It has seemed to me that it might be useful as I depart for the National
War College to prepare a review of the progress on implementation of the
Report and recommendations made by Dr. Milton
Eisenhower following his South American tour of June and
July 1953. It is now just over a year since the return of the
Eisenhower mission from South America, and the
Congress is now completing its session during which consideration was
given to a number of the matters raised in the Report. This seems a good
time to take stock.
There is set forth below in some detail the action taken on the various
recommendations of the Report (Tabs I and II). There are included
[Page 230]
pertinent comments on the
Report and its recommendations from other members of the Cabinet and
heads of agencies.
Throughout this paper I have sought to check carefully with officers of
the Department and elsewhere in the interests of accuracy as to facts
and figures. The opinions and conclusions stated are my own.
In sum, I believe that substantial progress has been made in implementing
the Eisenhower Report. There has been no dramatic
directive sweeping all previous policies before it but that was never
contemplated. Aside from a general policy statement, foreign policies in
practice are made up of the minutiae of practical decisions,
particularly when budgetary problems and Congressional appropriations
are involved in the procedure. With respect to the impact of the
Eisenhower Report, the general policy has been
laid down, and day-to-day decisions have proceeded during recent months
to fill out that framework.
There is a generally excellent record with respect to going forward on
the recommendations concerning specific problems discussed in the
supplemental report. There has been improvement in appropriations for
projects and programs along the lines recommended by Dr.
Eisenhower in his section on strengthening
understanding and mutual respect. Additional efforts need to be made,
and still greater advances could be made with larger appropriations,
especially in aid to American schools in Latin America and in the
program for the exchange of students and leaders. We spend so little on
these things in Latin America that increases which would be ridiculously
small percentage-wise in comparison with expenditures in other areas and
for other programs would loom very large indeed in this Hemisphere. In
fact, the very smallness of some of these appropriations has made added
difficulties in obtaining them. It is actually harder to get $135,000
for aid to American schools—and more detailed attention and scrutiny is
given to it simply because it stands as a separate item in the
budget—than to obtain a sum of several million dollars in much larger
aid programs.
Some progress has been made with respect to the recommendations for
strengthening economic cooperation. The record is poorest here, however,
and this is the area commonly agreed, and specifically underlined by Dr.
Eisenhower, to be of primary importance at the
present time and “the key to better relations” between the United States
and the other American Republics. There are three economic issues which
are paramount in Latin American thinking today:
Of these the third issue is, in my opinion, the least important just now
since the Latin Americans themselves realize that their clamor, no
matter how loud on this issue, is something less than realistic and
since we have a good sound position to stand on even though it may not
meet Latin American desires.
In my opinion, the United States trade and loan policies are the two
matters on which our continuing lack of definite and clear-cut positions
cause deep pre-occupation among our Latin American friends. These
uncertainties contribute to increasing doubts and lack of confidence
regarding our intentions and play into the hands of demagogic and
communist elements who wish to destroy good relations between the
nations of this Hemisphere.
In the loan field some progress has been made and the picture is brighter
than a year ago; but the carefully worded and qualified statement on the
Export–Import Bank policy which was made at Caracas— and how difficult
it was to get agreement in Washington even on that— was decidedly not
enough to meet the situation.
In the field of trade policy we are not better off than we were a year
ago, before Dr. Eisenhower’s clear and unequivocal
presentation of the outstanding importance in our relations with Latin
America of stable trade arrangements, with a minimum of mechanisms to
permit quotas or increased duties. Indeed, in some ways the situation
appears to have deteriorated. Domestic considerations must be given due
weight, of course, but I am convinced that the maximum effort has not
yet been made to convince American public opinion and the Congress on
the vital significance of foreign trade to our welfare and that of our
allies in the free world. We must intensify our efforts to find some
methods, be it the subsidy route or whatever, through which we can take
care of situations which affect usually defined and local industry
problems in this country but which can play such havoc with the economy
of a less diversified country depending on trade with us for the very
basis of its existence. Peril points and escape clauses, no matter how
“realistic” their acceptance may be in terms of domestic politics,
simply provide a built-in mechanism to open up and nullify any trade
agreement at any
[Page 232]
time. They
mean that there can be no real stability in trade arrangements. To fall
back on increased duties and restrictions is to walk open-eyed into the
pit.
These two policies—trade and lending—are absolutely basic in our
relations with Latin America today, and we need not expect other actions
or programs or propaganda to compensate for the lack of them or to be
able to do their work.
[Annex 2—Tab II]
II. Recommendations With Respect to Specific
Country Problems
a. venezuela
Recommendation
“Perhaps the most serious irritant in United States relations with
Venezuela we found was Venezuelan dissatisfaction over its inability
to purchase military equipment for its armed forces from the United
States in the amounts or under the terms desired … preferred to pay
outright … than to be the recipient of grant assistance … quantity
quite insignificant … European countries have consistently offered
equipment to Venezuela at prices cheaper than the United States …
with more rapid delivery and better payment terms. Growing
resentment in Venezuelan Government circles … threatening continued
existence of our military missions.
“It should not require a great effort to take the small steps
necessary … the Secretary of State and the Secretary of Defense
should give consideration to this situation with a devising
expeditious purchase and delivery arrangements.
“The Administration should continue vigorously its opposition to
measures which would change the present basis on which Venezuelan
oil enters the United States.”
Action
Comment of the Defense Department on March 22, 1954:11
“The chief Venezuelan complaint has been the cash upon
delivery terms required by the law (MDAA). As a result of a finding by the Director
of Foreign Operations on 27 January 1954, Venezuela now has
the same status as Canada, and the three military
departments are permitted to deliver stock items to
Venezuela with payment due sixty days after delivery …
Priority of delivery and availability … is based on policy
that military assistance should go first to nations that are
fighting or are liable to be the first to fight … However,
effort is being made within the priorities assigned to make
available and expedite the delivery of equipment to
Venezuela and other Latin American countries.”
It is believed that there has been improvement over the situation of
a year ago with respect to purchase and delivery arrangements, as
well as
[Page 239]
better
understanding on the part of Venezuelans concerning unavoidable
delays in the delivery process. The circumstances of the transfer of
certain Venezuelan arms purchases (tanks) to Europe primarily for
reasons of top-echelon graft, after the transaction had been
virtually completed here, have become widely known and much
criticized in Venezuelan military circles. This should serve to
reduce abuses in purchasing procedures in the future, and should
redound to our benefit.
Efforts to change the basis of oil imports by Congressional action,
which would violate the trade agreement with Venezuela, one of our
largest customers, have been unsuccessful thus far. The pressure
from coal, independent oil producers and other domestic interests
continues heavy, however. An inter-departmental committee is
currently studying the problem.
b. colombia
Recommendation
“The Secretaries of State and Defense should work out an equitable
and sympathetic formula for the settlement of the Colombian
reimbursement problem (for expenses in Korea) so that this matter
can be negotiated with the Colombians and this source of potential
trouble removed.”
Action
The Cabinet on March 5, 1954 agreed that the charges for Colombian
expenses in Korea should be held in abeyance until the outcome of
the proposed legislation to implement an NSC decision to permit the waiver of all or part of
reimbursement obligations.12
c. ecuador
Recommendation
That the Export–Import Bank act favorably on Ecuador’s long-pending
application for an Eximbank
loan for $2.5 million for improvement of the Quito and Guayaquil
airports. “The personal safety and the defense security of our
citizens would obviously be served through adequate loan assistance
to Ecuador in the improvement of her airports. … A shift of the
project to the World Bank with the attendant delays will cause harm
to United States-Ecuadoran relations.”
Action
On January 8, 1954 the Eximbank
authorized a credit of $2.5 million to assist in financing the
development of the two airports. After insisting for months that it
handle the airport loans and threatening that
[Page 240]
action by the Eximbank would imperil, if not
kill, Ecuador’s chances for larger loans for highway construction,
the World Bank on February 10 made a loan of $8.5 million for a road
construction program in Ecuador to aid agricultural development.
This was the full amount that had been requested for that project,
although another application for a port project has been rejected
for the present.
d. peru
Recommendation
Discussed Peru’s friendship for the United States and sound economic
policies of recent years, and Peruvian feelings of neglect over
small amount of United States loan assistance to country’s economic
development. Pointed out that decline of non-ferrous metals prices
and possibility of United States restrictions on lead and zinc gave
Peru much concern over possibly heavy pressures on her free economy.
Recommended the Toquepala project as a good business proposition, a
highly desirable development from the strategic point of view and as
in the interest of good United States relations with Peru.
Action
When Peru’s economy did come under pressure in late 1953 and early
1954, causing a sharp decline in the value of the sol, action was
taken quickly in Washington to alleviate the situation. The
International Monetary Fund, in a tribute to Peru’s essential
soundness, took action and authorized a standby credit to Peru of
$12.5 million,13 50% of her quota, a percentage rate
exceeded only once in IMF history.
The United States Treasury signed a bilateral stabilization
agreement14 for the same amount, and the Chase Bank contributed
to the solution with a loan of $5 million to Peru. These actions so
strengthened the sol that to date Peru has not found it necessary to
draw down any of the funds.
Settlement has been reached between Peru and the British on defaulted
sterling bonds, which makes Peru eligible for World Bank loans.
Comment from the Defense Department on the original Toquepala
project:
“appears to be a sound business proposition and desirable
from a strategic point of view … need for the development of
new copper sources.”
[Page 241]
No final action has been taken by this Government on the Toquepala
project. The Peruvian Government and American Smelting &
Refining have not yet reached agreement on terms of a concession
contract. In Washington the Eximbank, while ready to lend $60 million to match an
equal amount to be made available from defense procurement funds,
felt that it could not take on the full $120 million when the
Defense Materials Board cancelled its earlier certification of the
project. The Treasury Department has been opposed to public loans
for Toquepala.
After several months of relative inactivity, however, the project is
stirring vigorously again. AS&R
now states it expects shortly to arrive at satisfactory terms with
the Peruvians; and on August 5 AS&R submitted to the Department a revised proposal
which provided for a larger total project of $196 million, with
private interests prepared to put up 50% of this amount. This calls
for a scaling down of the Eximbank participation to $98 million. The Department
favors this proposition and hopes for Eximbank’s approval before the Rio Economic Conference.
Treasury’s attitude on this revised project is not yet known.
The President’s decision to reject the Tariff Commission’s
recommendation for increased duties on lead and zinc is a matter of
first-rate importance to Mexico and Peru in view of the large dollar
earnings received by those countries for those products. Bolivia
will also welcome the decision.
e. bolivia
Recommendation
“Our extension of aid to Bolivia had immediate success … through the
strengthening of moderate members of the Government … We should
continue our emergency efforts in our own national interest to help
Bolivia strengthen and diversify her internal economy … necessity
for a minimum of $15 million in aid for the coming fiscal year.
“Now that we have begun this program, we must not abandon it in
midstream … avoid a situation which runs the very real risk of
bringing the Communists into political ascendency. … If the price of
tin does not improve, Bolivia will need some aid for five years
while she is expanding her farm production.”
Action
Decision to extend to Bolivia an emergency economic aid program under
the Mutual Security Act, the only one in Latin America, was made in
September 1953, after Dr. Eisenhower’s visit
there and with his strong support, but before the publication of his
Report. The total program for fiscal year 1954 came to $14.5 million
and included food grants from surplus stocks and the more than
doubling of the technical cooperation program in agriculture.
[Page 242]
Consistent with the Eisenhower recommendation,
the Department recommended in the draft foreign aid program for
FY 195515 a $15 million dollar grant, $11 million of which
would be used primarily for purchase of goods to meet current
consumption needs and $4 million for equipment and supplies to
assist in diversifying and increasing Bolivia’s agricultural
production. Governor Stassen
considered it advisable to reduce the program to $9 million for
submission to Congress but agreed that, should the Bolivian
situation so warrant, additional assistance would be made available
under the proposed surplus agricultural disposal program. The $9
million figure was approved by the Congress in the foreign aid
appropriation bill.
The Department has given considerable thought to the possibility
that, unless the price of tin improves, Bolivia will need some aid
for perhaps five years. The exact amount will depend on whether or
not Bolivia is able to obtain loans for development purposes.
Development loans would enable Bolivia to apply foreign exchange,
now being used to purchase capital goods, to import minimum needs
for current consumption. By FY 1956
the need for food imports is expected to decrease somewhat. Aid to
finance the economic development program, however, will be required
for several years. The Bolivians have indicated a preference for
loan financing of their development programs.
Comment from the Eximbank:
“The circumstances in Bolivia which led to the decision to
extend aid in the form of grants limit the capacity of
Bolivia to undertake the obligations of large additional
loans.”
Since the issuance of the Report, the Eximbank has authorized a credit of $2.4 million,16 in addition to
loans over recent years totalling around $27 million, to finance the
completion of the Cochabamba–Santa Cruz highway and the repair of
equipment for use in maintenance and in building tributary roads.
The main highway is already carrying traffic and is scheduled to be
formally inaugurated in September of this year.
Comment from the Department of Defense:
“I agree with the necessity of providing emergency aid to
Bolivia; however, I believe that such aid should not be
continued on an indefinite basis … It is suggested that the
United States assist in the development of a broader base
for the Bolivian economy with particular emphasis upon
foodstuffs production.”
[Page 243]
Comment from the Treasury Department:17
“It is questionable that our emergency aid program should
continue as long as five years while Bolivia expands her
farm production. Realistic price incentives for their
exchange reform and a halting of the inflation are the basic
requirements.”
f. chile
Recommendation
“Chile’s rampant inflation and serious economic conditions have been
brought on by gross mismanagement … culmination of inept and
misguided policies came with the accumulation of 130,000 tons of
unsold copper. … While not essential to our needs this copper can be
a useful addition to our stockpile, and we should be prepared to
purchase it only under conditions which would contribute to a basic
improvement in Chilean economic policies. We should not submit to
political or economic blackmail.”
Action
In March of this year, after lengthy negotiations with Chile, a
cabinet decision was made to buy 100,000 tons of Chilean copper at
the then market price, 30 cents a pound, for our national stockpile.
The purchase was made on the strength of a renewal of Chile’s
promise not to sell copper to the Soviet Bloc, and to enact
legislation providing for a single tax on copper in lieu of the
present multiple system, return control over sales to the companies
(this is considered an additional safeguard in preventing shipments
to the Soviet Bloc), elimination of price fixing, and the
establishment of a non-discriminatory exchange rate for copper. The
promise to refrain from selling to the Soviet Bloc has been carried
out. The other assurances were embodied in a bill presented by the
Chilean Executive to the Congress on March 2 as an urgent measure.
At this date the “urgent measure” is still being considered by the
Chilean Congress, with the outcome unpredictable.
In the meantime, the Chilean Government has faltered from one crisis
to another, and the national economy has continued to decline. The
cost-of-living increased from May 1953 to May 1954 by more than 80%.
No solution to Chile’s grave problems appears in prospect, and there
is no indication that Chileans themselves, despite brave words and
innumerable promises, have yet determined to grasp the nettle
involved in the hard decisions that must be made if Chile is to be
put back on the road to sound policies. In the meantime,
irresponsible demagogues and Communists make hay in Congress and
before the public, and the Government
[Page 244]
becomes more and more a prisoner of its own
political cowardice and general policy drift.
Comment from the Treasury Department:
“Although the danger of large sales to the Soviets seems
lessened, the United States should in any agreement to buy
copper at the market, require assurances on this as well as
on fair treatment of the companies.”
g. uruguay
Recommendation
“Uruguay considers herself our loyal and tried friend in the
political councils of the Hemisphere and the world … of late they
have developed something of a fixation of being neglected by the
United States. Uruguayans tend to overlook the fact that they have
not treated United States private economic interests particularly
well in recent years, and they are greatly preoccupied over the
possibility of United States tariff quota restrictions or other
methods of trade control which would diminish the export to the
United States of Uruguayan wool. They are also concerned lest our
agricultural surpluses be used in such a way as to harm their
markets …
“Uruguay’s example of political democracy is one which it is in our
interest to encourage in Latin America. While we should not fail to
protect United States private interests … we should make every
effort to assuage Uruguayan feelings of neglect and to work out
methods of handling agricultural problems which would show adequate
understanding of Uruguay’s vital interests.”
Action
Uruguay has recently taken to wearing a self-fitted halo, which makes
cooperation with her difficult. Relations at the Caracas Conference
were not particularly satisfactory in either the political or
economic fields. Despite continued informal representations on our
part, the Uruguayan Congress earlier this year, aroused over chronic
meat shortages and fearful of domestic political consequences passed
a law to regulate the meat packing industry which discriminates
markedly against the United States-owned packing houses.
On the United States side of the ledger the countervailing duties
imposed in 1953 to United States imports over Uruguayan wool tops
(justified on the grounds of Uruguayan use of multiple exchange
rates) remain in effect. They have, however, been substantially
reduced, from 18% to 6% following a reduction in the Uruguayan
exchange rate. Early in 1954 this Government decided that it could
not carry out its
[Page 245]
obligations under GATT18 to reduce certain duties on meat
products because of our domestic beef situation. This decision was,
of course, very disappointing to Uruguay and was regarded as a
renege on a commitment by the United States.
United States agricultural surplus disposal policy, as reflected both
in the present legislation and in plans for future legislation,
embraces the principle that the disposal of United States surpluses
will be carried out in such a way as not to displace exports of
friendly countries. However, the Uruguayans have formally protested
the United States sales of linseed oil from CCC stocks and have regarded it as dumping. (The United
States price is approximately 16 cents and we recently disposed
abroad at 6 cents.) Uruguayan concern over our surplus disposal
program remains great.
h. aregentina
Recommendation
“It is in our national interest to maintain and broaden the
improvement in relations which has occurred … our primary aim should
be to counter the Argentine tendency toward neutralism … and to
align Argentina firmly on the side of the West. If we can develop in
the Argentine Government a sense of understanding and trust … we may
at some future time be able to exert influence which would lead to
an improvement in Argentine attitudes with respect to the
fundamental freedoms.
“We should not deceive ourselves as to the nature of the Government …
or as to Peron’s personalist
and emotional type of leadership. We should seek to carry on
relations with the Peron
Government in an atmosphere of frankness and we should display a
sympathetic attitude toward Argentine aspirations for economic
development through the aid of United States private enterprise. We
should seek to handle such domestic problems as the disposal of our
agricultural surpluses and possible tariff increases on wool in such
ways as to cause the least strain on our relations.”
Action
Real progress has been made in improving relations between this
Government and the Peron
administration. Ambassador Nufer holds a position which has not been equalled
by any United States representative since the beginning of the
Peron regime; and the
personal relationship established with Peron by Dr. Eisenhower has
contributed immeasurably to a growth of confidence and trust in us
on the part of the
[Page 246]
Argentine President. Fortified by these personal relationships,
Peron has up to now not
permitted the serious problems which remain between us, such as
United States public dislike for Argentine internal policies and
Argentine concern over United States agricultural policies, to
interfere with his overall policy of rapprochement with the United States. The dangers in the
basically personalist quality of Argentine policy under his
leadership must not be disregarded, however, for we know that many
influential Argentines in and out of the Government are less willing
than Peron to submerge their
traditional Argentine feelings of antagonism toward the United
States or to overlook our numerous fundamentally divergent views on
political and economic policies.
Beneficial results of improved relations with Argentina have included
out-standing improvement in Argentine press treatment of the United
States, cessation of official propaganda attacks on the United
States in Argentina and the other Latin American countries, and a
generally more sympathetic approach to United States policies and
motivations (although they do not hesitate to be critical in the
press and elsewhere of specific policies or actions). Peron has moved steadily toward a
more positive identification with the West and has shown himself
increasingly aware of the dangers of communist infiltration in
Argentina and elsewhere in the Hemisphere. He seems anxious now to
embark on a policy of broad, hemispheric action against communism,
and Ambassador Nufer has
recently proposed that we increase our cooperation with Peron, particularly with regard to
communist and Hemisphere security matters. His recommendations are
currently under study.
Sincere efforts are being made by Argentina to improve the atmosphere
for foreign private investment; as a result there has been a marked
resurgence of interest on the part of United States investors in
Argentina. United States investments in Argentina, however, still
face dollar remittance problems, due basically to the lack of dollar
exchange.
The Argentines have been greatly pleased over their Success in
purchasing at Government auction in this country a steel mill
originally constructed for Czechoslovakia; it will form an important
component in their plans for an integrated steel industry. In June
of this year the Eximbank
approved an application (subject to the raising by the industry of
certain additional financing by the company) for the financing of
the purchase of a blast furnace by the Argentines for this project.
An Eximbank mission has just
returned from Buenos Aires after a survey of various economic
development projects which United States firms are interested in
undertaking.
President Eisenhower’s call for further study of
the proposal of the Tariff Commission to raise wool duties provided
comfort to the Argentines, although the final decision is obviously
of great concern to them. They were encouraged by his decision not
to impose immediate restrictions
[Page 247]
on tung oil imports; nevertheless they are
still greatly preoccupied over future United States policies with
respect to United States import restrictions on these and other
items. Argentina has vigorously protested certain United States
actions in disposal of agricultural surpluses, particularly with
respect to our sales of linseed oil for export at far below domestic
prices, and has asked for consultation with us on the general
problem of agricultural surplus disposal.
Comment from the Defense Department:
“This Department is in agreement with Dr.
Eisenhower’s conclusions.”
i. paraguay
Recommendation
“We should continue our programs of technical assistance … the United
States would obviously derive great political benefit in Paraguay if
the Eximbank were to lend the
relatively small amount of $2.5 million necessary to give the
capital of Paraguay a water system.”
Action
The amount allocated for the United States contribution to the
technical assistance program in Paraguay was substantially greater
in FY 1954 than in 1953. Future
contributions to the program will depend on Paraguay’s ability to
assimilate them, as well as on actions taken by our Congress with
respect to appropriations.
After lengthy consideration, it now appears that the Eximbank is ready to go forward
with a loan to Paraguay for the waterworks system at Asunción,19 This
project has, of course, had the strong support of the
Department.
Comment from the Treasury Department:
“The proposed water system for Asunción is within the purview
of the World Bank. The economic case for it is weaker than
for other projects that would create or save more foreign
exchange.”
Comment from the Defense Department:
“This Department believes the United States should continue
Point IV and modest economic development aid.”
Comment from the Eximbank:
“As long ago as 1938 officials of the Paraguayan Government
discussed with the Bank the possibility of a credit to
assist in constructing a potable water system for Asunción …
broached from time to time but Paraguay has usually given
higher priority to other projects. It is our opinion that a
potable water system would probably cost considerably
[Page 248]
more than the $2.5
million presently given as the Paraguayan estimate. The
proposal presents a number of technical and financial
problems.”
j. brazil
Recommendation
“The President (Vargas) would
wish to send a small mission to the United States to confer with
officials of our Government regarding a plan of economic cooperation
between our two Governments … We should be prepared to sit down with
Brazil on her request and review sympathetically her problems. … In
such talks it is anticipated that Brazil would seek financial
assistance for economic projects which would not be of interest to
private firms. If the United States is not in a position to provide
such assistance, it will probably be very difficult to reach
agreement with Brazil on significant plans for economic
cooperation.
“We should continue to urge upon Brazil recognition of the benefits
of private investment … We should also continue to urge the
International Bank to expedite sound loans to Brazil in connection
with the recommendations made by the Joint Brazil–United States
Economic Development Commission …20
“Careful consideration should be given in our Government as to
methods by which Brazil can be encouraged to modify its present
restrictive petroleum legislation and find constructive solutions
which will permit sound development of Brazil’s petroleum
resources.”
Action
The small mission mentioned above has never been sent to the United
States, although various individuals holding high positions in the
Brazilian Government have visited Washington during the past year.
In accordance with this recommendation to consult and in preparation
for the Rio Economic Conference, the Department some time ago
formally invited the Brazilian Government to send a delegation to
Washington to discuss bilateral economic matters. The Brazilians
received this invitation with considerable satisfaction, but decided
to delay the talks until the arrival in Brazil of Assistant
Secretary Holland, who is now
scheduled to visit Rio in mid-September.21 The
Vice President of Brazil, Cafe
Filho,
[Page 249]
has
been invited for an official two weeks visit in the United States
commencing October 18.22
With respect to loans, a sympathetic reception was given to a
visiting Brazilian delegation which came to the United States in May
of this year for discussions relative to modifying the $300,000,000
loan repayment schedule. A satisfactory adjustment was made, and
general loan policies were discussed. Several Eximbank loans23 have been granted
since January of this year for Brazilian development projects.
With respect to World Bank loan activities in Brazil, a special
resident representative of the Bank has recently established an
office at Rio de Janeiro to work closely with the Brazilian
Government. The President of the World Bank, Mr. Eugene Black, and members of his
staff visited Brazil and reached an understanding with Finance
Minister Aranha concerning
development loan applications now on file with the Bank. It was
agreed to provide a “breather” of several months while World Bank
and Brazilian officials completed studies of Brazil’s financial
position. It is anticipated that further loans will be forthcoming
as Brazil’s financial situation improves.
The Petrobras Government Petroleum Corporation has been organized,
but no attempt has yet been made to modify existing legislation
which prevents foreign investment in Brazil’s petroleum development
on a reasonable basis. However, Brazil’s exchange shortage and the
inability of the Brazilian Government to provide dollars to
Petrobras exert pressures on Brazil to modify somewhat its present
restrictive policy, as against the extreme nationalism which would
continue to deny foreign participation altogether. The Department is
now examining the possibilities of approach to the Brazilian
Government on this subject.
Despite progress in certain aspects of our relations, Brazil still
entertains exaggerated feelings of neglect by the United States.
This situation makes our relations disturbed and delicate.
Comment from the Treasury Department:
“The World Bank is the normal source for development
financing … that Bank will remain in close contact with
Brazil’s efforts to qualify for further loans. We agree with
Dr. Eisenhower that a solution to
Brazil’s fuel problem is fundamental to the country’s sound
development and that the inflation and other financial
problems need urgently to be tackled by Brazil.”
Comment from the Defense Department:
“It is believed that the expansion of Brazil’s production
capacity would be mutually beneficial to our two
countries.”
[Page 250]
Comment from the Eximbank:
“Although the Eximbank
is not mentioned, there is a suggestion that the United
States should be in a position to assist in its desire to
seek financing for economic projects. The Eximbank has extended
valuable assistance to Brazil which we believe has been of
great benefit to both countries. As indicated above, the
Bank could do so in the future in such cases in which the
interests of the United States would be served.”
