811.51232/5–2649

Memorandum of Conversation, by Mr. Harold Midkiff of the Division of Brazilian Affairs

secret
Participants: Raul Fernandes, Brazilian Foreign Minister
Afranio de Mello-Franco, Counselor, Brazilian Embassy, Washington, D.C.
Edmundo Barbosa da Silva, secretary to Mr. Fernandes
U—Mr. Webb
AEA: BR—Mr. Midkiff

Mr. Fernandes stated that his visit was of a friendly, informal character and more in the nature of an exploratory conversation.

After an inquiry about developments in Paris, he quickly launched into the Argentine situation by asking if Mr. Webb had conversed with a certain Uruguayan Senator recently. This Senator was reported to have a message for the Department from his President and from the President of Chile on the subject of Argentina. Mr. Webb ascertained that the Senator had conferred with Mr. Daniels1 and had departed feeling pretty well satisfied as to the purpose of his visit. Mr. Fernandes went on to discuss his concern over developments in Argentina and the pressure which that country is exerting on Uruguay and Paraguay. In connection with the latter country he stated that its Government had asked Brazil to speed up construction of railroad and highway connections to provide an outlet through the port of Santos.

[Page 575]

The Minister stated that in the past “a balance” existed between Brazil and Argentina in South America but that Argentina has been gaining strength to the disadvantage of Brazil. Brazil, said the Minister, was weakened by its contribution to the war while Argentina profited from it; a weak Brazil is disadvantageous to the United States’ policy in Latin America while a strong Brazil would be helpful. The Minister stated that Brazil had never failed to support the United States in time of need, even when such support was clearly discriminatory. He thought Brazil should receive reciprocally favorable discriminatory treatment from the United States. The provisions for assistance contained in the joint statement of Presidents Truman and Dutra were not good enough, he said, since they were open to any nation.

Mr. Fernandes stated the United States is spending billions in aiding Europe and that some of these funds are being used to develop production in Africa and elsewhere of items which compete with Brazil in the international market—especially the European market. To take care of this situation the Minister said Brazil has to increase the consumptive capacity of its own people and enlarge its domestic markets. To accomplish this, he said, it will be necessary to obtain foreign assistance so that certain basic factors of Brazilian economic life such as transportation, education and health might be improved.

Mr. Webb asked if the work of the Joint Brazil–United States Technical Commission did not provide a solution to difficulties which Brazil was encountering. The Minister replied that while the work of the Commission was accurate and good it did not go far enough. Mr. Webb suggested that the resources of the Export-Import Bank and the International Bank might be useful in this connection but Mr. Fernandes said the Export-Import Bank finances exports of United States goods and does not cover other large expenditures while the International Bank is too cautious. He commented that in former days it was possible to have recourse to capital markets but this is no longer possible. Mr. Webb then inquired if the technical assistance program might not be helpful. The Minister asked, “What good are technicians without capital?”. Mr. Webb inquired if something could be done to break down the barriers to the flow of private capital and thus provide a solution to the problem. The Minister countered with the statement that the principal barriers to the flow of private capital stem from inconvertibility of exchange and balance of payments difficulties; these cannot be removed quickly. Furthermore, he said, United States capital has great opportunities in this country and will not seek employment abroad where the additional risks are not compensated by sufficiently greater earnings.

[Page 576]

Mr. Webb asked if there was not some growth in capital accumulation in Brazil which might be applied to development and the Minister replied that capital growth had not kept pace with the increase in population and that there was no market for Government securities.

Mr. Webb inquired whether the Brazilian Government had a program of development which might be used as a basis for discussion and study. To this the Minister replied that Brazil would not wish to present a program without some assurances, at least in principle, that help would be forthcoming. He previously had stated in reply to a question that none of these problems had been discussed by members of Dutra’s party during the President’s visit since this visit was purely one of courtesy and friendship and that Brazil could not broach such topics unless the initiative were taken by the United States. He said Brazil would ask for nothing but hoped something would be offered; a few millions of dollars in the form of a loan could not be considered important by the United States when billions were being given away. Here again he said the reason that the United States was reticent in doing anything for Brazil is fear of stirring up jealousies among other Latin American countries and repeated that in view of the past record Brazil deserved favorable treatment even to the extent of being discriminatory.

(During Mr. Webb’s absence for a few minutes in the course of the visit, Mr. Fernandes mentioned the figure of $600 million as an appropriate amount of financial aid over a six-year period but he said he did not care to make this known to the Acting Secretary. He again went over the cost of Brazil’s contribution in the war and roughly estimated it at $700 million. When this matter was again mentioned, Mr. Midkiff took the opportunity to remark that it was fortunate the United States had in Brazil a friend willing to fight and sacrifice to safeguard the same ideals in which we believe. It also was mentioned that the concept of free, private enterprise was still foremost in American thought though some trend away from this has been noticeable especially when emergency conditions have to be met.)

When Mr. Webb returned he brought in Secretary Tobin,2 who greeted the group and departed.

Mr. Webb stated he would have to consult Mr. Acheson about the problem posed by the Minister. He explained that any assistance outside that available through established organizations involved a question of policy and would require Congressional authorization. Mr. Webb asked if the Minister would care to designate some technically qualified person to discuss this matter with the Department’s technicians and the Minister replied that he did not like technicians [Page 577] since they cannot see the political picture, Mr. Webb then inquired if the Brazilian Ambassador would be available to talk about the subject. The Minister replied that the Ambassador would be available but that he would discuss this matter only if invited by the Department to do so. Mr. Webb assured Mr. Fernandes that both Mr. Acheson and the President were very interested in Brazil and that upon Mr. Acheson’s return the Brazilian Ambassador would be called in for further discussions about this matter.

Before he left Mr. Fernandes stated that he was having dinner with Mr. Vandenberg that evening and Mr. Connally the next evening.3 He indicated he would be returning to New York over the weekend in order to catch a boat for Brazil sailing June 4.

  1. Paul C. Daniels, Director of the Office of American Republic Affairs, and U.S. Representative on the Council of the OAS.
  2. Secretary of Labor Maurice Tobin.
  3. Senator Tom Connally, Chairman of the Senate Committee on Foreign Relations, and Senator Arthur H. Vandenberg, ranking minority member of the same committee.