832.6363/10–2446: Telegram

The Chargé in Brazil (Daniels) to the Secretary of State

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1798. Refinery concessions have been granted by National Petroleum Council to Drault Ernanny and Sampaio with capacity 8,000 to 10,000 barrels per day each, both concessions for Bio de Janeiro area, no concessions for São Paulo area having been yet approved. It had [Page 553]been naturally supposed by interested persons and concerns here that no further concessions would be granted pending approval proposed petroleum legislation, since otherwise equal opportunity participate in refining would be denied foreign concerns.

However, information now received to effect that National Petroleum Council considering seriously granting application of Sampaio to move concession already granted for Rio to São Paulo area, and at same time doubling authorized capacity. If approved, this would pretty well pre-empt major refining possibilities of Brazil and have effect of excluding American concerns from participation refining business in these major areas which serve 85 percent Brazil’s needs.

Standard Oil has pointed out to Embassy seriousness of action apparently contemplated by Petroleum Council, since they have been contemplating possibility of establishing refinery as well as engaging in drilling. Same observations would apply presumably to other American concerns interested in competing for refinery business.

Embassy feels that approval now by Petroleum Council to expand refinery concessions in São Paulo and Rio as well would be contrary to announced policy of Brazilian Government regarding foreign capital participation and not consistent with objectives of new constitution as well as proposed petroleum legislation. In view these important considerations, does Department wish Embassy to bring matter to attention Brazilian Government in hope forestalling action by Petroleum Council prejudicial American interests? Telegraph urgently because Petroleum Council apparently giving preferred attention Sampaio application.

Daniels