Foreign Relations of the United States: Diplomatic Papers, 1944, The American Republics, Volume VII

102.8951 Rio de Janeiro: Airgram

The Secretary of State to the Ambassador in Brazil (Caffery)

Washington, January 28, 1944—12:40 p.m.

A–105. For McAshan⁴¹ from Allen⁴² Rubber Development Corporation. Following is the text of an agreement reached with Bouças⁴³ which he has accepted on behalf of the Government of Brazil. This agreement has likewise been ratified by the Directors of Rubber Development Corporation.

“Dear Dr. Bouças: I have the honor to record in this note that, as a result of the conversations between you, in your capacity as Executive Director of the Commission for the Control of the Washington Accords, and as authorized representative of the Government of Brazil, and myself, in my capacity as President of Rubber Development Corporation, the following has been agreed upon between the Government of Brazil and the Rubber Development Corporation:

1. Rubber Development Corporation agrees to pay a premium of 33⅓ percent over the ‘Fixed Price’ as set forth in the agreement dated March 3, 1942⁴⁴ between Rubber Development Corporation (as successor to Rubber Beserve Company) and the Government Of Brazil and as supplemented by the Supplemental Agreement dated September 29, 1943, which established the ‘Fixed Price’ (referred to in the Supplemental Agreement as the ‘basic price’) at 45 cents per pound f.o.b. Belém for Acre fine, washed and dried, said premium to be payable upon rubber which is available for quality inspection or has been inspected by Rubber Development Corporation at an agreed shipping port and which has been tendered by the Banco de Credito da Borracha to Rubber Development Corporation for purchase during the period commencing with a date (subsequent hereto) to be agreed upon by Brazil and Rubber Development Corporation and ending March 31, 1945; it being understood that all rubber tendered thereafter to Rubber Development Corporation under the aforesaid agreements shall be purchased at the ‘Fixed Price’ therein established (i.e., on the basis of 45 cents per pound f.o.b. Belem for Acre fine, washed and dried) without the payment of the above mentioned premium, unless the Government of Brazil and the Rubber Development Corporation shall have executed a written agreement for a continuance of the premium thereafter.

2. In view of the fact that Rubber Development Corporation is paying the premium above referred to in order (a) to offset increased wages, living costs and other items affecting the cost of rubber production and (b) to provide a stimulus to maximum production, it is understood and agreed that Rubber Development Corporation shall discontinue at the earliest practicable date gradually and in accord with the Commission for the Control of the Washington Accords, but in any case not later than June 30, 1944, all payments, subsidies and contributions for these purposes, except for obligations already incurred by Rubber Development Corporation under the C.A.E.T.A.⁴⁵ Agreement,⁴⁶ and Brazil agrees to the cancellation or modification of such provisions of any agreements between Rubber Development Corporation and the Government of Brazil (or any agency or corporate instrumentality thereof) as may be necessary to be cancelled or modified in order to relieve Rubber Development Corporation of such payments, subsidies and contributions. Among other things the Government of Brazil agrees to a termination at such earliest practicable date of the following specific commitments and obligations of Rubber Development Corporation:

(1) Any obligations to supply staple foodstuffs or to maintain fixed prices therefor under the agreement dated April 3, 1943⁴⁷ between Rubber Development Corporation and SAVA.⁴⁸

(2) Any obligation to make available at less than cost tappers’ supplies and equipment under the aforesaid agreement between Rubber Development Corporation and SAVA.

(3) Any obligation under the proposed agreement dated July 16, 1943 between Rubber Development Corporation and SNAPP⁴⁹ to provide coal at less than cost or to pay higher than established freight rates on freight of Rubber Development Corporation moved by SNAPP on vessels other than those owned by Rubber Development Corporation or furnished by Rubber Development Corporation to SNAPP.

3. In view of the fact that Rubber Development Corporation has already expended in furtherance of the wild rubber program in Brazil amounts substantially in excess of the $5,000,000 development fund contemplated in the agreement of March 3, 1942, Brazil agrees to assume all development expenditures that may be required from now on, using for this purpose the volume premiums payable by Rubber Development Corporation to Brazil in accordance with Paragraph 4 of the aforesaid agreement of March 3, 1942 and such other funds as the Government of Brazil may make available for such purpose.

Among other things Brazil specifically agrees to assume all future development expenditures with respect to the following:

(a) Road building activities in Southern Matto Grosso.

(b) Labor subsidy in Southern Matto Grosso.

4. In accordance with Paragraph 5 of the agreement of March 3, 1942 Brazil agrees to take such action as may be necessary to require consumers of rubber within Brazil to pay the ‘Fixed Price’, plus the above mentioned premium of 33⅓ percent, so that the export and internal prices of rubber shall be the same.

It is further understood and agreed that the price heretofore agreed upon by Rubber Development Corporation and Brazil for the exportable surplus of tires and tubes which has been sold to Rubber Development Corporation under the provisions of the agreement of October 3, 1942,⁵⁰ shall not be increased as a result of the premium herein provided for unless it can be demonstrated that the manufacturers thereof cannot operate at a reasonable margin of profit, in which case Brazil and Rubber Development Corporation shall consult together and agree upon such increase in price as may be found justified in the circumstances.

5. In order to carry out the objective of facilitating and stimulating the maximum possible production of rubber, Brazil agrees:

(a) To make available funds of the Government of Brazil in the amount of Cr$10,000,000 for the purpose of facilitating and stimulating the maximum production of rubber, including specifically the purpose of providing an incentive for placing imported labor on the seringais and encouraging the opening of new estradas. The above fund shall be increased by the amount of any fortuitous profit arising by reason of any difference between the price received by the Banco de Credito da Borracha and the price paid by the Banco de Credito da Borracha for rubber on hand at the commencement of the premium period.

(b) To take such action as may be necessary to assure that the producers, merchants and others engaged in the production and handling of rubber in Brazil will receive their proportionate part of the full 33⅓ percent premium hereinabove mentioned.

(c) To take such action as may be necessary to assure that the taxes on rubber imposed by the producing states shall not be applicable to the premium of 33⅓ percent hereinabove mentioned, and that existing federal and state taxes on rubber will not be increased nor new taxes imposed while the said premium is being paid.

(d) To take such action as may be necessary to assure the effectuation of the practical measures already agreed upon by the Commission for the Control of the Washington Accords and Rubber Development Corporation in furtherance of the rubber program insofar as such measures are not inconsistent with the provisions of this agreement.

(e) To take such steps as may be necessary to bring about the establishment of the most favorable rate of exchange as applying to all exchange required for Rubber Development Corporation expenditures in Brazil, except for the purchase of rubber.

It is understood that this note, together with your acceptance thereof, shall constitute an agreement between the parties, to be formalized by the exchange of notes between the appropriate Brazilian and American authorities in Brazil.⁵¹

With assurances of my highest regards, I remain,

Very sincerely,

D. H. Allen, President”

Hull

41. S. Maurice McAshan, one of the directors of the Rubber Development Corporation.
42. Douglas H. Allen, president, Rubber Development Corporation.
43. Valentim Bouxjas, Executive Director of the Brazilian Commission for the Control of the Washington Accords.
44. For text of the agreement, see Department of State Executive Agreement Series No. 371, or 57 Stat. (pt. 2) 1318.
45. Commissão Administrativa do Encaminhamento de Trabalhadores para a Amazônia.
46. For summary, see Foreign Relations, 1942, vol. v, p. 727, footnote 3.
47. Not printed.
48. Superintendencia de Abastecimento do Vale Amazonico.
49. Serviços de Navegação da Amazônia e de Administração do Porto do Pará.
50. For a summary of this agreement, see Foreign Relations, 1942, vol. v, p. 719, footnote 87.
51. This agreement appears to have been formalized by an exchange of notes and referred to as the Amended Rubber Agreement of February 8, 1944.