103.9151/3–1947
The Acting Secretary of State to the Embassy in Brazil
No. 590
The Acting Secretary of State refers to the Department’s telegram No. 287 of March 1371 and to previous communications regarding the Banco de Credito da Borracha.
Representatives of the Department and of the Rubber Development Corporation met with Mr. Bouças on February 18 to discuss the [Page 483] disposal of the Rubber Development Corporation stock in the Bank. No agreement was reached. Mr. Bouças pointed out that there is no contract or obligation for the Brazilian Government to repurchase Rubber Development Corporation stock and contended that the United States should hold the stock for 20 years, representing the life of the Bank, rather than basing the date of withdrawal on the life of the Rubber Development Corporation or on the termination of the rubber agreement.
If the reasons for the organization of the Bank and the discussions concerning repurchase of the Rubber Development Corporation stock which were held prior to the Bank’s organization both are disregarded, and if the written documents concerning the Bank are taken as the sole evidence in the case, there is some support (although as indicated below, such support is considered weak) to Mr. Bouças’ contention that continued participation by the United States for 20 years is implied. For example, in the Decree Law which was forwarded as an attachment to the Embassy’s despatch No. 7936 of July 14, 1942,72 Articled gives the duration of the Bank as 20 years from the date of installation, and Articles 1, 5, and 6 mention Rubber Reserve and the American Directors of the Bank. Similarly, in the statutes of the Bank, which were forwarded as an attachment to the Embassy’s despatch No. 8139 of August 10, 1942,72 Article 3 gives the duration of the Bank as 20 years from the date of organization, and Articles 5, 8, 9, and 20 mention the Rubber Development Corporation or its representatives on the directorate of the Bank. Nowhere in either document is there any mention of the withdrawal of the American interest from the Bank, and it is difficult to argue that the paragraphs dealing with American participation are separable from the equally important paragraphs concerning the duration of the Bank.
It has never been contended that there was a written obligation of the Brazilian Government to repurchase the Rubber Development Corporation stock. However, it is considered from the viewpoint of the United States that the Brazilian Government should repurchase the stock in view of the fact that the subscription by the Rubber Development Corporation was for the sole purpose of implementing the rubber program, as contemplated in the agreement of March 3, 194273 (as extended to June 30, 1947). This agreement was entered into by both parties only for the purposes of the United Nations and hemispheric defense; consequently both the United States and Brazil benefited from this cooperative undertaking.
A recent interview with the representatives of the United States [Page 484] Government who arranged for participation by the Rubber Development Corporation in the Bank revealed that the question as to whether or not the Brazilian Government would purchase the Rubber Development Corporation stock was discussed at length at that time. The representatives stated that no agreement could be reached on this point, and it was recognized that the question would have to be left for subsequent determination. However, it is significant that provision was made at that time in the statutes governing the Bank for withdrawal of the Rubber Development Corporation from the Bank by the sale of its stock.
The Department and the Rubber Development Corporation consider that neither Mr. Bouças nor the Commission for the Control of the Washington Agreements is the proper party to negotiate for disposal of the stock, since, for the reasons given above, the problem becomes purely a policy and political question for settlement between the Embassy and the Foreign Office. Apparently previous messages from the Embassy to the Foreign Office and the Minister of Finance have not been answered except indirectly by the suggestion of the Commission for the Control of the Washington Agreements that the matter be discussed with Mr. Bouças. This is not considered satisfactory, and the Embassy is instructed again to call the matter to the attention of the Foreign Office and to insist upon immediate discussion of arrangements for disposal of the stock.
. . . . . . .