125. Brazil Program Analysis, Washington, November 1, 1969.1 2

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[Omitted here is the table of contents.]

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This Study responds to a Presidential directive for a Program Analysis of Brazil that would develop alternative statements of U.S. interests, objectives, policy options and their program and budget implications for consideration by the National Security Council. It is divided into five sections whose major conclusions are supported in 15 annexes. The first three sections analyze U.S. interests in Brazil; political, economic and social trends; and U.S. policies and programs since 1964. Drawing on these analyses, Section IV lays out four basic policy postures open to the U.S. in Brazil over the next five years and relates them to new U.S. initiatives toward Latin American developed by this Administration. Section V explores the program implications of the four policy options.

I. U.S. INTERESTS IN BRAZIL

An Overview

Analysis of our military diplomatic and commercial interests in Brazil indicates that our trade and investment position is preeminent among these traditional, concrete concerns. Our short-term military and diplomatic interests, while certainly worth protecting, appear to be of secondary importance. Within this framework, our policies and programs in Brazil should be shaped largely by our concern for the kind of relationship we want to see develop in the long run between the societies of the U.S. and Brazil. This relationship will be determined principally by the way in which Brazilian society develops and, therefore, implies an interest in all aspects of Brazilian development including the following:

-- Evolution of effective and responsive political institutions.

-- Economic growth.

-- Improvement and modernization of social structures.

The United States is and will continue to be concerned with its relationship to all of its Latin American neighbors and with their security and development. This concern has been reflected in numerous statements of our policy toward the region -- most recently in the President’s Report on Foreign Policy to the Congress -- and is taken as a “given” in what follows. In the framework of our overall policy toward Latin America, a mature, friendly, and mutually beneficial relationship with Brazil is particularly important because of Brazil’s long-run potential and the fact that Brazil occupies half of the land mass of South America and has half its people.

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[Omitted here is the remainder of Section I, Section II, “The Setting for U.S. Policies and Programs;”and Section III,“U.S. Policies and Programs 1964–1969.”]

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IV. U.S. POLICY OPTIONS 1970–74

Given our interests in Brazil as analyzed in Section I and the prevailing political, economic and social trends evaluated in Section II, the thrust of our Brazilian policies and programs over the next five years will be determined by three basic issues.

(1) Our Attitude Toward Internal Political Developments

Brazil will be ruled by its military establishment at least until March 15, 1974. Accordingly, we must now decide on a basic long-run posture toward the military government. In essence, two choices are open:

-- Disassociation from the regime on the grounds that it is narrowly based, authoritarian and repressive (Option I).

-- Pragmatic acceptance of the situation and a “hands off” posture toward internal political developments in Brazil (Options II, III and IV).

(2) The Importance We Place on Brazilian Economic Development

Assuming the continuation of current Brazilian economic policies, and the realization of substantial capital inflows from other sources, Brazil can sustain a growth rate of 6 percent a year without further concessional lending from the U.S. With a high level of such lending, a sustained rate of seven percent a year might be feasible. Under these circumstances, we can:

-- Regard a 6 percent growth rate as adequate and provide economic and military assistance at levels substantially below those prevailing in the 1965–68 period. This would be a posture of Retrenchment (Option II).

-- Continue a high level of assistance in support of a sustained 7 percent: growth rate (Options III and IV).

(3) Our Approach To Social Development in Brazil

Brazil’s social development has lagged considerably behinds its economic growth. A backlog of unresolved structural problems in areas of key social concern, e.g., agriculture, education and health, could well inhibit future economic performance. Our approach to this situation will be determined by the way in which we answer the question: should we support Brazilian initiatives for accelerated social improvement?

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-- A negative reply would lead us to consider the social environment as too sensitive an area for the effective application of foreign assistance measures, and to give social improvement a lower priority in our programs than continued economic growth. Assuming a decision to continue our assistance to Brazil at a high level, these judgments would result in a posture of Economic Support under which major balance of payments support for a sustained 7 percent growth rate would be provided (Option III).

-- A positive reply to the question would lead us to assume an active role in supporting Brazilian social initiatives and to relate all of our assistance to desired institutional change. This would be a posture of Social Emphasis (Option IV).

The basic structure of each option and the arguments for and against them are summarized below.

A. OPTION I (DISASSOCIATION)

1. Principal Features

-- Public and private affirmation of U.S. opposition to the military government. Cool, correct diplomatic relations.

-- Reduction of U.S. presence to the minimum necessary for the conduct of diplomatic relations.

-- Termination of economic and military assistance except for PL 480 Title II food donations through voluntary agencies. Continuation of Peace Corps programs assuming the Brazilian government permitted.

2. Arguments For

-- Affirms U.S. preference for effective, responsive political institutions in Latin America.

-- Appeals to opponents of military governments in the U.S. Congress and elsewhere.

-- Reduces our identification with a regime which could well become more authoritarian and repressive.

-- Might improve U.S. image among some opposition elements in Brazil; would alarm some elements in power structure and could stimulate them to press for political change.

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-- Does not prevent Brazil from maintaining a 6 percent growth rate.

3. Arguments Against

-- Endangers tangible U.S. military and commercial interests.

-- Would not produce desired political change; would stimulate negative and/or nationalistic reaction by GOB and elements throughout population.

-- Fails to recognize the success of economic policies supported by the U.S.

-- Would alienate the traditionally friendly Brazilian military; would dishearten elements outside power structure who hold U.S. assistance programs vital to the stimulation of social change; would not be welcomed by resident U.S. business community.

B. OPTION II (RETRENCHMENT)

1. Principal Features

-- Pragmatic acceptance of Brazil’s military government.

-- Reliance on multilateral programs to support Brazilian economic growth; bilateral support would be low level and low profile.

-- Resumption of economic and military assistance commitments at modest levels below those prevailing during FY 65–68.

-- Phased reduction in U.S. official presence in Brazil.

2. Arguments For

-- Recognizes success of Brazilian economic development policies and likelihood that Brazil can grow at a 6 percent rate without U.S. aid.

-- Frees aid funds for use elsewhere.

-- Reduces U.S. identification with authoritarian regime while realistically accepting the fact of its existence.

-- Provides a base from which to move to another option if significant political changes occur.

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3. Arguments Against

-- Makes it difficult for Brazil to sustain a 7 percent annual growth rate, which is necessary in order to provide jobs for all new entrants into the labor force.

-- Reduces U.S. influence on Brazilian foreign policy.

-- Might well be interpreted by the Médici government as signalling U.S. skepticism of its ability to initiate social reform and to prepare for eventual return to civilian rule.

C. OPTION III (ECONOMIC SUPPORT)

I. Principal Features

-- Major balance of payments support for a sustained 7 percent growth rate.

-- Emphasis on moving resources quickly and easily through program and sector loan mechanisms.

-- Support for Brazilian programs without onerous self-help conditions.

-- Continuation of military assistance at 1965–68 levels.

-- Reduction of U.S. presence and of high profile programs.

-- Avoidance of social areas not receiving high priority attention from the Brazilian government.

2. Arguments For

-- Would probably be optimal U.S. policy from point of view of Brazilian government.

-- Provides best environment for protection of tangible U.S. interests, particularly in regard to upcoming negotiations on commercial policy issues.

-- Encourages and supports Médici government, which has promised to concentrate on key social areas and to prepare Brazil for eventual return to civilian rule.

-- Supports the growth rate necessary for the absorption of all new entrants into the labor force.

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-- Rewards successful Brazilian economic policies.

-- Reduces Brazil’s debt service burden.

3. Arguments Against

-- Strongly supports authoritarian military regime, improves its chances of survival, and closely identifies U.S. with it, particularly in eyes of Brazilian public.

-- Could be embarrassing to U.S. if regime became more authoritarian and repressive.

-- Forgoes opportunity to support Brazilian advocates of badly needed social improvements.

-- Would entail movement to another posture if Medici were succeeded by a regime which abandoned price stabilization programs or expropriated U.S. investments without compensation.

D. OPTION IV (SOCIAL EMPHASIS)

1. Principal Features

-- Major emphasis on supporting Brazilian initiatives for improvements in education, agriculture and health. Assistance related to and often conditioned on institutional and policy improvements in these sectors.

-- Sector loans generally main assistance instrument; program loans utilized only in case of balance of payments crisis.

-- Pragmatic acceptance of military government.

-- Continuation of military assistance at 1965–68 levels.

-- Continuation of high profile programs requiring a large active staff, i.e., technical assistance.

-- Emphasis on assistance to Brazil’s impoverished Northeast.

2. Arguments For -- Given Brazil’s rapid rate of growth and healthy balance of payments, the most important contribution the U.S. can make to Brazilian development is in the area of social improvement, which has largely been neglected in the past.

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-- Provides good environment for protection of tangible U.S. interests.

-- Over time, would help build basis for broadened popular participation in Brazil’s political process.

-- Builds on past U.S. successes in implementing agriculture, health and educational programs.

-- Supports Medici regime’s intentions to concentrate on key social areas and encourages it to prepare for eventual return to civilian rule.

-- Improves U.S. image with Brazilian public through identification with needed social efforts.

3. Arguments Against

-- Given strong undercurrent of nationalism in Brazil, U.S. involvement in sensitive social areas could lead eventually to serious friction with the Brazilian government, particularly if a “nationalist-reformist” regime came to power.

-- Difficult to implement because of our ignorance of Brazilian social change mechanisms and our chronic difficulty in recruiting qualified personnel to carry out socially oriented programs.

-- Attempt to condition loans on introduction of social initiatives could lead to long delays between the appropriation of assistance funds and the signing of loan agreements, causing problems in Congress.

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[Omitted here k Section V, “The Program Implications of the Options,” and the Annexes, Tables, and Charts.]

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, NSC Institutional Files (H-Files), Box H–49, Senior Review Group, Brazil Program Analysis, 12–1–70. Secret.
  2. In this 7 page Analysis, the Under Secretaries Committee identified three key goals for U.S. policy in Brazil: a pro-United States Government, economic growth, and helping to promote a more modern social structure.