832.6363/12–445: Telegram

The Ambassador in Brazil (Berle) to the Secretary of State

3604. Embassy has been working on Deptel 2693, November 30, 7 p.m. referring to oil situation. Since entire case is rested on Economic Charter of Americas we shall at once be asked whether Dept. is prepared to implement article II of Charter which provides for equal access to commerce and raw materials of the earth, and also article IV which provides for prompt action by agreement between govts to prevent cartels or other private commercial arrangements from obstructing international competition, stifling competition etc., so as to arrive at competitive prices for consumers.

Point is that rule that capital should freely invest in refining industry is meaningless unless refining industry has free access to supply of raw material, otherwise oil companies could simply decline to provide the material for any refinery they did not own or control.

In our judgment this point is certain to be raised. Guilherme Guinle,70 well known to Dept, told me last night that about week ago Anderson of Jersey Standard had visited him suggesting that Guinle and Ypiranga should tie up with Standard, Shell-Mex, Texas, Atlantic group and offering to open credit of 8 million dollars should this be done. Incautiously, Anderson added that his head office had made representations to Dept which Jersey Standard thought would prevent any licensing of refineries at this time. Guinle thereupon sent to Petroleum Council to ask if this were so and reply appears to have been that Brazilian Govt would not take such interference kindly.

Position that Brazil cannot grant concession for refineries because the laws do not comply with article VI of Economic Charter (which I personally think does not follow) will immediately be countered with request whether we mean to live up to articles II and IV. In this respect Brazilian Govt would not find it difficult to secure support of both Mex and Venezuelan Govts whose interest in marketing here to refineries has likewise been reported.

We are of course encouraging liberalization of laws and have made [Page 536]good progress along this line, already having received indications that if concessions are granted they will be subject to any change in such laws. This will satisfy (Nacional?) of situation but of course will not satisfy Jersey Standard group which would like to block any concessions. According to its statement to us it would prefer no refining industry here.

This matter is now subject of general talk throughout Rio and undoubtedly will be in newspapers either here or in US at any time. If representations were made at FonOff they would undoubtedly decline to deal with matter until new administration comes in, though they would probably sympathize with liberalization of laws.

Time for receiving concession applications expires December 6; probably no decisions thereon for about 10 days thereafter if then, such decision being permissive but not mandatory.

Berle
  1. Presumably the president of Compania Siderurgica Nacional.