832.6176/8–944: Airgram
The Ambassador in Brazil (Caffery) to the Secretary of State
[Received August 21—8 a.m.]
A–1493. Following the receipt of Department’s A–1045, July 31, 2:10 p.m., “For Neumann from Allen, Rubber Development Corporation”, my Economic Counselor65 discussed the contents of the airgram with officials of the Rio de Janeiro office of RDC and with Mr. Utz66 of the Washington office of RDC, who is now visiting Brazil.
My Economic Counselor expressed surprise that the RDC in Washington had not consulted the Embassy on the understandings reached in Washington with Senhor Valentim Bouças. He added that if the views of the Embassy had been requested, the Embassy would have recommended that the extension of the price premium of 33⅓% on crude rubber be withheld pending the signing and promulgation of the decree-law on synthetic rubber and other plastics. The local officials of the RDC were under the impression that the decree-law and the price premium were tied together, but in view of the Department’s telegram 2365, of August 1, 10 p.m. (“From RDC Allen to Neumann”),64 authorizing public announcement of the extension [Page 611] of the premium payment, they said that they would check this point with their officials in Washington.
They subsequently reported that there was no connection between the two matters and that the RDC had informed other rubber producing countries in the Americas of the extension of the premium.
In reply to the Embassy’s question as to whether or not they had any problems outstanding with the Commission to Control the Washington Agreements, which administers the rubber agreement in Brazil, they said that the Brazilian Government has not yet put into effect the development fund of 10,000,000 cruzeiros as provided for in the agreement of February 8, 1944, and that other matters were still pending. The Embassy representative remarked that, in the opinion of the Embassy, the extension of the price premium should have been used as a bargaining power to obtain prompt promulgation of the decree-law on synthetic rubber and other plastics and prompt settlement of all important matters pending with the Commission to Control the Washington Agreements. He stated also that a public announcement at this time extending the price premium until March 31, 1946, might prejudice the overall program for the procurement of strategic materials because producers and exporters of the materials would use it as a basis for requesting an increase in prices for their products. He added that the development would be untimely and unfortunate, in view of the fact that the Brazilian Government recently increased the export prices on tantalite and beryl and which the Embassy and the USCC67 succeeded in having postponed but only after long and difficult negotiations.
The Embassy hopes that the Brazilian Government will not delay in promulgating the legislation necessary to implement the aforementioned agreement on synthetic rubber and other plastics, but desires to point out that in as much as the RDC has decided to announce the extension of the price premium at this time and not to tie it in with the synthetic rubber plan, that the Embassy and the RDC here will be deprived of a strong bargaining weapon.
The airgram under reference states that the arrangement on synthetic rubber will be formalized in Rio de Janeiro. The Embassy assumes that this means that it will take the form of an exchange of notes between the Embassy and the Foreign Office. If this is correct, the Embassy suggests that the Foreign Office should have been consulted concerning the terms of the proposed arrangement, even though the provisions are favorable to Brazil.