832.61333/904: Telegram
The Secretary of State to the Ambassador in Brazil (Caffery)
4637. The interested agencies here are of the view, in which the Department concurs, that the proposed termination of the coffee agreement should be vigorously prosecuted in view of (1) the proposed alteration of the shipping agreement,3 (2) the general improvement in shipping, (3) the fundamental improvement in the Brazilian economy, and (4) the falling off of offerings of coffee under the agreement. [Page 707] With this in view, it is requested that the Embassy address to the Foreign Minister a note which would embody the following:
“I have been instructed by my Government to bring to the attention of Your Excellency’s Government the question of the proposed termination of the coffee purchase agreement. It was never contemplated by my Government that the agreement would be of indefinite duration, but rather that the assistance which it was felt that the agreement would provide to the Brazilian coffee industry and the Brazilian economy generally would be related in point of time to the need occasioned by the lack of shipping. The shipping situation has now improved to the point where it is hoped that sufficient tonnage will be available to move the present Brazilian quota to the United States market during the current quota year.
During the period of more than a year since the agreement was reached, the Commodity Credit Corporation has been called upon to purchase only slightly more than 700,000 bags of the qualities and at the prices provided in the agreement, making it doubtful, it is believed, whether the continuance of the agreement is necessary to stabilize the Brazilian coffee economy or is in fact in the best interests of Brazil. Further purchases in volume cannot be made without interfering with normal trade operations, resulting in mutual problems which lead my Government to the conclusion that continuation of the agreement is to the interests of neither Brazil nor the United States.
As Your Excellency will recall, the matter of the disposal of the coffee was referred to as follows in a note addressed to me by Your Excellency on March 19, 1943:
‘It is understood that the Brazilian Government agrees that, after the quota year 1942/43, the Government of the United States may dispose of any quantity remaining in its possession in any way it deems advisable in order to ship it to any destination whatsoever. The Government of the United States will, however, advise and discuss with authorities of the Brazilian Government, at the appropriate time, with regard to plans for the utilization of this coffee.’
It is, of course, the desire of my Government to dispose of Commodity Credit Corporation coffee in such a manner as to interfere as little as possible with the sale of other Brazilian coffee. None of the coffee in question hertofore shipped from Brazil has been entered for consumption in the United States. The Corporation has, or will soon have, disposed of 3,800 bags to the American Red Cross for distribution abroad, 51,400 bags under lend-lease arrangements, and 96,600 bags for use by United States armed forces overseas. The attention of Your Excellency’s Government is invited to the fact, however, that such outlets for the Corporation’s coffee in markets outside the United States are limited and uncertain, and that there is believed to be no practicable method of disposing of the quantity of coffee which the Corporation is required to purchase under the agreement which would not involve more direct competition with other Brazilian coffee.
It was understood, of course, at the time the purchase agreement was consummated that problems of this nature would be encountered in disposing of such coffee as might be purchased in accordance with the agreement. These, however, were left for consideration in the light of future developments.
[Page 708]Should Your Excellency’s Government concur in the considered judgment of my Government that the mutual objectives of the agreement have been attained and that the agreement should hence be terminated, I am authorized by my Government to state that it is prepared to undertake to dispose of the remaining coffee heretofore purchased in outlets outside the United States, unless entry of some of the coffee into the United States should be necessary to meet an emergency situation, such as might require a resumption of rationing.”
If the Embassy perceives any objection, either in principle or detail, please advise.
Please keep Rich4 advised of all developments in connection with this matter.
In view of the delicate relationship of this matter to the shipping negotiations, the Department leaves to your judgment the timing of the presentation of the above note. Please keep it informed of your course.
- For correspondence on shipping problems, see pp. 720 ff.; concerning the shipping agreement of September 30, 1942, see Foreign Relations, 1942, vol. v, p. 743, footnote 29.↩
- Presumably Maj. Richard H. Rich, representative of the Foreign Economic Administration.↩