Miller Files, Lot 53 D 26

The Ambassador in Brazil ( Johnson ) to the Assistant Secretary of State for Inter-American Affairs ( Miller )

confidential
official informal

Dear Ed: Horacio Lafer1 called to see me by special appointment late yesterday afternoon. He first informed me that he had definitely decided to attend the meeting of the International Monetary Fund which takes place early in September in Washington.2 He will leave here on September 5 by air and will be in the United States about ten days. Accompanying him will be his wife, Dr. Eugenio Gudin, Walter Moreira Sales3 and Valentim Boucas.4 I do not yet know whether the wives of the three latter will be going along or not.

Lafer told me that he assumed I was familiar with the suggestion he had put up to Bohan and which was the subject of Bohan’s telegram to you at Panama of August 26.5 Lafer made it clear, and was quite frank about it, that he was appealing for my support for their request. He said that he was speaking on behalf of the President as well as himself in urging that the International Bank give serious consideration to an announcement which would earmark approximately $100,000,000 for Brazilian port development and for certain emergency purchases for the railroads. He said that they were not asking for the money, but for an announcement which could carry conviction to the Brazilian masses that the Joint Commission is doing something which will be of real and direct benefit to the people.

[Page 1220]

The Vargas Administration is having difficulties. Communist infiltration throughout the country is on the increase, the cost of living is high, and the Administration by no means has Congress in its pocket. What Vargas would like to do is to make an announcement that with the cooperation of the United States and through the machinery of the Joint Commission his Administration intends to carry out plans for rectification of the bad conditions in Brazilian ports, and that they expect the work to be completed within three years. At the same time, it would be announced that $100,000,000 had been earmarked for this purpose and for the purpose of much-needed emergency equipment for the railroads, and that the Brazilian Government was making available an equivalent amount in cruzeiros for necessary financing of the project.

The question of cruzeiro financing has been a tough one for the Administration, as you know, and I gather from Lafer that it is his belief such an announcement along the lines of that outlined above would be of immense service to the Administration, and in particular to the Finance Ministry, in securing the necessary legislation and appropriations from Congress to implement the Brazilian side of the Joint Commission’s work.

Lafer and Vargas do not expect the Bank actually to make money available except for completed and approved projects. What they want is an announcement that the Bank will earmark funds for the purposes described. The money, of course, will not be available until definite projects have been submitted to the Bank and received its approval. Such an announcement might also indirectly be very helpful in the Goes Monteiro talks now under way in Washington.

The statement telegraphed to Bohan from Tom Mann (Deptel 217, August 28, 7:00 p.m.)6 contained an excellent statement from the International Bank regarding its policy toward Brazil. It is a reasonable statement and one with which Lafer would not take issue. He would admit that it is Brazil’s fault that projects are not ready for immediate action by the Bank, but he and Vargas want help from us on an empirical basis and as a matter of high policy. Neves da Fontoura told me yesterday that he knew the Finance Minister was coming to see me, that he did not know in detail what he would take up, but that he knew in general terms, and that he fully supported the Finance Minister’s request.

Incidentally Lafer mentioned that he thought Brazil should look to the Ex-Imbank for any foreign financing it requires for industrial development and to the International Bank for foreign financing requirements for public works.

I told Lafer that I understood his point of view and sympathized with him, and that he would have my support in principle. I told him, [Page 1221] however, that the Bank had an established policy in these matters and that I could not express a valid opinion as to what the possibilities are. I told him that I was glad he was going to Washington, and that I knew you would be delighted to see him. He will certainly call on you at the first opportunity, and probably before he attempts to make any contacts with the Bank officials.

As I see it our overall relationship with Brazil needs a fillip in the very near future. You, of course, are only too aware of the persistent references on the part of Goes Monteiro to economic help. He is not, in my opinion, thinking primarily of returning from Washington with something in his pocket. Bather he is thinking of the job of salesmanship which Vargas, the Foreign Minister and the Chief of Staff will have on their hands if they take the risks, domestically, we wish them to take.

The help the Brazilian Administration and Military need so much might take many forms none of which would commit us, or the International Bank, to anything new. The Bank already has told the Brazilians it considers $300 millions a reasonable target figure for Brazilian borrowing for economic development purposes over the next five years. The Bank, therefore, might find it possible to say, publicly, that it considers $100 millions a reasonable figure for the Joint Commission to use as its target in preparing projects in the railway and port field for the consideration of the Bank, particularly if the Brazilian Government is ready to take action to provide adequate funds in cruzeiros to cover local costs of the projects which will be developed. The Department and the Bank must have many people who are very skillful in drafting who could evolve a statement, indicating that if Brazil does its part re cruzeiro financing, it can have every reason to expect that the dollar financing side of economically justified projects in the port and railway fields should not present any difficulties.

Under cover of Bohan’s letter to Tom Mann of August 28, 1951,7 there was transmitted a memorandum of the Gibbs and Hill railway technician contracted by TCA, Mr. H. D. Barber.8 I cannot speak for the technical side, but his opinion, I believe, should carry weight.

If you agree and consider it practicable, please see if the experts of the Bank cannot think up some sort of statement which they find they could make and have it ready to show to Finance Minister Lafer when he arrives.

I know your difficulties are great, and I do not know whether it is possible for the Bank to find some formula not too inconsistent with their policy which would help these people out. I sincerely hope that some way can be found. They need our help and support now, and if [Page 1222] we can give it I am convinced it will be deeply appreciated by Vargas and Lafer and Neves Fontoura, and will not be forgotten. I am also confident that it would strengthen the hand of the Government in dealing with left-wing groups and their anti-American tools who are scattered through the Administration.

Sincerely,

Herschel Johnson
  1. Brazilian Minister of Finance.
  2. Reference is to the Sixth Annual Meeting of the Boards of Governors of the International Bank for Reconstruction and Development and the International Monetary Fund held in Washington, September 10–14, 1951.
  3. Director, Currency and Credit Administration, Bank of Brazil.
  4. Valentim Fernandes Boucas, President, Brazilian Technical Council of Economics and Finance, and Financial Adviser to the Brazilian section, Joint Brazil–United States Economic Development Commission.
  5. Not printed.
  6. Supra.
  7. Not printed.
  8. H. Dale Barber, Chairman of the Subcommittee on Railroads, Joint Brazil–United States Economic Development Commission.