The Chargé in Brazil ( Key ) to the Secretary of State
90. Minister Fernandes2 has requested by letter that I inform him, after consulting the Department, of the views of our government with respect to the possibility of developing the export of coffee to western Europe either by inclusion in the products to be supplied by US under ERP 3 or purchase by ERP countries out of resources provided by US.
Minister asserted that Foreign Office has received insistent requests and is under strong pressure from numerous sources including press to obtain inclusion coffee in ERP. He stated that he had refrained up to present from raising this question realizing that ERP is still dependent on legislative approval but now felt that he must inquire since foreign press despatches report that Congress is discussing detailed measures relative to extent and nature European aid and that [Page 398] these discussions may result in inclusion or exclusion coffee in ERP after which it would be too late to take diplomatic action with respect to this important Brazilian product.
Foreign Minister emphasized that favorable response to his inquiry would have beneficial repercussions as our government is aware that Brazilian cooperation in assisting Europe in form UNRRA donations and credits to Britain and sterling area had been costly to Brazil and in excess her weakened economic capacity. He pointed out that problem Brazilian exports to Europe, payable in internationally accepted currencies, is important to Brazil for she no longer is in position to export against payments in soft currencies. He indicated Brazil would consider leaving in US for payment American export dollar funds accruing from Brazilian exports to Europe.
Comment: The pressure mentioned by Fernandes has come largely from the Sao Paulo coffee producers who view ERP as an instrument to assure movement of accumulating stocks of low grade coffee unsuitable for US consumption. The Foreign Minister’s letter undoubtedly has also been prompted by government’s desire to see this coffee exported to Europe, preferably by US purchase under ERP, against dollar payments as this would relieve government of eventual necessity of adopting measures for carrying these stocks. At same time it would ease stringent exchange situation.
As general policy government is uninterested in exporting to Europe against payments in soft currencies which allegedly it is unable to utilize owing refusal Europeans to accept their own currencies in payment Brazilian purchases or to accept firm orders for reasonably prompt delivery for goods urgently needed in Brazil.
I would appreciate receiving soonest for communication to Foreign Minister the Department’s views on the question he has raised.