Foreign Relations of the United States, 1958–1960, American Republics, Volume V

253. Memorandum of a Conversation, Brazilian Foreign Office, Rio de Janeiro, August 5, 1958, 9:30 a.m.¹

Rio de Janeiro, August 5, 1958, 9:30 a.m.

STB MC/1²

SUBJECT

• General Economic Problems

PARTICIPANTS

• US
  • The Secretary
  • Mr. Rubottom
  • Mr. Berding
  • Mr. Mann
  • Mr. Siracusa
  • Mr. Wallner
  • Mr. Cottam (Rep.Ofcr.)
  • Mr. DeSeabra (Interp.)
• Brazil
  • Foreign Minister Negrao de Lima
  • Finance Minister Lucas Lopes
  • Secretary Gen., Min. of For. Aff. Antonio Mendes Vianna
  • Barbosa da Silva, Chief of Economic Dept.
  • A. Castro, Chief of Political & Cultural Dept.
  • Luis Bastían Pinto, Chief of Political Division
  • Antonio Correa de Lago, Chief of Commercial Division
  • Dr. Roberto Campos, Acting Pres. BNDE
  • Dr. Jose G. Torres, Pres. of SUMDC
  • Raul Henrique de Vincensi, Chief of Protocol
  • Armando Mascarenhas, Min.’s Cabinet.
  • Mr. Marilo (Interpreter)
  • Ambassador Peixoto
  • Alfredo T. Valadao, Chief of Cabinet
  • Celso de Souza e Silva, Min.’s Cab.

In an atmosphere of cordiality the first meeting of Secretary Dulles with the Brazilian Minister of Foreign Affairs Francisco Negrao de Lima was opened at the Foreign Office.

As soon as the numerous photographers left the room the Foreign Minister, speaking in Portuguese, expressed the honor and gratitude of the Brazilian Government in receiving the Secretary at a moment when critical problems elsewhere in the world properly demand his attention. Especially because of the tense international situation, said the Foreign Minister, an exchange of views is important for better understanding of the foreign policies of the two countries. He also emphasized the enormous effort Brazil is making towards economic development and expressed the desire to reach concrete decisions on important problems of public concern. He then suggested that detailed discussions continue in small working groups at the Ministry of Finance later in the day.³ The round table discussion on the second day would, he said, consider points which might arise during the talks with President Kubitschek and topics of a bilateral character.⁴

The Secretary responded warmly, stating that he hoped his visit would help to broaden Pan American relations. Replying to the Foreign Minister’s request, the Secretary said he would be delighted to exchange views about problems of mutual concern but cautioned that he was not prepared to take concrete decisions on certain economic subjects because this would involve other departments and agencies in addition to the State Department. However, the Secretary expressed willingness to discuss problems in concrete terms. The Foreign Minister acknowledged the limitation stated by the Secretary, but said that he would like concrete decisions in so far as possible.

Inviting the Foreign Minister to choose the subjects and their sequence, the Secretary said, “These are difficult times for Finance Ministers everywhere.” He praised the courage and the ability of Minister Lucas Lopes, and said that he would listen to his presentation with great interest.

Minister Lopes thanked the Secretary and proceeded to read a prepared presentation (reported as Secto 4).⁵ Minister Lopes discussed development goals and reported that Brazil is establishing a favorable climate for foreign investment and is seeking the help of Eximbank, IBRD, and European credit institutions. The program contemplates spending about U.S. $2.3 billion or the equivalent in other currencies. Of this U.S. $1.3 billion correspond to effective foreign currency commitments during the period.

He summarized the principal problems as: 1) coffee, 2) Eximbank loans, which he said during the next two years would amount to requests totaling $300 million dollars (electric power $150 million, iron and steel $75 million, other industries $75 million). Other assistance, which he mentioned, included PL 480 loans which he hoped to expand. He then praised technical assistance through ICA and asked for an increase. He also hoped that the DLF may soon be prepared to fulfill Brazilian needs. Finally he requested that there be conversations with the United States Government for petroleum development without contemplating changes in Brazilian oil legislation.

Saying that Minister Lopes’ presentation is an important one, the Secretary said he would be unable to expound on it without further study. However, he could make a few general observations. The United States not only sympathizes with but welcomes the concept of a dynamic and growing Brazil, a Brazil which could grow without sacrificing freedoms, such as occurs under communist regimes. He said that economic development under communism gains rapidly but at a high cost in terms of human freedom; the right for people to choose their own occupation; to hold their own beliefs; to enjoy liberty. This, he noted, is a heavy price to pay. But that is what happens under communism. It is important that the free world maintain both a rate of growth and freedom for which men will sacrifice. The U.S., he continued, recognizes that, being a relatively highly developed country, it has a duty in the interest of the free world to help the less developed countries achieve a satisfactory rate of development. We remember that we, having achieved great results through private free enterprise, tend to believe that other countries too should count on private capital, which exists in abundance. Use of government capital should be the exception, not the rule.

The Secretary observed that conclusion of an investment guaranty agreement between our two countries might open a considerable reservoir of foreign capital.

The Secretary recognized that Brazil is a country which offers excellent prospects for economic growth and said that the United States would like to cooperate in “partnership within limits . . . in this great development”.⁶ He noticed while flying over Brazil the vast size of the territory and the low state of development. He compared Brazil’s development now with the United States one hundred years ago. The problems of rapid economic development, he stated, are very great in free societies and they involve great risks. In the Soviet Union, for example, only three per cent of the GNP goes back to the people for the common good. In most of the free world countries the figure is about 60 per cent. It is very difficult to attain a rapid rate of development without a high degree of economic controls, which are destructive of free enterprise and freedom. Observing that rapid economic development involves the risk of inflation he expressed the belief that the Brazilian Foreign Minister is fully aware of the problem. Even the Soviet Union, with all of its controls, falls short of its goals more often than it achieves them. But these problems, while they require caution and preparation, do not constitute barriers.

The Secretary said we realized, in this connection, that one of Brazil’s critical factors is coffee. During the last year the United States has altered its policies with respect to participating in international meetings, which seek to achieve the greatest stability in prices. The coffee problem is particularly complicated by the entry into the market of African produce.

The Secretary expressed his belief that the Eximbank will continue to be helpful to Brazil, both in loans for underdevelopment and loans for balance-of-payment purposes. The Bank has made more economic development loans to Brazil than to any other country in the world, and, under appropriate circumstances, will be glad to continue to do so.

He then asked that Assistant Secretary Mann study the Brazilian proposals in the economic sector and report his observations later.

With respect to the oil development program in Brazil, the Secretary said countries in different parts of the world have their own ideas as to how best to develop their natural resources, such as petroleum. And we are very happy to see success with whatever instrument is chosen by a foreign government. From our standpoint, the important thing is not so much how it is done as that it should be done. The Brazilian balance-of-payment problem is almost entirely due to the imports of petroleum products. The United States would welcome any arrangements that Petrobras can make with private concerns and private capital for the development of petroleum resources in Brazil. In this area it is not foreseeable that the United States Government should make available public funds for oil development, because it involves a large magnitude and considerable risks. Free enterprise can take such risks better than a government agency.

The Secretary also referred to help from the IBRD and expressed pleasure that it may help Brazil again soon. He was also happy that Brazil had spoken so highly of ICA, but stated that he did not know how much funds would be available either for ICA or for the Development Loan Fund.

In conclusion the Secretary said he hoped very much that the Brazilians would feel that his observations had been positive rather than negative. Basically, the prospects of Brazil’s vast opportunities have a tremendous appeal to us. We went through similar crises a century ago.

The Foreign Minister replied briefly, expressing great appreciation and much interest in the Secretary’s comments about Minister Lopes’ presentation. The Foreign Minister particularly appreciated the extreme clarity and simplicity with which the Secretary spoke, and acknowledged that the broad lines of his talk coincided with Brazilian Government thinking. He expressed extreme gratification for the Secretary’s presentation and said any differences which existed could be discussed by the respective advisers.

The Foreign Minister then presented the Secretary a draft press release, which merely stated that various specific problems would be examined and analyzed by mixed groups during the visit. The Secretary concurred in its release.

1. Source: Department of State, Central Files, 110.11-DU/8–658. Confidential. Drafted by Cottam.
2. The designation “STB MC” stands for “Secretary’s trip to Brazil memorandum of conversation.” This document is the first of a series of 20 memoranda of conversations between the Secretary or members of his party and Brazilian officials, August 5–6; the memoranda are listed and filed ibid., and in Conference Files: Lot 63 D 123, CF 1075.
3. Discussion of economic subjects, August 5, was reported in Secto 6 from Rio de Janeiro, August 6. (ibid., Central Files, 110.11-DU/8–658)
4. Roundtable discussions between President Kubitschek and Secretary Dulles took place at the Brazilian Foreign Office, August 6, concerning the wording of the joint communiqué on Operation Pan America (issued as Declaration of Brasilia); the methodology of submitting Operation Pan America to other Republics; and arrangements between Petrobras and private American companies. (Memoranda of conversations are ibid.)
5. Lopes’ presentation, reported in Secto 4, August 5, is summarized in the text of the memorandum of conversation printed here. (ibid., 110.11-DU/8–558)
6. Ellipsis in the source text.