The Chargé in Brazil (Daniels) to the Secretary of State
[Received 9:20 p.m.]
845. This afternoon in the course of conversation with Gracie82 I said I wished to consult him in regard to a matter of which I was somewhat uncertain as to how to proceed. I said I understood that consideration was currently being given by the competent Brazilian authorities to the possibility of revising Brazilian legislative and constitutional provisions to permit participation of foreign capital in the petroleum industry, both refining and production. I asked Gracie if he thought it would be appropriate for me to express to the Foreign Office the official views of the US Government in regard to this important matter, bearing in mind our natural desire to avoid taking any step which might be construed as intervening in a domestic matter or making representations which might cause embarrassment. I added that, as a matter of fact, I assumed our official views were already quite well understood, and in fact had been stated in a general way in the Embassy’s note No. 349 of December 12, 1945 to the Foreign Office (see Embdespatch No. 4073 of January 23, 1946).83 Gracie recalled that note, and I pointed out that our views were based on the recommendations of the Mexico City Conference last year, specifically the Act of Chapultepec.84 As he well knew, I added, our views favored the participation of private foreign capital in the petroleum industry refining as well as production, but that I was uncertain as to how far to proceed in presenting those views officially to the Brazilian Government or whether they would be welcome.
Gracie suggested that I give him, personally and confidentially, a memorandum setting forth our views on this subject. He said that after consultation with Foreign Minister João Neves he could determine what use could best be made of it, if any, bearing in mind the obvious desirability of avoiding political embarrassment. I said that personally I would be delighted to give him such a memo, but even on the proposed personal and confidential basis felt it would be necessary for me to have prior authorization from the Department. Any such memo would not need to go into great detail in regard to the various considerations involved, most of which are by now fairly well known to the Brazilian authorities, but would rather be a summary of the [Page 544]major considerations supporting our position favoring the participation of foreign capital in the oil industry; and its use and distribution would be under control of Gracie and Foreign Office to avoid any embarrassment to the Brazilian Government or the Department.
I think such a memo handed Gracie at this time would be useful, and request telegraphic instructions whether to proceed along this line.