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

832.10/2–2053

Memorandum by the Deputy Assistant Secretary of State for Inter-American Affairs (Mann) to the Secretary of State ¹

confidential

[Washington,] February 20, 1953.

Subject:

• Brazil’s request for a Commercial Backlog Loan; Briefing for the Brazilian Ambassador’s visit.

The Brazilian Government has applied to the Export–Import Bank for a 3-year, $350 million loan to enable Brazil to liquidate its commercial backlog owing to United States exporters. The Under Secretary, on the recommendation of Mr. Linder,² decided that the United States should not approve a loan in excess of $100 million. The Under Secretary added that if Brazil reacted unfavorably he would be disposed to reconsider. With the Department’s concurrence, the NAC yesterday approved a $100 million loan and the Export–Import Bank is expected to pass on the Brazilian application this morning.

Upon being informed of the $100 million limit, the Ambassador requested an appointment with you.

The Brazilian Government will consider our attitude toward this request as a test of the willingness of the new administration to cooperate with Brazil in the solution of its economic problems. While this Bureau has never recommended economic grants for Latin America, I believe that a sound and adequate lending policy toward the area is vital to our ability to keep them on our side; and that this is particularly true of Brazil, our traditional and principal ally in the inter-American system. Our failure to lend adequate cooperation will create a serious risk that Brazil will become more nationalistic and less cooperative in its relations with us.

While Brazil should institute extensive reforms, it is vital that our tactic at this time should be to lend them sound and reasonable support while at the same time urging them to recognize that their, and not just our, interests require them to carry out these reforms. We should not attempt to hold Brazil’s feet to the fire and attempt to force them, by limiting our cooperation, to do things which they are not yet prepared to do.

Recommendations:

1. That you listen to the Brazilian Ambassador’s exposition of his point of view and inform him that you will take this matter under immediate advisement.

2. Subsequent to the Ambassador’s departure, that the Department reconsider this problem. It is ARA’s position that the Department should inform the NAC that it considers an Export–Import Bank loan to Brazil of between a minimum of $200 million and a maximum of $300 million required by the national interest. The question of the limit of Brazil’s ability to repay and the precise terms and conditions under which the loan will be made should be specified by the Export–Import Bank. This formula would give the Export–Import Bank the necessary latitude to negotiate an agreement which would accommodate the best interests of both countries.³

1. Drafted by Mr. Mann.
2. The referenced recommendation is contained in a memorandum by Mr. Linder to the Secretary, dated Feb. 19, 1953 (832.10/2–1953).

3. A note attached to the source text addressed to the Secretary, initialed by Under Secretary Smith, dated Feb. 20, 1953, reads as follows: “While I concur in the recommendations of ARA, I think that the view of Economic Affairs is the sounder one.”

   On Feb. 21, 1953, the Export–Import Bank authorized a line of credit in the amount of $300 million in favor of the Banco do Brasil, S. A., to assist Brazil in liquidating its past due United States dollar accounts. For additional information concerning the credit, see Export–Import Bank of Washington, Sixteenth Semiannual Report to Congress for the Period January–June 1953 (Washington, 1953), pp. 7–8.