between the two countries. This means, in the first place, exports of coffee.
- However, I beg your Excellency’s kind attention to the tremendous difficulties which we are meeting with in the process of undoing the modifications in the composition of the trade referred to above, due to the fact that the purchasing power placed in our hands as a result of the abnormal purchases made by the United States in my country has not resulted in increased ability to import from this country the bare essentials so badly needed to maintain our economy and much less to prevent inflation.
- In fact, we had to manage with obsolete and worn out transportation equipment, turn to an uneconomic use of charcoal because of lack of coal and fuel, as well as provide our farmers with the most primitive tools with which to till their lands, having into consideration that only lately we succeeded in placing orders in this country for modern agricultural machinery. Furthermore, the machinery, equipment and semi-industrialized materials that we were able to procure, did not even approach the indispensable minimum to avoid the rise in our agricultural production costs.
- In these circumstances, the Brazilian Government is now facing the task of having to attend to a substantial increase in imports of both [Page 507] producers and consumers durable goods unobtainable in sufficient quantities during the war, and which will be procured at prices far beyond the levels prevailing even in the year 1945. For this purpose, we are confronted with two alternatives. Either we spend the dollar exchanges and gold reserves so painfully accumulated, in which case practically nothing would be left to take care of our international obligations,34 namely the services of the external debt, Export-Import Bank loans and commitments made in virtue of the Bretton Woods agreements,35 or we shall embark upon an export program that might provide the necessary funds to cover the deferred imports.
- Upon studying carefully these two alternatives, my Government has found advisable to follow the second alternative. To start with, however, we have to give our best attention to the most important of our markets, that is, the United States import market, inasmuch as the postwar reconstruction going on practically everywhere in Europe and Asia will close to my country, for a longer period of time than anticipated, the other outlets normally opened to our exports in peace time.
- Be it added, however, that the freezing of coffee import prices in the United States for more than four years and at a level that, for a long time, has ceased to afford producers in Brazil a reasonable margin of profit, has become a problem of capital importance the solution of which cannot possibly be further postponed. The political stability so necessary to a new Government might be endangered in case fundamental economic problems such as the one hereto referred are left unsolved.
- Therefore, I shall be grateful if Your Excellency will be so kind as to communicate to the other competent authorities of your Government the request of the Brazilian Government hereby made to the effect that a more adequate plan envisaging either the decontrol of coffee or a reasonable increase of present prices so as to cover the production costs of that commodity, as well as to assure compensating returns to producers.
- I am authorized to assure Your Excellency that, once a decision along these lines is agreed upon, the Government of Brazil is ready to cooperate to the full extent with the United States Government towards avoiding a runaway in prices that might come to endanger both the normal supply of this market and the desired degree of stabilization as sought for by your Government in laying down its price policies.
I avail myself [etc.]