561.333D3/5–1745: Telegram

The Ambassador in Brazil ( Berle ) to the Secretary of State

1557. For Clayton. Acting Foreign Minister18 called me today and read a note from Souza Costa19 requesting the Foreign Office to take up at once with AmEmbassy the possibility of the urgent protest of the Brazilian Govt against the proposed revision of the Inter-American Coffee Agreement. …

. . . . . . . . . . . . . .

Full text of Souza Costa’s note20 will follow by airmail; but the substance is that the coffee agreement without maintenance of quotas is wholly useless to Brazil. It merely means that other countries will take a greater share. The Brazilians do not believe that Europeans will buy coffee.

[Page 359]

Expecting this very urgent protest we have been going into the situation here. Our conclusions are first, that the coffee agreement without the quota agreement means less than nothing to Brazil if surplus conditions recur; second, that Brazil cannot afford to risk losing her permanent traditional market in the US on the assumption that Europe will buy coffee in sufficient quantities to make quotas unnecessary; third, that future European buying can be determined by experience and not by preconceived hypothesis. By consequence this Emb urgently recommends that reconsideration be given to the US position and our delegate to the Board21 be instructed not to oppose the Brazilian view that the existing quota system be continued at least for another year. During this additional period further consideration could be given to possible future revisions when more facts are available regarding European buying and supply and consumption in general.

In all fairness to Brazil Dept should remember following points.

We have fought out the ceiling price issue with vigor and have so far resisted Brazilian demands at the expense of much unfavorable newspaper publicity and apparent loss of good will on the part of the Brazilians.
The traditional Brazilian participation in the US market was seriously prejudiced during 1942 and 1943 because of our shipping requirements and simultaneous expansion of quotas to permit other coffee producing countries to supply US market requirements to a much greater extent than before.
Under our existing price ceiling on green and roasted coffee, Brazilian coffee suffers a relative disadvantage in the US market as compared with the mild coffees.
Since mid-1944 Brazilian Govt has maintained the flow of coffee at ceiling prices in face of tremendous planter objections; to date it has supplied Santos exporters almost 5 million bags of DNC22 coffees for sale to US civilian market and Armed Forces.
A coffee subsidy plan has been worked out recently with cooperation of Souza Costa involving disbursement roughly 75 million dollars in subsidy payments to make up difference between American ceiling price and stated cost of production, approval of which by President Vargas is pending.
The Brazilians feel that action taken by US Govt in flatly rejecting a price readjustment on coffee after Mexico City Conference was in violation of the resolution approved by that Conference regarding price controls.23
Our cotton export subsidy is considered locally as a serious blow to Brazilian economy and has further weakened faith in our expressed policies of economic cooperation.
Finally, belief in inter-American cooperation is just now at a low ebb owing to San Francisco developments.24

It would be helpful to me in relations with Foreign Office and Ministry of Finance if Department could telegraph its reaction to foregoing and possibilities of meeting Brazilian views in regard to coffee.

  1. Pedro Leão Velloso.
  2. Arthur de Souza Costa, Minister of Finance.
  3. Copy of note transmitted to the Department in despatch 1404, May 18, 1945, not printed.
  4. Edward G. Cale.
  5. Brazilian National Coffee Department.
  6. See footnote 14, p. 356.
  7. United Nations Conference on International Organization held at San Francisco, April 25–June 26, 1945. For documentation on the Conference, see vol. i, pp. 1 ff.