632.6231/164: Telegram
The Chargé in Brazil (Scotten) to the Secretary of State
[Received 2:45 p.m.]
59. Embassy’s telegram 56, June 1, 1 p.m. I called last night at his request upon the Minister of Finance accompanied by Boucas. The Minister informed me that he had received a memorandum from the American Chamber of Commerce as well as our aide-mémoire on [Page 328] the trade arrangement with Germany and that the British had likewise made representations about this subject. As a result of these representations he explained that the German Government was being notified that the present Brazilian-German compensation arrangement would be extended for a period of 3 months during which studies would be made with a view to analyzing our objections. I asked him if this was equivalent to a denouncement of the present arrangement and he said emphatically that it was not; that he saw no reason to denounce the present arrangement. He then added that he felt Brazil must continue to deal with Germany in compensation marks although during the course of the studies about to be undertaken he would attempt to evolve some plan to eliminate “subsidized imports”. I explained that as I understood the situation with respect to Brazil, subsidies on many German exports were granted through the operation of the compensation marks system itself. He thereupon showed me photostat copies of private barter arrangements for the German and American firms which had evidently been furnished him from the source mentioned in the Embassy’s previous telegrams. I explained that these transactions were not made with the compensation mark but were merely barter arrangements and that no price discount or subsidy was involved. The Minister apparently had no conception of this difference and he asked me to secure for him a technical exposé of the system as operated in the United States at the present time. I called his attention to the explanation regarding this point contained in the aide-mémoire but he asked me to obtain a full exposé regarding it and I trust the Department will furnish it without delay as I am convinced the Minister of Finance is entirely confused regarding this matter.
He then asked me to see the Acting Minister for Foreign Affairs which I did. The Acting Minister for Foreign Affairs confirmed what the Minister of Finance had told me regarding the prolongation for 3 months of the arrangement and stated that the Minister of Finance had desired to prolong it for 1 year and that it was cut down to 3 months only upon the insistence of the Foreign Office. I stated that I was greatly discouraged as the result of my conversation with the Minister of Finance in view of the statement he had made that Brazil must continue with the compensation mark system.
. . . . . . . . . . . . . .
In view of the two conversations reported above I believe our case to be hopeless unless we are willing to use pressure. However, in order to dispel the confusion which apparently exists in the mind of the Minister of Finance I venture to reiterate my request that the Department furnish the Embassy with as complete information as possible as to the actual mechanics of the present barter arrangements [Page 329] which are now permitted between American and German firms (see Embassy’s despatch 1319, March 22nd) and also full information concerning the exact operation of the “subsidy or price discount system” existing in Germany.