Memorandum by the Assistant Secretary of State for Inter-American Affairs (Cabot) to the Under Secretary of State (Smith)1



  • Agreement with Brazil to Terminate the Joint Brazil–United States Economic Development Commission.


Since last year the target date for termination of the Commission has been June 30, 1953. This date was approved by President Vargas. However, last Friday Embassy telegrams 1622 and 16232 reported a change of mind on the part of the President. He now believes it politically impossible for him to agree to termination on June 30 and insists that an understanding (commitment) be reached on the financing of the balance of the projects.
The reason for this change of heart is that he fears that the termination of the Commission will provoke a debate in Congress about how the balance of the projects will be financed, and thereby embarrass the Administration, which is already under heavy criticism from its opponents on many issues.
The Administration has led the Brazilian Congress and public to believe that the United States, the Eximbank and the IBRD are firmly committed to provide the foreign financing needed for this entire program. If the debate following the termination of the Commission reveals that there is no such definite commitment, the Administration will be very vulnerable for having created a National Development Bank and imposed taxes to provide the Cruzeiro financing.
The Department desires a voluntary agreement with Brazil to close out the Commission, rather than terminating it unilaterally. Since President Vargas now feels strongly that he cannot agree to close on June 30, the Department has proposed an extension until August 31 or September 30 provided that the Brazilians will agree now to close on either of those dates. Our Chargé d’Affaires, Walter N. Walmsley, thinks it might be possible to reach an agreement on this basis and is proposing it to the Foreign Office today, maintaining the attitude that this proposal is not relevant to the question of further financing.3
  1. Drafted by Mr. Cottrell; a note attached to the source text, dated June 2, 1953, indicates that the Under Secretary saw this memorandum.
  2. The referenced telegrams, dated May 29, 1953, are not printed (832.00 TA/5–2953).
  3. In telegram 1739, from Rio de Janeiro, dated June 19, 1953, Chargé Walmsley informed the Department that Brazilian Finance Minister Oswaldo Aranha agreed to the closing of the Joint Commission after completion of its substantive work on or about July 31, 1953, that he did not believe prior financing commitments existed, and that he preferred a simple announcement rather than an exchange of notes terminating the commission (832.00 TA/6–1953).

    In telegram 1368, to Rio de Janeiro, dated June 23, 1953, the Department indicated that in view of Finance Minister Aranha’s position, it would not insist on an early exchange of notes terminating the commission, but believed that notes should be exchanged at some appropriate future time (832.00 TA/6–1953).