832.6363/1–2648: Telegram

The Chargé in Brazil (Key) to the Secretary of State


83. 1. Embassy has been unable thus far to obtain copy of revised draft petrol law (Deptel 10, January 62).

2. On January 15 investment committee approved by majority vote and submitted to President Dutra3 report on revised draft. Published [Page 353] excerpts thereof reveal committee suggested foreign capital be permitted compete on equal terms with national in exploitation and distribution petroleum for internal consumption but foreign investment in refinery operations and specialized transportation facilities petroleum for internal consumption be restricted to maximum 40% stock holding with right to vote. Other suggestions by committee if correctly reported in press probably would be unacceptable to foreign capital.

3. Embassy is informed report investment committee has been disappointing to President and since presentation he has been marshalling arguments and opinions from other sources, including Cabinet Ministers, to support amending revised draft law to make it acceptable foreign capital.

4. Embassy understands both Foreign Minister and War Minister4 have expressed themselves as being opposed any restrictions on foreign investment in refinery operation and inland transportation facilities.

5. President Dutra has been fully apprised by Ambassador Pawley and the high American officials, who visited Brazil last year, concerning US views with respect to development petrol resources. . . . Embassy does not feel, therefore, that it would help matters at this juncture to use present critical supply situation as opening to reiterate these views to President and request him to make available copy of revised draft law which he recognizes as unsatisfactory and is endeavoring to amend to eliminate undesirable features.

6. It should be pointed out that supply situation is being interpreted by certain elements of general staff and influential Brazilians, opposed to liberal oil legislation, as pressure being exerted by foreign producers to induce government to enact a law favorable to their interests.

7. Embassy fears that were it to approach President at this time, even informally, with respect to projected petrol law that such action would be seized on by this opposition to openly allege that US Government has associated itself with the foreign companies in applying pressure to Brazil.

8. Every effort has been made and will continue to be made to cause enactment of liberal petrol legislation. It would be helpful in connection with overall aspects of this problem and particularly with respect to Paragraph 6 above if Department could prevail on Standard, the only American supplier of fuel oil, to schedule soonest one or two additional cargos of fuel oil to relieve the acute shortage [Page 354] this combustible. Fuel oil is being severely rationed unofficially but will continue at point of exhaustion if a minimum supply cannot be put into distribution system and thereafter tankers scheduled with some regularity within the limitations of world supply situation.

  1. Telegram 10 to Rio de Janeiro not printed. In telegram 6, also of January 6, 1948, the Department had instructed the Embassy in Brazil to seek a copy of the proposed law and an opportunity to offer comments before the draft was sent to the Brazilian Congress. Telegram 6 is printed in Foreign Relations, 1947, vol. viii, p. 466.
  2. General Euríco Gaspar Dutra, President of Brazil.
  3. Raul Fernandes and Maj. Gen. Canrobert Pereira da Costa, respectively.