832.6363/10–2446: Telegram

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

us urgent

1386. Embtel 1798, Oct 24. Granting of refinery concession Drault Ernanny Sampaio considered out of consonance with spirit of economic charter of the Americas (Chapultepec) and new Braz constitution especially since bids and negotiation for concessions carried out under laws precluding non-Braz participation.

Even accepting concessions as irremediable fait accompli Dept feels strongly that transfer Sampaio concession to São Paulo and doubling capacities both refineries would automatically preclude any future participation of American Cos in refining regardless of law and would [Page 554]effectively vitiate intent new constitution since combined refining capacities approximately equal Braz consumption all products.

Emb should bring above to attention appropriate Braz authorities. Emb may further wish to point out that exclusive control refining operations by two Braz groups places marketing Cos in position of being completely dependent upon refiners with possible prejudice freedom of operation and consequent damage of their market position.