832.6363/10–1046: Telegram

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


1341. Embtel 1736, Oct 10.92 Suggestions to committee via Garner93 on proposed Braz petroleum law should be in form basic principles rather than specific provisions. Dept submits following as principles basic to progressive petroleum legislation:

Equality of access to exploration exploitation rights and market for products thereof irrespective nationality capital.
Freedom disposal proceeds exploitation; due regard however national requirements.
Concession areas of sufficient size make feasible expenditure sums necessary adequate investigation. Concessions could, perhaps should, vary in size according relative difficulty expense development.
Concession life should permit sufficient time completion each phase without undue burden concessionaire provided due diligence exercised. Life each phase might vary according locale.
Equitable production royalties providing maximum possible benefit grantor while insuring return concessionaire commensurate risk and investment.

Suggestions: Where provisions being considered stimulation prompt development or discouragement holding inactive acreage Dept recommends consideration methods forced reduction acreage at stated periods or progressive increase rentals areas retained or both. Also as stimulus development customary grant duty exemption necessary imports during exploration development stages.

Actual provisions of law presumably will be result of discussions and study between grantor and prospective grantees as to equity and maximum feasible conditions. Dept not inclined suggest officially any specific terms but willing that petroleum Attaché furnish advice and assistance informally if requested.

  1. Not printed.
  2. Of the firm of De Golyer and MacNaughton.