811.5017/6–2946: Telegram

The Acting Secretary of State to the Ambassador in Brazil (Pawley)

us urgent

888. Following text coffee understanding between Mr. Braden and Brazilian Ambassador mailed Emb June 26:

“In order to provide a sound basis for international trade in coffee and to prevent the development of conditions which might lead to an unbalanced situation in such trade in the future, it is understood that:

  • “1. The Government of the United States will take immediate steps to increase green coffee price ceilings by 2 cents per pound while still maintaining in effect the present coffee subsidy of 3 cents per pound.
  • “2. If the aforementioned subsidy should be withdrawn in whole or in part while price control of coffee in the United States is still in effect, ceiling prices on coffee will be correspondingly adjusted.
  • “3. The Government of Brazil will not increase its minimum export prices or its export taxes on coffee above present levels.
  • “4. The Government of Brazil will not alter its exchange rates in such a way as to increase the cost of coffee to the buyer or otherwise restrict the flow of coffee.
  • “5. Should such action be necessary to assure an adequate flow of coffee under this arrangement, the Government of Brazil, upon the request of the Government of the United States, will place coffee on the market at the prices provided for in this arrangement up to a total of 3,000,000 bags. The Government of Brazil may be called upon to supply up to 500,000 bags of such coffee per month. The grades of this coffee will range from Santos 2s to Santos 5s, inclusive, the percentage of each grade to approximate the proportion of such grades exported to the United States during 1941 and the cup quality of the coffee to be soft or better.
  • “6. The Government of Brazil will, in general refrain from taking any action likely to encourage withholding of coffee from the market.
  • “7. This arrangement will endure until March 31, 1947, or so long as coffee is subject to price control in the United States, whichever is the shorter period.”

Trade here and govt agencies disturbed because offerings above prices importers may legitimately pay. Imperative upgrading and evasion price regulations not develop under new arrangement.

Brazilian Emb has been informed our intention ask immediate sale 500,000 bags coffee unless satisfactory volume offerings made by private trade prices importers can legally pay.

Emb has advised Brazilian Finance Minister intends inform Brazilian exporters details understanding with U.S. We have suggested Minister include statement Govt definitely plans take action assure satisfactory volume trade within ceiling prices should this be necessary. Brazilian Emb expressed view trade will be established satisfactory price basis once fate OPA determined.

You are requested take any appropriate action stress desirability establishing trade legitimate price basis and to express our intention to ask immediate sale Govt coffee should this be necessary.

Should coffee pledged as collateral for loans be sold imperative all steps necessary be taken to protect investors’ interest in collateral.

Dept will inform Emb should it decide ask for Govt coffee. Dept would appreciate Embs advice whether such request should be made immediately.