The United States Representative on the Inter-American Economic and Social Council (Bohan)1 to the Officer in Charge of Brazilian Affairs (Kidder)


Dear Randy: I am enclosing copy of a letter dated June 15, 1951, from Herbert E. Gaston, Chairman of the Export-Import Bank of Washington, to Mr. Truslow. I am sending you this copy, as you were not sure whether it was in the files in Washington, and also because it gives me a chance to give you a bit of background on a problem that may become quite serious.

You will recall that you felt that the bark of this letter was probably worse than its bite, and I am inclined to believe, from reading the files, that Mr. Truslow also felt this way about it. I cannot be as optimistic. [Page 1209] One of the principal reasons for my having become so frustrated that I asked for retirement at the tender age of fifty was the general attitude of the Export Import Bank vis-à-vis Mexico. As the Economic Counselor of the American Embassy in Mexico City, I was called upon to try to get for the United States practically eighty percent of what it wanted from Mexico, and yet the Embassy was most effectively short-circuited when it came to what Mexico wanted from the United States, i.e. credits from the Export-Import Bank.

As I read over Mr. Gaston’s letter, I cannot help but be struck by the difference in the attitude he takes from that of the International Bank. I am very sure that the International Bank has not given the Joint Commission the power of veto. I am equally sure that the International Bank has a “deep and continuing interest in the welfare of Brazil and—concern that the prosperity of that country shall not be endangered by its entering prematurely into undertakings which may be more attractive than timely.” In other words, my opinion is that the International Bank reserves the same rights that the Export-Import Bank does with this difference. Mr. Gaston takes the position that it is his bank and not the combined judgment of the United States Government and the Joint Commission that is to make policy; in other words, the Export-Import Bank is a government within a government.

You know that I have the kindest feelings towards Mr. Gaston, but I think that the Export-Import Bank has forgotten that it is only part of a whole and not the whole. I realize that the problem must be solved, not with a shillaly [shillelagh?] but with diplomacy, I certainly hope that matters can be worked out so that the overall policies of the United States towards the Joint Commission can be carried out by Mr. Knapp and that the prestige of the Commission will not be as adversely affected in Brazil as the American Embassy in Mexico City was affected by the lack of cooperation on the part of the Export-Import Bank.

Sincerely yours,

Merwin L. Bohan

Dear Mr. Truslow: If I thought an agreement formalizing relations between the Export-Import Bank and the U.S. Brazilian Commission to be necessary or advisable I should have several reservations to make to what you propose in your letter of June 8. But I don’t see any real point to such an agreement. I am ignorant of the provisions of your agreement with the International Bank, nor do I know anything about the negotiations between that institution and the Brazilian Government which preceded that agreement. In any event the situations [Page 1210] of the two institutions are not quite comparable since this Bank is an agency of the United States.

However, it is quite easy to outline what seems to be the reasonable course for this Bank to pursue, having in mind the existence of the Joint Commission and its general objectives as set forth in Section 410 of the Economic Cooperation Act of 1950.

In its operations in International Bank member countries this Bank will be guided by the advices of the National Advisory Council, which define generally the scope of this Bank and the International Bank and stipulate that neither Bank shall establish a monopoly of lending in any country. We should not feel ourselves warranted in subscribing to any understanding or agreement which would have the effect of modifying or evading the Council’s action or the responsibilities of the Directors under the provisions of the Export-Import Bank Act of 1945 or any other legislation affecting the Bank.

We shall be happy, of course, to cooperate as fully as we can with the Commission under the limitations I have mentioned. We do not intend to keep any secrets from the Commission as to our operations in Brazil. We should expect to use what seems to us to be the normal channel of communications; that is, the State Department, but are disposed to take special steps to see that the State Department supplies to you all information which may be helpful, including summaries of any applications and action taken on them.

As I mentioned to you in our conversation at lunch the other day, this would include information on loan applications not eligible for International Bank financing because a National Government guaranty is not offered or is not found to be requisite. It would include also projects in which the United States has a special interest, such as strategic materials projects, as well as proposed exporter credits for machinery or materials where there is substantial participation by the supplier, and also supplemental credits for projects to which large commitments have already been made by this Bank.

We should welcome the views of the Commission on any of these matters, but we could not under any circumstances concede a veto power to the Commission on any proposed loan. We should expect that the Commission, where it has strong contrary views, would present them to the National Advisory Council directly or through the medium of the State Department. We shall ourselves be willing to consider such objections carefully and give great weight to them and if we are not convinced we should be willing ourselves to forward the Commission’s objections to the National Advisory Council.

I make these observations because of our deep and continuing interest in the welfare of Brazil and our concern that the prosperity of that country shall not be endangered by its entering prematurely into undertakings which may be more attractive than timely. We cannot [Page 1211] fail also to note that this Bank is the custodian of obligations to the United States to the extent of more than $96,000,000 out of credits to the amount of more than $203,000,000 extended for Brazilian development beginning in 1939.

In view of this record it would seem appropriate that we be supplied with information as to projects undertaken and contemplated through the advice of the Joint Commission and we should be grateful also for any new information the Commission may feel free to supply to us on Brazilian balance of payments and budget conditions and prospects.

One of the salient features of recent Brazilian economic history has been the long-continued dollar shortage, only very recently overcome, which caused officers of the Brazilian Government two years ago to discuss with us the prospects of an exchange loan to cover accumulated arrearages in dollar payments for merchandise, and we cannot ignore the fact that budget shortages continuing up to the present have seriously embarrassed at least one project toward which we had made large loan commitments in dollars.

We expect to continue our own studies of these matters to guide us in our Brazilian loan policy. But we should be grateful for any help that the Joint Commission feels warranted in extending to us.


Herbert E. Gaston
  1. Mr. Bohan had been appointed interim United States Commissioner on the Joint Brazil-United States Economic Development Commission after the death of the original Commissioner, Francis Adams Truslow, on July 8, 1951, and he served in that capacity until the appointment of J. Burke Knapp as Commissioner on September 28, 1951.