Foreign Relations of the United States: Diplomatic Papers, 1943, The American Republics, Volume V

740.00112A European War 1939/27590

Memorandum by the Ambassador in Brazil (Caffery) to the President of the Brazilian Defense Commission (Portella)⁷⁴

[Translation]

[Rio de Janeiro,] December 21, 1942.

Basis for Discussion

The Embassy of the United States of America believes that both in the economic warfare and naval and military fields there should exist coordinated cooperation between the allied Governments of Brazil and the United States of America, in order to unite the efforts of their respective Governments in a joint program against the common enemy. In accordance with this policy it is suggested that a meeting be called to discuss the following points:

I—Correlation of Controls

Since July, 1941, the United States of America has maintained as an integral part of its controls the Proclaimed List of Certain Blocked Nationals⁷⁵ for the purpose of publicizing the names of persons and firms to which the commercial and financial facilities of the United States are to be refused. The Government of the United States of America believes that the maintenance of this list is essential to the war effort. It is further believed by the United States Government that the list referred to has had a considerable effect in weakening the influence of enemy interests or interests acting on behalf of the enemy.

The Embassy was pleased to note the adoption by Brazil of Decree-Law No. 4807 and the creation of the Economic Defense Commission, and believes that by this means there may be effected an efficient elimination of enemy interests from the Brazilian economic life. It is considered advisable that a clear and concrete agreement be adopted between Brazil and the United States of America, concerning the status of the Proclaimed List with respect to firms taken over by the Brazilian Government.

Generally speaking, the United States of America is prepared to delete from the Proclaimed List all firms of real value to Brazil’s economy, in the event that (1) all undesirable elements have been removed from the property and management; (2) all undesirable employees have been removed; (3) all contracts and connections with enemy interests are terminated. As to firms that are not of outstanding value to the economy of Brazil, such as commercial and financial establishments, it is hoped that those may be liquidated and that, consequently, no problems will arise in connection with their deletion from the Proclaimed List. The Embassy admits that it is necessary, as a measure preliminary to nationalization of important enterprises, that the Commission assign administrators to investigate and study the affairs of particular firms in a position to be transferred to desirable private hands. The Embassy is prepared to consider a plan which will extend facilities to these firms on a temporary basis during the period prior to their nationalization and subsequent removal from the Proclaimed List. In such cases, however, it is assumed that the Economic Defense Commission is prepared to offer guarantees to the United States of America that the administration will be an indivisible part of the program of nationalization, which will be effected within the minimum possible time. As to purely commercial enterprises which are not essential to the economy of Brazil (many of which were centers of enemy activities), it is assumed that there will be no necessity of granting them special facilities and that from the outset the administrators will actually act as liquidators. This distinction is of importance in the consideration of the subject by the Government of the United States of America, it being understood that many of these enterprises are of pronounced enemy character and have already been adversely affected, and that the firms are virtually in a state of liquidation. The negotiation of an agreement of this nature prior to action by the Commission in special cases will afford the two Governments an opportunity to proceed jointly in a spirit of understanding.

II—Financial and Technical Assistance

The United States of America believes that the nationalization of enemy industrial enterprises in Brazil is of great importance to our common war effort. Many of these enterprises are equipped to produce materials of vital importance, and their nationalization will have the effect both of destroying the enemy interests and of increasing Brazilian war potential.

In order to avoid the transfer of these properties to undesirable hands the Government of the United States of America is prepared, if so desired, to offer financial assistance in the form of advances of credit to reliable Brazilian parties, in order to facilitate the purchase of these properties after their expropriation. It is further suggested that this matter be discussed with the Director of Exchange of the Bank of Brazil,⁷⁶ who is familiar with the opinion of the President of the Export-Import Bank⁷⁷ on this subject. The Export-Import Bank, generally speaking, transacts business in Brazil exclusively through the intermediary of the Bank of Brazil.

To the extent desired, although within the limits imposed by our present war effort, the United States of America is prepared to extend technical assistance to nationalized firms, or, if the Economic Defense Commission so desires, to try to interest American firms in participation in specific cases where technical assistance is necessary.

III—Consultation and Exchange of Information

It is suggested that there be created a permanent and extra-official system of contact and consultation between the two Governments, through the media of the Economic Defense Commission and the Embassy of the United States of America, in order to reach an understanding with respect to specific cases and exchange of information. In this respect reference is made to Resolution No. VIII adopted by the Inter-American Conference on Systems of Economic and Financial Control,⁷⁸ which establishes a mutual consultation and exchange of information. The Government of the United States of America has in its possession information concerning the enemy interests in Brazil which may be of great value to the Economic Defense Commission. On the other hand, Brazil will have available through the expropriaation of enemy firms information in regard to enemy activities in Brazil and other countries which may be of vital importance to the war effort and the administration of the economic warfare program in other countries. The Government of the United States of America is prepared to make available to the Brazilian Government any information which may be of interest to that Government in that respect, and it is assumed that the Brazilian authorities are prepared to reciprocate on the same basis.

74. Copy transmitted to the Department by the Ambassador in his despatch No. 10425, March 15; received March 26. Gen. Arthur Silvio Portella was also Director of the War Materials Division of the Brazilian War Department.
75. For discussions on the Proclaimed List in 1942, see Foreign Relations, 1942, vol. v, pp. 757 ff.
76. Francisco Alves dos Santos Filho.
77. Warren Lee Pierson.
78. For text of Resolution, see Pan American Union, Congress and Conference Series No. 39: Final Act of the Inter-American Conference on Systems of Economic and Financial Control (Washington, 1942); for comment on the Conference, held in Washington June 30–July 10, 1942, see Foreign Relations, 1942, vol. v, pp. 58 ff.