832.50 JTC/12–2248

The Co-Chairman, Joint Brazil–United States Technical Commission (Abbink) to the Assistant Secretary of State (Thorp)


Dear Mr. Secretary: On January 7, 1949, the Joint Brazil–United States Technical Commission will have been at work in Brazil for four months. Inasmuch as the original estimate of the time that would be required was set at 4–6 months, a progress report seems in order.

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Forecast is always dangerous, but there is good reason to believe the final report will contain the following recommendations, among others:

That a bilateral treaty on the treatment of foreign capital be negotiated.
That a bilateral treaty on taxation be negotiated.
That any foreign funds needed for industrial development can be obtained from private sources if the proper atmosphere can be created by means of recommendations (a) and (b).
That no foreign funds be sought for development projects in the public domain (hydroelectric installations, railways, etc.) until the necessary cruzeiro expenditures are provided for through new tax legislation or commitments in the current budget.
That “authorities” be set up to deal with such questions as power, fuel and minerals development, to cut across the frustration now occasioned by the intervention of many government departments, each with a different approach and, frequently, diverse objectives.
That Central Bank legislation be enacted immediately, but that the consideration of other banking institutions proposed in the current legislative program (rural credit, export-import, etc.), be postponed.
That the “forced loan” financing feature of the Salte Plan be abandoned as a danger to the whole government securities market.
That the investment of social security and similar funds be rigidly circumscribed so as to prevent their use in real estate and other speculative ventures.
That any legislation furthering development programs in Brazil contain a clause providing that only a small percentage of any appropriations made by Federal, State or Municipal governments may be used for “administrative” expense.

The decision by the U.S. members of the Joint Commission in advance of their arrival that they would make no unilateral statements regarding the work of the Joint Commission, but that all statements must be joint statements, was agreed to by the Brazilian members at one of the first meetings of the Joint Commission, and has generally been adhered to, though it has not been possible at all times to control the desire for publicity on the part of some members of the Sub-commissions, all of which were appointed by the Brazilian government.

Largely as the result of this policy a hostile press campaign, particularly on the part of newspapers representing extreme viewpoints to the right or left, has died down, and most comments on the work of the Joint Commission have become more objective. It should be noted, however, that neither the Brazilian government nor the public generally had sufficient understanding in advance of the type of work the Joint Commission would undertake. In fact, it was not until late in November that the Brazilian members of the Joint Commission itself began to realize the value to their country of the studies that have been made.

As appreciation of the value to Brazil of the Joint Commission’s work grows, so there is increasing insistence at the Cabinet level within the Brazilian government that collaboration in joint studies should not be dropped when the Joint Commission’s report is completed, but that some mechanism should be provided through which the recommendations in the report can be reviewed periodically. The final report of the Joint Commission will probably contain such a suggestion, included at the insistence of its Brazilian members. It will be for the governments of both countries to decide whether or not and how to implement such a suggestion.

As the result (referred to above) of the change in attitude toward possible government loans on the part of the Brazilian members of the Joint Commission and of financial officers of the Brazilian government, and to demonstrate to them the methods employed by “authorities” [Page 372] in the United States, the suggestion was made by United States members of the Joint Commission that a study by Brazilian officials of such organizations be made in the United States.

The Finance Minister of Brazil seemed genuinely interested in such a study, and suggested he might head the study group himself. This resulted in our suggestion to the Department that the Finance Minister be invited to repay the visit to Brazil in 1947 of the Honorable John W. Snyder, Secretary of the Treasury of the United States, and that he should take with him such Brazilian members of the Joint Commission as he might designate.

Neither the Finance Minister nor Brazilian members of the Joint Commission can be under any illusion that the visit was suggested by United States members of the Joint Commission as a means of obtaining a loan from the United States government, although it is admitted that public inference to this effect may be difficult to avoid. It is hoped that when the visit takes place the attitude maintained consistently by the United States members of the Joint Brazil–United States Technical Commission will be emphasized—that Brazil’s hopes for economic development will be realized precisely to the extent that the Brazilian people put their own house in order, and that whatever foreign investment is required will be forthcoming once Brazilian determination to take the necessary steps in advance has been specifically demonstrated.

When the visit of the Finance Minister was first under consideration, it was hoped that it could be timed for early January so that the work of the Joint Commission might be carried on in the United States to avoid the dispersion of its membership, already referred to in this report.

This timing was not found feasible, however, and the visit now has been tentatively set for April, 1949.

During the next few weeks the United States Co-Chairman expects to visit a number of the States in Brazil to discuss their particular problems with State officials, and to impress upon them individually that development of their areas depends primarily upon local initiative, enterprise and financing. This is the theme that has been emphasized throughout at meetings of the Joint Commission and with Brazilian federal officials. Visits to the various States will represent a difficult schedule, but the idea is enthusiastically endorsed by the Brazilian government, and has the approval of the U.S. Embassy here.

Respectfully submitted,

John Abbink