299. Memorandum of a Conversation, Department of State, Washington, January 22, 19551
SUBJECT
- Brazil: Economic Problems
PARTICIPANTS
- Mr. Edward J. Sparks, Deputy Assistant Secretary
- Mr. Rollin S. Atwood, Director, Office of South American Affairs
- Mr. S. J. Cottrell, OSA
- Mr. Jack C. Corbett, OFD
- Assistant Secretary Henry F. Holland
- Mr. William V. Turnage, OFD
It was decided that in very general terms Brazil’s economic problems arise from:
- 1.
- An annual cruzeiro budget which contemplates a huge deficit. The published budget of $56 billion cruzeiros contemplates a deficit of some 3.2 billion. In addition there are expenditures anticipated, but not included in the budget, which increase the deficit to 16 billion for calendar year 1955.
- 2.
- An economy whose dollar requirement exceeds those which it can reasonably be anticipated that the economy will earn under present policies.
Solutions of Brazil’s problems require:
- 1.
- Reduction in estimates of cruzeiro expenditures. This can be accomplished by the President’s vetoing some of the cruzeiro expenditures contemplated by the budget, a right given him by Brazilian law.
- 2.
- Adoption of coffee policies which will give the country chance to earn maximum income from sale of coffee and financial help from the United States.
It was felt that if Brazil would take measures to reduce its budgetary deficit and give assurances as to what its coffee policy [Page 633] will be, then the United States would be justified in setting up a series of monthly loans which we would be willing to make so long as Brazil fulfills its undertakings and furnishes full and complete information enabling us to determine the degree of her compliance.
The foregoing was discussed by Holland with Hoover who authorized the following program:
- 1.
-
Urge Messrs. Overby from Treasury and Arey from the Export-Import Bank to proceed immediately to Brazil with a State Department officer. They would be requested to study in detail the existing situation in Brazil and attempt to obtain assurances from the Brazilians with respect to reduction of their budget deficits and with respect to their future coffee policy.
On the basis of the reports from this group the United States could determine what financing it will be justified in giving with reasonable assurance that the Brazilian Government will on its part do what is necessary to avert the financial crisis which can be averted only by its adoption of sound policies.
- 2.
- We shall urge Ambassador Dunn 2 to proceed to his post as quickly as possible.