The Chargé in Paraguay (Trueblood) to the Secretary of State
313. Negrão De Lima leaves here this afternoon for Porto Murtinho on Brazil–Paraguay frontier where he will confer again with rebels. He states govt will not consent to restore to active duty officers participating in rebellion but will pension them, offering full amnesty to all others connected with revolt. Will not agree to give freedom to Communists but will leave decision to Constituent Assembly.
Negrão doubtful rebels will accept these terms but points out that since he saw them 2 weeks ago tide of battle has gone against them, hence they may be more receptive now.
Negrão stated Paraguayan Govt wishes United States included among mediatory group in event mediation proceeds which was agreeable to Brazil. (FonMin confirmed this to me yesterday. Chaves again expressed view that govt needed military victory, but thought mediation to assist in pacification would be of great utility.) Negrão does not however see any place for mediation if struggle is fought to finish. He said President had reiterated intention of inviting foreign observers to witness elections here.
Negrão will proceed to Rio following contact with rebels.
Sent Dept 313, repeated Rio 57, Buenos Aires 88.