The Acting Secretary of State to the Embassy in Brazil
The Department appreciates the reluctance expressed by the Embassy to grant such release, since it appears that the firm has not complied with all of the provisions of the undertaking, and the firm’s failure to comply may be said to constitute an act of bad faith. The Department wishes, however, to make the following comments with regard to the termination of undertakings in general:
It is felt that, with the withdrawal of the Proclaimed List and in the absence of other sanctions to be applied against violators, the effective enforcement of undertakings has by and large become difficult, if not impossible. For this reason the Embassy was instructed in the Department’s airgram no. 841 of November 29, 194693 to release firms or persons from undertakings when such release is requested by the signatory, unless circumstances were found to be present which would make it desirable to retain the undertaking in force. The purpose of granting such release only upon request was to avoid creating [Page 493] the impression that this government had effected a wholesale whitewash of firms or persons previously considered objectionable or that it is no longer interested in economic security measures in general, and in the affairs of such firms or persons in particular. The clause “unless a review of the case reveals any circumstances which would make it desirable to retain the undertaking in effect for the period specified therein” is interpreted as referring to consideration of such factors as (a) the accomplishments which can be achieved through observance of the undertaking, (b) any adverse effects of release (e.g. release may compromise an effected elimination of undesirable elements by removing the obstacle to readmission), (c) the possibility of obtaining full compliance, and (d) the desirability of insisting on compliance for the sake of principle.
In the case at hand, and with reference to point (c) above, the Department wonders whether refusal to grant the requested release could be expected to result in complete fulfillment of the firm’s obligations at this time, since full compliance was not obtained at the time when reinclusion of the firm in the Proclaimed List remained a possibility. In this connection, it is noted that in the Embassy’s despatch no. 3640 of December 4, 1945,94 in which a proposal was submitted for the termination of the fiscalization of the firm, the Embassy stated that there had been substantial compliance with the principal conditions of the undertaking, including elimination of the most objectionable employees.
On the other hand, and with reference to point (a) above, if the firm should decide to comply with the terms of the undertaking, it would presumably be obliged under Brazilian law to pay indemnification to the employees dismissed; in addition to receiving such a windfall, these persons would not be hindered in any way in seeking employment with other firms in which they might be more dangerous than in a brewery.
With regard to those persons named by the Embassy who are shareholders in the company, the Department perceives certain practical difficulties surrounding any attempt to remove them from the affairs of the firm. It would appear that none of these persons are subject to Brazilian expropriation measures either on the basis of nationality or inimical activities, since such action has not been taken and the Department’s files do not indicate that such action has been contemplated or has been requested of the Brazilian authorities. Elimination of these shareholders would, therefore, have to be accomplished by persuasion which, if successful, would result in placing into their hands funds available for investment elsewhere.[Page 494]
The Department believes, therefore, that the Companhia Cervejaria Brahma should be released from its undertaking, unless the Embassy feels that retention of the undertaking may still accomplish a useful purpose, or that continued fiscalization of the firm is desirable in view of the presence of objectionable employees and shareholders, or that withdrawal of the undertaking at this time would be embarrassing to the Embassy.