325. Memorandum From the Assistant Secretary of State for Inter-American Affairs (Holland) to the Secretary of State1
SUBJECT
- Oil Development in Brazil
You have asked that I prepare a summary of information which might be useful to some outstanding United States oil man if he were to visit Brazil to discuss the problems of the Brazilian oil industry with government officials there. The memorandum will be submitted to you promptly. In the meantime I would like to set out one or two points of concern that your request raises in my mind.
The issue of whether the Brazilian oil industry should be developed by a national monopoly or by foreign companies was the most inflammatory issue in the fall presidential election.
The issue is one manufactured by the Communists and they devote much of their propaganda effort to it. A few months ago they featured a completely false propaganda story that a Standard of [Page 691] New Jersey official had come to Brazil to offer $500 million for legislative reform and a contract satisfactory to his company. A little while later the same story was repeated but the figure was raised to $1 billion.
The net result of the Communist campaign is that the president-elect and principal government officials have taken the public position that they favor development of the oil industry by the national monopoly to the exclusion of foreign companies.
The Communist Party has its agents well scattered through the Brazilian Government. Any prominent United States oil man visiting Brazil would be put under surveillance and the purpose of his visit would be quickly determined. Regardless of his true purpose, if he talked to Government officials the Communists would fabricate and publicize some such story as those mentioned above. Under existing conditions the Government would then simply have to break off contact with him.
The responsible agents of our Government place high priority on the opening up of the Brazilian oil industry to private enterprise. It is the only way that Brazil will achieve a petroleum industry and, until one is achieved, Brazil’s economic problems will grow steadily worse.
We are in contact with high governmental officials including the President-elect on this subject. We are hopeful that during his term of office the objective mentioned can be attained. I believe sincerely that our success will be obstructed if any United States citizen prominent in the oil industry were to visit Brazil and attempt to discuss this problem with top government officials.2
- Source: Department of State, Central Files, 832.2553/1–1356. Confidential; Eyes Only. Sent through S/S. Under Secretary Hoover initialed his concurrence on the source text.↩
- On January 18, Holland forwarded a memorandum to Dulles entitled, “Brazilian Petroleum Situation.” This two-page memorandum briefly summarized the relevant Brazilian petroleum legislation, the significance of Brazilian oil production, and the political implications of the government’s policy. “Because of the explosive political issue,” the memorandum reads in part, “high officials who realize the imperative necessity of a liberalized policy toward foreign capital for oil development find it difficult to take action.” It noted that Kubitschek had expressed himself “in favor of foreign participation” in private statements, but added that “it still remains to be seen whether he has the political courage and backing to change the existing situation.” (Ibid., 832.2553/1–1856)↩