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

1224. Embassy telegrams 1216 and 1217.2 President Kubitschek having summoned me this morning on another matter, I took opportunity to tell him of my lengthy meeting March 22 with Finance Minister Alkmim and to give him Portuguese translation of Secretary Anderson’s letter. President had just returned from weekend outside Rio and had not been in touch with Alkmim since latter’s call on me.

Kubitschek read letter carefully expressing immediate opinion that pledge of gold, by itself, would trigger devastating and perhaps mortal attack on his government. He said that given “political immaturity” of Brazilian people coupled with ferocity and irresponsibility of opposition, word that part of Brazil’s already pitifully small gold holdings had been pledged, could finish his government; at the least it would tragically undermine it while at same time provide heaven-sent opportunity for “enemies of United States.”

In ensuing discussion I described background of IMF operations, and their reasonable insistence on formulation of program et cetera. I indicated willingness my government to examine extent to which we might be able to cooperate in helping Brazil solve not only problem of moment but longer range matters including examination balance-of-payment difficulties and also relationship thereof to President’s development program, situation of coffee and likewise petroleum. I then suggested that as alternative to short term credit from U.S., or pledging gold, immediate emergency might be met if Alkmim would work fast, [Page 668] present acceptable program to IMF, and thereupon obtain release of 37.5 million dollars representing 3rd quarter of quota. I expressed opinion fund prepared for its part give urgent consideration to balance-of-payment program, based on figures already supplied by Alkmim to IMF representatives, if Alkmim would submit reasonable plan.

President clearly unprepared for this morning’s discussion but his attitude was reasonable and he said he would canvass situation with Alkmim without delay. I left Anderson letter with President and also referred to Rubottom’s Texas speech3 as directly relevant to our desire to be of assistance, promising him copy of Portuguese text this afternoon.

Comment:

I am inclined to agree with Kubitschek that gold operation, granted present political atmosphere, might be dangerous move for his whole administration. His views were forcefully stated and we should not ignore estimate by President himself of effect of given step on unstable Brazil political situation. His reluctance however provided opportunity to plug away at desirability of Alkmim’s producing plan, with 3rd quota as bait. As indicated Embassy telegram 1217, I hope fund manager will hammer away on same theme with Ambassador Peixoto, since if fund can in fact release 37.5 million, promptly, against suitable plan, that might obviously provide emergency assistance in lieu of loan from U.S., or pledging gold.

Should it finally appear that Brazil reluctantly agrees to pledge gold, Department might consider whether announcement could be coupled with some joint U.S.-Brazil statement that would indicate our willingness (in satisfactory circumstances) to collaborate in solution of long-range in contrast to emergency problems. In other words, if we force Brazil to take unpalatable medicine or to take step Kubitschek informs us would be politically dangerous, we might consider balancing that step by participating in statement so drafted as to minimize those dangers.

Briggs
  1. Source: Department of State, Central Files, 832.10/3–2458. Confidential; Priority.
  2. Telegram 1216 from Rio de Janeiro, March 23, reported that Alkmim told Briggs on March 22 that he was dissatisfied with Anderson’s March 21 letter. Alkmim made a strong plea for an immediate U.S. $50-million short-term loan until the IMF and Brazil could reach an agreement. Telegram 1217 from Rio de Janeiro, March 23, reported that the Embassy could not recommend the short-term loan Alkmim requested. (Both ibid., 832.10/3–2358)
  3. For text of Rubottom’s speech of March 21, see Department of State Bulletin, April 14, 1958, p. 608.