832.00 TA/6–452:Telegram

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


1536. For Bohan.

Presume IBRD keeping you informed activities their del here, but summary report fols.
Bank del informed Lafer last night willing proceed negot Rio Grande loan, i.e. legis no obstacle. Further informed Lafer bank prepared negot immed on project Nr 1 for Central Railway, amount of which estimated by bank at $12.5 million after allowances for contingencies. Bank del stated, however, that further $15 million for central suburban cars cld not be firmly assured by June 30, since wld require further study and wld have to be considered in light further progress on free market legis (not quite clear whether bank del said, or Lafer understood, that granting this loan contingent upon actual passage free market legis). Bank del reports Lafer extremely pleased and that he did not press with them for additional projs (e.g. National Alkali, Parana–Santa Catarina or Salto Grande) except that he expressed hope loan for third unit Paulo Afonso cld be pressed through in order that initial package wld “provide something for north.” Min has requested Berenhauser present latter proj to joint comm as soon as possible, but [Page 584] since this proj hinges upon difficult (even dubious) market study, believe impossible for joint comm and bank act within proposed time sched.
“Package” which thus emerges same as that formulated in Embtel 1451, May 22,1 minus loan on central suburban cars. Lafer clearly strongly desires include Parana–Santa Catarina in June 30 package although we cannot say this indispensable to acceptable resolution present crisis. Fact Lafer failed mention this proj to bank del merely reveals his hope it will be handled by Eximbank. Wld appreciate early advice as to which bank handling this proj and as to prospects firm assurance thereon before June 30. Pls advise similarly re Rio road proj, polit importance of which obvious.
Understand from Lafer Black agreed not proceed further with Braz traction loan until proj presented through normal channels joint comm. Pls confirm.
As result foregoing events situation has eased here immensely. We consider immed crisis resolved, although additional firm assurances before June 30 on Parana–Santa Catarina and Rio road proj wld be most helpful and we urge their inclusion in “package” if at all possible. We have no doubt these additions, which wld appeal to Braz as positive step, wld substantially buttress Lafer’s polit influence, expedite passage free market bill, and create warm atmosphere for Secretary’s visit.
  1. Ante, p. 579.