832.24/7–2346
The Ambassador in Brazil (Pawley) to the Assistant Secretary of State for Economic Affairs (Clayton)
[Received August 5.]
Dear Mr. Secretary: Yesterday I obtained from a very reliable source information to the effect that the Argentine Ambassador here,38 after a conference with the Foreign Minister, telegraphed his Government that the second quarter allocation of rubber had not been shipped because of difficulties created by the United States Government.
Immediately upon receipt of the Department’s telegram no. 799, June 15, 2 p.m., I conferred with the Foreign Minister stating that the allocation for the second quarter had been made and that he was at liberty to obtain the second quarter shipment from the United States or the rubber could be allocated from Brazilian stocks. The Foreign Minister immediately conferred with the Argentine Ambassador, and it was my understanding that arrangements were reached between them for shipment of this rubber from Brazil. However, we heard nothing further until yesterday.
In various conferences between the Foreign Minister and the Argentine Ambassador during the past weeks, the Argentine Government committed itself verbally to shipment of 50,000 tons of wheat per month through December. The Foreign Minister informed me that the offer was made in glowing terms and with protestations of friendship, and that Argentina expected nothing in return.
The Foreign Minister tells me, however, that before the meeting was over he was informed that Argentina was desperately in need of tires. Therefore, the Foreign Minister felt compelled to offer assistance and committed Brazil to furnish 10,000 tires.
Yesterday the Foreign Minister informed me that the Argentine Ambassador had called on him to say that the Argentine Government [Page 145] cannot furnish more than 30,000 tons of wheat a month, although the Foreign Minister has already had shipped between 6,000 and 7,000 tires. (In addition, we are informed that large quantities of tires are being smuggled over the border.)
When the conference was over, the Argentine Ambassador telegraphed his Foreign Office to the effect that the Brazilian Foreign Minister had stated that the second quarter of rubber had not gone forward because of difficulties imposed by the United States. He further informed his Foreign Office that the Brazilian Foreign Minister was adamant that the Argentine Government live up to its commitment of 50,000 tons of wheat per month.
In my telephone conversation with you several weeks ago, I recommended that Brazil be authorized to sell direct to Argentina through the Combined Rubber Committee the rubber Argentina is seeking, and that Brazil negotiate the best price that can be obtained from Argentina in exchange for a commitment in writing from Argentina to furnish a minimum of 50,000 tons of wheat per month.
Through this process we would be relieved of paying 60 cents for Brazilian rubber that would ultimately reach Argentina after paying freight to the United States and back. Although the Brazilian Government is naturally anxious that we continue to take their rubber at 60 cents and make it available to Argentina at 23½ cents in order that Brazil obtain Argentine wheat, I have pointed out the inequity of the United States being in the middle of this type of transaction and taking this substantial loss for no apparent good reason. The Foreign Minister and others present agreed with my point of view and felt that the Brazilian Government would handle it that way if the United States Government was unwilling to buy at 60 cents and sell it in their behalf at 23½ cents.
I pointed out that the United States Government was subsidizing Brazilian coffee on a very substantial basis39 and at very great cost to the United States Government, and that it was only reasonable that Brazil should make her rubber available to Argentina at the best price she could get.
I would greatly appreciate your views on this matter.
I agree with your telegram that the tripartite agreement is not effective. We believe that it should be canceled, as we are convinced here that this device for procuring wheat has not been effective.
Sincerely yours,