832.51/8–3149
The Secretary of State to the Embassy in Brazil
No. 228
The Secretary of State reviews herein for the information of the Officer in Charge, developments relative to the economic discussions between this Government and the Government of Brazil.
On May 21, 1949 the White House announced, on behalf of the President of Brazil and the President of the United States, that representatives of their respective Governments would be instructed to commence negotiations for an investment treaty and that a joint study of tax relations, between the two countries, would be made with a view to negotiating an appropriate agreement.
On May 23, 1949 Mr. Octavio Bulhões, of the Brazilian Ministry of Finance, visited the Department to seek our views informally with respect to the proposed investment and taxation agreements and the current dollar exchange backlog situation in Brazil. He was introduced to the appropriate officials of the Department for discussion related to the investment and taxation agreements and arrangements were made to discuss the exchange backlog situation at a later date. On this same occasion Mr. Bulhões was asked whether Mr. Octavio Paranagua, Brazil’s delegate to the International Monetary Fund, would be interested in these prospective exchange backlog discussions and upon answering affirmatively was informed that Mr. Paranagua would be welcome to participate. From that time, up to the present, these exploratory discussions have continued, intermittently, in Washington.
On June 2, 1949 Mr. Bulhões visited the Export-Import Bank for the purpose of discussing, informally, a proposed three-year credit for Brazil, in the amount of US $100 million, for liquidation of Brazil’s past-due dollar exchange backlog. He also proposed an additional credit of US $35 million, on a “call” basis, repayable over a longer period and for use in necessary equipment purchases. The Bank has taken the position of deferring consideration of these proposals until the results of the new Brazilian exchange and import controls can be appraised.
On June 9, 1949 public notice was given, in this country, of the proposed joint study of tax relations. Certain information related thereto was requested of the Embassy by the Department’s Instructions 140 of June 22, 1949 and 151 of June 26, 1949, to which the [Page 580] Embassy replied through its Despatches 538 of July 7, 1949 and 651 of July 26, 1949.1
On June 21, 1949 the draft of a so-called Treaty of Friendship, Economic Development and Commerce2 was presented to Mr. Bulhões who said that he had expected a draft of an investment treaty but that the draft handed him was different. He added that he would be glad to forward a copy of this document to his Government, through Mr. Paranagua who expected to fly to Rio de Janeiro the following day. Mr. Bulhões then expressed preference to negotiate a separate investment treaty in Washington and was assured that the United States wished to reach a mutually agreeable accommodation but strongly preferred to negotiate a complete FCN treaty. It is the Department’s belief that, if the several negotiations are carried on together and kept interrelated, it will be possible to negotiate considerably more than the investment provisions. Mr. Bulhões added that he would be ready to commence negotiations upon Mr. Paranagua’s return to Washington in another week and said that he would like to have the latter participate in the negotiations. At Mr. Bulhões’ request Departmental officers met with him on July 14, 1949 to again discuss this draft treaty of Friendship, Economic Development and Commerce and particularly an inquiry he had received from his government as to what articles would be eliminated if the treaty were limited to investment provisions. On this occasion Mr. Paranagua participated in the meeting.
By a formal note of July 14, 1949,2 to the Brazilian Embassy, Washington, the Department suggested that both the United States and Brazilian Governments name one or more representatives to carry on discussions on these various economic proposals. The note was acknowledged by the Embassy, on July 18, 1949, with assurances that the Brazilian Government’s reply would be communicated as soon as received. A second formal note on the Brazilian Embassy,2 bearing the same date but received two days later, informed the Department that Mr. Octavio Paranagua, in collaboration with Mr. Octavio Bulhões, had been designated by the Brazilian Government to negotiate for means of liquidating the backlog of past-due dollar exchange as well as the acquisition of equipment necessary for Brazil’s economic development. This note made no reference to any previous communication between the Embassy and the Department. The Department is without further reply to its note of July 14, 1949, and neither the Department nor the Bank has been approached about this exchange [Page 581] backlog proposal since receiving notice of Mr. Paranagua’s designation. Mr. John Abbink has been acting as the negotiator and coordinator of the U.S. position on all economic negotiations.3
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- Under cover of a note from the Brazilian Embassy, August 25, Mr. Bulhões submitted a letter to Under Secretary of State Webb, dated August 24, embodying suggestions for negotiation of a bilateral agreement on investment guaranties; neither the note nor the letter is printed. (811.51232/8–2549)↩