832.10/10–1950

Memorandum of Conversation, by the Secretary of State

secret

Subject: Financial Aid for Development Projects in Brazil

Participants: Secretary of State Acheson
Assistant Secretary of State Miller
ARA/E—Mr. Ivan White
ARA: OSA—Mr. Randolph Kidder

[Page 776]

Mr. Miller referred to that part of Ambassador Nabuco’s conversation on October 9 with President Truman and me which relates to loans to Brazil. Mr. Miller explained that he wished to discuss related matters with me and asked if I could enlarge on what I had written in my Memorandum of Conversation. I stated that, in addition to what appears in the Memorandum of Conversation, the Ambassador had done little except make a general complaint regarding the treatment allegedly received by Brazil and the difficulties incurred in attempting to get a loan for Minas Gerais.

Mr. Miller outlined the difficulties, including those relating to the question of Bank jurisdiction, which have been experienced with the application for the Minas loan. The jurisdictional problem arising from the confusion as to the exact spheres of operation of the Export-Import Bank and the International Bank is one which must be cleared up and on which Mr. Miller asked my assistance. He informed me that last night he talked at some length with Mr. Black, President of the International Bank, and that Mr. Black had expressed his willingness to make available to the Brazilian Government credits up to $250 million to be used for development over a period of five years, or for a shorter period should it be possible to make use of the funds in such shorter period. He was prepared, under certain conditions, to make a public announcement to this effect.

Mr. Miller outlined the current status of plans for a Joint Economic Development Commission in Brazil (under authority of Section 410 of the Act of International Development) and said that Mr. Black is willing to assign a representative to Brazil who would participate in the Joint Commission. Mr. White explained that under the Act representatives of international organizations may participate in such commission when requested by both participants, and that such a joint organization could be very helpful to Brazil in the preparation of projects and in the determination of priorities. The main difficulty in connection with Mr. Black’s proposal to aid Brazil is that he is unwilling to act unless the sphere of activity of the Export-Import Bank is limited and defined to his satisfaction and the amount of dollar indebtedness to be incurred kept within set limits. Mr. Black believes that as Brazil is a member of the International Bank, the development field in that country should devolve on his Bank.

A copy of telegram #267 of October 18 to Embassy Rio on the coming visit to Brazil of an Export-Import Bank Mission headed by Mr. Stambaugh was shown to me and the open-end nature of numbered [Page 777]paragraph 41 was discussed. Mr. Miller commented that it is essential to clarify jurisdictional issues between the two Banks before the Mission goes to Brazil.2

Mr. White explained that there is a limited but important field for future ExImBank activity, consisting of additional credits to such current clients as the Rio Doce and Central do Brasil3 and for projects in the direct U.S. national interest, such as the Urucum manganese proposal. These ExImBank type projects should not total more than $100 million, making a combined investment program for the two banks of about $350 million over a 4 or 5 year period.

Mr. Miller informed me that he had discussed the problem of the jurisdiction of the two Banks with Assistant Secretary of the Treasury Martin both before and after Mr. Martin’s recent trip to Europe but that Martin did not believe that the stage for discussion of the jurisdictional problem would be reached—Mr. Martin had expressed doubts on the advisability of development projects during the emergency. I inquired whether settlement of jurisdictional questions in Brazil would mean a direct conflict with the Export-Import Bank on whose cooperation the Department must depend in other areas of the world. Mr. Miller answered by stating that if I would discuss the matter with Secretary Snyder4 and Assistant Secretary Martin, the settlement of the jurisdictional question might perhaps be undertaken by Secretary Snyder. I agreed to discuss the matter with Messrs. Snyder and Martin and said that I would inform the President, when I see him this afternoon, of developments with regard to loans to Brazil and of Mr. Miller’s program. I emphasized that it would assist me greatly with the President if I could explain to the latter that Brazil’s loan problems and the Joint Economic Development Commission are tied in closely with the Point IV Program and that the solution of outstanding difficulties would help greatly in making the Point IV Program a success in Brazil. That program is very close to the heart of the President. Mr. Miller said that a memorandum would be prepared for me.5

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Mr. White, in reply to my question, said that the $350 million program included only projects essential to the development of Brazil’s economy or to the U.S. defense program. Non-essential items had been eliminated from consideration.6

  1. This paragraph indicated the intention of the Mission to discuss, in addition to specific projects mentioned previously in telegram 267, any matters which the Brazilians might bring up, including plans for economic development and the financing thereof. (103.02–XMB/9–1250)
  2. The Mission was in Brazil from November 1 to November 19, 1950. A resume of its activities there is contained in despatch No. 810 from Rio de Janeiro, November 30, 1950, not printed. (103–XMB/11–3050)
  3. On February 12, 1945, the Export-Import Bank had authorized a credit of $4.5 million dollars to the Central Railways of Brazil for purchase of electrical equipment.
  4. John W. Snyder, Secretary of the Treasury.
  5. See footnote 4, p. 780.
  6. In his memorandum of that part of his meeting of October 19 with the President which was devoted to Brazilian matters, the Secretary reported in part: “I referred to the loan situation and outlined to the President the possibilities of very constructive work along the lines outlined to me this morning by Mr. Miller. The President was particularly pleased about the use which would be made of the Point Four legislation and urged me to talk with Secretary Snyder about defining the fields of the World Bank and Export Import Bank. He said if there was trouble in getting this worked out, we could come to him for help. He thought the suggestion as put forward by Mr. Miller was an eminently good and workable one. Accordingly, I shall take this up with Secretary Snyder as soon as I have the memorandum from Mr. Miller.” (832, 10/10–1950)