800.5018/4–846
The Acting Chief of the Division of Brazilian Affairs (Braddock) to the Chargé in Brazil (Daniels)
Dear Paul: The wheat-rubber discussions have now been going on for some time and not much prospect of a really satisfactory solution is yet in sight. The terrific tightness of wheat is the major obstacle. The United States is far behind on its commitments to Europe, and the men who are responsible for determining where our wheat shall go just don’t have nearly enough supplies with which to do the job. Late comers and particularly those who do not normally depend on the United States for their wheat have practically no chance to get anything here. Mr. Braden has gone to bat in the most vigorous way to try to get emergency shipments of wheat or flour for Brazil, and just can’t get to first base. Rubber does not seem to offer too good a means for coaxing wheat out of Argentina and the Brazilians, in their desperation to get wheat, have apparently not understood how weak their rubber bargaining position is. It is impossible for any one to hold back the tide of Far Eastern rubber that is now coming on the market. All countries, including Argentina, will be getting more rubber and at much less price than they have been for years.
For our part we are committed for the second quarter, at least, to meeting the CRC allocations of the American republics at the same price that we ourselves have to pay for Far Eastern rubber. [Page 127] To continue to sell them at 60 cents a pound when they know we are buying in the East at approximately 22 cents would bring down on our heads a storm of justified criticism; moreover, it would make it impossible for us to keep these republics out of direct participation in the Far Eastern market as our competitors. This we want to avoid since their demands, though small, could easily result in forcing up the price at which we can buy rubber for our own needs. It is possible that the Argentines are still unaware of our policy to furnish all the American republics, beginning with the second quarter, with the amount of their rubber allocations at the cost to us of Far Eastern rubber, but if Brazil were to trade on this ignorance, it could only have an unfortunate reaction when the Argentines learned that they had been taken in. In such case Brazil might really have something to worry about regarding her future wheat supply. Moreover, as pointed out in our telegram to you of April 5, no. 459, the United States could not be a party, even a silent one, to such a misrepresentation.
Some of this appears in the note which we sent to the Brazilian Embassy in reply to their last rubber-wheat proposal, referred to in the telegram in question, and other aspects we have discussed very frankly with García of the Brazilian Embassy. I have told him also, in urging Brazil’s agreement to cancellation of the Tripartite Agreement, that this agreement could not possibly be used as a permanent lever for prying wheat out of Argentina, since if there were no other means of making the Argentina rubber allocation effective, the CRC could simply change the source of the allocation. The Far Eastern producers are not in the least bound by the Tripartite Agreement.
On the other side of the picture, there is no doubt at all that if, on the one hand, Argentina is entitled to her rubber allocation, Brazil is no less entitled to her allocation* of wheat, and it is incumbent on us and on the members of the Combined Food Board to do our utmost to see that Brazil’s wheat allocations are filled.
It seemed to me that you might be glad to have a little more of the Department’s thinking on these questions than is possible to convey in telegrams bearing on this or that specific proposal.
Sincerely yours,
- Allocation still tentative; no allocations have been finally determined and can’t be until Argentina and her possibilities are factors that can be counted on. [Footnote in the original.]↩