398.14/10–3050

Memorandum by the Assistant Secretary of State for Inter-American Affairs (Miller) to the Secretary of State

confidental

In connection with my memo to you on Brazil,1 I attach a memorandum which was given to me this morning by Messrs. Black, Garner,2 and Anderson of the International Bank. This is the most encouraging thing that has ever come out of the International Bank in relation to Latin America and makes it imperative that we try to get there promptly. You will appreciate that the memorandum is tentative in so far as concerns the statements of the Department’s position. I have informed Mr. Black that you will discuss this matter with Secretary Snyder or discuss it in a Cabinet meeting with the objective of having Secretary Snyder take this up in the NAC. It seems to me that this is important in view of Mr. Black’s proposal to put this matter up to the Board of his Bank in which event it would be necessary for the U.S. Executive Director to be instructed by the NAC. As to the details of the respective roles to be played in Brazil by the International Bank and the Eximbank, this should be negotiated out between the International Bank and the Eximbank under the auspices of Secretary Snyder and Mr. Martin prior to final action by the NAC.

Mr. Black also confirmed this morning that he is prepared to assign a full-time officer to Brazil to maintain close liaison with the proposed Joint Commission.3 Under these circumstances, if we can [Page 779]reach agreement on the program outlined in the attached memorandum, we will have the basis for a really effective implementation of Point IV in Brazil and make it a model for all other countries in; Latin America. We have been working towards this end since July 1949 and we need now just one push from you to put this across.

[Annex]

Memorandum

Representatives of the Department of State and the International Bank for Reconstruction and Development, in the interests of assuring a substantial contribution to the development of Brazil through provision of foreign capital, have discussed means of avoiding conflicts between the activities of the International Bank and United: States agencies which might make the contributions of the International Bank and of the proposed Brazilian-American joint commission less effective. They have arrived at the following general understanding:

1.
Assuming that Brazil is willing to accept the International Bank as its investment banker, the International Bank is able and willing: to make loans for sound developmental projects in Brazil to the extent of Brazil’s capacity to service those loans. The International Bank believes that the amount of loans which it would be prepared to make to Brazil over, say, the next five years would be in the magnitude of about $250,000,000.
The $250,000,000 figure is not to be considered as a firm commitment on the part of the International Bank but as an expression of the Bank’s present intentions which would, naturally, be subject to adjustment in the light of any material changes affecting the Brazilian situation. On the other hand, it is not to be taken as the International Bank’s estimate of the maximum external debt which Brazil can bear, but rather as a working figure which can be used by Brazil and the International Bank for planning purposes.
2.
The International Bank, subject to approval of its Executive Directors, is prepared to make an official statement to Brazil along the lines of paragraph 1 and to make its statement public.
3.
The State Department recognizes the position of the International Bank as the investment banker for Brazil, that is, as the primary source of foreign loan capital (exclusive of that obtained directly from private investors) for development purposes. The State [Page 780]Department also recognizes that if the International Bank is to proceed vigorously with the program outlined in paragraph 1, it must be assured that loans by United States agencies will not interfere with consistent development planning, make the International Bank’s program less effective or impair Brazil’s ability to service its external debt, including the debt foreseen in the International Bank’s lending program as well as existing debt. Accordingly, the State Department will seek a decision from the National Advisory Council that loans for projects in Brazil from United States agencies will be limited to (a) projects which are such integral parts of projects previously financed by loans from them as to be clearly inappropriate for the International Bank to undertake and (b) projects which the International Bank is unable to finance and to which the United States Government attaches special strategic importance.
The decision will be implemented by an agreement between the International Bank and the United States representatives as to which projects presently being considered fall within category (a) and the maximum amount of projects to be financed within that category. It is assumed that this maximum will be moderate, since otherwise the scope of the International Bank program would have to be reduced to a point that would not be appealing to Brazil.4
The decision will also contain assurances that in financing projects falling within category (b), unless the projects are self-liquidating in terms of direct foreign exchange benefits, the United States Government will finance them in such manner as will not adversely affect Brazil’s ability to service its other external debt.

  1. See footnote 4, below.
  2. Robert L. Garner, Vice President of the IBRD.
  3. Text of the Agreement Relating to Technical Cooperation, which entered into force by an exchange of notes at Rio de Janeiro on December 19, 1950, is printed in United States Treaties and Other International Agreements (UST), vol. 2 (pt. 1), p. 845. Text of a subsidiary Agreement that created a Joint Commission for Economic Development, effected by an exchange of notes in Rio on October 21 and December 19, 1950, and in force from the latter date, is included ibid., pp. 864–871. The Department’s press release of December 21, 1950, regarding these agreements, is printed in the Department of State Bulletin, January 1, 1951, p. 25. File 832.00 TA for 1950 has detailed information respecting the negotiation of the agreements.
  4. In his memorandum of October 26, 1950, to the Secretary, not printed, Mr. Miller had advanced proposals similar to those above. Additionally, he had suggested limitation of Export-Import Bank loans to Brazil, within the two mentioned categories, to a dollar amount of $100 million over the period 1951–1954. (832.10/10–2050)