235. Memorandum of a Conversation, Department of State, Washington, March 14, 19581

SUBJECT

  • Brazilian Financial Problem

PARTICIPANTS

  • Ambassador Ernani do Amaral Peixoto of Brazil
  • Mr. Henrique Rodrigues Valle, Minister Counselor, Embassy of Brazil
  • R. R. Rubottom, Assistant Secretary for Inter-American Affairs
  • Maurice M. Bernbaum, Director for South American Affairs
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Ambassador Peixoto had Valle translate in reading a letter addressed in Portuguese by Brazilian Finance Minister Alkmim to Robert Anderson, Secretary of the Treasury.2 The letter stated that the Brazilian Government was facing serious foreign exchange difficulties owing to the difficulties in the sale of coffee, and that such difficulties threatened to interfere seriously with Brazil’s normal trade with the United States. The problem created by the exchange shortage was being discussed with representatives of the International Monetary Fund and it was hoped that a good basis would be laid in these conversations for a later approach to various U.S. Government specialized agencies. Such an approach would be required owing to the magnitude of Brazil’s foreign exchange problem and the relatively limited amounts available from the International Monetary Fund. However, results from this procedure could not be expected for some time, while the peak of Brazil’s financial crisis could be expected within 15–20 days when available foreign exchange would be completely exhausted. In view of this situation the Government of Brazil was appealing to the U.S. for a prompt loan of $50 million to tide Brazil over the temporary situation. A more permanent arrangement could be made later after the deliberations of the International Monetary Fund.

Mr. Rubottom expressed the opinion that the Brazilian Government was very well advised in having asked for consultation with the Monetary Fund. Aside from other benefits, such consultation would place the Brazilian Government in the position of justifying to potential critics the unpalatable measures which had to be taken on the ground that they are recommended by an impartial international agency. Peixoto interjected at this point that this was one of the great advantages of the Fund procedures—that it was far better politically for the Brazilian Government to follow the advice of an international agency than it would be to accept the suggestions of the United States. Mr. Rubottom added that the various officials charged with financial responsibilities, with whom he had discussed the Brazilian problem, felt quite definitely that there was no point in financial assistance to Brazil if such assistance would not contribute to rectification of the underlying problem and correspondingly resolve the need for a similar request in three months or so. They all believed quite definitely that there were many things that Brazil had to do, unpalatable as they might be at the moment, to correct the economic imbalance—only then could financial assistance be of real constructive value to Brazil. He expected that this was essentially the answer which Ambassador Peixoto could expect to hear from Secretary Anderson.

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Ambassador Peixoto stated that he hoped to see Anderson that afternoon and that the results of the conversation would determine the timing of his return to Brazil.3 He had previously expected to return about April 1 for a PSD convention but thought it possible that he would be going back somewhat earlier, perhaps next week. He did not comment at any length on Mr. Rubottom’s remarks.

  1. Source: Department of State, Central Files, 832.10/3–1458. Confidential. Drafted by Bernbaum.
  2. Dated March 11; not found in Department of State files.
  3. No record of this conversation has been found in Department of State files.