234. Telegram From the Department of State to the Embassy in Brazil 1

984. While deploring obvious tactic, Dept believes Kubitschek’s remarks (Embtel 1098)2 provide opportunity speak with him directly in two matters of concern to US namely 1) exchange crisis and US response to request for standby credit and 2) Brazil–USSR trade potential with accompanying possibility resumption diplomatic relations. Implications President’s remarks seem require effort our part insure he understands US position which may not have been fully and accurately reported to him by Alkmim. Subject your concurrence suggest you seek early interview with Kubitschek and indicating you acting on instruction speak along following lines:3

Tell him his remarks reported to Washington which desires he fully and accurately understand US position. US Government sympathetic problems besetting his administration and desirous be helpful in constructive ways consistent traditionally cooperative and friendly attitude toward Brazil and Kubitschek personally. Request for Eximbank standby communicated in Rio by Alkmim and in Washington by Peixoto received urgent consideration this Government at Cabinet level. Unanimous conclusion was that request Eximbank standby both faced technical problems indicated Deptel 9344 and highly inadvisable from Brazilian point of view since would increase indebtedness without being likely to lead to real, basic solution Brazil’s problems and thus would only add to burden in months and years to come.

For these reasons US concluded such operation would not render service to Brazil and therefore earnestly recommended consultation IMF which agency created and qualified to assist situations of this kind. Moreover, acceptance from international organizations of advice requiring adoption measures having impact domestic economy would be politically more palatable to Kubitschek than would acceptance from US. Gratified this regard learn Brazil has now approached fund re Deptel 979.5

[Page 662]

Should Kubitschek inquire about possible US assistance after consultation IMF you should say that Eximbank has in no instance extended assistance any country under circumstances described by Brazil prior actual adoption corrective measures in agreement with IMF. Most recent examples are credits to UK, Colombia and Chile and option to France to defer next two years payments. In each instance countries first sought IMF assistance, reached agreement and have undertaken necessary corrective measures. Should Kubitschek ask why we cannot help on same basis as past 300 and 75 million dollar Eximbank credits extended you should say that situation then not comparable present. Three hundred million loan in 1953 was to assist refunding 450 million dollars arrearages in payments US exporters and made only after Brazil took corrective measures to reverse trend and halt accumulation arrearages. Moreover, IMF consulted on informal basis. The 75 million dollar loan (of which 45 million used) was established in 1954 in close coordination with IMF and when Brazil was taking appropriate corrective measures. Brazil’s failure continue apply these measures responsible in part, our opinion, for their lack of anticipated effectiveness.

Should Kubitschek press you for more direct reply you may if situation demands repeat policy outlined penultimate paragraph Deptel 938. However if you have not already made such statement to Alkmim, would prefer you avoid doing so with Kubitschek if possible.

Re other aspect of his remarks, you may assure Kubitschek we recognize seriousness of problems created for Brazil by accumulating coffee surplus and her desire expand market where may be found, including USSR. Say if Brazil believes some surpluses can be fruitfully disposed of in this way US would understand exploitation of the opportunity. Would like sound word of caution however and warn Kubitschek of danger getting in too deep with USSR. This regard you might use arguments outlined Deptel 8186 placing particular emphasis on our assumption that for reasons stated Brazil would only increase trade in conjunction adequate safeguard measures, to which we understand Braz Government has already given careful thought and that resumption diplomatic relations this time would be avoided as tending vitiate effectiveness such safeguards.

Should it be necessary explain why US warns countries such as Brazil against diplomatic ties with the Soviet while maintaining them itself and even now encouraging closer cultural ties you might use [Page 663] following arguments. US maintains ties with USSR because its responsibilities leave no other choice. If peace to be maintained must be contact between US and USSR and no effort can be spared promote understanding and minimize areas of conflict. At same time, internal political problems caused here by subversion potential Soviet diplomatic representation are negligible. US Communist Party virtually nonexistent and almost totally without influence. Moreover there are no political parties or movements of significance in US with which CP can ally itself, directly or indirectly, effectively to promote USSR interests. In Brazil, on the other hand, non-Communist party structures, discipline, and traditions are not so sharply formulated and there exists strong nationalist sentiment irrespective of party which Kubitschek has more than once told us is exploited by Communists to promote the interests of the USSR and to hamper his adoption constructive measures in interest Brazil. You might cite as example difficulties caused by nationalists and Communists re conclusion missiles tracking station agreement7 which was recognized by Kubitschek as serving interests Brazil as well as of entire Free World. To open doors to Soviet agents through a mission in Rio this time would in our opinion maximize problems Kubitschek will face in difficult months ahead as he tries solve Brazil’s basic problems and would make more difficult his constructive cooperation with US this regard.

  1. Source: Department of State, Central Files, 832.10/2–2558. Secret; Priority. Drafted by Siracusa and signed for Dulles by Snow. Repeated to Bogotá, Buenos Aires, and Mexico City by pouch.
  2. Supra .
  3. The Embassy preferred to wait until the subject arose again of its own accord rather than seek an appointment with Kubitschek for the purpose outlined above. (Telegram 1122 from Rio de Janeiro, March 5; Department of State, Central Files, 832.10/3–558)
  4. Not printed. (ibid., 832.10/2–1458)
  5. In telegram 979 to Rio de Janeiro, February 28, the Department reported that Paranaguá had begun discussions on a $37.5 million drawing by Brazil from the International Monetary Fund. (ibid., 832.10/2–2758)
  6. In telegram 818 to Rio de Janeiro, January 17, the Department pointed out that the aim of Soviet trade was to export communism, and that since Soviet imports were not motivated by economic need, there was a “constant threat resale or dumping in other markets produce from free world sellers.” It also indicated that increasing trade and establishing diplomatic relations between the Soviet Union and Latin America would adversely affect Latin American relations with the United States. (ibid., 432.6041/ 1–1758)
  7. For text of the Agreement on the Establishment of the Guided Missile Tracking Station on the Island of Fernando do Noronha, signed January 21, 1957, see 8 UST p. 87. For further documentation, see Foreign Relations, 1955–1957, vol. VII, pp. 713 ff.