832.00 TA/5–653:Telegram

The Secretary of State to the Embassy in Brazil 1


1197. Department believes Joint Commission should terminate June 30. Embassy telegram 1538.2 Ambassador instructed inform Foreign Minister and Finance Minister following Department views:

Continuation Joint Commission will not improve prospects finance projects. Conversations with Torres and Salles indicate [Page 614] Brazilians believe existence Commission will help obtain commitments from banks or shift balance program financing to Eximbank or Treasury. Should be made clear Foreign Minister neither possibility exists.
Past misunderstandings and present impasse are result repeated unsuccessful attempts place financing on basis advance Bank commitments, specified conditions. Also public statements have created misunderstandings regarding financial commitments. Continuation this basis would lead to further frustrations and misunderstandings detrimental entire program.
To break impasse and move forward constructively towards ultimate successful financing Joint Commission program new basis must be established now. It should rest on understanding that US Government, Brazilian Government and lending institutions all desire see Brazil’s economic development be financed as rapidly as possible but within Brazil’s borrowing capacity to prevent over extension credit and default. If this principle accepted then Brazil’s capacity becomes key and limit to financing, not advance commitments unrelated to Brazil’s financial position.
These criteria can be determined by IBRD in close cooperation and study with Brazilian economists of National Development Bank. To accomplish this purpose IBRD willing establish representative Rio and work closely on financial aspects.
Should be understood that if Brazil’s credit deteriorates for whatever cause, loaning progress will slow accordingly. If credit improves loan rate should accelerate.
IBRD and Development Bank staff studies will reveal what measures can be taken to improve Brazil’s credit and these will provide guide to constructive action.
Embassy telegram 15343 describing financing plan being developed American Section Commission indicates prior bank commitments implicit. Since these cannot be obtained Department recommends this plan be submitted IBRD not for purpose exacting commitment but for its staff use in proceeding according above outlined plan.
Department appreciates possible internal political repercussions and possible attacks upon US as result terminating Commission. However Department believes extent these developments will depend largely upon how termination is presented to Brazilian public and officials. If no effort made place constructive view on above plan reaction could be severe. If intelligent sincere effort made by Brazilians and Embassy to present new plan in favorable light and early publicity initiative taken to forestall critics then repercussions could be minimized.
Embassy instructed prepare and release appropriate publicity through most effective Brazilian and/or US channels in cooperation and with Brazilian consent to achieve above purpose. Department suggests general guidance announcing termination should be Joint Commission was established assist Brazil its long range economic planning program. Commission program developed three main functions: (a) Preparation projects by Joint Commission. Now completed; (b) Presentation projects for financing. $122 million already granted. Balance to be financed due course through IBRD basis soundness individual projects and Brazil’s capacity absorb external debt. This will be facilitated through close cooperation National Development Bank and IBRD local representative; (c) Execution projects. Main responsibility rests recipient loans. Assistance by bank staffs. US help through technical assistance provided through Technical Assistance Agreement 1950.4
Department realizes above plan does not meet Brazilian desire for commitment early financing all projects accordance any agreed plan or timetable. Such desire simply impossible achieve. Plan does provide sound basis ultimate success program if Brazilians will cooperate.
President Eisenhower May 7 received Peixotos,5 Salles, Cabot. Salles left memo6 suggesting repayments recent $300 million Eximbank loan be used for financing Joint Commission program. No discussion this suggestion at this meeting.
May 8 meeting Department7 included Salles, Torres, Carvalho,8 Bernardes,9 Cabot, Atwood, Cottrell. Department views discussed in detail. Brazilians also informed not possible change terms short term $300 million loan for specific purpose into long term development loans.
Brazilians somewhat disappointed but appeared to agree it would be more embarrassing for them as well as us to terminate Commission [Page 616] on December 31 than on June 30. Discussion showed that real Brazilian concern is to assure orderly financing of entire program and their misgivings regarding attitude of IBRD. Salles will report meeting to Foreign Office.
If Brazilians unwilling agree proposed exchange notes terminating Commission on June 30 after discussion above plan Department plan modify draft note sent enclosure Department Instruction No. 77 by substituting following language as penultimate paragraph10 “It will be appreciated if Your Excellency’s Government will regard this note as an expression of the intent of my Government to terminate its participation in the Joint Brazil—United States Economic Development Commission on June 30, 1953.” Department hopes Brazilians will accept original note and latter procedure will not be necessary.

  1. Drafted by Mr. Cottrell; cleared with Messrs. Cabot, Atwood, and Corbett.
  2. Supra.
  3. Dated May 5, 1953, p. 611.
  4. For text of the exchange of notes, signed at Rio de Janeiro, Oct. 21 and Dec. 19, 1950, and entered into force on the latter date, constituting an agreement between the United States and Brazil relating to technical cooperation, see 2 UST 851.
  5. Amaral Peixoto, Brazilian Governor of the State of Rio de Janeiro, and Señora Peixoto (née Alzira Vargas, daughter of President Vargas). A memorandum of the conversation between President Eisenhower and the Peixotos, drafted by Mr. Cabot, dated May 7, 1953, is in file 832.2546/5–753. Ambassador Moreira Salles was not present during the conversation.
  6. An undated memorandum fitting the description was left with President Eisenhower by Governor Peixoto; it is attached to the memorandum of conversation, dated May 7, but not printed.
  7. No memorandum of conversation at the referenced meeting was found in Department of State files.
  8. Sylvio Ribeiro de Carvalho, Counselor of the Brazilian Embassy.
  9. Carlos Alfredo Bernardes, First Secretary, Brazilian Embassy.
  10. Department Instruction No. 77 is not printed. The referenced paragraph of the draft note reads as follows: “This note; and Your Excellency’s reply indicating approval of the Work accomplished by the Commission and of the proposals set forth above, will be regarded by my Government as a cordial agreement to terminate the Joint Brazil–United States Economic Development Commission on June 30, 1953.” (832.00 TA/4–253)