832.00–TA/8–951
The United States Representative on the
Inter-American Economic and Social Council (Bohan)1
to the Officer in Charge of Brazilian Affairs
(Kidder)
confidential
Rio de Janeiro, August 9,
1951.
Dear Randy: I am enclosing copy of a
letter dated June 15, 1951, from Herbert E. Gaston, Chairman of the
Export-Import Bank of Washington, to Mr. Truslow. I am sending you
this copy, as you were not sure whether it was in the files in
Washington, and also because it gives me a chance to give you a bit
of background on a problem that may become quite serious.
You will recall that you felt that the bark of this letter was
probably worse than its bite, and I am inclined to believe, from
reading the files, that Mr. Truslow also felt this way about it. I
cannot be as optimistic.
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One of the principal reasons for my having become so frustrated that
I asked for retirement at the tender age of fifty was the general
attitude of the Export Import Bank vis-à-vis Mexico. As the Economic
Counselor of the American Embassy in Mexico City, I was called upon
to try to get for the United States practically eighty percent of
what it wanted from Mexico, and yet the Embassy was most effectively
short-circuited when it came to what Mexico wanted from the United
States, i.e. credits from the Export-Import Bank.
As I read over Mr. Gaston’s letter, I cannot help but be struck by
the difference in the attitude he takes from that of the
International Bank. I am very sure that the International Bank has
not given the Joint Commission the power of veto. I am equally sure
that the International Bank has a “deep and continuing interest in
the welfare of Brazil and—concern that the prosperity of that
country shall not be endangered by its entering prematurely into
undertakings which may be more attractive than timely.” In other
words, my opinion is that the International Bank reserves the same
rights that the Export-Import Bank does with this difference. Mr.
Gaston takes the position that it is his bank and not the combined
judgment of the United States Government and the Joint Commission
that is to make policy; in other words, the Export-Import Bank is a
government within a government.
You know that I have the kindest feelings towards Mr. Gaston, but I
think that the Export-Import Bank has forgotten that it is only part
of a whole and not the whole. I realize that the problem must be
solved, not with a shillaly [shillelagh?] but
with diplomacy, I certainly hope that matters can be worked out so
that the overall policies of the United States towards the Joint
Commission can be carried out by Mr. Knapp and that the prestige of
the Commission will not be as adversely affected in Brazil as the
American Embassy in Mexico City was affected by the lack of
cooperation on the part of the Export-Import Bank.
Sincerely yours,
[Enclosure]
Washington, June 15,
1951.
Dear Mr. Truslow: If I thought an
agreement formalizing relations between the Export-Import Bank
and the U.S. Brazilian Commission to be necessary or advisable I
should have several reservations to make to what you propose in
your letter of June 8. But I don’t see any real point to such an
agreement. I am ignorant of the provisions of your agreement
with the International Bank, nor do I know anything about the
negotiations between that institution and the Brazilian
Government which preceded that agreement. In any event the
situations
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of the
two institutions are not quite comparable since this Bank is an
agency of the United States.
However, it is quite easy to outline what seems to be the
reasonable course for this Bank to pursue, having in mind the
existence of the Joint Commission and its general objectives as
set forth in Section 410 of the Economic Cooperation Act of
1950.
In its operations in International Bank member countries this
Bank will be guided by the advices of the National Advisory
Council, which define generally the scope of this Bank and the
International Bank and stipulate that neither Bank shall
establish a monopoly of lending in any country. We should not
feel ourselves warranted in subscribing to any understanding or
agreement which would have the effect of modifying or evading
the Council’s action or the responsibilities of the Directors
under the provisions of the Export-Import Bank Act of 1945 or
any other legislation affecting the Bank.
We shall be happy, of course, to cooperate as fully as we can
with the Commission under the limitations I have mentioned. We
do not intend to keep any secrets from the Commission as to our
operations in Brazil. We should expect to use what seems to us
to be the normal channel of communications; that is, the State
Department, but are disposed to take special steps to see that
the State Department supplies to you all information which may
be helpful, including summaries of any applications and action
taken on them.
As I mentioned to you in our conversation at lunch the other day,
this would include information on loan applications not eligible
for International Bank financing because a National Government
guaranty is not offered or is not found to be requisite. It
would include also projects in which the United States has a
special interest, such as strategic materials projects, as well
as proposed exporter credits for machinery or materials where
there is substantial participation by the supplier, and also
supplemental credits for projects to which large commitments
have already been made by this Bank.
We should welcome the views of the Commission on any of these
matters, but we could not under any circumstances concede a veto
power to the Commission on any proposed loan. We should expect
that the Commission, where it has strong contrary views, would
present them to the National Advisory Council directly or
through the medium of the State Department. We shall ourselves
be willing to consider such objections carefully and give great
weight to them and if we are not convinced we should be willing
ourselves to forward the Commission’s objections to the National
Advisory Council.
I make these observations because of our deep and continuing
interest in the welfare of Brazil and our concern that the
prosperity of that country shall not be endangered by its
entering prematurely into undertakings which may be more
attractive than timely. We cannot
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fail also to note that this Bank is the
custodian of obligations to the United States to the extent of
more than $96,000,000 out of credits to the amount of more than
$203,000,000 extended for Brazilian development beginning in
1939.
In view of this record it would seem appropriate that we be
supplied with information as to projects undertaken and
contemplated through the advice of the Joint Commission and we
should be grateful also for any new information the Commission
may feel free to supply to us on Brazilian balance of payments
and budget conditions and prospects.
One of the salient features of recent Brazilian economic history
has been the long-continued dollar shortage, only very recently
overcome, which caused officers of the Brazilian Government two
years ago to discuss with us the prospects of an exchange loan
to cover accumulated arrearages in dollar payments for
merchandise, and we cannot ignore the fact that budget shortages
continuing up to the present have seriously embarrassed at least
one project toward which we had made large loan commitments in
dollars.
We expect to continue our own studies of these matters to guide
us in our Brazilian loan policy. But we should be grateful for
any help that the Joint Commission feels warranted in extending
to us.
Sincerely,
