221. Memorandum of Conversation1
- The Expropriation of the IT&T Properties in Rio Grande do Sul, Brazil
- The Secretary
- Ambassador Roberto Campos, of Brazil
- Minister Arnaldo Vasconcellos, Brazilian Embassy
- ARA—Mr. Barall
- EST—Mr. Wilson
In the course of Ambassador Campos’ call, the Secretary mentioned the problem created for the two Governments by the action of Governor [Page 457] Brizzola, of Rio Grande do Sul, in expropriating the properties of the IT&T in that state.2 He said we know that the Brazilian Government is concerned about the matter also. It is a problem we could both do without. The Secretary indicated he believed the eventual solution might be for the Government of Brazil to underwrite the settlement on compensation. Ambassador Campos agreed that the expropriation is embarrassing for the Brazilian Government and for President Goulart, who has intervened in the problem. He said he thought evaluation of the properties might eventually have to be set by the courts, with payments to be made by the State or Federal Government. He pointed out the autonomy of the state governments in Brazil in such matters.
With regard to the statement made to the press by the Department on Saturday,3 Ambassador Campos said he thought this action by the Department was premature. It may have repercussions in Brazil, though he has not yet heard of any. He thought it would have been better to delay any statement while the Federal Government of Brazil was taking action. The Secretary replied that the expropriation created a problem for us too. The State Department had to make an indication of interest and concern with the problem in order to forestall possible strong pressures in this country from the business community and the Congress. He said an action such as the expropriation was contrary to our efforts to mobilize the capital available for development.
Ambassador Campos referred favorably to the proposals of American and Foreign Power to arrange for sale of its properties with the intent of shifting its investment into less controversial fields, as was done in Colombia and Mexico. Such an arrangement prevented the loss of capital investment in the country through the sale. The Ambassador commented that he thought Brizzola had jumped the gun by his expropriation action and that the timing had been most unfortunate. The Secretary said we hope to maintain the morale of U.S. investors abroad in order for them to take part in development. Expropriation without adequate compensation makes this very difficult. The Ambassador agreed.
- Source: Department of State, Secretary’s Memoranda of Conversation: Lot 65 D 330. Official Use Only. Drafted by Wilson of ARA/EST. Approved in S on February 28.↩
- On February 16 Governor Leonel Brizzola ordered the expropriation of the Companhia Telefonica Nacional, a subsidiary of the American firm International Telephone and Telegraph. The Brazilian Government compensated the company in the amount of $140,000. ITT valued CTN’s assets at between $6 and $8 million.↩
- On February 17 the Department of State issued a statement condemning the actions of Governor Brizzola and stating that the adequate, just, and prompt compensation that must accompany such an expropriation had not been made to ITT. (Keesing’s Contemporary Archives, 1961-1962, p. 18815)↩