Office of the Historian

234. Action Memorandum From the President’s Special Assistant (Rostow) to President Johnson in Texas1

Washington, February 23, 1968.

SUBJECT

  • 1968 Economic Assistance for Brazil

This package contains the unanimous recommendation of AID, State, Agriculture, and BOB, with Treasury concurrence, that you approve an economic assistance program for Brazil for 1968 of $255 million.2 Of this amount, $170 million is FY 1968 money for program, sector and project loans, $50 million a carryover from the 1967 program loan, and $35 million of PL–480.

Brazilian performance last year was not as good as we would have liked. In large part, it was due to President Costa e Silva’s new team getting its policies and priorities established. The soft spots were the large budget deficit, too rapid expansion of private credit and a sizeable depletion of foreign reserves. But inflation was reduced from 41% [Page 521] in 1966 to 25% in 1967. The import liberalization program was maintained. And the January exchange rate and credit actions showed a renewed commitment to stabilization.

The negotiating strategy of our assistance package has been carefully coordinated with the IMF and World Bank. The self-help conditions are hard-headed but realistic. Gaud and Oliver find that the application of the Symington Amendment is not required. Applicability of the Conte–Long Amendment will depend on whether President Costa e Silva decides to buy supersonic aircraft or other sophisticated weapon systems. The aid package is structured to permit Conte–Long deductions if this becomes necessary.3

I recommend you approve the negotiating package as proposed by Bill Gaud and Covey Oliver.

Walt

Approve4

Disapprove

Call me

  1. Source: Johnson Library, National Security File, Country File, Brazil, Vol. VII–a, 8/64–11/68. Confidential. Sent by pouch to the President at his Ranch in Texas.↩
  2. Attached but not printed are a memorandum from Zwick to the President, February 9, and two memoranda from Gaud to the President, both February 6.↩
  3. For an assessment of the Conte–Long and Symington amendments, “Probable Consequences of a Refusal by the US to Sell F–5 Aircraft in Latin America,” see Document 66.↩
  4. The President checked this option and added by hand: “ask Oliver to get maximum credit with all Brazilians on this.” According to another copy of this memorandum, Assistant to the President Jim Jones relayed this message to Rostow by telephone on February 24. (Johnson Library, National Security File, Country File, Brazil, Vol. VII–a, 8/64–11/68) The United States and Brazil signed the program loan agreement on May 23.↩