Foreign Relations of the United States Diplomatic Papers, 1938, The American Republics, Volume V

832.5151/1253

The Acting Secretary of State to the Chargé in Brazil (Scotten)

No. 251

Washington, December 10, 1938.

Sir: Reference is made to the Department’s telegram no. 132, November 24, 1938, noon, and to your telegram no. 274, November 25, 1938, 5 p.m., in reply, concerning the possible presentation to the Brazilian Minister of Foreign Affairs of a note concerning exchange treatment of United States commerce.

Unless you perceive some serious objection to doing so, you are requested to discuss this matter in an entirely informal and friendly manner with Dr. Aranha, acquainting him with the text of the proposed note and earnestly soliciting his cooperation in working out a solution of this important and pressing problem. Subsequent to your conversation, you are directed to make a formal presentation of the note, unless it appears that some other course would be preferable, in which case you should request further instructions from the Department. A copy of the proposed note is enclosed.

For your information and guidance in discussing this matter with Dr. Aranha, there is enclosed a copy of a report⁴⁸ on Brazilian exchange treatment of American commerce prepared by a special subcommittee appointed by Assistant Secretary of State Francis B. Sayre. You are referred to section two of the report, with regard to your comment that “Although it is true that German exporters are now receiving slightly preferential treatment over exporters from the United States, the reason is inherent in the compensation system itself”, and to section six of the report with regard to your statement that “The danger of our insisting at this time upon a strict compliance with the Aranha letter of February 2, 1935, is that Brazil might comply but counter with restrictive measures on importation, already contemplated in President Vargas’ statement of November 10.” In this latter regard, it is of interest to note that the American members of the United States–Brazilian Commercial Committee in New York and the President of the National Foreign Trade Council have indicated informally to officers of the Department that they believe the majority of United States exporters would probably favor Brazilian quantitative limitation of imports with prompt payment for actual imports as compared with the present exchange treatment, if such a choice were necessary.

A telegraphic report of the results of your action in this regard is requested.

Very truly yours,

Sumner Welles

[Enclosure]

Text of Proposed Note to the Brazilian Minister for Foreign Affairs

Excellency: The United States Government wishes to refer to Article VI of the Trade Agreement between the United States and Brazil in which the Brazilian Government agreed that if it should establish or maintain a control of foreign exchange it would accord to the nationals and commerce of the United States the most general and complete application of the unconditional most-favored-nation principle. The United States Government also wishes to refer to the note addressed by the Brazilian Ambassador, Mr. Aranha, to the Secretary of State on February 2, 1935, the day of signature of the trade agreement, which contained the following statement:

“Animated with the purpose of making Article VI of the trade agreement between Brazil and the United States of America, signed today, perfectly clear, my Government has authorized me to advise Your Excellency that, so long as there may be any need for it to maintain the present control over foreign exchange, it interprets the promise contained in the said article as follows:

1. The Bank of Brazil will furnish sufficient exchange for the payments, as they become due, for all future importations of American products into Brazil.”

The United States Government notes that for some time the Brazilian Government has not in fact furnished sufficient exchange for the payments, as they become due, for all importations of American products into Brazil. It also understands that, by virtue of the special currency arrangements governing commercial payments between Brazil and Germany, German exporters are in fact receiving preferred treatment in the matter of payment over exporters from the United States.

The United States Government does not doubt that the Brazilian Government intends to give full practical effect to the obligation freely assumed in the trade agreement, as that obligation is interpreted in the note of February 2, 1935. It would, therefore, welcome being informed by the Brazilian Government as to the steps which will be taken to this end.

Accept [etc.]

48. Not attached to file copy of this document.