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

269. Memorandum From the Deputy Director of the Office of East Coast Affairs (Briggs) to the Assistant Secretary of State for Inter-American Affairs (Rubottom)¹

Washington, May 14, 1959.

SUBJECT

• Expropriation of American and Foreign Power Company Properties in Rio Grande do Sul, Brazil

For your background, the following is what I consider to be the probable political motivation of the sudden and seemingly poorly timed expropriation of the American and Foreign Power Company holdings in Rio Grande do Sul.²

Janio Quadros, former Governor of São Paulo and newly elected Federal Deputy on the Brazilian Labor Party (PTB) ticket, is at this moment an odds-on favor in the 1960 presidential race. He has great popular appeal and his election on the PTB slate means that he will draw support from that party, which has been virtually the personal vehicle of Vice President João Goulart, its national chairman.

Realizing this threat to his leadership of the PTB and therefore to his own political future, the intensely ambitious Goulart is determined to stop Quadros. He and his advisers have therefore begun maneuvers to this end, the first of which is the formulation of a PTB “program”. The whole tenor of this so-called program is ultra-nationalism, with emphasis on the need for Brazil to reduce or eliminate the power of foreign economic “trusts” and to stop the drain on Brazil’s resources which remittances of profits by foreign companies allegedly cause. It is beginning to be clear that Goulart and the PTB, in order to stop Quadros, plan immediately to begin the creation of a mass sentiment of ultra-nationalism which Goulart can head and which might give him sufficient political appeal not only to maintain his hold on his own party but also to attract nationalist elements of all parties to his banner.

The State of Rio Grande do Sul is Goulart’s home state. It is controlled by the PTB and its Governor, Leonel Brizzola, in addition to being a member of the party, is Goulart’s brother-in-law. American and Foreign Power has been having difficulties in that state for years, owing to the state government’s desire to keep power rates low during a decade of steadily rising costs. The result has been that, principally for political reasons, the company has suffered greatly insofar as public opinion is concerned. It is therefore logical that, in line with Goulart’s political objectives, the American and Foreign Power Company holdings in Rio Grande do Sul should be the first target.

The move against American and Foreign Power is probably only the opening gun in the PTB election campaign. We may expect that the party will make U.S. interests in Brazil increasingly a campaign issue and that U.S. interests in states controlled by the PTB will be subject to constant political pressures. Moreover, it is doubtful that President Kubitschek or his administration will or can have any significant moderating influence on Goulart and his supporters.

1. Source: Department of State, Central Files, 232.1141/5–1459. Confidential. Drafted by Briggs and sent through Boonstra. The source text bears the following notation from Rubottom to Hill: “Mr. Hill: Please see me re this pronto. 5/14/59 RRR”.
2. The Rio Grande do Sul State Government, with the approval of the Federal Mines and Energy Ministry, expropriated the concession and assets of Rio Grandense Light & Power Corp. (Companhia de Energia Electrica Rio Grandense), a subsidiary of American & Foreign Power Co., on May 11. The State Government of Rio Grande do Sul reportedly had decided not to pay the $15 million at which it had evaluated the properties.