832.5151/659: Telegram
The Chargé in Brazil (Gordon) to the Secretary of State
[Received 9:10 p.m.]
161. My 156 June 17, 4 p.m.65 In view of the importance of this question the Department may wish to have the exact text in translation [Page 377] of the resolution adopted by Federal Foreign Trade Council. It reads as follows:
“Without prejudicing our policy which is advantageous to the system of compensation in international trade and considering the interests created by commerce with countries which at present can only operate under this regime the Council resolved to authorize the Bank of Brazil to permit with the exception of cotton that the export of national products be made in blocked currencies with, however, the previous authorization of that Bank.
Imports from those nations are subject to this same authorization and the Bank of Brazil will adopt the necessary measures in order that existing interests may be defended without, however, stimulating the increase of this commerce.”
For the same reason I am transmitting the text in translation of a note to this Embassy from the Finance Ministry.
“A resolution taken today by the Federal Foreign Trade Council does not modify the fundamental point of view of the policy of the Government which is contrary to the system of compensations. It has for its only objective to prevent the loss of many interests created by commerce with nations which are today in a condition of only being able to operate under this system.
Such is the case of Germany on whose market various Brazilian products such as cocoa, hides, tobacco, wool, fat, and even coffee up to the limit of German consumption are dependent for their exportation. On the other hand there are many Brazilian interests in commerce and industry which depend upon German importations.
The measure adopted is for the express purpose of protecting these existing interests without an increase of commerce prejudicial to nations which operate freely with Brazil. The Bank of Brazil controlling the importation of German products to Brazil and the exportation of Brazilian products to Germany attains this objective in an entirely satisfactory manner.”
Nothing more than what is contained in this, to my mind, fallacious and inconsequential statement has been given to the public as an explanation of the Brazilian action.
It appears that on Monday at the Federal Trade Council meeting President Vargas abstained from attending and Souza Costa67 who rarely attends these meetings was present to expound the Government’s reasons for this decision. I understand that Valentim Bouças68 was the only person present at the meeting who vigorously opposed and voted against the decision desired by the Government.
Of course all the factors included in the statements above quoted and which could have been brought up by the Minister of Finance, were inherent in the situation when Brazil decided to take her action [Page 378] shutting down on compensation mark transactions barely a month ago. However, as what I have above reported clearly indicates the Brazilian Government apparently has no realization of the psychological effect which must be created abroad by such a stultifying reversal of a fundamental policy so recently determined upon after allegedly full debate and consideration of its consequences.
The Foreign Minister returned to Rio this afternoon and I shall undoubtedly have a full conversation with him very shortly. I naturally dislike to pass this matter over in silence but in view of its importance I should hesitate to make the observations which my view of the situation at this end would suggest without knowing how far the Department would wish me to go. If therefore the Department should be considering the formulation of a note to the Brazilian Government or any views the substance of which it may desire me to repeat to the Foreign Minister I shall be very glad to carry out its instructions immediately.
Please see my telegram 162 of this date69 which further illustrates the unfortunate instability and ineptitude of the Brazilian authorities entrusted with exchange matters and the dangerous tricks resulting therefrom.
- Not printed.↩
- Brazilian Minister of Finance.↩
- Director of the Brazilian Statistical Service, a member of the Brazilian Foreign Trade Council and Secretary of and Technical Representative of the Departments of Justice and Treasury on the Commission for Economic and Financial Studies of the Brazilian States and Municipalities.↩
- Infra.↩