The Ambassador in Brazil (Berle) to the Secretary of State
[Received November 18—12:16 a, m.]
3449. With further reference to conversation described in Embtel 3448, November 17,62 certain additional matters were mentioned and agreement reached.[Page 528]
First, that Dept. would probably wish to reconsider Deptel 2599, November 10 and particularly paragraphs intimating withdrawal of U.S.–Brazil economic cooperation if oil companies’ desires were not met. All present agreed with me that any such policy would be impossible in first place and threat of it disastrous. Embassy suggests that Dept. cancel this telegram of record.
Second, all hands agreed that Brazilian refining industry was sure to come within relatively short time either because it is presently profitable now, as Gulf’s representative unofficially stated, or because pressure of growing market and need for meeting foreign exchange position will rapidly create both economic base and economic pressure. Standard and Atlantic stated that they prefer not to go into refining business here but recognize that it is sure to come. They and Texas took position that they hoped Brazilian refining would not be so managed as to freeze them out of market and Standard representative indicated personally that he could make arrangements not unlike those which Gulf appears to have made.
Third, all agreed that two refineries Brazilians are proposing to build would supply only minority of market in existence at time of their completion, leaving plenty of room for sales by others. I stated that we had consistently opposed and would continue to oppose any policy building artificial fences around these or any other refineries creating artificial monopoly freezing out other Americans or Brazilians or others from access to market on equal terms.
Fourth, all hands agreed that best thing to do was to let situation go forward as at present but to ask that Petroleum Council so handle matters that further entries into refining business and market would not be precluded. All expressed satisfaction with this disposition.
Fifth, I stated that policy of Government had been and now was to strengthen Brazilian industry in partnership with Americans where they could contribute as they could in this case; that Ave sought not monopoly but fair competitive arrangements so that prices should be reasonable and service adequate on economic basis and also so that Brazil and Brazilians should be relieved from pressure of paying out foreign exchange for services they could perform in Brazil on economic basis. All appeared to assent to this definition of policy.
Therewith we propose to leave it for time being. Clark63 who handles contact with Petroleum Council is expounding this point of view to head of the Council.
In addition to foregoing, all stated that they had no intention of handling their arrangements so as to squeeze out anyone else or eliminate [Page 529]competition. They also agreed that we were under obligation to do nothing which would shut off access to market by other countries particularly Britain.