811.516 Export-Import Bank/12–1047

The Chief of the Division of Brazilian Affairs ( Dawson ) to the Counselor of Embassy for Economic Affairs in Brazil ( Brooks )

confidential

Dear Clarence: There finally reached me late yesterday afternoon the memorandum31 which FN was supposed to prepare on Souza Costa’s first visit to Thorp on November 18. Only one copy was apparently available after distribution in the economic shop although I had been promised that one would go to you immediately. Consequently, [Page 453] the girls in this office have had to go through the bad task of copying the whole kit and caboodle. I hope you are duly grateful.

You will notice that the memorandum also covers three talks which Corliss32 had with Bulhões33 as follow-ups to Souza Costa’s approach and that the third annex is a written explanation by Bulhões of what Souza Costa was after. From a perusal of all of the papers I think it is quite clear that Souza Costa was purely on a fishing expedition and that the ground shifted.

FN will probably be equally long in getting out any memo on Souza Costa’s final conversation with Thorp yesterday and having it O.K.’d by the latter so I will try to give you informally the gist of what was said.

First, I should mention that Souza Costa, accompanied by Martins and Bulhões, did go over to see Martin of the Eximbank several days ago. While we have no memorandum of the conversation and were not present, we understand that Martin made no commitments of any nature and that the talk was in very general terms.

With Thorp, Souza Costa explained that he had been to the Bank and that it was his understanding that everything would depend upon the Department’s recommendations. Thorp patiently set Souza Costa straight on the present structure of the Bank’s Board and where responsibilities for loan policy lay. When Souza Costa asked what the Department’s reaction to his request for a loan was, Thorp said that it did not have sufficient data on which to judge, pointing out that detailed information on Brazil’s exchange position, trade and balance of payments for recent months on such a basis as to see trends with projections for the future were not on hand. He courteously said that when Souza Costa got these from Brazil, we would be glad to look them over. He also enquired whether Brazil had done everything possible to restrict its non-essential imports from the United States to improve its dollar position.

Thorp brought up the fact that a $50,000,000 credit for the Brazilian Government had been granted by the Eximbank last year subject to approval of individual projects but that the Brazilian Government had withdrawn the request. Souza Costa explained that he understood that the loan in question had been for purchase of equipment in the United States in connection with a transportation program but that he supposed it had been abandoned “for budgetary reasons”. The loan he was requesting was of an entirely different nature, to help solve [Page 454] Brazil’s exchange difficulties and would be to the Bank of Brazil (this was the first time, so far as I have been able to discover, that the important point that the Bank of Brazil, not the Government, wanted the loan had been mentioned!; with this the case, it is all the more inconceivable that Vieira Machado34 should know nothing of the “Souza Costa angle”, as indicated in your telegram no. 1665,35 if Souza Costa really had any authority).

Thorp then asked what Brazil was going to do about entering into the International Monetary Fund and indicated that failure to do so might be an obstacle to granting a loan even if the need therefor were shown. Souza Costa said that, having been at Bretton Woods, he was naturally strongly in favor of Brazil’s taking full part in the Fund but that there was much opposition to it in Brazil on the grounds that the Government could not afford it and would be too restricted by the Fund limitations in view of its unsettled exchange state. He then said that he would be very much helped in his efforts to get action on the Fund if he could tell his colleagues back in Brazil that a loan would be forthcoming if Brazil fixed itself up with the Fund. Thorp corrected this interpretation rapidly and reiterated what he had said to start the discussion on this point.

An interesting thing in connection with all of this was that Martins never opened his yap once during the entire hour-long meeting. I am afraid that Souza Costa left in a rather disgruntled frame of mind, although he was pleasant enough in his urbane way, but that cannot be helped. One cannot give a man $100,000,000 to toy with just to keep him happy. Souza Costa never was able to see Lovett, who has been busy as a bird dog not only with his regular duties as Acting Secretary but in endless hearings on the Hill. I explained all of this carefully to Souza Costa and Martins and pointed out that Thorp was the top economic man to whom Lovett would refer matters such as those in which Souza Costa was interested. After all, he did see practically everyone else in the Government who would have anything conceivably to do with his quest. He said goodbye to Armour today and is off for New York tomorrow preparatory to enplaning for Brazil on Sunday.

I suppose David and Norrie36 will be interested in this thumbnail sketch.

Best to you,

Sincerely, if hurriedly,

Allan Dawson
  1. Not printed.
  2. James C. Corliss, Assistant Chief, Division of Financial Affairs.
  3. Octavio Bulhões, official of the Brazilian Finance Ministry.
  4. Acting Minister of Finance in Brazil.
  5. Not printed.
  6. Presumably David McK. Key, Counselor of Embassy, and Norris S. Haselton, First Secretary of Embassy.