Foreign Relations of the United States, 1952–1954, The American Republics, Volume IV

033.3211/10–1752

The Assistant Secretary of State for Inter-American Affairs (Miller) to the Ambassador in Brazil (Johnson)¹

confidential
official–informal

[Washington,] October 17, 1952.

Dear Herschel: You have read my letter of October 11² to Merwin reporting on Lafer’s visit,³ and outlining the increasing difficulties we are facing up here until the remittance bill is passed and something is done about the backlog.⁴

I recognize the danger of overplaying our hand if we apply too much pressure on our Brazilian friends, but I’m wondering if this might not be a very opportune time for you and Merwin to call on the President and review the situation with him.

I assume that Vargas’ recent proposal to create new government jobs for his political opponents may mean that he is getting along with them much better. Hence, he now might be able to get some support from them in pushing the remittance bill through.

Also, I gather that Lafer has checked in with the President after his trip and has passed on the views he collected up here. A visit by you and Merwin now might help crystallize his decision and speed up action.

Such a visit might backfire if the President construed it as a pressure play, but I am sure you could handle it to avoid this result.

You might indicate to Lafer that your desire for a talk with Vargas was prompted by me, because I feel that the picture has been muddied since Lafer’s visit by some misunderstandings, including the recent press statement by Stanley Andrews, and I would like to have the situation clarified to the President as we now see it. Although I have not seen Ary⁵ or Sarmanho personally for some time, I understand that both of them are quite bitter about the position of the IBRD. If they report to Vargas that the whole difficulty is here in Washington, it may focus Vargas’ attention in this direction instead of spurring efforts to move the remittance bill along, and get on with a solution to the backlog problem.

You might seek the audience on the grounds that both of you called on him last April, and would like to review the progress made since that date. You might say to the President that United States Government agencies in Washington and the World Bank are, thanks in part to the fine impression left by Minister Lafer, willing to help Brazil to the maximum extent in getting on with our development loan program. This goodwill was originally demonstrated when the Banks granted about $100 million in loans during the early part of the year, and has been demonstrated again by the Eximbank loans for the Barbara and agricultural machinery projects. However, although this willingness has not diminished, certain problems have arisen in the United States which have made it difficult for the Banks to continue at the rate they and we desire. You might point out that both Banks are necessarily sensitive to public opinion here, and particularly so in this election year. Consequently, they find it increasingly difficult to maintain the loan program at top speed in the face of growing impatience on the part of U.S. investors and exporters concerned with the remittance decree and the backlog. You can say that, as a result of Minister Lafer’s visit, official circles here are convinced of Brazil’s active interest in these problems, but the general public is not fully aware of this. They only see that their bills are still unpaid and the remittance bill is not passed. You might tell the President that you are sure he can understand this political dilemma in which we find ourselves, and you could emphasize that we do not want him to interpret this slowdown to any idea that it might be deliberate coercion on our part, or due to any lack of sympathy or understanding of his own problems.

You might tell him that it is a fact that when these two problems are solved, it will relieve the pressures on the Banks to slow down, and they will then be able to resume the normal rate.

I should tell you that we also have a selfish interest up here in promoting such a visit to the President. First, it would permit us to reply to our critics that the problem has been discussed with the President himself, and secondly, if he gives you any encouragement, it will be very helpful in bucking up other agencies here and certain skeptical individuals.

I hope you and Merwin will give this suggestion your best thought, and let me know what your views are. If you approve, please go ahead without any further clearance, and make your approach as you think best.

Our reports on radio broadcasts in Brazil indicate that Neves Fontoura may come up prepared to talk about the loan program. We shall discuss this subject with him along the lines outlined above.

With kindest regards,

Sincerely yours,

Edward G. Miller, Jr.

1. Drafted by Mr. Cottrell.
2. A copy of the referenced letter is contained in Miller files, lot 53 D 26, “Brazil.”
3. Minister Láfer’s unofficial visit to New York City and Washington took place during the latter part of September.

4. Reference is to the commercial debt owed by Brazil to U.S. exporters. With respect to the commercial backlog, Mr. Miller’s letter of Oct. 11, 1952, reads in part as follows:

   “The picture is becoming complicated by a new factor, namely, the dissatisfaction that is felt up here over Brazil’s credit position and this has in the last few weeks become the prime issue in regard to Brazil both here and in New York. It is true that Lafer has taken certain courageous measures to cut down imports but the feeling is that in addition to this he should come up with some definite plan with regard to the backlog and secondly that he then should go to the root of the problem which is the devaluation of the cruzeiro. On the first of these, namely the backlog problem, Lafer met with unanimous disapproval of his idea of putting exports for the next six months on a 180-day credit basis. Mr. Snyder himself felt that this was unfair to the smaller exporters who are now waiting for their money and there was general skepticism as to whether he could get their suppliers of wheat and oil to go along. The Eximbank offered him in effect a $250 million credit for four or five years at a low interest rate for the backlog and both Treasury and Mr. Southard of the Fund supported this proposal. Lafer however did not display enthusiasm probably because of his fear that once Brazil was up to date, they would go on another spending spree. With regard to the proposed devaluation of the cruzeiro, he simply said absolutely no, and he seems to be adamant even over the proposal to put some exports up into the free market.”

5. Ary F. Torres.