214. Telegram From the Embassy in Brazil to the Department of State1

713. Reference: Embtel 702.2 Embassy believes US policy concerning financial aid to Brazil should differ somewhat as between making new aid commitments, on one hand, and complying with commitments already made, on other.

Embassy believes US should be particularly slow in entering into new aid commitments. Goulart’s past associations with Communists and his anti-US positions are matter of public record and well-known through Latin America. Haste in offering US aid, in absence convincing disavowal those associations and positions, would undoubtedly weaken political strength of US friends throughout hemisphere and particularly in Brazil.

Embassy believes fact is USG is in excellent posture. No new aid commitment should be expected from it. Those commitments already made are sufficient, e.g., stabilization support and Alliance for Progress as reached Punta Del Este. We should and can avoid debate Mariani implication commitment finance Plano de Emergencia, reference despatch 140, 1499.3

With respect financial commitments already made by US, comprising $338 million new money, Embassy considers harm could be done to fundamental Brazil-US relations if there is any suggestion US does not intend comply fully with agreements establishing those credits. Such suggestions would undoubtedly be interpreted in Brazil as proof US opposition to Goulart. Many, possibly including Goulart himself, might even use such “proof” of US opposition to Goulart to support thesis, being widely spread by Communists and others, that USG was behind movement Brazilian military frustrate will of people that Goulart take office as President. On other hand, Embassy recommends that in talks with Brazilian officials, as soon as advisable, we give emphasis to fact US financial commitments predicated on GOB policy pursue self-help measures, as manifested GOB letter and memo to IMF, and that Embassy be authorized convey to new officials desire of USG ascertain whether new GOB intends follow stabilization program described in memorandum to IMF, since $338 million credits approved on understanding [Page 446] GOB economic program would be pursued “under conditions of financial stabilization.” (Dillon-Mariani press release May 17).4

Following additional factors considered pertinent:

Importance that Finance Ministry be strong and be allowed operate under firm orientation toward financial stability is greater than ever now that Parliamentary form of government in effect. Likelihood that inexperienced, if not irresponsible, legislators will undermine Finance Minister’s policies will probably be magnified unless new government, including Prime Minister and legislators, understand importance financial stability.
Bank of Brazil foreign exchange position fairly strong at present; reference Embtel 696.5 Accordingly, US can delay authorizing drawings on loans without endangering Brazilian balance of payments position at this time. However, GOB clearly cannot postpone such drawings indefinitely.

  1. Source: Department of State, Central Files, 732.5-MSP/9-861. Secret.
  2. Dated September 6. (Ibid., 732.11/9-661)
  3. Reference is to Despatch 140, August 22, and telegram 1499, April 27. (Ibid., 732.5-MSP/8-2261 and 737.00/4-2761)
  4. See footnote 2, Document 209.
  5. Dated September 6. (Department of State, Central Files, 832.14/9-661)