811.5017/5–646: Telegram

The Chargé in Brazil (Daniels) to the Secretary of State


835. At the request of Finance Minister Vidigal, I called at his office accompanied by Ovidio de Abreu, President of the National Coffee Department. Minister Vidigal said he wished to discuss the serious coffee situation in Brazil. He said he spoke officially and not solely as spokesman for coffee-producing interests. He referred to the [Page 511] greatly increased cost of production of coffee in recent years and today which threatens the coffee producers with economic disaster under present ceiling prices. The problem is aggravated by the fact that not only had all costs going into coffee production risen but at the same time the general cost of living had greatly increased so that general living expenses of producers were much higher at the very time that the increased costs of production made their income less. He strongly urged that immediate consideration be given to increasing ceiling prices to five cents, that is, two cents above present subsidized price.

In the course of the discussion, reference was made to the negotiations of last October-November providing for the sale of DNC stocks under certain conditions to smooth the transition to a free coffee market. Without expressing himself in definite or final terms, Minister Vidigal expressed objection to any such plans on grounds that coffee producers would bitterly attack the Government (a) because sales of DNC coffee would lower the market price of their coffee and (b) because sales of DNC coffee would be made at prices lower than might otherwise be obtained for it.

Needless to say I mentioned to Vidigal, the same as to many other people in the past, that the major difficulty confronting the US Government was holding the line against inflation, and that any increase of ceilings on certain articles made it more difficult to control inflationary tendencies in general. Vidigal seemed well-informed of this important consideration but again stressed the equally important and perhaps more serious predicament of the coffee producer and the interest of the Brazilian Government in the matter.

Both Vidigal and Abreu expressed desire to discuss coffee problem further in hope of reaching early solution. Embassy has made no proposals in absence instructions from Department. Embassy recommends that serious consideration be given proposal of Minister Vidigal for five cent increase ceiling price (which would make possible elimination subsidies) if it is not found practicable to remove price control altogether.