The Brazilian Chargé ( Lobo ) to the Secretary of State

Excellency: I have the honor to inform you that this Embassy has been advised by the Ministry of Foreign Relations that the negotiations to ensure an adequate supply of Argentine wheat for Brazil are now at a standstill.

Although the conclusion of an agreement was expected until a few days ago, it appears that the recent announcement in regard to shipment of American tires to that country has produced an unfavorable effect on the position of the Brazilian Government in the matter of these negotiations, in view of the fact that the exportation of tires was made without the consultation called for by the tripartite agreement, the United States Government having declined furthermore the suggestion to delay the actual shipment for a few days, and considering also the absence of any clause conditioning the supply of tires to specific commitments for the export of wheat.
It is felt in Brazil that as a result of the transaction, the Argentine Government, left free to strike the best bargain among prospective buyers, has shown considerable less interest in carrying out the negotiations.
Because of these developments the Brazilian Government is unable to confirm the viewpoint according to which the failure to consult with the Brazilian Government in advance of the transaction could be justified on the ground that such action aimed precisely at enhancing the opportunities for Brazil and other countries to obtain larger imports of wheat. The Brazilian Government does not thereby consider that there is anything objectionable per se in the exportation of tires or of any road equipment that may contribute to relieve a world shortage of a basic foodstuff; but it feels that the same transaction might have been better timed with its negotiations, without hindrance to the aim of relieving world shortage, while involving conditions more directly helpful to the countries interested in the supply of Argentine wheat.
The maintenance of a sufficient level of wheat imports is a matter of grave concern to the Brazilian Government. The normal consumption of wheat bread in Brazil (26.5 kilograms per capita yearly) can be regarded as a minimum dietary requirement, which, contrarily to that of other countries that enjoy higher nutrition standards, cannot be further compressed without reducing large masses of population dangerously close to the subsistence level. This fact, in our view, should be given special weight in the determination and measurement of minimum import quotas.
The use of substitute foods has been made particularly difficult by the liquidation of our manioc flour (farinha de raspa) industry, subsequently to the Brazilian-Argentine agreement signed in 1940, which aimed at eliminating manioc and rice mixtures in the bread consumed in Brazil and of chicory and sugar in the coffee consumed in Argentina, both of which practices curtailed artificially consumption and imports, restricted the international division of labour and created a permanent source of commercial friction between the two countries. If we are to reestablish the large scale utilization of manioc flour, it would be necessary to guarantee a long lease on life to the manioc industry, through the erection of trade barriers and extension of subsidies, measures which would be particularly unfortunate at a time when a generous drive for relaxation of trade barriers is being conducted.
Other possible substitutes, such as rye and barley, are not produced in any significant amounts and the utilization of corn would only aggravate its shortage for cattle feeding. The alternative of an all-out effort to increase local wheat production, besides being essentially a long-run solution, would result in an uneconomical diversion of resources, and in the strengthening of the tendency towards nationalistic self-sufficiency, which would not consult either the interests of the wheat producing countries or our own.
It thus appears that in the Brazilian case there is no possibility, in the short run, either of compressing consumption or of lessening the dependence upon imports.
It would be, therefore, of great help if Your Excellency could advise us whether the Brazilian Government can be assured of the cooperation of the Government of the United States as regards the establishment and implementation of quotas for the supply of wheat to Brazil, particularly in view of the fact that normal requirements in that country exceed minimum standards of nutrition by a very thin margin.

I have the honor to renew to Your Excellency the assurances of my highest consideration.

Fernando Lobo