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  4. Document 231

231. Memorandum of a Conversation, Department of State, Washington, February 14, 19581

Washington, February 14, 1958

SUBJECT

  • Brazil’s Request for $100,000,000 Standby Credit

PARTICIPANTS

  • Ernani do Amaral Peixoto, Brazilian Ambassador
  • Henrique Rodrigues Valle, Minister Counselor, Brazilian Embassy
  • Miguel Alvaro Ozorio do Almeida, First Secretary, Brazilian Embassy
  • ARA—Mr. Rubottom
  • OSA—Mr. Siracusa
  • OSA—Mr. Ingersoll

Ambassador Peixoto and Mr. Valle said that, as Mr. Rubottom probably knows, Brazilian coffee exports have been falling off and for this and other reasons the exchange situation has deteriorated to a serious point. If Brazil is unable to obtain immediate relief, her imports from the United States will be affected. He has, therefore, been instructed to request a $100,000,000 Export-Import Bank loan for three months, to assure continuation of United States imports, to be extendable at the end of that time. Later in the discussion it was brought out that Brazil wants the loan before the opening of the exchange market next Wednesday, February 19. From now until Wednesday, Carnival holidays will be in progress. It was later clarified that according to Ambassador Peixoto’s present understanding, Brazil wants a stand-by credit largely for psychological reasons, and does not intend to draw it down, as was first indicated. The Ambassador, after explaining this point, however, added that he had queried Rio and expects further clarification later today and will inform the Department.

Mr. Rubottom said we have been aware of Brazil’s problems with coffee exports and of its affect on her exchange reserves. We recognize it as a serious problem with which we sympathize. However, a number of problems are presented.

Mr. Rubottom pointed out that the Eximbank normally does not give stand-by credits. In the single instance wherein it had been done (the Suez loan2), the Bank had required 120 percent collateral and a commitment fee.

[Page 658]

In the case of the Federal Reserve stand-by to Brazil of 1952, full gold collateral had been required, Mr. Rubottom said. However, it is also his understanding that Brazilian gold reserves are already fully committed.

In these circumstances, Mr. Rubottom said, it is difficult to see just how we could be of help. He will, however, report the circumstances to Mr. Dillon, he said.

Meanwhile, although he could not be encouraging, Mr. Rubottom said, he thought it would be well to discuss the matter with Export-Import Bank officials. Ambassador Peixoto replied that he already has an appointment to see Mr. Waugh this afternoon.

Mr. Rubottom then inquired whether or not the Ambassador has considered going to the IMF. The case, as he understands it, he said, seems to be exactly the sort of thing the IMF was created to deal with. To this Mr. Almeida replied that he does not think the Fund could do anything effective because of the status of Brazil’s previous drawing. (Brazil took its first traunch of 37.5 million last October.) The Ambassador said, however, that he would talk to Brazil’s representative, Mr. Paranaguá,3 before calling on Mr. Waugh this afternoon. Mr. Rubottom again urged that the IMF route be explored.

Mr. Rubottom said finally that if it should prove possible to be of some assistance, whether through United States Government or international agency resources, he is certain that a real interest would be manifested not only in the circumstances and conditions leading to Brazil’s present condition, but also in corrective measures and means which should be adopted in order that the assistance would do permanent good.

It was agreed that any press inquiries would be met with a denial that this subject was discussed. If the press learns of the Ambassador’s visit, it should be told that the GATT negotiations were discussed. This discussion is the subject of a separate memorandum.

  1. Source: Department of State, Central Files, 832.10/2–1458. Confidential. Drafted by Siracusa.↩
  2. Reference presumably is to the $500-million credit which the Export-Import Bank of Washington authorized for the United Kingdom on December 21, 1956; for the Bank’s announcement of the loan, see Department of State Bulletin, January 7, 1957, p. 29.↩
  3. Octavio Paranaguá, Alternate Governor for Brazil, and Executive Director for Brazil, Colombia, the Dominican Republic, Haiti, Panama, and Peru, International Monetary Fund.↩