840.50 Recovery/12–749

The Ambassador in Portugal (MacVeagh) to the Secretary of State


No. 357

Ambassador W. Averell Harriman, Special Representative in Europe for the ECA, arrived in Lisbon, via a U.S. army plane, at 2 p. m., on Thanksgiving Day, November 24th. This was Mr. Harriman’s first visit to Portugal since the initiation of the Marshall Plan.…

Though Mr. Harriman intended his visit to be primarily one of rest and recreation, he made good use of the opportunities which it afforded for enlightening interested Portuguese on ECA matters and most obligingly acceded to all the official demands unavoidably made upon him. The Portuguese press gave good coverage to his visit and carried extensive accounts of a press conference held by him at the American Embassy. In addition, he had a long interview with Dr. Salazar, the Prime Minister, at which he was accompanied by both Mr. Patten2 and Mr. Xanthaky, the American Ambassador’s Special Assistant, who acted as interpreter at Dr. Salazar’s request. He also called with the American Ambassador on Dr. da Matta, the Foreign Minister, and on Dr. de Faria, Acting Director General of the Foreign Office. He made a special personal call on Dr. Costa Leite, the [Page 715] Finance Minister, at the latter’s house where he was recuperating from a serious accident, was guest at a dinner given by the American Ambassador for the Foreign Minister, and also guest of honor at a large luncheon in the Ministry of Foreign Affairs given jointly by the Ministers for Foreign Affairs and Finance.

The visit seems also to have been useful as regarding Mr. Harriman’s personal opportunities for observing the working out of the Marshall Plan in Portugal. In addition to two long conversations with the American Ambassador regarding relations with the Portuguese and other matters, he spent much time in company with Mr. Patten and held an extended conference with the ECA staff at which all aspects of Portuguese and colonial ECA operations were discussed. His interest and acumen provided a valuable stimulus to the morale of all concerned.

The highlight of Mr. Harriman’s visit was, of course, his interview with Dr. Salazar, of which I enclose a full report as drawn up by Mr. Xanthaky.…

. . . . . . . . . . . . . .

Lincoln MacVeagh

Memorandum of Conversation, by Mr. Theodore A. Xanthaky, Special Assistant to the Ambassador in Portugal (MacVeagh)


[Participants:] Prime Minister Salazar
Ambassador W. Averell Harriman
Mr. David L. Patten, Chief, ECA Mission to Portugal
Theo. A. Xanthaky, Special Assistant

At Dr. Salazar’s request, I accompanied Ambassador Harriman and Mr. Patten when they called on the Prime Minister this morning, and acted as interpreter throughout the interview.

Mr. Harriman began by expressing warm thanks to Dr. Salazar for the hospitality accorded him by the Portuguese Government, after which Dr. Salazar welcomed Mr. Harriman to Portugal and expressed [Page 716] the profound gratitude of the Portuguese people to the United States for its assistance under the Marshall Plan. Dr. Salazar added that he also wished particularly to thank Mr. Harriman for his personal patience, forbearance, and understanding in studying the country’s problems.

Mr. Harriman remarked that he was very pleased that Portugal had joined not only the Marshall Plan but also its corollary, the North Atlantic Pact. He said that in his opinion the North Atlantic Pact is probably the most important single international step taken in modern times. The Prime Minister smilingly commented, “We shall see.” To this Mr. Harriman immediately retorted, “You seem to be somewhat skeptical. May I ask why?” Dr. Salazar replied “I am not really skeptical, but you Americans are apt to entertain an optimism about your sincere intentions and altruistic plans which has at times gone unjustified by results.” Mr. Harriman admitted that the United States sets its sights high, but said he felt that by and large its objectives have not only been met but even exceeded.

Dr. Salazar evinced great interest in our relations with the U.S.S.R. and inquired why it had taken so many years, with loss of such precious time, for us to realize what the Russians were up to. Mr. Harriman explained that our leaders and diplomats were never unaware of Soviet ambitions but Mr. Roosevelt, and subsequently Mr. Truman, felt that, in keeping with prevailing U.S. public opinion, every effort should be made to get the Russians to agree to a viable and lasting peace, and that to that end we exercised great patience and made considerable sacrifices. “In other words,” said Dr. Salazar, “it was through the rebuffs which you got from the Russians that your people finally realized the situation.” “Exactly so,” replied Mr. Harriman, adding that now the American people are not only indignant and alarmed but also for all practical purposes, united and vigilant in their attitude toward Russia.

Mr. Harriman then went on to say that he and his associates were convinced that the development of the Portuguese colonies could be most useful in speeding the reconstruction of European economy in general and specifically in helping to bridge Portugal’s dollar gap. Dr. Salazar said he realized the importance of their possessions but he preferred to deal with specific projects rather than to lose time on grandiose but somewhat Utopian schemes for African development. [Page 717] For example, he said, the Prime Minister of Southern Rhodesia has agreed with the Portuguese Government to make a request of OEEC for technical assistance, etc., with a view to improving transportation and port facilities in East Africa, particularly the Port of Beira and the Beira Railway, and also rail outlets on the West African coast either at Mossamedes or Benguela. He mentioned that the United States has a direct interest in this as it is the principal consumer of Rhodesian chrome ore (some five or six hundred thousand tons annually). This led Mr. Harriman to expound the reasons governing U.S. insistence on over-all planning, such as the necessity of avoiding duplication of effort and providing eventually for integrated transportation, etc., but at the same time he assured the Doctor that he also favored specific projects and stated that we have in mind the immediate development of a manganese property in Angola. In this latter connection, he said the United States is especially desirous of reducing its purchases of manganese in Russia, but cautioned that it is necessary to tackle the Angola project expeditiously as several other properties in various parts of the world are also under consideration and, should our needs be satisfied from those sources, our interest in Angola would be proportionately lessened. With direct reference to Dr. Salazar’s strictures on the grandiose quality of U.S. thinking on these subjects, Mr. Harriman took occasion to say that it had been the experience of the ECA that colonial ministries in general seem to suffer from an “occupational disease, namely, the finding of ways for doing nothing.” Dr. Salazar laughed at this and said he realized that to a certain extent this may be true in the case of the Portuguese Ministry but that it is not entirely so. He remarked that the knowledge which the Portuguese have gained in over 400 years of colonial administration and experience cannot blithely be put aside. He pointed out that Africa (meaning Mozambique and Angola) is a primitive country with a primitive population and things do not move there at the pace to which Europeans and Americans are accustomed.

The Doctor then opened up an extended discussion on the subject of the British and their problems. He declared that England constitutes “the only moral and political value left in Europe” and said that he desires to do everything possible, within Portugal’s limited means, to contribute to her rehabilitation, mentioning in particular that he is endeavoring to direct as much trade there as possible. He added, however, [Page 718] that this can be very difficult at times because on many products the British cannot quote either fixed prices or delivery dates. He criticized the Labor Government and attributed to it the malaise which has struck Great Britain. Mr. Harriman said he believed that a principal cause of Portugal’s present inability to obtain from England as much merchandise as she formerly purchased from that country, is the fact that Great Britain is now making heavy shipments to India and Pakistan in an endeavor to pay off her war debts to those nations. He expressed the opinion that a change in this policy is necessary and that some funding arrangement with India and Pakistan will have to be made in order to allow Great Britain to place more of her merchandise in two-way markets. In addition, he told Dr. Salazar that there has been considerable progress, not only with the British but also with the Belgians and others, in breaking down the “double price” system. He mentioned confidentially that he expects the British to abolish the present spread between domestic and foreign price quotations on coal (which would directly affect Portugal) by the end of January.

Mr. Harriman then complimented Dr. Salazar on his accomplishment in balancing the budget and keeping his financial house in order for so many years, and the Prime Minister remarked that he had done this notwithstanding the unpopular aspect of some of his measures. He opined that some other countries, which depend on popular support for their existence, have not been able to take necessary financial measures for fear their governments might be overturned.

The conversation next turned on Portuguese-American trade and Mr. Harriman remarked that he felt there is a definite opportunity for expansion in the sale of Portuguese products in the United States. He mentioned that the total yearly American liquor bill, including beer, is eight billion dollars and that there is unquestionably room for an increase in Port wine sales. Dr. Salazar objected that penetrating the American market is not as easy as it appears to be on the surface. In the first place, he said, duties are prohibitive and also administrative procedures, sanitary regulations, etc., make business complicated and difficult. However, Mr. Harriman assured him that the Secretary of the Treasury is at present studying both the customs angle and the possibility of simplifying the entry of foreign merchandise. At this point Mr. Patten remarked that a technical assistance project is being set up by the ECA Mission in Lisbon with the idea of [Page 719] aiding interested Portuguese entities in a survey of the American market.

Mr. Harriman then inquired of Dr. Salazar whether he could be of any service to him, and the Doctor said he would appreciate help in the acceleration of allocations destined to Portugal under the Marshall Plan. The Prime Minister mentioned that preparation of the Portuguese revised program has been delayed owing to the fact that it has remained doubtful until recently just how much of the money allocated this year was to be in grant and how much in loan. He also remarked that the business recession in Portugal during the past year, and the consequent shortage of escudos, had caused the Portuguese to hope for a larger sum in the way of grant than the four million dollars now contemplated. Mr. Harriman said that this figure of four million has been decided on by the National Advisory Council in Washington and that he hoped the Doctor would understand that decision to be final. Dr. Salazar said he fully understood this, and that, he was, of course, very thankful for the grant; all that he wished to point out was that this question had been a contributing factor in delaying the completion of the Portuguese program.

In conclusion, Mr. Harriman expressed pleasure in knowing that Portugal subscribes to the free enterprise system as we understand it in the United States, and the Doctor confirmed that he is entirely of that school of thought, the only instances in which the Portuguese Government has entered into industrial or other enterprises being, he said, when private capital was not available. Mr. Harriman then said that he felt sure that private American capital would be glad to cooperate in the development of Portuguese resources not only in metropolitan Portugal but also in the colonies. The Doctor inquired how such capital would enter the country, i.e., would it be in the form of direct loans or in association with Portuguese capital. Mr. Harriman explained that it might take either of those two courses or it might be in the form of branch factories, etc. He personally felt that association with local capital was the most satisfactory method. Dr. Salazar said he agreed with this but was also not opposed to the other methods should they appear more appropriate in given cases.

The long interview terminated with Dr. Salazar again thanking Mr. Harriman for what the United States had done for Portugal and inviting him to call on him again anytime he desired.

T[heodore] A. X[anthaky]
[Page 720]


[For text of Agreement regarding compensation for damage caused to persons and property in Macao by American military planes during World War II, effected by exchanges of notes dated at Washington October 3, 1947, and February 21, May 3 and 20, and August 4, 1949, which entered into force August 4, 1949, see United States Treaties and Other International Agreements (UST), volume 3 (pt. 4), page 4914.]

  1. David L. Patten, Chief, ECA Mission to Portugal.