April 22, 1952
S - The Secretary
ARA - Mr. Miller
Appointment with Mr. Eugene Holman at 3:00 today
In connection with Mr. Holman's visit this afternoon, Mr. Holman's purpose is probably to ask you to do whatever you can during your visit to Brazil to influence the Brazilian Government to adopt a more liberal policy in regard to petroleum development which would permit foreign companies an opportunity to engage in exploration and refining. The present situation is that American companies are excluded from these fields of activity and the Brazilian Congress is presently considering legislation for the creation of a national Brazilian institution with Brazilian public and private capital to have monopolistic control over production. At the same time several Brazilian-owned refineries are in the course of construction.
We agree with Mr. Holman that Brazil's petroleum policy is totally inadequate and that unless Brazil changes its petroleum policy the country will never realize its economic potential. Opposition towards a more liberal petroleum policy comes not only from the communists but, more importantly, from nationalist elements. We have discussed the matter frankly with friendly officials of the Brazilian Government over a period of years, but without success. The large American companies have also made various proposals to Vargas during the last year which have also failed of success.
Mr. Holman in his letter to me which I sent you last week in effect recommends that the Export-Import Bank and the International Bank should withhold loans to Brazil for development purposes until they work out a different petroleum policy. It seems to me that this is an extremely unwise policy to take and that it would merely weaken our friends in the Government such as the Finance Minister and the Foreign Minister and play into the hands of nationalistic elements. Vargas has recently shown a tendency to break away from the more nationalistic elements in Brazil and his dismissal of the highly nationalistic War Minister, Estilac Leal, a few weeks ago is a decided move for the better. The application of sanctions with regard to Brazil over petroleum investments would in our opinion play into the hands of Estilac Leal and his group and hurt out friends.
ARA:EGMiller,Jr.:arp