832.00/1–1551: Telegram

The Ambassador in Brazil ( Johnson ) to the Secretary of State

confidential

915. There follows complete text Vargas document2 referred to Embtel 914, January 15.3

“1. Sr. Getulio Vargas, President-elect of Brazil,4 appreciated the courtesy of the Government of The United States of America, in submitting to him, in a confidential manner, the topics which will be debated at the Washington conference, to take place next March.

“2. The topics referred to appear to him, in general interesting and opportune. In his new period of government Sr. Getulio Vargas will be animated by the desire to continue the policy of cooperation and loyalty which he previously carried out with the US and other nations of this hemisphere, and which was translated into an intimate and sincere collaboration, both in the economic and military spheres, during the difficult emergency of the second war. The political events which followed the termination of that war, and which continued to develop, filling with apprehension those who have responsibilities of government, have made it imperative to strengthen the bonds among the American countries.

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“Brazil expects to give to the US at the Washington conference—as in other pronouncements and programs—its cooperation, but considers it indispensable that the government of the US understand that this cooperation, besides imposing all types of sacrifices, requires an effective understanding so that the economic life of the country which gives it will not be disturbed to the point of having its immediate and future possibilities of development and production substantially reduced.

“3. The Brazilian Government, in its internal policy, will exert all efforts to see that the reestablishment of a war economy in the US will not have on the internal economy of our country only the effect of a passing prosperity, and will collaborate with the Government of the US in appropriate measures to offset the inflation stimulated by war.

“In this sense, the Brazilian Government requires the positive support of the North American Government so that orders of materials needed for the establishment of basic industries and the execution of public works will move forward quickly and have priority of delivery and that requests for credits from such establishments as the Export-Import Bank and the International Bank related to these orders will be granted and processed with rapidity. Instead of accumulating a balance of dollars, resulting from the growth of exports, for subsequent utilization, the Brazilian Government desires to utilize it immediately in payment of orders and in servicing loans granted.

“4. It is not inopportune to recall that direct North American investments in Brazil in the past decade have corresponded to the confidence and expectations of investors. The atmosphere of general progress and juridical security does not justify a withdrawal, such as that which followed the great depression of 1929 not only in relation to Brazil but with respect to all Latin America. The value of Brazilian cooperation and the earning power of our establishments justifies the conclusion that North American investment at the moment is excessively timid. To intensify the flow of private capital it is necessary that the Government of the US give it official stimulus and not discriminate against Brazil in measures of cooperation which have been adopted in relations to other parts of the world.

“5. The goodwill of the Brazilian Government towards contributing national raw materials for the emergency economy of the US should have its counterpart in the goodwill of the Government of North America towards conceding priority of manufacture and medium and long term bank credits for the immediate execution of a rational program of industrialization and public works to which the principle efforts of the Brazilian administration will be devoted.

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“6. The Brazilian Government finds it equally necessary that artificial restrictions on the present level of prices of Brazilian exports, and especially coffee, shall not be imposed.

“No foreign financing will contribute to the intensive development of our country if we do not have domestic capital to support and absorb aid coming from abroad. In recent years coffee has been the principal factor not only in rebalancing our accounts with the US, but in creating internal availabilities which have formed new capital and developed initiatives. Any policy which does not respect real prices, such as that coffee has attained in a free market economy, would be contrary to the development of the country.

“7. The Government of the US is not unaware that many North American initiatives in Brazil have been frustrated by legal and fiscal obstacles which upset the collaboration of the two countries. The Brazilian Government is ready to adopt in its internal policy measures which will favor and stimulate the spontaneous flow of American capital into Brazil; but the US, having attained the greatest degree of economic expansion known in history, must recognize that it does not need a protection in policy, unfavorable to the establishment of manufacturing industries in the places which are sources of foreign raw materials, nor does it need to continue overloading by taxes the income of its emigrated capital.

“8. The Brazilian Government wishes to conclude with the US a policy of economic reciprocity which will make available national raw materials of strategic value to the other country. It believes however, that at the same time it is indispensable that the US adopt positive measures which will translate themselves into a policy of positive aid in the development of our economy for the rationalization of agriculture, and for industrialization.

“This policy should be part of the general principles affirmed at the conference next March but its perfect definition and realization must result from bilateral negotiations which the Brazilian Government wishes to initiate early in February.

“Through these bilateral negotiations, the Brazilian Government will make known its immediate plans of economic development and of legislative and administrative measures through which it intends to assume them.

“The Brazilian Government views with special sympathy the creation of an American-Brazilian organism, of easy functioning and reduced bureaucracy, charged with coordinating, on the technical-financial level, a policy of cooperation between the two countries.

“9. With respect to Brazilian initiative, this policy does not contemplate only government enterprises and services. On the contrary, so far as possible, it will try to encourage private initiative, give aid to enterprises of integrity the action of which would be included in the general [Page 1187] program, and coordinate, in accordance with the public interest, the objectives of the administration and of business.

“10. Within the general program of developing basic sectors of continental economy, the Brazilian Government expects, then, from North America, direct and indirect support for effective measures which will contribute to the progress of Brazil and the well-being of its people.

“Thus, there will be requested, in the bilateral negotiations referred to above, supplies with priority and long and medium term financing for the following undertakings:

  • “I. Construction of hydroelectric plants in the upper Sao Francisco, Minas Gerais, and Rio Grande do Sul, in accordance with plans approved by the Federal Government and by the state governments.
  • “II. Works of economic utility in the Sao Francisco valley, notably in the Paulo Afonso region, including transportation, urbanization and sanitation.
  • “III. Construction and installation of petroleum refineries with a capacity of 10,000 to 30,000 barrels, for Brazilian private or state organizations.
  • “IV. Construction and installation of two synthetic nitrate plants destine for private or state organizations for installation in zones of the lower Sao Francisco and in Minas Gerais.
  • “V. Construction and installation of new installations for expanding the Volta Redonda steel mill, with the immediate utilization of the credit already granted by the Export-Import Bank;5 and, later, the construction and installation of a second steel mill with a capacity of 1,000 tons daily, in Minas Gerais, in the Rio Doce zone, which possesses railway transport and port installations which will assure an outlet for the production.
  • “VI. Dredging, construction and permanent equipment of maritime ports and acquisition of vessels for renovating the merchant fleet, with a view to assuring the expansion and regularization of cabotage.
  • “VII. Equipment and execution of a plan for the rational utilization of Brazilian coal, including the operations of mining, beneficiation and transportation.
  • “VIII. Financial and technical cooperation in the improvement, re-equipment and electrification of railways.
  • “IX. Financing the transportation and establishment of European immigrants, principally Italians, so as to assure the integration of imported manpower in the national economy, permitting the execution of an immigration program on a large scale.
  • “X. Establishment in Brazil of industries for the treatment of national raw materials, with mixed capital, in order to make possible the exportation of manufactured products instead of the raw materials themselves.
  • “XI. Creation, of one or more mixed American-Brazilian companies for the study of the raw materials of the country, the exploration for and exploitation of mineral deposits.
  • “XII. The construction and installation of a factory at Cabo Frío for the production of alkalis,6 and cooperation in studies for a second factory in the northern part of the country.
  • “XIII. Equipment and execution, through private or state organizations, of the plan for storing, transporting and conserving foodstuffs including the construction of silos for cereals, treating and fumigating plants, warehouses, and refrigerated vessels.
  • “XIV. Supplying of equipment and indispensable parts for the regular maintenance of Brazilian aviation.

“11. These points, listed as examples in this note, represent in synthesis the cooperation that the government of Brazil expects from the US for the realization of an unpostponable economic development program. It is evident that they cannot be included in the agenda of the international meeting. They should be the object of bilateral negotiations which, however, will be embodied in the spirit and the principles of the meeting, of consultation, which the Government of Brazil will attend animated by the most sincere aim of continental cooperation, ready to offer its contribution to the common effort.”

Johnson
  1. The so-called “Vargas document” was a confidential memorandum by Brazilian President-elect Getúlio Dornelles Vargas, delivered to Ambassador Johnson on January 13, 1951, by Brazilian Minister of Foreign Affairs João Neves da Fontoura, under cover of an informal note dated January 11, 1951. The memorandum was in response to an unsigned and undated paper discussing the forthcoming Fourth Meeting of Consultation of Ministers of Foreign Affairs of American States which Ambassador Johnson had handed to Foreign Minister Neves da Fontoura on December 29, 1950. Copies of these documents, including the Portuguese text of President-elect Vargas’ memorandum, were transmitted to the Department of State under cover of despatch 1085, from Rio de Janeiro, dated January 24, 1951, not printed (363/1–2451).

    The Fourth Meeting of Consultation of Ministers of Foreign Affairs of American States was held at Washington, March 26–April 7, 1951. For documentation, see pp. 925 ff.

  2. Not printed.
  3. Getúlio Vargas was elected President of Brazil on October 3, 1950, and he assumed office on January 31, 1951. He had previously served as President, 1930–1945.
  4. On July 20, 1950, the Board of Directors of the Export-Import Bank had authorized a credit of $25,000,000 to the Republic of Brazil to finance the purchase of equipment necessary for expanding steel production at the Volta Redonda mill. Extension of the credit, however, was pending the Brazilian Government’s full compliance with the provisions of the loan agreement.
  5. In the latter part of 1950, the Cia. Nacional de Alcalis had applied to the International Bank for Reconstruction and Development (IBRD) for a credit to finance the foreign exchange costs of a 100,000-ton alkali plant at Cabo Frío. The IBRD had the application under consideration during 1951.