Foreign Relations of the United States, 1948, The Western Hemisphere, Volume IX

832.24/2–1248

The Acting Secretary of State to the Brazilian Ambassador (Martins)

confidential

Washington, April 15, 1948.

Excellency: I have the honor to refer to Your Excellency’s note No. 29/524.2(22), dated February 12, 1948,¹ concerning the terms of acceptance by the Government of Brazil of a proposal made by my Government on March 14, 1947² for the reaching of a final settlement of those lend-lease accounts arising out of charges for defense aid supplied to the Government of Brazil within the terms of the Lend-Lease Agreement signed by representatives of our respective Governments on March 3, 1942³ under the authority of, and subject to the terms and conditions of the Act of March 11, 1941,⁴ as amended, and to any acts supplemental thereto.

Your Excellency states that your Government has instructed you to propose, formally, to my Government the final settlement of the obligations assumed by the Government of Brazil under the terms of the Agreement of March 3, 1942. As a means to this end Your Excellency proposes a series of conditions under which your Government is prepared to effect a settlement in full by the payment of an amount of $70,000,000 of which, a payment of $35,000,000 already having been made, the amount of $35,000,000 represents the balance due. It is proposed that this amount shall be paid in seven annual installments of $5,000,000 each but with the privilege of effecting, in advance, at any time, any or all of these payments which shall begin with the payment of July 1, 1948.

On behalf of the Government of the United States of America the Department of State confirms that the terms and conditions of the proposal made by my Government to the Government of Brazil on March 14, 1947 were and are as follows:

1. The total amount of the lend-lease account for defense aid to Brazil, under the stipulations of the Lend-Lease Agreement of March 3, 1942 shall be deemed to be exactly two hundred million dollars ($200,000,000), United States currency.

2. Within the amount of $200,000,000. there shall be included

(a) all charges and/or credits which have been reported and applied to the Brazilian lend-lease account under the terms of the Agreement, as well as any pending or future charges and/or credits which may be applicable to that account;

(b) all authorized charges arising out of the so-called “pipeline agreement” of June 28, 1946;⁵

(c) all authorized charges under the authority of requisition B–50,780 covering the ocean transportation costs from Italy to Brazil of certain component elements of the Brazilian Expeditionary Force (ground and air) and their impedimenta;

(d) all approved charges, accrued within the purview of a relevant authority, for land and/or air transportation of Brazilian officials;

(e) certain authorized charges for the cost of hospitalization and of medical services extended by the Government of the United States to Brazilian service personnel; and

(f) all other outstanding charges, including those not yet reported, or charges still to be classified for billing, any of which would properly fall within a category of lend-lease eligibility and conform to accepted program criteria for Brazil.

3. The total reimbursement responsibility of the Government of Brazil shall be at the rate of the repayment percentage stipulated in the Agreement,—viz: thirty-five per cent (35%) of the value of the aid furnished, or the sum of seventy million dollars ($70,000,000), United States currency. Inasmuch as the Government of Brazil has already made payment of the sum of thirty-five million dollars ($35,000,000), United States currency, the balance now due, except for conditions as otherwise provided for in this settlement arrangement, is exactly thirty-five million dollars ($35,000,000), United States currency.

4. Outstanding unsettled accounts arising out of special procurement operations effected through lend-lease channels and for which the Government of Brazil has already agreed to pay the full value thereof (“cash reimbursement” and/or “cash reimbursable” transactions) shall, in no manner, be affected by this settlement arrangement but shall be treated separately and apart herefrom in order that they may be paid in full.

5. With respect to defense aid extended to the Government of Brazil in the form of vessels (including ships, boats, barges or floating dry docks) and leased under Charter Party Agreements within the lend-lease program all such vessels shall be returned to the United States not later than the termination of the present wars. Final determination of disposition of these vessels will be the subject of special consideration and shall not be made a part of the conditions of this settlement arrangement.

6. Any and all charges for materials, equipment, services and any other eligible defense aid furnished to the Government of Brazil for the use of the Brazilian Expeditionary Force (ground and air) shall be waived in full by the Government of the United States, subject to the conditions stated in paragraphs 7 and 8, below, which are desired in consideration of the consummation of a final settlement undertaking. Amongst other things, these include:

(a) the furnishing to the Government of the United States by the Government of Brazil of an inventory report of those materials supplied to the Brazilian Expeditionary Force which were returned to Brazil from the Mediterranean Theater of Operations following the end of hostilities;

(b) the formal assurance of the Government of Brazil that neither all, nor any part of the materials mentioned in subparagraph (a) above either have been, or will be sold, transferred, given away or otherwise permitted to come into the possession of any person or persons not lawfully entitled to receive them or to any one who may not be actively or directly associated with the armed forces of Brazil, without the prior consent of the President of the United States.

7. In consideration of the terms and provisions of this settlement arrangement as herein enumerated, the Government of Brazil will process and settle all claims of individuals, firms and corporations domiciled in Brazil and will discharge any liability of the Government of the United States and members of its armed forces and civilian personnel attached thereto, where such claims arise out of acts or omissions in the territory of Brazil of such armed forces or civilian personnel, both line-of-duty and non-line-of-duty, occurring on or after December 7, 1941 and prior to the date of this note. While it is estimated that the total value of such claims may amount to approximately forty-five thousand dollars ($45,000.), United States currency, the obligation of the Government of Brazil, as assumed hereunder, is not limited to that amount.

8. All other claims, or any other accounts of any character, representing claims of any kind of one Government against the other, or, of third parties against either Government, which are not specifically mentioned or dealt with in this note, are not waived nor in any way affected by the arrangement set forth in this note. However, and pursuant to terms previously agreed upon by representatives of our respective Governments, in the cases of those claims which already may have been made, or which still may be made by the Government of Italy against the Government of the United States for damages alleged to have been incurred against Italian Nationals (military or civilian) by personnel of the Brazilian armed forces attached to the United States’ Fifth Army in the Mediterranean Theater of Operations, the Government of Brazil will request the Government of Italy to address all such claims directly to the Government of Brazil.

9. In addition to the reference to claims made in paragraphs 7 and 8, above, the Government of Brazil will process and settle, and discharge any liability of the Government of the United States arising out of a claim involving damages caused in the sinking of the Brazilian sailing vessel Areia Branca as the result of collision with the United States Army Transport Monterrey on September 28, 1943, near the entrance to the Port of Natal, Brazil. While it is estimated that the maximum of this claim may be eighteen thousand dollars ($18,000), United States currency, the obligation of the Government of Brazil is not limited to that amount.

10. The Government of the United States is agreeable to the request of Your Excellency’s Government that the amount still due, thirty-five million dollars ($35,000,000), United States currency, as specified in paragraph 3, shall be paid, without interest, in the form of seven (7) annual payments of five million dollars ($5,000,000), United States currency, each, and that the first of these payments shall become due and payable on the first day of July, 1948, the second payment on the first day of July, 1949, and remaining five (5) payments on each succeeding first day of July through the year 1954. It is further agreed that the Government of Brazil, at any time and at its own discretion, may advance the date for making any payment or, if it so wishes, may pay the entire oustanding balance in one payment prior to the scheduled due date. Interest at the rate of 2⅜% per annum shall be charged against any amounts which may not be paid within the stated schedule of payments. Annual payments will be made in the form of legal orders of payment in favor of “The Treasurer of the United States” and will be presented, for appropriate disposition, to the Department of State.

11. Upon the receipt, by the Government of the United States, of the final payment under this settlement arrangement, and conditional only upon the satisfactory fulfillment on the part of both participating Governments of all terms and conditions made a part hereof, the Lend-Lease Agreement of March 3, 1942 shall, by virtue of this settlement arrangement, become terminated by mutual consent of the two signatory Governments as provided for in Article VIII of that Agreement. However, it is mutually agreed that nothing in this settlement arrangement shall, at any time, either waive or modify the force of the provisions of Article VI and of Article VII of the Agreement of March 3, 1942.

There have been handed to an official of the Brazilian Embassy two copies each of statements LL–11, LL–12, and LL–13,⁶ together with their respective supporting schedules of accounts; also, a statement of charges made against the pipeline agreement of June 28, 1946. Accompanying this note are two copies of a composite tabulation of the entire lend-lease account upon which this settlement has been based. From the date of this note no further statements of the lend-lease account will be sent to Your Excellency’s Government.

If this final settlement arrangement of the Agreement of March 3, 1942 has the concurrence of the Government of Brazil it is requested that Your Excellency direct to the Department of State a formal confirmation of your Government’s understanding and acceptance of the several terms and conditions of this arrangement, by means of which a full and final settlement of the Brazilian Government’s lend-lease responsibility, except those designated and agreed upon herein as for separate settlement, may be effectively achieved.⁷

Accept [etc.]

Robert A. Lovett

[Enclosure]

Brazilian Lend-Lease Account

As calculated—January 31, 1948—for final settlement purposes.

Title of Account	Billing	Repayment Schedule	Amount Paid	Balance Due
Lend-Lease Agreement	$200,623,422.67	$70,218,197.94	$35,000,000	$35,218,197.94
Pipeline Agreement	1,187,718.66	415,701.57		415,701.57
	$201,811,141.33			35,633,899.51
Req. B–50,780 (est.) $3,750,000.00 Transportation (land and air) $2,475,130.74 Hospitalization and Medical $1,904,479.00 Special Miscellaneous Charges $4,586.76
	8,134,196.50	2,846,968.60		2,846,968.60
Unreported charges over	5,000,000.00	1,750,000.00		1,750,000.00
calculated summary	$214,945,337.83	$75,230,868.11	$35,000,000	$40,230,868.11
proposed settlement	$200,000,000.00	$70,000,000.00	$35,000,000	$35,000,000.00
B. E. F. Account (est.)	$67,033,159.84		No Charge
Vessels leased under Charter Party	$72,645,883.00	Subject to separate settlement arrangemeent

Outstanding unsettled “Cash” repayment accounts (Not included in the settlement)

	Bal. due from	Bal. due to
Brazilian Aeronautical Commission	$2,286,361.72
Brazilian Military Commission		$243,412.53
Brazilian Navy Purchasing Office		107,319.63
Brazilian Airplane Engine Factory Commission(*)		202,728.03

1. Not printed.
2. See below.
3. Foreign Relations, 1942, vol. v, pp. 815–818.
4. 55 Stat., 31.
5. For text, see Department of State, Treaties and Other International Acts Series No. 1537.
6. Not printed.
7. On April 15, 1948 the Brazilian Ambassador addressed a confirmatory note to the Secretary of State (not printed).
8. Converted to public corporation with government control.