280. Letter from the Assistant Secretary of State for Inter-American Affairs (Rubottom) to the Ambassador in Brazil (Cabot)1

Dear Jack: Assuming you have noted the absence so far of a specific reply to your letter of last December 4, I want to send forward at this time the assurance that your helpful suggestions toward improving relations with Brazil have been widely distributed and discussed in the Department and that the area of agreement with your thoughts is large indeed. Fortunately there has been substantial progress in recent months already along the lines of certain of your suggestions; as time passes, we can push forward further on these items and endeavor to add others.

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As your letter suggests, we took certain risks in handling the Brazilian financial approach last May and undertook knowingly the possible subsequent short-term deterioration in our relations. On the other hand, we had very much in mind the establishment of safeguards against risks which might involve a long-time deterioration of relations. The problem thus has been one of assuring that a deterioration resulting from our handling of the financial situation—a handling which I think is confirmed by hindsight to have been the most suitable one—did not become more than a strictly temporary fluctuation. This seems to have been the case.

I think it is safe to say that our over-all relations with Brazil are better now than they were a year ago. With respect to financial matters, Ambassador Moreira Salles has stated in at least two recent conversations with us that Brazil is no longer facing a balance of payments crisis.2 On the other hand, I think that we all sense that the day of reckoning has been postponed rather than averted. On each problem that we now have with Brazil, we face the very real responsibility of looking forward to the way in which our handling will affect the next Brazilian Government. This responsibility is made all the greater by the often demonstrated disregard of the Kubitschek Government of the problems of its successor.

The coming visit of President Eisenhower to Brazil3 undoubtedly is one of the most beneficial things which could be done at this time. Even so, however, we must be realistic in recognizing that the improvement in relations resulting from the trip is more likely than not to be followed after a few months by another dip, given the well-known human proclivity against maintenance of any sustained high emotional pitch. The fact that the trip comes at a strategic time in our relations with Brazil should nevertheless carry us through many of the problems which we face during the last year of the Kubitschek regime. One could go on for some time in this speculative course of thinking but you have already thought much about these things.

Perhaps it would be more helpful to refer at this point specifically to the numbered suggestions in your December 4 letter, and to outline our comments on them:

Your suggestion that the President might come to the inauguration of Brasilia has, of course, been overtaken by events. We shall do our best to obtain a suitably appropriate and distinguished citizen to [Page 754] head our delegation when Brasilia is inaugurated. As a first choice we are submitting the name of Governor Rockefeller of New York, and if this does not prove feasible, we should like to obtain consideration of your cousin, Ambassador Henry Cabot Lodge. We are thinking along lines that the delegation could suitably include you, a high-ranking Departmental officer, two Senators, and one or two other persons designated by the White House.
We have been continuing our special efforts to assure treatment of Brazilian officials reasonably in line with their aspirations. Now that the Quito Conference has been indefinitely postponed, the proposal for Foreign Minister Lafer to visit Washington takes on added significance. Lately we have not heard any more concerning his intentions to visit Canada, but we are prepared to extend him an invitation to come to Washington whenever he makes the trip. As he already has the invitation to Canada, it is difficult to see how we could extend him a separate invitation to visit the United States alone; therefore, it may be best for us to wait and see whether he takes up our already known intentions to invite him here at the time he decides to go to Canada. Any further views that you may have will be appreciated.
I am afraid that it is not feasible at this time for us to prejudge in any way the attitude of the Inter-American Bank on any specific project, such as a loan to Petrobras. The Bank will simply have to be given time to work out its own policy. Meanwhile, we shall have to work within the framework of the statement made by Assistant Secretary Graydon Upton on June 23, 1959, in response to a question by Senator Morse4 (copy attached).5
I don’t think that there is any serious problem respecting our willingness to make sound development loans. On the other hand, there is inescapably the need for Brazil and the United States jointly to consider what “sound” means. Certainly we are disposed to talk with the Brazilians on anything they wish to bring up. In the event that we cannot mutually agree that a given project is “sound,” this does not mean that the United States is rebuffing the Brazilians. Much of this is psychological and one of the important things is to get back on a basis where the Brazilians and we can talk reasonably and dispassionately concerning economic development. You know, of course, that the Eximbank has been more than willing to discuss specified projects such as the possible purchase by Brazilian airlines of jet aircraft. The principal delay in this particular project has been the apparent reluctuance of the Brazilian Government to decide as to which airline it [Page 755] wishes to support in getting jets. We hear now that the Varig application has the edge and is under active consideration by Eximbank.6
Our previous exchanges of views on Operation Pan America have been helpful and have contributed much toward the attitude now developing here concerning a possible meeting of the Committee of 9 or perhaps the Committee of 21.7 We are not certain at this point as to whether or not we should initiate such action or concur in Brazilian action but probably by the time this letter reaches you we will already have forwarded you some definite instructions in this regard.
The delay which has taken place in forwarding to you data helpful in refuting nationalist allegations of lush profits draining from Brazil has worried us also and we have kept up pressure to get the data from the technical people here. It is hard to document precisely such matters, although our case appears generally very good, and I am not certain that we can extract precisely the type of thing you want. A draft instruction is now ready but has not been cleared. I have asked the Brazilian desk to send informally the draft to you in the hope that it will be helpful even in this form.8
PL–480 has been a useful instrument and we have hopes for more flexibility respecting its use in the future than in the past. Certainly we will want to review very carefully the possibility of PL–480 local currency grants, as has been done in India, for the purpose of promoting economic development. Perhaps a more immediate problem is whether or not Brazil wants additional PL–480 assistance at this time. Our guess is that, at the expiration of the present PL–480 agreement next June 30,9 Brazil may ask for a new agreement to run for three to five years more. An agreement of this magnitude certainly will bring up the serious policy question as to the most advantageous way to use the local currency.10
All of us would like to see Brazil and other countries embark on comprehensive, serious studies pointing toward expanded uses for principal products such as coffee. For us to initiate such studies could be counter-productive, as you suggest, but anything we can do to encourage them along these lines could provide a real opportunity for productive cooperation. Tom Mann has urged getting Latin American chemists here to study the work on synthetic coffee, particularly in connection with the work of the Scientific Department of the Coffee Brewing Institute at New York, but we must go slowly on this to avoid provoking suspicions of any ulterior motives on our part. The Stanford Research Institute recently made a study concerning the utilization of coffee for production of oil and cattle feed11 and it is to be hoped that Brazil will show an active interest in this and other initial projects.
It is too early to predict just what is going to happen on sugar legislation but we are alert, in case there are reallocations of quotas, to the desirability of doing something for Brazil.
We have always before us the need for more dynamic and productive programs in technical assistance. Evaluation of the manner in which technical assistance and special programs can be used for reaching long-range objectives must indeed be emphasized more. I feel that too often it is subordinated to the daily routine of working on the mass of current demands.
11 and 12.
Dramatic assistance on large-scale projects is something to be considered in the context of over-all administration policies and feasible Congressional appropriations. None of us should ever become so enmeshed in these limitations, however, that we cannot see the larger horizons.

In reviewing all of the above, I have the impression that I have left more unsaid than said. There will be opportunities soon I hope to go over this orally with you and I feel this will be more productive than anything I can write.

During the next several weeks, with the President’s visit coming up, perhaps we should concentrate most on doing the best possible job in the psychological field.

With all best wishes.

Sincerely yours,

  1. Source: Department of State, Rio de Janeiro Embassy Files: Lot 68 F 77, 320 Brazil-U.S. 1960. Confidential; Official-Informal. Drafted by Hemba and Boonstra, January 15. Received in Rio de Janeiro on January 25.
  2. In the memorandum of November 20 on a conversation with Secretary Herter, Ambassador Moreira Salles stated that although Brazil had a balance-of-payments deficit at the end of October, it was expected that no deficit would exist at the end of 1959 because of the volume of coffee sales. (ibid., Central Files, 601.3211/11–2059)
  3. On December 30, Under Secretary Dillon informed Moreira Salles of the prospect of a visit to Brazil by President Eisenhower in February. (Department of State, Memorandum of Conversation, Secretary’s Memoranda of Conversation: Lot 64 D 199)
  4. Senator Wayne Morse.
  5. Not filed with the source text and not further identified.
  6. The Export-Import Bank of Washington authorized a $6.9-million credit to VARIG on February 4 to finance purchases from the Boeing Aircraft Co. For further information, see Export-Import Bank of Washington, Report to the Congress for the Twelve Months Ending June 30, 2961 (Washington, 1961), p. 118.
  7. The Committee of 21, as the Special Committee of the Council of the Organization of American States To Study the Formulation of New Measures for Economic Cooperation came to be known, established a Subcommittee of 9 members (including the United States) to expedite implementation of new measures recommended at its Second Meeting in Buenos Aires, April 27–May 8, 1959.
  8. Not further identified.
  9. Reference is to the agreement amending the Surplus Agricultural Commodities Agreement of December 31, 1956, signed by representatives of Brazil and the United States at Washington, September 2, 1959; for text, see 10 UST (pt. 2) 1638.
  10. The agreement was extended until December 31, 1960, by the Surplus Agricultural Commodities Agreement of December 9; 11 UST (pt. 2) 2532; and until June 30, 1961, by the Surplus Agricultural Commodities Agreement of December 29, 1960; 11 UST (pt. 2) 2559.
  11. Not further identified.