204. Telegram From the Department of State to the Embassy in Brazil1
1010. Critical importance of Brazilian role in current hemisphere problems along with bilateral considerations makes evident urgent need establish effective and productive understanding with Quadros soonest possible. For this purpose Department recognizes your need in initial contacts to have available constructive suggestions and proposals dealing with economic and financial problems of probable chief immediate concern to Quadros.
United States Government handicapped this regard by Quadros avoidance so far of substantive contacts with us and by inability assess clearly probable Quadros policies either within country or abroad. On other hand this provides opportunity to make exploratory suggestions designed draw out and influence Quadros positions. In this connection we particularly concerned such aspects as chaotic GOB financial situation, unconfirmed reports Quadros inclination toward independent foreign policy, and position re Castro and associated hemisphere problems. Our objectives require constructive GOB postures these issues and avoidance tendency GOB to bargain political cooperation against financial assistance.[Page 425]
Judging from Embdes 6272 and other sources the magnitude of GOB financial problem and scope of desirable assistance during 1961 cannot be ascertained until detailed studies requiring weeks or months after Quadros inauguration. However appears certain that GOB will solicit and expect substantial assistance to help maintain essential imports and reschedule existing debts owed to United States, European and other major creditors. At that time it would be appropriate to link such assist-ance to specific action on part of GOB with respect to its internal and external financial problems.
In view present situation U.S. Government believes our objectives best served by tangible immediate expression our willingness assist Quadros during initial months his government so that he will have time study problems and adopt constructive solutions. This move obviously most effective if recognized as friendly action unconnected any pressure from Quadros and preliminary to consideration more detailed program he may subsequently draw up.
Accordingly you instructed seek appointment with Quadros soonest and make known following U.S. Government view:
- U.S. Government cognizant difficulties GOB facing this year in external payments and in maintenance essential imports. We assume that GOB will be engaged during next several weeks in study of problem and formulation of constructive program. Representatives U.S. Government agencies will be available for consultation to extent GOB may desire.
- If Quadros indicates that immediate U.S. Government financial assistance would assist him in gaining time for establishment of constructive program and if you believe that an offer of such assistance would be warmly received you are authorized to say on behalf of President Kennedy that Eximbank would be willing to extend a credit line of 100 million dollars to assist GOB in financing essential imports of capital goods from U.S. as required and thus to conserve remaining foreign exchange.3 Early consultation necessary in this case between GOB technicians and Eximbank regarding procedures for utilization of credit and negotiation of repayment terms.
- Reference wheat, other commodities (FYI—not including sugar—End FYI), and local currency problems, President Kennedy in State of Union Message January 30 announced that Food for Peace mission will be sent to Latin America immediately. This mission will be prepared [Page 426] to discuss with Brazilian officials the means for assuring orderly PL-480 shipments following expiration present extended agreement, including possibilities partial grant of funds, as well as loan, if GOB prefers, as well as other possibilities of increasing and rationalizing production and distribution of food.
- In economic and social development problems, U.S. Government is vividly aware of distressed region in Northeast Brazil and, subject to GOB desires, suggests the early exploration of joint remedial projects in that area.
- Source: Kennedy Library, President’s Office Files, Brazil—Secretary 1961. Confidential; Niact; Limit Distribution. Drafted by Boonstra. Approved by Ball. Cleared by Mann, Martin, and S/S in the Department, Dillon for Treasury, Goodwin for the White House, and by Agriculture and the Export-Import Bank.↩
- Dated January 23. (Department of State, Central Files, 832.10/1-2361)↩
- In a February 3 memorandum to the President, Secretary Rusk stated that the Department did not know the desires of President Quadros with respect to the loan. If he did desire the money, arrangements could be made for the President to make any such announcement. (Kennedy Library, President’s Office Files, Brazil—Secretary 1961)↩