632.6231/150: Telegram
The Chargé in Brazil (Scotten) to the Secretary of State
[Received April 23—11:30 a.m.]
37. The Acting Minister for Foreign Affairs requested me to call on him yesterday afternoon. He explained that he had been having frequent talks with the President of the Republic13 regarding the Brazilian-German compensation arrangement and that action regarding its renewal or denouncement has to be taken by June 6th as it was signed on June 6th of last year. He added that the President shares his views that Brazil must cooperate more closely with the United States on trade matters and that the President is practically convinced of the desirability of not renewing the agreement with Germany. However he added that he could not say as much for the Minister of Finance14 who, although willing to meet specific objections on the part of the United States, nevertheless looks at this subject from a realistic point of view and believes that the German market is too important for Brazil to lose and that there is only one basis of dealing with Germany at the present time, namely compensation. The Minister of Finance had informed him that he would not be able to discuss this question in detail until May 3rd as he is too busy at the present time with budgetary and other matters. However, he requested the Acting Minister for Foreign Affairs to obtain [Page 322] from the American Embassy a full report voicing American objections to the operation of the Brazilian-German agreement and what we consider to be its effect upon the operation of the Brazilian-American treaty. The Acting Minister for Foreign Affairs added that in his conversations with the Minister of Finance he would use such a report or not, depending upon the tactics of the Minister of Finance. Should the latter, when he comes to grips with this question, be willing to discuss it on the general principle of Brazilian-American relations it might not be necessary for the Acting Minister of Foreign Affairs to use such a report. However, if, as he expects, the Minister of Finance calls for our definite objections with figures to support the same, it would be most helpful for him to have this report at hand.
The Acting Minister for Foreign Affairs added that the local representative of J. Henry Schroeder Banking Corporation has been bombarding the Minister of Finance and the Federal Foreign Trade Council with clippings from English and American newspapers tending to show that commercial deals in compensation marks between German and American firms are being permitted by the American Government and that this was having its effect upon the Minister of Finance.
I recalled the conversations which Mr. Welles15 had with the Minister of Finance on December 30th at which time the Minister of Finance requested a list of the principal American commodities to be affected by the German compensation trade and explained that a partial list had been made in the Embassy and that Mr. Welles had actually presented it to the Minister of Finance.
I hesitate to take any action upon the request of the Acting Minister for Foreign Affairs without specific instructions from the Department especially as no reply has been received to the Embassy’s despatch No. 1319 of March 22nd or telegram No. 31 of April 6, 11 a.m.
I feel that if the Department is still convinced of the desirability of Brazil withdrawing from the compensation arrangement with Germany the time to strike has arrived and that the Department should spare no effort to give the Acting Minister for Foreign Affairs the material and arguments which he desires in the form suggested in the Embassy’s telegram No. 31, April 6, 11 a.m. The Embassy could supplement such a message with full statistical information which it has now obtained from official Brazilian sources in compliance [Page 323] with the Department’s instruction No. 581 of September 28, 1936.16