222. Memorandum From Secretary of the Treasury Dillon to President Kennedy1


  • U.S.-Brazilian Financial Discussions

This will supplement the information I gave you by telephone on our financial discussions with Brazil.

After several days of negotiations in which the U.S. side was represented by the Export-Import Bank, the AID, the State Department and the Treasury, we reached full agreement last night on U.S. financial support for the new Brazilian stabilization program. I believe this agreement is fully satisfactory to the U.S. and that it will provide adequate support to Brazil’s new program while assuring that U.S. funds will be made available only as progress is achieved under that program.

Last May we had agreed to provide $338 million in new money to support stabilization under the Quadros regime. Additional funds were provided by the International Monetary Fund and by Brazil’s European creditors. After the breakdown of the stabilization program connected with the resignation of President Quadros, Brazil’s drawings from the IMF were halted. By the turn of the year drawings from the Europeans and from the U.S. were also discontinued. Of the original $338 million committed by the U.S., Brazil drew $209 million, leaving a balance of $129 million. Of this, $59 million were in Eximbank funds, $35 million in AID funds and $35 million in the Treasury Exchange Stabilization Fund.

On March 15, 1962 the Council of Ministers approved a new stabilization program designed to bring a halt to the serious inflation which has amounted to about 50% over the past 12 months. The new program marks a hopeful beginning, but its effectiveness will depend importantly on action still to be taken by the Brazilian Congress, as well as on the willingness of the Brazilian Government to adopt additional and alternative measures in the event that the program initially approved will not prove adequate. The principal unknown quantity is the degree to which President Goulart will himself pursue stabilization efforts with the necessary vigor in the face of inevitable domestic political opposition.

Because of the uncertainties regarding future Brazilian performance the IMF was unwilling to give its full approval to Brazil’s program at this time and accord to Brazil a further standby. However, the IMF has agreed [Page 459] to postpone repayment of Brazil’s debt to the Fund of $20 million, to work with Brazil in the next 2 months in perfecting its program and to invite the European creditors to release some $20 million from the remaining standby of about $80 million from Europe.

The agreement we have now reached with the Brazilians consists of: (1) a letter to me from Minister Moreira Salles outlining the new program approved by the Council of Ministers and (2) my response to the Finance Minister stating that the U.S. is prepared “to effect releases out of the $129 million balance of the funds earmarked for Brazil in May 1961, as the financial program is effectively carried out and as may be mutually agreed between the two Governments.”

We have agreed to release immediately (this week) an initial amount of $35 million—$16 million to be provided by the Eximbank and $9.50 million each from AID and the Treasury. Minister Moreira Salles was strongly urged by his delegation to ask for an immediate release of at least $50 million. He called on me last night to ask whether this would be possible but assured me that he did not wish to press the point. He was entirely satisfied with the explanation I gave him to the effect that a larger release in the absence of Brazilian performance, as distinct from plans, would be seriously criticized by our Congress which was now considering the large appropriation which we were proposing for the Alliance for Progress. I do not believe that Minister Moreira Salles will recommend to President Goulart that he pursue this matter further with you, but it is always possible that other members of the Brazilian delegation here will do so. I do not believe that any further concessions are desirable or necessary.

We have kept the IMF fully informed of our discussion and Managing Director Jacobsson is in full agreement with the arrangements we are making.

The exchange of letters between Moreira Salles and myself will be completed today and a short statement will be released to the press.

We have also agreed on a paragraph which might be included in the communiqué which you and President Goulart plan to issue sometime tomorrow.2 A copy of this text for your consideration is attached.3

Douglas Dillon4
  1. Source: Kennedy Library, National Security Files, Countries Series, Brazil, April 1962. Confidential.
  2. For text of the communiqué, see Public Papers of the Presidents of the United States: John F. Kennedy, 1962, pp. 287-289.
  3. Not found.
  4. Printed from a copy that indicates Dillon signed the original.