Foreign Relations of the United States, 1969–1976, Volume E–10, Documents on American Republics, 1969–1972

118. Memorandum From Arnold Nachmanoff of the National Security Council Staff to the Senior Military Advisor, National Security Council Staff (Haig)¹ ²

Washington, February 27, 1969

Subject:

• Under Secretaries’ Committee Meeting, February 27, 1969—Brazil Aid Strategy

The Under Secretaries’ Committee will consider eight major pending economic and military assistance program decisions which have been deferred since the promulgation of a dictatorial Institutional Act (IA–5) by President Costa e Silva on December 13, 1968. Officially, these assistance programs have been “under review”. However, the NSC–IG for Latin America believes they must be considered now.

The basic issue to be considered is how to steer a delicate course between (a) close identification of the US with the repressive policies of the military regime and (b) antagonizing the regime and jeopardizing our overall interests in Brazil while trying to keep our policy options open pending completion of the broad policy reviews on Latin America and Foreign Aid that are now underway.

The NSC–IG for Latin America considered three near-term policy options:

1. Deny all economic and military assistance.

2. Resume assistance on a normal scale.

3. Plan to fulfill existing commitments, but hold up on new commitments.

The first two options were rejected because either course would go too far in one direction and tend to limit our major policy options unnecessarily. The third option translates into a recommendation to go forward with three programs and defer decision on five others.

Program Decisions

The three programs the NSC–IG for Latin America recommends going forward with are:

• —a $75 million FY 1968 program loan ($50 million to be released in early March, $25 million later); the Brazilians were informed on December 12 that they had met the conditions for release of the $50 million tranche;
• —final negotiations on 9 previously authorized AID project loans totalling $113 million, signing to be spaced over 4–6 months, subject to Washington concurrence after continuous review of the economic and political situation; and
• —a favorable vote in the Inter-American Development Bank (IDB) on a $26 million livestock loan for Brazil.

Although there is no dissent in the NSC–IG on these three decisions, the IG recognizes that going ahead with the AID program loan and 9 project loans represents a decision to proceed with as much as $188 million of economic assistance for Brazil in the next few months. This may very well be interpreted in Brazil and the US as an acceptance (or approval) of Brazil’s internal political situation. Some criticism will be inevitable, but attempts will be made to minimize this interpretation by advance Congressional briefings, press backgrounders, and discussion with the Brazilian government.

There is no dissent on the recommendation that decision on four of the program issues be deferred. These four issues are:

• —the FY 1969 economic assistance program;
• —the FY 1970 economic assistance program;
• —the sale of two squadrons of A–4 aircraft;
• —major items under the FY 1969 military assistance program.

The rationale for deferral is that no harm to program or political objectives will result from delaying decisions for a few months until the President and the NSC have completed action on the broader policy reviews and a further assessment can be made of the evolving situation in Brazil. The Brazilians are not likely to press us for a decision on these issues in the next few months.

Destroyer Escorts

The JCS dissents on the NSC–IG recommendation that a decision be deferred on allowing Brazil to construct two destroyer escorts in US yards and to obtain a commercial dollar loan for a portion of their construction costs. The NSC–IG position is based on three factors:

1. It would be read the wrong way politically in Brazil, and in the US, if one of our first cooperative actions with Brazil after IA–5 is in the military sphere.

2. Favorable action would require Brazil to commit substantial ($100 million) foreign exchange resources for military expenditures, which would complicate the problems of our pending AID programs.

3. A decision on the DE’s should be linked to a decision on the A–4’s, which we are not prepared to make at this time.

The JCS (and the Country Team in Rio) favors approval of the DE deal now because:

• —delay would be considered a rebuff by the Brazilians, who would react to the detriment of our military and political relations, and
• —the Brazilians may turn to Europe for their ships if we delay.

There are clearly risks on either side. If we go forward, it is likely that press and Congressional criticism will be intense. The AID program loan will be viewed as an indirect way of financing the construction of the DE’s. The image of the Administration’s Latin American policy will not be helped.

Weighed against that is the risk of serious strain in our political-military relations with Brazil. It may be useful to explore a few points in more detail at the meeting:

1. Who, specifically, within the Government of Brazil is pressing for an immediate decision on the DE’s? Will Costa e Silva or his principal advisers be seriously concerned about a two or three month delay, or is it just the Navy?

2. Given the magnitude of the foreign exchange expenditures required for the DE’s, A–4’s, and other equipment, would it be possible to delay on the DE’s in the context of a technical (financial) issue, rather than a political one?

3. Would a decision to go forward on the DE’s now have more serious implications for the AID program than a decision to go forward 3–6 months from now? How concerned is AID about the possible repercussions of this decision on the Hill?

I understand that Under Secretary Richardson is favorably disposed towards the NSC–IG recommendations, but may defer a decision on the DE’s if pressed by the JCS.

1. Source: National Archives, Nixon Presidential Materials, NSC Files, NSC Institutional (H-Files), Box H–249, Under-Secretaries Memorandum Files, Under-Secretaries Study Memoranda, U/SM 1–9. Secret. On February 27, the Under Secretaries Committee, chaired by Richardson, agreed to the $75 million tranche and went ahead with negotiations (“stretched out as much as possible”) on the nine outstanding U.S. AID project loans, totaling $113 million. Action on the DEs and A–4 aircraft was deferred. (Ibid., NSC Undersecretaries Files: Lot 83 D 276, NSC–U/DM 3)
2. Nachmanoff related the decision of the NSC Inter-Agency Group (NSC–IG) for Latin America to consider aid to Brazil, and raised questions about the ramifications of delaying arms sales.