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 You are in: Under Secretary for Public Diplomacy and Public Affairs > Bureau of Public Affairs > Bureau of Public Affairs: Office of the Historian > Foreign Relations of the United States > Johnson Administration > Volume XXXI
Foreign Relations, 1964-1968, Volume XXXI, South and Central America; Mexico
Released by the Office of the Historian
Documents 214-244

214. Telegram From the Embassy in Brazil to the Department of State/1/

Rio de Janeiro, June 10, 1964, noon.

/1/ Source: National Archives and Records Administration, RG 59, Central Files 1964-66, POL 17 US-BRAZ. Confidential; Priority; Limdis.

2790. 1. President Castello Branco received me in Brasilia Tuesday afternoon/2/ for one and one-quarter hours. At start, I presented him book on White House, recently published Portuguese translations of LBJ biography and collection of speeches, and Kennedy half dollar. All were graciously acknowledged.

/2/ June 9.

2. I said purpose of visit was to review general situation prior to Washington consultations/3/ and learn Castelloís state of mind after two months in office. President asked if I had seen Juracy Magalhaes recently (I had done so late Tuesday morning) and then showed me staff report on areas of friction abroad, including chapters on AMFORP, Hanna, CTB, French contentious cases, and remittance of profits, saying that work on resolution of all was going forward rapidly. Then showed me separate mimeographed bill on profits remittance revision, which would receive final cabinet consideration Thursday and go to Congress promptly thereafter. President emphasized systematic staff work as basic feature his administration, saying he felt pleased with progress considering that neither he nor ministers had expected to be in office and therefore had lacked period of advance preparation. He mentioned main legislative items of housing, taxes (in two phases), bank reform, agrarian reform, the strike regulation law, all as indicating real progress in governmental process. He said threefold goals of inflation containment, development, and reform were no mere slogans, but genuine objectives which were being fleshed out in administrative and legislative measures. We had a little interchange on need for popular slogans to win broad support, which president acknowledged but said he approached with wariness, considering damage done the country by such past slogans as "petroleum is ours," and "reforms with or without the constitution."

/3/ Gordon was scheduled to arrive in Washington on June 13 to review the status of economic assistance to Brazil. (Telegram 2695 from Rio de Janeiro, May 29; National Archives and Records Administration, RG 59, Central Files 1964-66, AID(US) 9 BRAZ) He was one of six Ambassadors in Latin America to meet President Johnson on June 18; see Document 18. According to Ruskís Appointment Book Gordon also met Rusk on June 18; no substantive record of the meeting has been found. (Johnson Library) The next day the Department reported that AID had approved a $50 million loan to Brazil for balance of payments assistance. Although the agreement was to be signed immediately, the actual disbursement of funds was made contingent on settlement of the AMFORP dispute. (Telegrams 1776 and 1778 to Rio de Janeiro, June 19; National Archives and Records Administration, RG 59, Central Files 1964-66, AID(US) 9 BRAZ) The United States and Brazil signed the loan agreement on June 23.

3. President then said he had great interest in Alliance for Progress and its effective application in Brazil. Said he felt threefold program entirely in line with charter of Punta del Este, also actively interested in having social as well as economic side maintained, noting special importance of social side in northeast. He said investments in human beings essential even for effective economic development there, and he rejected argument that social benefits would come automatically from promotion of industrialization. President talked warmly of recent Recife meeting with Kubish.

4. I then turned conversation to political side, saying that cancellation Kubitschek political rights would raise serious questions abroad and asking how he would explain it if in my place./4/ President first traced formal steps in procedure, stating that charges and requests for cancellation came from three ministers, that evidence was carefully collected, National Security Council considered and recommended, and he then acted. As to reasons, he said they were both past and future. In past, despite Kubitschekís substantial contributions to development of country, these had been made without regard to financial responsibility and with large scale corruption, including personal enrichment Kubitschek and his friends. In addition, Kubitschek had wooed Communist support, and had paid price of letting them get into the governmental machine, where as previously they had been working on students and trade unions and others outside. He said that among other things, Kubitschek had dismissed Lucas Lopes, who now one of Kubitschekís leading defenders, as Finance Minister at insistence of Prestes. As to future, cancellation of mandate and therefore candidacy was essential to safeguard country against rebuilding of same phenomena of corruption and Communist infiltration from which country had suffered in last decade. Kubitschek had been intending to base his candidacy not merely on PSD, but on Goulart supporters in PTB and on Communist collaboration. President said he recognized that procedures had distasteful aspects, not meeting usual norms of right to defense or judicial review, but he felt that conditions of country initiated by Kubitschek himself and greatly intensified by Goulart had made exceptional procedures indispensable to effective clean-up and replacement of country on sound track of honest democratic government. June 15 would end this phase, any further clean-up actions taking place under normal National Security Law S. President noted that popular reaction to Kubitschek cancellation had been very small. The Congress was debating subject at that very moment, and he expected PSD speeches denouncing injustice and making some sort of manifesto, but he did not believe PSD would obstruct governmental program.

/4/ On June 5 the Department suggested that Gordon convey to Castello Branco the "seriousness" of international reaction to the suspension of Kubitschekís political rights. (Telegram 1697 to Rio de Janeiro; ibid., POL 29 BRAZ) In telegram 1716 to Rio de Janeiro, June 9, Mann also recommended that Gordon express to Castello Branco "the mounting concern which we feel here" regarding actions taken under the Institutional Act: "The failure on the part of the Brazilian Government to follow due processes of law and to proceed in a democratic manner will increase our difficulties in responding to Brazilian requests for economic assistance." (Ibid.) The Embassy reported that telegram 2790 had arrived after "Ambassadorís call on Castello Branco in Brasilia and on eve his departure for U.S." (Telegram 2818 from Rio de Janeiro, June 11; ibid.) Mann reported on the "Kubitschek thing" in a telephone conversation with the President, June 11; see Document 16.

5. I then asked whether he planned to issue any sort of official declaration or justification of action on Kubitschek. President replied that something of sort was being projected, on basis partial rather than full dossier, since full revelation would be embarrassing to nation. I urged strongly desirability of issuance some form official justification, emphasizing importance of this to public opinion abroad. President appeared to be impressed by my emphasis on this point.

6. I then speculated on political effects, including likelihood that PSD might now turn to Kruel as candidate, and danger militarization of whole political process, noting concern in foreign press and public opinion of possible slide into military dictatorship. (This whole political discussion was conducted with caution, since I am still developing personal relationship with Castello Branco of type permitting candid treatment such matters.) President replied he well aware concern of excessive militarization but absolutely confident that action his government would dispel this concern. Pointed out that military candidates in Brazil had never gotten much enthusiasm, even from the armed forces noting such cases as those Monteiro, Lott, etc. Also said he would require any officers desiring to be candidates to take leave from jobs, said they could not use their offices as campaign headquarters in the way Lott had done. He said, incidentally, that Kruel had telephoned a few days ago to indicate his personal endorsement of cancellation Kubitschek political rights.

7. I then raised question of possible prolongation Castelloís own man-date. On this, he was reticent, although indirectly indicating reluctance consider anything which appeared to be of personal benefit to him. We discussed in this connection length of necessarily unpopular austerity phase of anti-inflation effort, which he said might be much longer than six months but he hoped would be over by first anniversary of revolution next April. Also said that essence of his government would be noninvolvement in campaign. Remarked with smile that Lacerda had had anti-Goulart issue as major campaign weapon, and might in future become anti-Castello, although he hoped that Lacerdaís future political posture would become more positive than negative.

8. As conversation concluding we covered smaller points. President said had discussed C-130 project with Air Minister earlier same day, with negotiations to proceed. Details will go through JBUSMC.

9. In response to question on embarked aviation, President said he would settle this within few weeks. Issue could be settled only by President, and he intended to resolve it once for all. Then remarked that Kubitschek had bequeathed country two aircraft carriers, the Minas Gerais and Brasilia, one anchored uselessly in Guanabara Bay and the other anchored uselessly in the central plateau.

10. President inquired on relation timing my return and Juracy Magalhaes arrival in Washington. Said he placed highest hopes on Juracyís effectiveness as Ambassador. In addition to formal credentials, he is giving Juracy personal letter to LBJ./5/ He also mentioned Lacerdaís mission to Europe and US to help explain revolution, and indicated hope President Johnson might be able receive Lacerda.

/5/ Magalhaes evidently delivered the letter when he presented his credentials to President Johnson on July 9. (Johnson Library, Presidentís Daily Diary)

11. President then asked me about US political party convention prospects, Presidential elections, and other aspects current US scene. We also talked of common acquaintances, President speaking of Colonel Walters in terms of affection and respect. Conversation ended on most cordial note, leaving me impression real progress in melting reserve which is one of Castelloís personal characteristics.

12. Comment. My general impression was extremely favorable. I did not encounter any nervousness or anxiety on Castelloís part, despite fact that Kubitschek action obviously tough decision. On contrary, impression was rather one of calm resolve to get on with problems of clean-up, administrative rebuilding, and positive program. I also noted feeling of greater confidence on economic subjects, together with full backing policy lines recommended by Campos./6/

/6/ In a June 15 memorandum to Bundy, Sayre offered the following comment: "All reporting indicates Brazil is seriously proceeding on reform measures. Unfortunately there is an undercurrent that the U.S. owes Brazil assistance because it threw out the Communists." (Ibid., National Security File, Country File, Brazil, Vol. IV, 4/64-8/64)



215. Letter From the Ambassador to Brazil (Gordon) to the Assistant Secretary of State for Inter-American Affairs (Mann)/1/

Rio de Janeiro, August 10, 1964.

/1/ Source: National Archives and Records Administration, RG 59, ARA/LA Files: Lot 66 D 65, Brazil, 1964. Confidential; Official-Informal.

Dear Tom:

This is in reply to your letter of July 31,/2/ carried here by Bill Rogers at the beginning of last week. Billís trip was extremely helpful for all of us. In addition to some immediate problems, including the Rio-S„o Paulo highway question, it gave us the chance to review the broad strategy of our economic assistance relationships with Brazil in the light of the way in which the governmental program has been shaping up. It has also given Bill some most useful firsthand insights into the attitudes and problems of the Campos-Bulhűes team and of the Castello Branco government in general in the economic field.

/2/ Attached but not printed. In his letter to Gordon, Mann reported that the Johnson administration had recently given "a considerable amount of thought to the problem of helping Brazil to get its house in order." According to Mann immediate action was necessary. "If Brazil fails to act responsibly in the months immediately ahead," he argued, "we will then be in a crisis situation again, perhaps of even larger proportions." Mann also reported, however, that IMF officials had expressed "great skepticism about the Ďgradualistí approach to the problem of inflation," a concern shared by "those of us who are working on this problem in the Department."

From our own talks in June,/3/ I know that you and I are in accord that the coming months are a time of exceptional importance in determining the economic and political course of Brazil for perhaps a long period to come, with derived effects on the whole future of Latin America. In this respect, the revolution was decisive in creating new opportunities, but not necessarily in how those opportunities will be used. The Castello Branco government must make good use of this time, and our own efforts should be directed toward promoting and supporting that objective. It would be a disastrous error for us to relax in our relationships with Brazil on the mistaken theory that the revolution had eliminated the Communist or Peronist danger here and things could now simply take care of themselves. I know that this is not your view, but with the world so full of urgent crises, I occasionally have the feeling that some elements in the bureaucracy are all too ready to relax into a "business as usual" frame of mind.

/3/ See footnote 3, Document 214.

Your letter of July 31 is concentrated mainly on the stabilization effort. The Castello Branco government, for its part, has constantly emphasized the three-fold goals of stabilization, development, and reform. I believe that this rather broader emphasis is correct, for both economic and political reasons. It is true that rampant inflation is the most acute of the economic problems facing the government. Yet it would be an error to concentrate policy-making entirely on anti-inflation measures, or to give stabilization an exclusive priority, even for a limited period of time.

In economic terms this is because Brazil is still a fairly poor country with a very rapidly growing population, which was suffering in the last year from stagnation along with accelerating inflation. It must continue the building of essential economic and social infrastructure and the stimulation of private investment in both industry and agriculture at the same time that it is fighting hard to reverse the inflationary forces. Even in the interests of stabilization itself, moreover, the acceleration of certain types of investments, such as those designed to finish up projects already begun, so as to get some goods and services out of investment already made, or those designed to improve agricultural output and a better flow to market, will contribute directly to supply and demand equilibrium. The problem cannot be tackled simply on the demand side. And in political terms, there must be a reasonably widespread conviction that burdens of austerity are being spread with equity and that beyond the tunnel of austerity there is the light of development and of progressive reform.

The alleged dichotomy between the "once for all" or "gradualist" attack on inflation, mentioned in your luncheon with the IMF people, seems to me an essentially false option. Inflation at the rate of 120 percent per year, which had been reached in Brazil in the first quarter of this year, is the economic counterpart of a heavy locomotive on a down slope or a heavy merry-go-round, with a tremendous amount of momentum built into it in the form of habits and expectations in all sectors of the community-businessmen, bankers and borrowers, workers and consumers. There is no way of stopping such a machine abruptly without producing an explosion or converting the energy of momentum into such intense heat that it will consume the whole institutional structure.

The realistic questions are: (a) Is the goal really stabilization or is it simply continuing inflation at a substantial even if lower rate, and (b) is the time period by which stabilization is to be achieved politically and economically a realistic one? Even the most orthodox monetarist would not expect to achieve stabilization in Brazilís present circumstances in less than six to twelve months. Whether it should be six to twelve, twelve to eighteen, or eighteen to twenty-four months does not seem to me a matter of fundamental doctrinal difference. The essential objective is that the goal be the right one, the direction of policy the right one, and the time be what is realistically feasible. An effort to bring about an excessively abrupt halt to inflation would either mean massive deflation, with wholesale bankruptcies and very heavy unemployment, or would require the kind of price-wage freeze and direct intervention in every phase of the economy which could only be enforced in a rigid dictatorship. Given Brazilian habits and attitudes, I doubt whether even a rigid dictatorship could enforce it.

With respect to the restoration of confidence and the change of expectations, I cannot agree that it makes little difference whether the rate of inflation is fifty percent or a hundred percent. In my mind, the direction of change is as important as the actual rate of inflation at any given moment. The change of expectations involved in shifting from a constant or accelerating rate of inflation to a decelerating rate of inflation is as significant as the change involved in shifting from some inflation to no inflation. I see two critical points of inflection in the inflationary curve: the change from concave upward to concave downward (which is the move from acceleration to deceleration), and the later change from concave downward to actual stability.

That much having been said, the problem before us is to judge whether the Brazilian governmentís policies are really bringing about this first point of inflection, whether the deceleration will be maintained, and whether its pace is sufficiently rapid. The cases cited by the IMF of "all-out campaigns for a limited period of time"-Greece, Formosa, and Bolivia-seem to me only partially relevant. They involved either beginning situations which were much less severe than the present one in Brazil or volumes of outside aid which constituted a far larger proportion of domestic gross product than can conceivably be envisaged in the Brazilian case. The world is not prepared to finance an import surplus in Brazil of one or two billion dollars a year. Such a surplus could not be absorbed here, even if financing were available, because industrialization has already proceeded to the point where such staggering competition from the outside world would be unacceptable.

I do not want to prejudge the new Brazilian economic plan, since we are just beginning our analysis of it. Ralph Korpís/4/ preliminary indications, however, suggest that it is, in some respects at least, encouragingly tough considering the situation with which this government began in April. Castello Branco, Campos, and Bulhűes show no fear of unpopularity as such for a limited period of time. They accept this as inevitable. The danger of those who would play personal politics with Brazilís profound problems lies at the present in other quarters.

/4/ Financial Attachť in Rio de Janeiro.

Castello Brancoís willingness to have his term extended was essentially a result of his conviction that there would be another year of unpopular measures, and that the active campaign period should wait until after the eventual up-turn rather than getting started in the midst of this unpopular phase. I even have doubts as to whether the government program may not be excessively austere on some points, notably the postponement of any further military or civilian civil service wage increases until after December 1965. I should like to leave a quantitative discussion of these matters, however, for analysis in the coming days and weeks when we have had a better chance to study the details of the program.

Although I was not personally involved in the mid-1950ís, as you were, I know the history of the broken promises in connection with past aid package negotiations with Brazil. Since 1961 I have been painfully and intimately involved with them. Looking back at the 1953 and subsequent cases with some historical perspective, however, I am not persuaded that our Export-Import Bank loans were all to the bad. It is a misfortune that Kubitschek was not restrained from various inflationary follies, including the building of Brasilia. On the other hand, the positive things that were done as a result of the project-formulating work of the Joint Brazil-US Economic Commission in the early fifties, and the later help from some World Bank and much Export-Import Bank financing, did make possible the S„o Paulo development which in turn created the middle class which won the April revolution here in Brazil. And Brazil did enjoy a six to seven percent annual growth rate all through the 1950ís, even though there were imbalances in some of this growth. So neither in economic nor in political terms was that money simply thrown down the drain. Quite the contrary. This is not an argument for aid now regardless of performance, but merely a caveat to the over-gloomy view of our actions a decade ago. Obviously we do want effective performance now, and there is good reason to believe that the Castello Branco government will provide it.

In arriving at judgments on the relation between the performance of the new Brazilian government and our own (and IMFís and othersí) support, we must bear in mind that these are not mutually independent phenomena. These questions always involve the will of the government concerned and the political capacity to make that will effective. On the former point, my judgment is that this government has a stronger will for the right policies than any other in Brazilís postwar history. On the latter point, our own support in adequate quantity and at the right time may itself make a decisive contribution. If we wait too long to observe performance we may by that very delay make the performance impossible. The only satisfactory arrangement is to have the performance and the outside support run in parallel, and with both related to realizable targets.

The government is already under heavy political fire from an unhealthy and unholy alliance. That alliance naturally includes the Communist, fellow travelling, and extreme negative nationalist forces who were in the Goulart camp. It includes conservative land owners who hate the thought of even the most minimal land reform. It includes the backward monopolistic nationalist business group which fears competition from foreign private investment and opposes any domestic democratization of capital or internal competition as well. And in recent weeks it has threatened to include the powerful voice of Carlos Lacerda for purely personalistic reasons; I hope that his basic intelligence will soon put these in their proper perspective, but I cannot yet be confident of this.

So far, Castello Branco has maintained a resolute tranquillity in pushing ahead with what he believes is right, but some positive economic and social gains along with the wage austerity and other negative aspects of the stabilization program may be crucial to the survival of the governmentís program-and conceivably in certain circumstances, to the survival of the government itself. It is especially important that sacrifices not all appear to be concentrated on wage-earners, or in any event that progress is in sight on housing and education as an offset to temporary wage level sacrifices.

We should also be careful to define performance requirements in terms which are within reasonable judgments of what is politically manageable by a relatively strong and good willed government, but one which does not possess dictatorial powers. As I see the postwar record, a chronic source of disillusionment with IMF stand-by agreements in Latin America has been the extraction of commitments from hard pressed finance ministers who did not themselves believe they were capable of being carried out when those commitments were signed. It is a sobering experience to review the history of these agreements and the brief periods within which many of their provisions were disregarded. These would not be good precedents for us to follow in present Brazilian circumstances.

It is against the above background that we should confront the question of the timing and nature of further economic support for the Brazilian program. We should of course continue processing projects as rapidly as the mechanics permit. As to the next phase of comprehensive negotiation, there emerged from a long discussion Thursday afternoon/5/ among Bill Rogers, Jack Kubish, Ralph Korp, and myself the conclusion that the desirable timing would be in mid-October, related to the Campos presentation to CIAP now scheduled for about October 10. We believe that it would be most desirable to promote the negotiation of an IMF stand-by agreement at the same time. We have already suggested to Campos the desirability of requesting the presence of at least one IMF Staff man here as soon as possible.

/5/ August 6.

Ideally, IMF assistance should be used to liquidate commercial arrears and reduce the backlog of financial arrears (including payments to small suppliers who cannot be included in the rescheduling negotiations and cutting down the excessive volume of outstanding swaps, the renewal of which is itself an inflationary factor). It would be helpful to obtain corresponding action from the private banks, at least in reopening the $90 million in US bank credit lines and longer-term credits from both US and European banks along the lines of the 1961 arrangements. Our own assistance would include an estimate of the total project support through fiscal Ď65 at least, and a complementary program loan from AID. I would hope that at the same time the World Bank would be prepared to make further encouraging qualitative noises about its expectations in Brazil, and that the IDB might indicate some orders of magnitude of its expected assistance. I naturally also hope that Harold Linder/6/ might by then be prepared to consider some modest new project loans for especially attractive projects within the Export-Import Bankís traditional fields of activity. Together with a forecast on PL 480, this could make a substantial showing of external support for the GOB efforts, with both good economic and good political results.

/6/ President and Chairman, Export-Import Bank.

It would also be very desirable to give at least some preliminary indications in October of what might be done during the calendar year 1966. Exactly what and in what form, I would prefer to defer for recommendation after seeing how much of a basis the Brazilian program affords. Even with respect to 1965, there is the critical question of what portion of our commitments, if any, may be contingent upon Congressional action in the form of supplemental authorization and appropriation for the present fiscal year.

So far as broad magnitudes of development assistance are concerned, assuming that the stabilization effort is going in the right direction and that IMF resources are concentrated on short-term strengthening of the balance-of-payments position, I believe that Brazilian needs for total annual long-term capital inflow during the next few years are in the general range of six hundred to seven hundred million dollars per year. This is consistent with the "Gordon formula" of thirty percent for Brazil applied to the Punta del Este overall figure of more than two billion per year in annual outside resources. More important, it is consistent with a rough macro-economic analysis of the Brazilian situation, and with rough estimates on sectoral requirements and sectoral lending opportunities and absorptive capacities.

As to the sources from which such a total might be made up, the following indicates reasonable orders of magnitude:

AID and Export-Import Bank



PL 480









European and Japanese Bilateral



Net private (gross would be larger)






This total is about three and one half percent of GNP. Since it is additional investment and takes the form of high return imports, it could make the critical difference between an unsatisfactory and a satisfactory growth rate.

The short-term problem of food supply, also mentioned in your letter, is one which has been greatly worrying me. It is a major contributory source to the growing unpopularity of the present government, although it arises now by coincidence and is not a result of the stabilization effort. I have reviewed the problem at length with Dick Newberg/7/ and Jack Kubish. They advise that the main remedies, some of which cannot be effective rapidly, lie in domestic action here, but there are some contributions we can make through technical assistance and through certain elements of the AID program, such as rural credit and fertilizer imports, as well as through PL 480. We have helped Newberg to secure a strong position in the Agriculture Ministry to advise on improvement of relevant domestic policies, and we will have further specific recommendations for our action in the near future.

/7/Director, Office of Agriculture and Rural Development (AID) in Rio de Janeiro.

Let me conclude on a somewhat personal note. I have the impression-I hope erroneously-that some elements in Washington may look on me as a mere advocate for anything the Brazilian government may request, or a proponent of unlimited and unconditional aid to Brazil simply because I am Ambassador here. This is not a stance that I want to occupy or feel justly described as occupying. Many GOB proposals or requests are turned down here without Washington ever hearing of them. Like Castello Branco, the AID Mission and I are interested in successful policies and good results, not in ephemeral popularity.

At the same time, having helped guide United States strategy through the tortuous period of the Goulart regime, and also being vindicated (so far at least) with respect to the political moderation and progressive reformism of the Castello Branco regime (see recent issues of Newsweek compared with their June appraisals), I do feel entitled to some degree of credit and to reasonable promptness of response from Washington when I plead urgency. The bureaucratic machine in recent weeks has occasionally been exasperatingly slow or unresponsive. A good example is the absence of action on the declaration of US-use PL 480 cruzeiros as surplus, on which Ralph Burton will show you my recent letter to Kermit Gordon./8/ Another example is the very chilly first response to the proposal for including a Guanabara housing project in the AFL-CIO housing guarantee program. These two examples have a direct bearing on our influence with youth and labor groups, both of which we have been repeatedly (and rightly) enjoined to cultivate with all instruments at our disposal.

/8/ Director, Bureau of the Budget. The "recent letter" from Lincoln Gordon to Kermit Gordon has not been found.

I have sometimes been reminded of the magnificent little book by F.M. Cornford, entitled Microcosmographia Academica-only fifty pages long and a valiant precursor of Parkinson-which is a masterpiece of exposition of bureaucratic obstructionism. Among other principles, Cornford points out that there is "generally only one reason for doing something, but many reasons for doing nothing". The present is not the time to apply this principle in Brazil!

I need hardly emphasize, after the recent Foreign Ministersí meeting on Cuba/9/ and the prompt Brazilian response on Vietnam,/10/ that in its international posture the new Brazilian government has now rejoined the free world. In addition to the economic issues discussed in this letter, this political consideration is a valid reason for resolving close cases in favor of support for Brazil. I do not have as long an experience in Latin American affairs as you, but my own has been very intensive in the past eight years. I believe that wise policies on our part may help to set this country, and with it much of the rest of the continent, on a long-lasting course of healthy development as a firmly-anchored member of the free world community and an assured ally of the United States. Such an objective warrants a strong effort on our part and a willingness to take some risks.

/9/ See Documents 19-23.

/10/ Reference is evidently to the Brazilian response to President Johnsonís personal message on the Gulf of Tonkin incident; see Foreign Relations, 1964-1968, vol. I, Document 281.

Please forgive the length and rambling character of this letter. I hope it may be helpful in clarifying our frame of mind here in Rio on these fundamental issues.

With warm personal regards,




216. Memorandum From Robert M. Sayre of the National Security Council Staff to the Presidentís Special Assistant for National Security Affairs (Bundy)/1/

Washington, September 30, 1964.

/1/ Source: Johnson Library, National Security File, Country File, Brazil, Vol. VII-a, 8/64-11/68. Confidential.

I am reluctant to burden you with the rather lengthy memorandum and telegrams attached/2/ but there is a "great debate" going on about our policy toward Brazil. I think you need to know about it. The success (or failure) of our Brazilian policy will determine the course of events in Brazil for years to come.

/2/ Attached but not printed are a September 14 memorandum from Rostow to Mann; telegram 700 from Rio de Janeiro, September 24; and telegram 42 from Brasilia, September 28. In a September 7 memorandum to Mann, Rostow proposed a "broad strategy" for attacking inflation in Brazil: "The Situation in Brazil-now reinforced by the election of Frei in Chile-gives us a rare and perhaps transient interval of opportunity. We could not conceive of a government in Brazil more mature, more level-headed about relations with the U.S., and in its attitudes towards private enterprise." (National Archives and Records Administration, RG 59, Central Files 1964-66, POL 15-1 BRAZ)

Essentially, Rostow is suggesting the shock treatment. Gordon is pressing for strong support of what might be called a moderate course, although bringing inflation down from 140% to 10% in less than two years may not be regarded as moderate by those people who get hit.

I believe everyone agrees with Rostow on the seriousness of the issue and the objective. The argument is over means. On that, I side with Gordon. But I think both make a mistake in trying to apply U.S. and Western European economic theories to Brazil. In homogenous commodities, price may respond fairly well to supply and demand theory. Even here, however, poor marketing makes this debatable. But on manufactured products, Latins are real monopolists. Any program that is based on the premise that increasing supply will result in an automatic cut in prices in Latin America, fails to recognize this social attitude. Social and political rigidities in Latin America are strong. I think this is why Tom Mann views with some skepticism that even the "moderate" program pushed by Gordon will be carried out and he, therefore, wants to keep on maximum pressure by putting out our money generally after Brazil delivers the goods./3/

/3/ Bundy wrote his response on the memorandum: "Iím with Gordon. Rostow is very strong but not strong enough to remake Brazil one-handed." On November 2 AID Administrator Bell approved a proposal to provide Brazil with $100 million for project loans and $150 million for a program loan "on the most concessionary terms legally available." (Memorandum from Mann to Bell, October 29; ibid., ARA/LA Files: Lot 66 D 65, Brazil 1964) The United States and Brazil signed the agreement on December 14.



217. Telegram From the Embassy Office in Brasilia to the Department of State/1/

Brasilia, May 4, 1965, 2130Z.

/1/ Source: National Archives and Records Administration, RG 59, Central Files 1964-66, POL 7 US/HARRIMAN. Secret; Immediate. Repeated Immediate to Rio de Janeiro and Priority to Buenos Aires, Santiago, Lima, Quito, Bogota, Caracas, Mexico City, Panama, Guatemala, USCINCSO, and USUN. Passed to the White House, DOD, and CIA.

153. For President and Secretary of State from Harriman.

1. Immediately upon arrival in Brasilia 1330 Tuesday, I was received by President Castello Branco for one and one-half hour working luncheon, together with FonMin Vasco Leitao da Cunha and Ambassador Gordon. Conversation was cordial, frank, and very much to the point.

2. In my opening exposition, I first reviewed reasons for President Johnsonís emergency action last Wednesday,/2/ collapse local authority in Dominican Republic and increasing takeover of rebellion by foreign-trained Communist elements. Since we aware of GOB support for multilateral force resolution and indications of willingness contribute thereto, I concentrated on immediate problems how secure effective OAS action to authorize I-A force and work toward Dominican Republic conditions permitting people peacefully choose own government. I also expressed appreciation GOB public support President Johnsonís actions.

/2/ On Tuesday, April 27, the President sent U.S. Marines to the Dominican Republic to protect American lives in the midst of civil war; he later claimed that action was necessary to prevent the establishment of a Communist dictatorship. In response to criticism that he had acted unilaterally, the President dispatched Ambassador at Large Harriman and a team of high-level officials to Latin America for consultation, i.e., to explain the decision and to seek support from other countries. Before Harriman arrived in Brasilia, Walters met Castello Branco to "prepare a favorable atmosphere." When Harriman landed at the airport, Walters gave him a note: "Donít push too hard. The door is open." (Vernon A. Walters, Silent Missions, pp. 399-401)

3. Castello Branco replied that problem had two aspects. Substantive one was to avoid Communist seizure of another country, as well as saving innocent lives. Formal one was to legitimate actions through effective OAS measures. GOB subject to two constraints in sending troops: (a) must have OAS request and (b) must have congressional approval. It is vitally important secure two-thirds MFM vote on I-A force. To get this, most effective step is to galvanize OAS five-man commission on spot and get them to take three steps soonest: (a) secure effective cease-fire, (b) make clear to LA governments and publics the nature and extent of Communist threat, and (c) to insist on constitution of I-A force under its political guidance. He said commission so far acting too much like Red Cross body and not taking enough political leadership. He instructed FonMin to communicate forthwith to Penna Marinho in this sense.

4. We also discussed Brazilian approaches through Ambassadors here and in Washington to press Peru and Ecuador to favorable vote. They will also work on Chile, Uruguay and Mexico, although not expecting much from latter two.

5. Castello Branco stated failure secure two-thirds vote would create major rupture in OAS and also be signal for political violence in much of hemisphere. He felt sure that US would not withdraw any forces and made clear he would not want us to. On this point, I assured him President Johnson would stand firm until it was clear that Dominican people would have opportunity establish government of own choice. If MFM vote not secured, Castello Branco doubted possibility going through with May 20 Rio conference.

6. Castello Branco stated categorically that after favorable MFM vote he would request congressional authority to send force. We did not discuss size of force or command arrangements, but ARMAís contacts indicate Brazilian military thinking of one infantry battalion, one MP company, and possibly a tank company totalling up to one thousand men. Castello Branco had discussed Monday evening with congressional leaders and was seeing them again at 1500 when we adjourned. Their reaction was that OAS request was key, and that with such request favorable vote would be given although with some difficulties in chamber. Castello Branco also thought MFM might want to decide specifically on which countries to invite to send forces, and they should if possible include one of the "shy maidens."

7. In discussing hostile attitude Chile and Venezuela, I mentioned personal friendship with Bosch as one element and reluctance believe that he had lost effective leadership of rebellion to Communist and allied elements. Castello Branco said he had received two telegrams from Bosch protesting US intervention, but shows no disposition to credit Bosch line.

8. After presidential meeting, we continued briefly with FonMin, who sending instructions to Penna Marinho through OAS. GOB has been without direct communications with Santo Domingo Embassy for three days. We offered ours if they have any trouble, but agree OAS politically preferable channel if working.

9. FonMin also gave us copy their Monday morning instructions to MFM representative, strongly opposing Mexico, supporting US actions and resolutions. Translation follows separately.

10. FonMin also gave preliminary views on how Dominican Republic crisis will require being taken into account at May 20 Rio Conference if held, specifically possibility acting on establishment permanent arrangements for emergency I-A peacekeeping force.

11. Castello Branco agreed to keep in closest touch with us here and in Washington to concert specific moves to achieve our mutual objectives on which there appears to be full agreement./3/

/3/ On May 6 the OAS voted to form an Inter-American Peace Force, a unit that augmented U.S. forces with contingents from several member states led by Brazil. Six days later, the OAS voted to postpone the Second Special Inter-American Conference scheduled to start in Rio de Janeiro on May 20. For documentation on the Dominican crisis, see Foreign Relations, 1964-1968, volume XXXII.



218. National Intelligence Estimate/1/

NIE 93-65 Washington, May 12, 1965.

/1/ Source: Central Intelligence Agency, Job 79-R01012A, O/DDI Registry. Secret; Controlled Dissem. According to a note on the cover sheet this estimate was prepared in the Central Intelligence Agency with the participation of the intelligence organizations of the Departments of State and Defense and the National Security Agency. The United States Intelligence Board concurred in this estimate on May 12. The estimate superseded SNIE 93-64 (Document 213).


The Problem

To assess the character of the Castello Branco regime, and to estimate Brazilís political and economic prospects over the next year or two.


A. The Castello Branco government has provided responsible and effective leadership, reversing the movement toward chaos of the Goulart period and making an impressive start toward reasonable solutions of Brazilís many problems. President Castello Branco commands, largely on his own terms, the strong support of the military establishment and the cooperation of Congress. This has enabled him both to preserve the qualified constitutional system imposed by the military after Goulartís removal and to press ahead with his program of major reforms. (Paras. 1-11)

B. So serious and basic are the economic problems inherited by the Castello Branco government, however, that despite its determined efforts improvements can come only slowly. While attempting to bring Brazilís hyperinflation gradually under control, the administration is also trying to prepare the way for rapid economic growth and meaningful social reform. Its accomplishments so far have fallen short of its aims: it could not prevent a small decline in the economy in 1964, and its goals of relative price stability and vigorous economic expansion by 1966 are probably already beyond reach. Nevertheless, it has achieved much in correcting the worst imbalances and has set the stage for a significant reduction of inflation and a respectable rate of economic growth. (Paras. 17-27)

C. Popular discontent is likely to increase over the next year, primarily because all elements of the population are feeling the pinch of the regimeís austerity program. Because the regimeís integrity and authority are widely respected, however, this discontent is not likely to precipitate a major challenge to political stability. Over the next year, leftist extremists will probably try to carry out sporadic sabotage and terrorism, but their capabilities are limited and Brazilís security forces will almost certainly be able to handle any threat they may pose. The so-called hardline groups in the military are likely to attempt to coerce the President occasionally, as in the past, but such pressures will almost certainly not threaten his overthrow or even force him to reverse his essentially moderate political policies. (Paras. 12-16, 28-34)

D. There is, of course, a potential conflict between the regimeís determination to ensure the continuation of its program and its desire to hold presidential elections as scheduled in November 1966. To ensure continuation of its policies through an electoral victory, the regime will probably seek to form a combination of political machines at the state level that can "deliver" the vote. Castello Branco would be the strongest pro-regime candidate. Although he has so far flatly refused to run, there will be considerable pressure on him to change his mind. In any case, we consider it likely that the election will be held. (Paras. 36-39)

[Omitted here is the Discussion section of the estimate.]


219. Memorandum From William G. Bowdler of the National Security Council Staff to the Presidentís Special Assistant for National Security Affairs (Bundy)/1/

Washington, October 26, 1965.

/1/ Source: Johnson Library, National Security File, Country File, Brazil, Vol. V, 9/64-11/65. Secret.

Storm Clouds in Brazil

In the past few days the political-military crisis in Brazil, resulting from the October 3 gubernatorial elections and the return of President Kubitschek on October 4, has become more serious. Former Ambassador Juracy Magalhaes, who recently returned to Brazil,/2/ reportedly believes that the Castello Branco Government has lost considerable ground since October 3.

/2/ Magalh„es was appointed Minister of Justice and the Interior on October 7.

The "hard line" supporters of the April 1964 Revolution interpreted the recent elections as a defeat for the Revolution. They fear a return to power of pre-revolutionary elements associated with subversion and corruption. Governor Carlos Lacerda is in the forefront of the "hard line" movement.

On October 13 President Castello Branco sent to the Congress special measures to forestall the anti-revolutionary implications of the election results and of Kubitschekís return. These measures were designed in large part to mollify the "hard-liners." The measures have run into trouble in the Congress. The Castello Branco Government, lacking the necessary votes to put them through, has been placing the heaviest possible pressure on the Congress and has indicated that the Congress must either vote with the Government or risk losing its right to participate in the nationís political decisions.

The Congressional vote was originally scheduled for today. As indicated in recent cable traffic,/3/ there has been considerable speculation that the government, anticipating defeat, was prepared to declare a state of siege or to issue a new Institutional Act to counter anticipated coup action by the "hard-liners." Embassy Rio reports that the vote has been postponed until tomorrow./4/ This probably indicates that the government is hopeful of being able to put together enough votes by then to pass the legislation.

/3/ The principal cable is telegram 885 from Rio de Janeiro, October 25. (National Archives and Records Administration, RG 59, Central Files 1964-66, POL 23-5 BRAZ)

/4/ In telegram 891 from Rio de Janeiro, October 26; ibid.

Ambassador Gordon left for Brazil this morning./5/ He will be in Rio by this evening.

/5/ Gordon was in Washington, October 11-26, for consultations on economic assistance to Brazil.

ARA has recommended to Secretary Rusk that we take a position of complete neutrality in word and deed on this one./6/ I think this is the wisest course to follow for the time being.

/6/ The Department instructed the Embassy as follows: "During current crisis in Brazil, Department believes that best posture for US is one of complete neutrality both in word and deed. Given extreme sensitivity of issues involved, U.S. officials should refrain from making any public statements at this time." (Telegram 655 to Rio de Janeiro, October 26; National Archives and Records Administration, RG 59, Central Files 1964-66, POL 23-BRAZ)



220. Telegram From the Embassy in Brazil to the Department of State/1/

Rio de Janeiro, October 27, 1965, 1851Z.

/1/ Source: National Archives and Records Administration, RG 59, Central Files 1964-66, POL 23-5 BRAZ. Confidential; Immediate; Limdis. Repeated to Brasilia and passed to White House, DOD, and CIA.

910. 1. It will be obvious to Department that second Institutional Act/2/ represents severe setback in our own hopes, which I believe have been fully shared by Castello Branco himself, Juracy Magalhaes, and most key advisers of GOB, that Brazil could maintain uninterrupted march on road back to full constitutional normalcy. All the defects in law and principle contained in the first Institutional Act (see my Embtel 2235,/3/ April 10, 1964) have been repeated in the second, amplified by fact that this no longer in first flush of successful revolution following near chaos.

/2/ Castello Branco announced the second Institutional Act on the morning of October 27. The act revived several elements of its predecessor, including the authority to suspend the political rights of citizens and elected officials for 10 years. It also expanded membership on the Supreme Court, dissolved the existing political parties, and increased the governmentís power to intervene in the individual states, declare a state of siege, and recess the Congress. Presidential elections were scheduled for October 1966 with Castello Branco declared ineligible to succeed himself. On October 27 Bundy prepared a memorandum to the President on the crisis leading to the second Institutional Act. A handwritten notation on the memorandum indicates it was not sent. (Johnson Library, National Security File, Country File, Brazil, Vol. V, 9/64-11/65)

/3/ Document 211.

2. My first impression, without opportunity since Tuesday/4/ night return for any conversations outside Embassy staff, is that this measure reflects much greater than necessary concessions to hard line, engendered by unfortunate concomitance of Lacerda intemperance, Kubitschek return, provocative statements of Supreme Court president, and other adventitious factors generating emotional military reactions which have reduced the Presidentís effective authority and weakened congressional support for government. In longer term perspective, it is the price paid by Castello Branco for failure to start months ago the systematic building of a political base and his reluctance to develop a strong domestic program of propaganda and public relations.

/4/ October 26.

3. As in previous case, act falls well short of outright dictatorship. Congress remains, although obviously subject even greater executive pressures, press remains free, and opposition political organizations will be recreated under terms July 1965 party statute. Governors elected October 3 are expected to be empowered. Nevertheless, reassertion at this late date of unqualified revolutionary constituent authority is very arbitrary law-making, with no bow either to Congress, plebiscite, or other device for popular legitimation, and we must expect US and foreign press and other reactions accordingly.

3. [sic] In face this fait accompli we confront several difficult problems. Some OARS may be tempted to react vigorously, even to point of cutting relations, or to refuse attendance November 17 LA conference. Domestically, todayís action reflects a polarization of forces which in long run can only serve interests of extreme left or right and which it is in US interest to seek depolarize in any way we can.

4. I believe we neither can nor should avoid a formal public reaction to Institutional Act no. two. Suggested text in para 6 below, choice of spokesman obviously best determined by Department. Purpose is to express concern, strengthen Presidentís hand in resisting hard line pressures for harsh application new powers, and at same time to indicate continuing broad support of economic policies and program.

5. In event Department spokesman queried re continuation aid to GOB, suggest reply on lines GOB program fits Punta del Este criteria, has just been reviewed and warmly endorsed by CIAP, and withdrawal support would not only undermine further economic and social progress but also reduce prospects early achievement full constitutional normalcy.

6. Begin text: The USG regrets that the Brazilian executive authorities have felt that, in order to safeguard the country from a recurrence of the chaotic political and economic conditions which made necessary the revolution of March 1964, it was necessary to adopt a new series of extra-ordinary measures. It feels confident, however, in view of the record of the Castello Branco government during the past 18 months, that these measures will be applied with moderation and restraint. It [also] hopes that the very substantial progress already made in the efforts toward economic stabilization, renewed development, and the reform and modernization of economic and social institutions will be carried forward to full realization, and that Brazilís precious heritage of constitutional government based on representative democracy will be consolidated as the institutional foundation for the further progress of this greater sister nation. End text.

7. Department may wish repeat this message in whole or part to other LA posts./5/

/5/ Bowdler forwarded the telegram to Bundy as an attachment to an October 27 memorandum in which he argued: "I think that Gordon might be able to make his point with Castello Branco, Juracy Magalhaes, and others, in private talks and avoid running the serious adverse risks." Bundy concurred. (Johnson Library, National Security File, Country File, Brazil, Vol. V, 9/64-11/65) In telegram 670 to Rio de Janeiro, October 28, the Department informed Gordon that the Embassy was free to express concern to "selected Brazilians" in private, but the Department would continue to give "no comment." (National Archives and Records Administration, RG 59, Central Files 1964-66, POL 23-5 BRAZ) On October 29 Gordon reported raising the issue with Magalh„es, who "naturally preferred silence to condemnation, but saw no harm and some real merit" in an official U.S. statement of "regret." Gordon recommended making a high-level statement as soon as possible, which he believed could be done "without undue inconsistency and to overall benefit." (Telegram 949 from Rio de Janeiro; ibid.) The Department, however, refused to change its position. (Telegram 688 to Rio de Janeiro, October 30; ibid.)



221. Telegram From the Embassy in Brazil to the Department of State/1/

Rio de Janeiro, November 3, 1965, 1817Z.

/1/ Source: National Archives and Records Administration, RG 59, Central Files 1964-66, POL 23-5 BRAZ. Confidential; Priority; Limdis.

993. Subject: Talk with President Castello Branco on Second Institutional Act.

1. Taking advantage of All Soulsí holiday, President asked me to meet him Tuesday/2/ morning for almost two-hour private conversation on above and related subjects. President started by inquiring about Mrs. Gordonís recent trip on Sao Francisco River, his own similar voyage forty years ago, problems of internal road and rail transport and coastal navigation in Brazil, comparisons with French transportation system as he saw it in 1936-38. Thence talk moved to disastrous United Front experience in France, perspicacity of de Gaulle in those days compared with now, refusal of old French generals to listen to him, etc. Castello then said that such topics were agreeable to discuss on a holiday morning, but were not reasons for which he had asked my call.

/2/ November 2.

2. Turning to second Institutional Act, President said he had spent some time Monday afternoon reviewing foreign press comments. He mentioned Washington Post sympathetic attitude but also harsh condemnation by New York Times and Herald Tribune, several Paris papers, and comments elsewhere in Latin America. He said he was not surprised at sharpness of some foreign reaction, recognizing that close acquaintance with Brazilian history and contemporary reality was essential to understanding of what had happened.

3. He then made brief exposition of immediate background of the Institutional Act (partly overlapping Embtel 988)/3/ saying that substantial portion of Congress and several Supreme Court justices had mistaken his desire to return to constitutional normality as willingness to return to the prerevolutionary past. Kubitschekís misunderstanding had been even greater. In eyes these groups, April revolution had not signified a serious change of direction for Brazil; it was rather a mere change of persons in power which could easily be reversed. As early as October 15, Castello had become convinced that this misunderstanding must be corrected, either through congressional acceptance of the governmentís proposed new legislation on federal-state relations and restriction of Cassados or through issuance of second Institutional Act. Strenuous endeavors were made to bring home to Congress the significance of the choice, but in considerable measure due to Kubitschek and Lacerda influence, an adequate number of congressmen had not been persuaded. He then requested my own observations.

/3/ Telegram 988 from Rio de Janeiro, November 2, reported on a discussion the previous evening between Castello Branco and Vernon Walters. (National Archives and Records Administration, RG 59, Central Files 1964-66, POL 23-5 BRAZ)

4. Prefacing with request permission to speak personally and with complete candor, I replied at length. I said that he knew our official public position to be that these were internal political matters, but had some reason to suppose that my own reactions were widely shared by Washington authorities. I said the initial impact on me had been both shock and sorrow. I had been shocked at extent of arbitrary powers assumed through the act and sorrowful at fact that it symbolized a major setback in his own effort, which American authorities had followed with great sympathy, to bring about full constitutional normalization without jeopardizing basic purposes of revolution. I appreciated that in the immediate circumstances the alternative might have been even worse, and I understood the adventitious factors of Kubitschekís return and Lacerdaís agitation, but I could not help regret that the situation had gotten to the point where such a choice was necessary. I referred to missed opportunities during the last twelve months to begin building a serious political base for revolution and to develop adequate domestic propaganda and internal public relations designed to give a broad sense of public participation and enlist the support of various influential groups. Where governors or candidates had done so, I remarked, they had generally been successful in recent state elections, as in cases Parana, Para, Maranahao, and Goias, but federal government had failed to take such measures on nation-wide basis.

5. Then quoting National Archives motto that "What is past is prologue," I said I could summarize present view by saying this was a lost battle but not necessarily a lost war. For future, I saw both constructive possibilities and also very serious dangers. I then specified a number of critical issues.

6. The first concerned the use that would be made of the extraordinary powers, which in themselves were obviously juridically barbarous. It seemed to me clear that, despite the widespread acceptance in the country for the Institutional Act, ranging from enthusiasm to relief to passivity, tension between the hard line and the moderate line of the revolution was certainly not ended. (A) It was still visible in question whether governors-elect Negrao de Lima and Israel Pinheiro would be installed in office. (B) It would also be reflected in the extent of new cassations. (C) Then there was sensitive and important issue of restrictions of press freedom. On this point (although I had not yet seen Deptel 696),/4/ I said was well aware of irresponsibility of much of Brazilian press, having myself frequently been victim of distortions or misrepresentations, but President must be aware that foreign opinion regarding Brazil was formed by reporting of newpapermen and nothing could antagonize them more rapidly than restrictions on press freedom. Castello interrupted at this point to indicate his concurrence.

/4/ In telegram 696 to Rio de Janeiro, November 1, the Department suggested that Gordon "make Juracy and others see heavy cost GOB would pay abroad for restricting press freedom in Brazil." (Ibid., PPB 9 BRAZ)

7. Second important issue for future, I continued, was that of his own tenure in office, referring to press reports his possible resignation on January 31. Mildness of some of foreign reaction to Institutional Act, I said, must be attributed to his own demonstrated record of moderation and personal confidence which he had inspired abroad.

8. Third critical issue concerned positive side of revolution, including success of Juracyís effort to build political base and development of effective internal public relations emphasizing positive goals of modernization and constructive reform as well as opposition to corruption and subversion. Here too Castello interrupted to express concurrence, saying this required team effort and he was now reconstructing ministerial team with this as well as other points in mind.

9. Turning then to grounds for worry about future, I said that essential concern was that situation might slide into outright military dictatorship. Persons familiar with Brazilian history knew that historic political role of armed forces had been to intervene to place nation back on tracks of order and progress when it was threatened with being derailed, in effect exercising "moderating power" contained in the imperial constitution until 1889, but not themselves to govern. Now there seemed to be some indication of desire by armed forces to assume governmental responsibility itself. Men drawn from military career had of course played large part in Brazilian politics historically and at present, but I saw an important distinction between "civil military" types such as Juracy, Ney Braga, Jarbas Passarinho,/5/ and Castello Branco himself, and others whose essential view was that all problems could be resolved by force alone, rather than by persuasion and enlisting of public support or a judicious mixture between persuasion and force. If this latter type won control, I could see no reason to expect Brazil to be exempt from universal rule that force breeds counterforce. I felt that radical left in Brazil, as illustrated in nomination of Marshal Lott,/6/ had been deliberately trying to precipitate military dictatorship in hopes of securing power through long-run broadly based united front movement of protest and reaction.

/5/ Braga and Passarinho were the outgoing governors of ParanŠ and ParŠ, respectively.

/6/ Henrique Batista Duffles Teixeira Lott, Minister of War under President Kubitschek, had been nominated for Governor of Guanabara as the candidate of the Brazilian Labor Party (PTB). His candidacy was subsequently voided by the Superior Electoral Tribunal.

10. President listened attentively to this long exposition, interrupting at several points but not dissenting. He remarked that few people outside Brazil had understood depth of corruption and subversion which had been tolerated under Kubitschek and then actively stimulated under Goulart. He cited a statement of Luis Carlos Prestes, Secretary of Brazilian Communist Party, in late 1963 to affect that "We already have the government but do not yet have the power." Thence effort to neutralize armed forces by subversive organization of NCOís. This led to digression in which we compared Goulart regime to recent Indonesian experience under Sukarno, perhaps only two historic examples of deliberate "superversion" of national institutions in mistaken view that Communists could always be controlled.

11. I then asked President his general impression of my reactions to institutional act. He replied that they were reactions of a good and close observer, but he thought too pessimistic. I said that this was good news and asked why. He replied for two reasons: (a) My combination of American and university backgrounds may have made me too perfectionist on some points of juridical principle, and (b) he was convinced that a military dictatorship could be and would be avoided. He then proceeded to describe two types of military dictatorships, the classical Latin American type of simply ruling by force and enjoying fruits of power and more recent Nasserist type, with socialist overtones and drumming up of popular support through intense nationalism. He thought Brazil would resist implantation of either type. I raised question whether certain of Lacerdaís writings and some thinking among younger officers might not be signs of incipient Nasserism in Brazil. President thought this was possible but unlikely, especially if effective work now done to build political base for revolution. He expressed confidence in success of Juracyís efforts in this regard. Although saying it would be work of months and not merely days or weeks. He thought November would be critical month in laying out basic guidelines of this effort and its success should be readily visible by about next March.

12. President then changed subject to University of Brasilia, saying that he was returning there early Wednesday in order to deal at firsthand with that crisis. Juracy had reported to him talk with Vice President Lowry of Ford Foundation which I had arranged last Saturday./7/ I repeated Lowryís concern that present crisis threatened major loss to Brazil of non-Communist professors, especially in sciences where talent scarce and jobs easily obtained elsewhere. This was

in addition to adverse foreign reaction to mishandling an admittedly extremely difficult problem of faculty and student subversion at Brasilia.

/7/ October 30.

13. In conclusion, President raised subject of forthcoming Rio Conference and visit of Secretary Rusk. He expressed keen desire for long private talk with Secretary, apart from protocol visits and any social affairs such as projected Roberto Campos dinner. He thought that perhaps Saturday afternoon or Sunday November 20 or 21 would be best indicated time.

14. Throughout this long talk, I was seeking to appraise Presidentís general frame of mind in face of last weekís critical developments. He was somewhat tired and still reflecting some of extreme tension to which he had been subjected but basically well composed and apparently conscious of heavy responsibilities he still faces and prepared to come to grips with them. I did not request, and he did not offer, specific commitments on any of points outlined above, but I believe they may have some real weight in decisions of coming weeks./8/

/8/ In telegram 1046 from Rio de Janeiro, November 7, Gordon reported having an "extremely encouraging" talk about the situation in Brazil with Juracy Magalh„es on November 6. Since Castello Branco had described Gordon as "deeply worried but excessively pessimistic," Magalh„es offered reassurance: the purpose of the Second Institutional Act was "to save Brazilian democracy, not to destroy it." Magalh„es was confident that world opinion would recognize this once certain events transpired, including: "the installation of the recently elected state governors; the rebuilding of a political party structure; the direct election next year of other governors and congress; and the moderation with which the arbitrary powers of the IA-2 (Institutional Act No. 2) will be used." (National Archives and Records Administration, RG 59, Central Files 1964-66, POL 15-1 BRAZ)



222. Telegram From the Department of State to the Embassy in Brazil/1/

Washington, November 7, 1965, 2:09 p.m.

/1/ Source: National Archives and Records Administration, RG 59, Central Files 1964-66, POL 23-5 BRAZ. Confidential; Exdis. Drafted by Kubish and Sayre on November 6, cleared by Vaughn and U. Alexis Johnson, and approved by Rusk. In a November 6 memorandum to Rusk, Vaughn recommended approval of the telegram: "I am convinced that other crises may develop in which the Brazilian military will be tempted to become even more dominant and repressive, and I am concerned that perhaps some of our own U.S. officials, particularly in the military services, may not fully appreciate the serious damage to our interests which could result from such a development. This cable should make our basic policy view quite clear and strengthen Ambassador Gordonís hand, and ours in ARA, in executing that policy." (Ibid., POL 23-9 BRAZ)

744. For Ambassador from Secretary. Subject: Recent Developments in Brazil.

I have read your telegram 993/2/ reporting your conversation with Castello Branco on Brazilís Second Institutional Act.

/2/ Document 221.

You have struck precisely correct note. Although we have been maintaining silence publicly on Second Institutional Act, Castello Branco and other Brazilian leaders should be made acutely aware our serious concern and deep disappointment over recent developments in Brazil. We had strongest hope that Brazil was moving toward effective exercise political democracy and was achieving substantial success in its economic reform and development programs. We sincerely regret backwards steps on the political side and earnestly hope that the arbitrary powers assumed in the Institutional Act will be employed with the greatest moderation and restraint.

Because of Brazilís great size and influence in hemisphere, events in Brazil have far-reaching consequences throughout the hemisphere. Important developments in Brazil inevitably affect the United States and the free world. The emergence of a repressive authoritarian regime would represent a serious reverse in an otherwise rather encouraging series of developments throughout the hemisphere under the Alliance for Progress. Unless the danger of a sharp movement to the extreme right is averted, the basis will be laid for vigorous reaction from the left and serious political instability in Brazil. We must do whatever we can to avoid such developments. The Alliance for Progress and many of our hemispheric policies and programs can only be effective with the cooperation of a Brazilian government that is following progressive policies and avoiding the extremes of both the right and the left./3/

/3/ The following sentence was removed from the beginning of the last paragraph: "I have discussed Brazilian developments with the President who is apprehensive over this recent turn of events in Brazil."

I am sure you have already been talking to your Country Team about the situation in Brazil and what influence the United States might be able to bring to bear. I also understand that you will soon be submitting recommendations on the specific short-term policies and lines of action we should follow with respect to the Brazilian government. In the meantime, I wanted to emphasize to you my concern about developments in Brazil and to urge that you and your Country Team consider very thoroughly how we can best bring our influence to bear, including economic and military assistance, to persuade Brazilian leaders-especially Brazilian military leaders-to pull back from their apparent commitment to increased authoritarianism./4/

/4/ In his reply Gordon urged that the Department reconsider its decision against issuing a public statement: "By holding to line that Second Institutional Act is purely domestic political affair, we tend to give impression inside Brazil, in rest of LA, and in US itself that we condone or even applaud what has been done." (Telegram 1083 from Rio de Janeiro, November 9; National Archives and Records Administration, RG 59, Central Files 1964-66, POL 23-5 BRAZ) The Department declined Gordonís request, maintaining that the press saw nothing inconsistent or paradoxical in a public stance of "no comment." The Department was concerned, however, about press reports that the Embassy disagreed with official policy: "This is extremely unfortunate and we assume you are dealing with this matter in the manner you think best." (Telegram 802 to Rio de Janeiro, November 12; ibid.)



223. Telegram From the Embassy in Brazil to the Department of State/1/

Rio de Janeiro, November 14, 1965, 2129Z.

/1/ Source: National Archives and Records Administration, RG 59, Central Files 1964-66, POL 23-5 BRAZ. Secret; Priority; Limdis. Repeated to Brasilia.

1124. Ref. Embtel 967./2/

/2/ In telegram 967 from Rio de Janeiro, October 31, the Embassy described conditions leading to the Second Institutional Act, analyzed public reaction to its promulgation, and assessed political consequences for the "foreseeable future." According to this assessment, Costa e Silva had emerged from the crisis in a "greatly strengthened position," while Lacerdaís ability to influence events had been "diminished considerably." (Ibid.)

1. Depressing and dangerous situation described in recent messages has brightened notably over past several days as result well-conceived and executed GOB campaign to expound positive aspects and purposes of revolution. This campaign has also given important psychological boost to Presidentís prestige and image as being in command of situation, sorely lacking in weeks following October 3. Nevertheless it is not yet possible to have full confidence in continuation this prospect. In longer view, developments during past three months have obviously represented substantial retrogression in terms political objectives Castello Branco government (CBG). Institutional Act No. 2 (IA-2), however its powers may be used, stands not only as symbol of authoritarianism to outside world but also could tempt extremist political and military leaders to seize control of this ready-made dictatorial mechanism. Problem for United States policy is to assess to what extent and in what ways USG can use its resources and influence so that powers of government remain in moderate hands while danger of move toward extremism is reduced and constitutional legitimacy and the rule of law restored, in order to contribute to building of permanent political bases for stability plus progress.

2. At outset we should have no illusions regarding our ability greatly to influence course of political developments in Brazil, given its size and complexity and ease with which attempts to intervene in domestic politics could backfire.

3. Whenever opportunities are afforded (as in my recent conversations with President Castello Branco and Justice Minister Juracy Magalhaes)/3/ I intend to say frankly to political and military leaders of country that USG not only regrets arbitrary assumption of discretionary powers by CBG, but sees serious danger of slippage into undisguised military dictatorship unless way is found to reassert unequivocally hierarchical authority of President, military ministers, and major troop commanders over radical elements among middle-rank officers. At same time, Defense Attachť, who enjoys respect and brotherly affection of almost every top figure in Brazilian army has been authorized, under my close direction, to convey similar thoughts to selected influential senior and middle-level military commanders whose discretion can be trusted. Other appropriate senior Country Team officers, both civilian and military, will privately and discretely make known USG position.

/3/ See Document 221 and footnote 8 thereto.

4. There is risk that one or another of our interlocutors may resent this kind of talk and may therefore attempt to build our action into public issue of interference in internal affairs. However, this risk is acceptable since the message as such is unobjectionable. Risk of not making clear our views is that it could lead to miscalculated assumption there is no limit to USG toleration of arbitrary abuse of power by GOB. (Brastel 62/4/ shows this assumption already present to a degree.) Defense Attachť reports many officers now beginning to show interest in USG views on Brazilian developments about where IA-2 could lead them. Our encouragement needed to stimulate especially military to think hard before taking further rash initiatives in political area.

/4/ Dated November 5. (National Archives and Records Administration, RG 59, Central Files 1964-66, POL 15 BRAZ)

5. Reftel noted first real test of new situation is installation of Guanabara Governor-elect Negrao de Lima December 5. Although tension continues on this issue, with Negraoís testimony to IPM/5/ on Communist Party Nov 15 or 16 being a delicate passage, odds now seem much better than ever after unequivocal stand taken by President, that this crisis point will be passed relatively calmly.

/5/ Military Police Investigation.

6. We may be able exercise some salutary influence in this situation. We are making clear that USG watching it closely as one test of GOB intentions, although this is clearly internal affair, we are reminding selected contacts that US Congress, which controls purse strings on foreign assistance, is responsive to negative US public opinion attitudes on issues such as this.

7. Additionally Embassy and USG should treat Negrao as any of other governors-elect, although without making contrived public issue of it. For instance, I intend to have program officer of AID mission seek appointment with Negrao for purpose of briefing him on Guanabara projects completed, under way and under discussion, and eliciting any ideas he may have on future areas of cooperative effort. Moreover, if Negrao should again express interest in going to US, as he did immediately following elections, we should respond by offering facilitative assistance, plus financial assistance if indicated.

8. Similar treatment should be provided to Governor-elect Pinheiro in Minas Gerais, although problem is less serious and immediate since President has already received Pinheiro and inauguration not due until January 31, 1966.

9. On longer-range problem of building permanent political base, CBG now seems to be headed in right direction of organizing new party to support revolution, getting political as well as technical talent in cabinet, and mounting sustained public relations campaign. Although abolition existing parties should theoretically facilitate task of building revolutionary party, other factors complicate task. Abrupt extinction of parties has left residue of confusion and ill feeling, parochial and personal differences and ambitions at state and municipal levels, which was one of reasons for proliferation of parties, will require time and patient effort to overcome. It is, however, noteworthy and encouraging sign of deep-seated Brazilian democratic orientation that while Mexican example of single-party institutionalized revolution is well known to Brazilians, no serious movement to follow this example has surfaced.

10. During past ten days, our early concern that Castello Branco might give up fight and precipitate succession prematurely has been resolved by his unequivocal declaration of intent to serve until March 15, 1967, and to use this time actively to pursue economic and political goals of revolution. One of these goals is ending of arbitrary powers of IA-2 at time of transmission of presidency, so that successor regime will be functioning on basis of a reformed and stabilized democratic political system. The Secretary should have the opportunity to stress importance of this point when he meets with Castello Branco during Rio Conference./6/ We should take advantage of all high-level visitors to Brazil in coming weeks and months to express similar viewpoint, especially to WarMin Costa e Silva and to other political and military leaders.

/6/ At the meeting in Rio de Janeiro on November 20, Rusk assured Castello Branco that the concern previously expressed by Gordon was "by no means limited to the Ambassador. A cold reading of the terms of the Institutional Act could not but leave a shocking effect, especially to Americans trained to regard the constitution and its limitations on all branches of the government as the fundamental basis of organized national life. The reader not familiar with Brazil and with the Presidentís character and attitudes could easily be misled, since he had no way of knowing what the Institutional Act was not intended to be in practice." (Telegram Secto 51 from Rio de Janeiro, November 23; National Archives and Records Administration, RG 59, Central Files 1964-66, POL BRAZ-US)

11. Where local and personal bitterness appear to be holding up progress toward establishment of an effective party structure, and opportunities are afforded in conversations with the political figures involved, we intend discreetly make clear the importance USG attaches to this element of CBG program.

12. To give technical support to development of party and popular support base, we should through covert channels renew our offer to provide assistance to CBG in scientific opinion sampling. In this same area, continued encouragement should also be given to the governmentís program, launched since his return by Juracy, to explain governmentís programs and objectives to people. Radio-TV appearances by cabinet officials, state governors, and congressional spokesmen for administration have already begun to have positive effect.

13. Our post-institutional act view of AID strategy is fully covered in redraft of Brazil annex paper,/7/ prepared at White House request and sent Bundy via courier (copy pouched Kubish), supplemented by Embtel 1053./8/ Subsequent CBG actions, including strong policy declarations in Presidentís Niteroi and Rio speeches of Nov 11 and 13, confirm our confidence in continuity CBG efforts for stabilization, development, and reform and make even more conclusive the choice of strategy and maintenance of aid negotiating timetable recommended in those documents.

/7/ A copy of the revised draft, November 4, is in the Johnson Library, National Security File, Country File, Brazil, Vol. V, 9/64-11/65.

/8/ Telegram 1053 from Rio de Janeiro, November 8, forwarded several revisions to the text of the Brazil annex paper. (National Archives and Records Administration, RG 59, Central Files 1964-66, AID(US) BRAZ)

14. We are also giving thought to alternative lines of action if situation takes sharp turn for worse in short or medium term future. These will be subject separate message./9/

/9/ Not found.



224. Memorandum From Secretary of State Rusk to President Johnson in Texas/1/

Washington, December 3, 1965.

/1/ Source: National Archives and Records Administration, RG 59, Central Files 1964-66, AID(US) 9 BRAZ. Confidential. No drafting information appears on the memorandum. According to the Presidentís Daily Diary, Johnson was at his Ranch in Texas, November 19-December 12 and December 21-January 2, 1966. (Johnson Library)

The Problem:

Your authorization is requested to proceed in early December with negotiations with the Government of Brazil for a program loan to cover Calendar Year 1966, and to conclude the loan if negotiations produce a Brazilian commitment to a satisfactory program. Concurrent negotiations are expected to be in process between the IMF and the Government of Brazil for an extension of Brazilís IMF standby agreement, and the United States and IMF expectations of Brazilian commitments have been coordinated.


Since coming to power in April 1964, the Castello Branco Administration has conducted an admirably tough economic program of stabilization, development, and reform. These self-help measures have been on the whole very effective in reducing the rate of inflation and commencing a broad-based and very promising process of economic development and social progress. We consider that Brazil has made excellent use of the support we have been providing and is today conducting the strongest program of economic self-help in the hemisphere.

AID provided a $50 million contingency loan to the new government in June 1964, and on the basis of formal self-help commitments made by Brazil to CIAP, a $150 million program loan was authorized last December. Other international assistance for 1965 included a $53.6 million U.S. Treasury exchange agreement and a $125 million IMF standby agreement, as well as project assistance from AID, the Inter-American Bank, and the World Bank, and a modest amount under PL-480.

The Brazilian performance this year has on most points exceeded the commitments for self-help undertaken a year ago. This record was warmly endorsed in a formal CIAP review last month.

Additional funds are required for 1966 to support an expanded level of import necessary to achieve Brazilís investment and growth objectives. Ambassador Gordon and his country team have strongly recommended an AID program loan of $150 million, plus a number of project loans (estimated to total around $75-$100 million) and a new PL-480 agreement (preliminary estimate: $35 million). The program loan decision needs to be taken now, in order to relate the timing and the content of our negotiations properly to those of IMF.

The country teamís estimates are that Brazilís needs for net capital imports to support an adequate rate of economic and social development, supplementing intensive self-help measures to mobilize internal resources, are on the order of $600-$1000 million a year for the next several years. The country team considers that, allowing for imports from private investment, international institutions, PL-480, and AID project loans, the "resource gap" justifies a program loan of at least $200 million in 1966. The structure of Brazilís trade and balance-of-payments, however, makes it unlikely that more than $150 million of resources in the form of additional developmental imports from the U.S. can be effectively transferred and used. Even this figure implies a substantial increase in Brazilian imports from 1965 levels.

Administrator Bell and his staff in Washington, recognizing the uncertainty of any balance-of-payments projections and the greater familiarity of the country team with conditions in Brazil, nevertheless consider that the very substantial improvement in Brazilís balance-of-payments position over the last year, the doubts about the amount of increase in Brazilian imports in 1966, and the availability for emergency needs of additional sources of funding from the IMF, combine to suggest that $100 million might turn out to be enough to support the Brazilian self-help program.

The question has been raised whether a portion of the development import needs should be financed by drawings on the IMF over and above the amounts needed to repay IMF loans coming due in 1966. Such IMF resources, however, should be reserved for unforeseen short-term balance-of-payments difficulties arising from commodity price fluctuations or other factors beyond the countryís control. (Note that a one cent per pound drop in coffee prices loses Brazil $25 million over a year.) What Brazil currently needs is long-term development capital rather than short or medium-term balance-of-payments support. Like many other less developed countries, Brazilís foreign indebtedness structure is already overweighted with short and medium-term debt, and we have been pressing them to avoid further such accumulations.

Both Ambassador Gordon and Administrator Bell agree that if Brazil continues its present strongly favorable economic progress it should be possible to reduce the level of the program loan for 1967 and to reduce AID assistance to Brazil progressively thereafter.

Ambassador Gordon and his country team believe that their recommendation for a $150 million program loan on economic grounds is strongly reinforced by political considerations. Their views are summarized in the following paragraphs.

From a situation of galloping inflation, growing stagnation, and imminent leftist, anti-American dictatorship less than two years ago, the Castello Branco government has brought Brazil halfway along the road to price stability. It has restarted development on a sound long-term basis. It has reversed the nationalist and statist trends to favor private enterprise and foreign investment. It has undertaken major modernizing reforms. It has adopted a strongly pro-Western foreign policy. It is fighting a life-and-death struggle against both right and left-wing extremists to preserve these policy lines, ensure a like-minded successor regime, and restore constitutional normality. It has enjoyed our vigorous political and economic support.

In October 1966, elections are scheduled for Congress, eleven State Governors and all State legislatures; as well as an indirect election of the successor President by the Congress. Castello Branco has only recently and belatedly begun the task of building a strong political base and popularizing the positive goals of the revolution. The local currency counterpart of our program loan, to be applied largely to private enterprise expansion, education, health, and agricultural development can make a major contribution to the success of this effort.

To reduce our program loan for 1966 from the $150 million level being provided in 1965 would appear to be a withdrawal of U.S. support at the most decisive moment in the Castello Branco effort.

Nor can we neglect the effect of reduced support for Brazil on our whole stance toward Latin America and the Alliance for Progress. The proposed loan, while large in dollars, is relatively small in relation to Brazilís size. It amounts to $1.77 per capita, compared with proposed program loans for 1966 of almost $10 per capita for Chile and $4 for Colombia. A reduction now would look like a penalty for effective self-help. It would be taken as a deliberate blow to the largest nation in Latin America, in face of the Castello Branco regimeís wholehearted cooperation with us in hemispheric and world affairs, including the provision of a sizable military contingent in the Dominican Republic. Since Brazil by itself is 35 percent of Latin America, and the Alliance stands or falls by success or failure there more than anywhere else, reduced support for Brazil now would look like a retreat from our renewed commitments to sustain the Alliance, including your warmly welcomed pledge reported by me to the Inter-American Conference in Rio.

The risks to U.S. political and security interests if our policy should fail in Brazil are enormous and the costs of failure would be very large in relation to the sums under discussion. Such failure might take the form of an anti-American nationalist military dictatorship or of a Communist-controlled regime. Both are plausible hypotheses. Continued full support for Castello Branco and his policies is the best insurance available against these contingencies.

Use of U.S. Funds. The program loan will be used to finance basic imports from the United States. A major share of the counterpart funds will be used for loans to finance private sector development in agriculture, industry, and housing. Other amounts will be used to finance special programs in education, labor, and public health.

Effect on U.S. Balance of Payments will be minimal in view of the restriction on the use of the loan funds for imports from the United States. Disbursements will not occur until well into 1966. Measures introduced by the Central Bank will increase the attractiveness of United States exports and thereby result in additional follow-on exports from the United States. The expectations for 1966 are that there will be a net capital inflow into Brazil from Western Europe, Japan, and the international financial institutions.


Weighing these factors together, it seems to me we have two alternative courses of action:

1. To authorize a program loan of $150 million, stating during the negotiations that we are not sure that the requirements of Brazilís recovery will in fact call for the full amount during 1966, that we expect to review requirements quarterly during the year, and if less than the full amount is needed, the remainder will be held back for disbursement in the following year and taken into account in negotiations for AID loans at that time.

2. To authorize a $100 million program loan, stating during the negotiations that requirements may in fact call for larger amounts if the actual pace of Brazilian recovery and growth so indicates, and we would be prepared to add to the loan up to a maximum of $150 million if it is needed during the year.

I consider that the minimal economic needs of the situation might be met by the second alternative, especially if there is some lag in the implementation of the Brazilian investment program. On the other hand, political considerations so strongly favor the first alternative that I believe it to be the clearly indicated course of action.

Accordingly, I recommend that you authorize us to proceed with negotiations for a $150 million program loan under the general framework outlined above, and in accordance with the detailed statement of proposed terms and conditions which is attached to this memorandum. Administrator Bell joins me in this recommendation./2/

/2/ A note on the memorandum indicates that the President approved the loan on December 11. In telegram 1014 to Rio de Janeiro, December 11, Harriman informed Gordon that, although the loan was not tied to Vietnam, the Department urgently sought his advice on how to approach Castello Branco for a suitable military contribution. (Ibid., National Security File, Country File, Brazil, Vol. VI, 12/65-3/67) In response Gordon suggested an informal approach without reference to the program loan. Any linkage between Vietnam and the program loan, he explained, "would be disastrous, and even private hint would arouse resentment from Castello Branco, who although good friend is also very dignified and proud Brazilian." (Telegram 1432 from Rio de Janeiro, December 12; ibid.) The Department agreed to treat Vietnam separately, but instructed Gordon to approach Castello Branco in an official capacity, i.e. on behalf of President Johnson. (Telegram 1018 to Rio de Janeiro, December 15; ibid.) The United States and Brazil signed the program loan on February 10, 1966.

Dean Rusk


225. Memorandum From the Presidentís Special Assistant for National Security Affairs (Bundy) to President Johnson in Texas/1/

Washington, December 31, 1965, noon.

/1/ Source: Johnson Library, National Security File, Country File, Vietnam, Vol. XLIII, Memos (B), 12/13/65-12/31/65. Secret. The memorandum indicates that the President saw it. Bundy also attached a December 23 memorandum from Harriman to the President; see Foreign Relations, 1964-1968, vol. III, Document 240. Both were sent to the Ranch on December 31.

Averell Harriman and I owe you an interim report on the effort to get troops from Brazil to Vietnam. With your permission we separated the $150 million program loan from the issue of troops, but in the same meeting in which Gordon told Castello Branco about the loan, he made a very strong pitch on the troops and made it clear how much this matters to you./2/ Castello promised to give the matter his prayerful consideration. He pointed out that under the Brazilian Constitution Congressional approval is required before troops can be sent abroad and the Brazilian Congress does not reconvene before March. Gordon and our excellent military attachť General Walters (who are very close to Castello Branco) are following up on this and although it is clear that Castello faces a bigger and harder political problem than Harriman and I thought possible, Gordon and Walters think that in time a Branco contribution in some form can be worked out.

/2/ An account of the meeting is in telegram 1456 from Rio de Janeiro, December 17. (Johnson Library, National Security File, Country File, Brazil, Vol. VI, 12/65-3/67)

Just before Christmas Harriman submitted to me a memorandum for you on this subject, but he asked me to hold it to see whether we would get something more from the Brazilians in the next few days. Nothing new and startling has come in and the above report is the essence as it now stands./3/

/3/ Although providing coffee and medical supplies, Brazil never sent troops or military supplies to Vietnam. (Department of the Army, Allied Participation in the Vietnam, p. 169)



226. National Intelligence Estimate/1/

NIE 93-66 Washington, August 18, 1966.

/1/ Source: Central Intelligence Agency, Job 79R-01012A, O/DDI Registry. Secret; Controlled Dissem. According to a note on the cover sheet this estimate was prepared in the Central Intelligence Agency with the participation of the intelligence organizations of the Departments of State and Defense and the National Security Agency. The United States Intelligence Board concurred in this estimate on August 18. The estimate superseded SNIE 93-65 (Document 218).


The Problem

To estimate the situation in Brazil and the prospects for the next year or two.


A. Castello Branco has managed for the most part to preserve constitutional forms without endangering the objectives of the revolution and has retained solid military backing. His economic corrective measures are showing favorable results, but the results have come slowly and the measures have provoked widespread dissatisfaction.

B. The administration is determined to see that acceptable candidates are chosen in the series of elections scheduled for this fall. It is taking steps to ensure that no opponents will become governors in the indirect elections on 3 September in 12 states. But the touchiest election will be the direct popular one to be held on 15 November for federal congressmen and state legislators; Castello Branco may deem it necessary to interfere directly and obviously so as to retain a working majority in Congress.

C. Costa e Silva, who has been War Minister, is almost certain to be elected president by the present Congress on 3 October. He will probably not exert much influence in the "lame duck" period before his four-year term begins on 15 March. Castello Brancoís policies will not change much in those months, though there will be some loss of momentum.

D. General dissatisfactions will persist, but the new government will probably succeed in keeping the opposition off balance and fragmented. At least to begin with, Costa e Silvaís control over the military establishment will be firm, and we do not believe that a military coup against him is likely during the period of this estimate.

E. Costa e Silvaís administration is likely to be a marked departure from Castello Brancoís, not in its broad goals, but in style of governing, in choice of key advisors, and in certain lines of policy. In some ways he will probably perform better; for example, he will give higher priority to public relations and may reduce popular opposition to some extent. He is likely to try for better relations with students and labor organizations, but will take whatever measures seem necessary to prevent a resurgence of the extreme left.

F. In other matters, however, Costa e Silva will probably not do as well. In his efforts to "humanize" the economic program, he may weaken present checks on inflation. Because he is less judicious and more a man of action than Castello Branco, we see more chance that he might resort to harsh, authoritarian methods. Finally, we think that he will put more emphasis on Brazilian nationalism and that in time this could cause friction in US-Brazilian relations.

[Omitted here is the Discussion section of the estimate.]


227. Memorandum From the Presidentís Special Assistant (Rostow) to President Johnson/1/

Washington, December 6, 1966.

/1/ Source: Johnson Library, National Security File, Country File, Brazil, Vol. VI, 12/65-3/67. Confidential.

Program Loan for Brazil

AID requests (Tab A),/2/ under the new commitments procedure, your authorization to negotiate the following assistance package for Brazil for 1967:

/2/ Tab A was a memorandum from Gaud to the President, November 22; attached but not printed.

-a $100 million program loan

-up to $90 million for project loans (fertilizer plant, power generating facilities, highway maintenance equipment, seed capital for a national savings and loan system, and agricultural diversification) without submitting each project for your approval.

AID also asks your approval to start discussions with the Brazilians on "sector" loans in agriculture, education and health for 1968 without making any specific dollar commitments. This lead time is necessary in order to influence the Brazilian 1968 budget preparations which begin in early 1967.

The $190 million loan level is $40 million less than you authorized for 1966.

BOB recommends approval of the AID request (Tab B)./3/ Treasury objects to only one aspect. Joe Fowler is against the use of dollars for a $20 million savings and loan (home financing) project included in the $90 million project loan level. He argues that cruzeiro counterpart funds generated by the program loan should be used instead (Tab C)./4/

/3/ Tab B was a memorandum from Schultze to the President, November 29; attached but not printed.

/4/ Tab C was a note from Fowler; attached but not printed.

Joe Fowler consistently opposes the use of dollar loans for local cost financing because of their alleged adverse impact on our balance of payments position. To get at the facts, an inter-agency group under the direction of Charlie Schultze recently made a thorough study of this issue. State, CEA, AID and BOB-with only Treasury objecting-found that there was no inherent reason why project dollar loans for local costs should have any different effect on the balance of payments than other forms of aid.

Other reasons why I do not go along with Joe Fowlerís objection are:

-In Latin America in particular we find that our dollar assistance does not leak to any significant degree to other areas.

-The project loan in question is designed to stimulate institutional development in one area where Brazil is most deficient-home financing.

-The Brazilians agreed to our terms for the loan on the basis of dollar support and will probably scrap the project unless we carry through with it.

-Cruzeiro counterpart funds generated by the program loan are already largely earmarked for equally pressing local cost projects.

I am satisfied that the $190 million package has been carefully tailored to Brazilís needs and ability to use the money effectively. The safeguards on self-help, performance review and tied procurement will be adequately covered. Brazilís economic and political record in 1966 has not been all that we desired. But its over-all performance has been satisfactory and its collaboration with us on hemisphere and world issues continues to be close. The Costa e Silva administration is not expected to change this.

I recommend that you approve the package requested by AID.


1. Approve $100 million program loan:


/5/ The President checked this option.


Speak to me

2. Approve $90 million project loan level (i.e. without subsequent individual project review):


Yes, but with $20 million savings and loan project covered by counterpart funds/6/

/6/ The President checked this option.

Prefer project-by-project review

Speak to me

3. Approve AIDís request to start discussions on "sector" loans without specific dollar commitments:


/7/ The President checked this option and wrote: "Very confidential. Conditionally, provided I donít get boxed in as I have been by AID, Ag[riculture] and State on India." The United States and Brazil signed the program loan agreement on March 11, 1967.


Speak to me


228. Memorandum of Conversation/1/

Washington, January 26, 1967, 12:31-12:55 p.m.

/1/ Source: National Archives and Records Administration, RG 59, Central Files 1967-69, POL 7 BRAZ. Secret. Drafted by J.A. DeSeabra (OPR/LS) and S.C. Lyon (ARA/BR). Approved in the White House on February 2. The time of the meeting is taken from the Presidentís Daily Diary. (Johnson Library) The conversation began in the Oval Office.

Brazilian-U.S. Relations

Lyndon B. Johnson, President of the United States
Lincoln Gordon, Assistant Secretary of State for Inter-American Affairs
John W. Tuthill, United States Ambassador to Brazil
Josť A. De Seabra, Interpreter
Arthur da Costa e Silva, President-elect of Brazil
Vasco Leit„o da Cunha, Brazilian Ambassador to the United States
Edmundo Macedo Soares e Silva, President, National Confederation of Industries of Brazil

/2/ A note on the memorandum indicates that Gordon, Tuthill, Leit„o da Cunha, and Macedo Soares were present for part of the conversation only.

President-elect Costa e Silva expressed his appreciation for the opportunity to meet a man of the stature and leadership qualities of President Johnson, and stated emphatically that his country was, as it has always been, a staunch friend of the United States.

President Johnson said that he was well aware of the traditional friendship between the two countries, and was glad that the President-elect had been able to come to the United States before assuming his many important responsibilities. It is the intention of the United States to continue to cooperate with Brazil in all possible efforts towards achieving ever greater progress in that country.

Costa e Silva said that he hoped that the United States will continue to be favorably disposed toward Brazil while he endeavors to re-establish a totally democratic and legitimate regime in his country.

At this point, the two Presidents moved to the White House lawn and continued their conversation.

President Johnson expressed in warm and forceful terms his appreciation for Brazilís prompt and determined action during the Dominican crisis. Costa e Silva mentioned the part that he played at that time as Minister of War. He further stressed the need for continued vigilance and action against the danger of communism.

President Johnson said that the two countries should always stand together so as to resist effectively any totalitarianism, be it from the left or the right.

Then the conversation continued for a short time in the Cabinet Room in the presence of Assistant Secretary Gordon, Ambassador Leit„o da Cunha, Ambassador Tuthill, and Governor Macedo Soares.

The Presidents exchanged complimentary remarks about their respective Ambassadors. President Johnson mentioned that he had granted very prompt recognition to the Brazilian revolutionary regime on the strong recommendation of Mr. Gordon. He added that even though such prompt action had created some difficulties for him at home, the subsequent turn of events had borne out the sound judgment of Mr. Gordon, who was to be considered a hero and not a "scapegoat."


229. Memorandum From the Presidentís Special Assistant (Rostow) to President Johnson/1/

Washington, June 14, 1967.

/1/ Source: Johnson Library, National Security File, Country File, Brazil, Vol. VII, 3/67-9/67. Confidential.

Brazilian Performance under the Program Loan

Costa e Silva has been in office for three months and it is apparent that his administration varies in style and substance from Castello Brancoís. Performance in two areas are of particular concern to us: foreign policy and the domestic stabilization program.

Castello Branco carried out tough political and economic measures designed to consolidate the "revolution" with little regard to their impact on his public image. He kept a tight rein over policy making by his Cabinet. Cooperation with us on foreign policy matters could hardly have been closer.

Costa e Silva is much concerned with being "popular," restoring the "democratic" image of Brazil and "humanizing" the economic recovery program. At the same time, he personally does not want to depart too far from the objectives of the 1964 revolution. Costa e Silva appears to be leaving broad authority with his Cabinet Ministers without close coordination at the top. They have yet to hammer out an overall, consistent policy.

As a result, there is a puzzling ambivalence in the orientation of the Costa e Silva administration. For example, in foreign affairs Costa e Silva expresses close identification with our policies-and I believe he is sincere in this. But his Foreign Minister publicly advocates a "non-involvement" policy on Vietnam, insists on a nuclear-test-for-peaceful-uses exception in the Non-Proliferation Treaty, strikes a reluctant stance on Venezuelaís complaint against Cuba and takes an equivocal position on our efforts to unscramble the Israel-Arab problem.

On the domestic front, Costa e Silva professed support for stabilization program and accepted the self-help terms of the $100 million program loan negotiated with Castello Branco. On that basis, we authorized the first $25 million tranche with the clear understanding that release of subsequent tranches would depend on performance.

Recent performance has been so poor that fiscal and monetary results deviate widely from CIAP targets which were conditions of the program loan agreement. These targets are no longer attainable. We are therefore being forced to revise our strategy and tactics regarding our economic assistance.

The failure of the Brazilians to meet the targets is illustrated by these key examples:

-At the end of May the budget deficit was 1.12 billion new cruzeiros, while the commitment for the full year was projected at 554 million new cruzeiros.

-The coffee price decision announced four days ago provides for a price increase to growers averaging 28% for the year, instead of the 10-15%, which we understood would be the target. (The increase will act as a strong disincentive to agricultural diversification.)

-The level of domestic credit appears to have expanded during the first five months of 1967 by 600 million new cruzeiros-the amount projected for the entire year.

It is not clear to what extent these policies are the result of catering to domestic political pressures, technical incompetence on the part of the new Ministers, or lack of coordination and control during the first months of the Costa e Silva administration.

What concerns us is that if Costa e Silva does not develop a responsible fiscal and financial program and stick to it, the stabilization program will be undermined and our assistance will be wasted.

State-AID, together with Treasury and BOB, have developed a strategy for trying to make the Brazilians face their problems and take corrective action. It has these elements:

-Tuthill will personally discuss the situation with Costa e Silva as soon as possible, making clear that we cannot make further disbursements of the program loan because of wide deviations from the loan agreement. He will also indicate that project and sector loans may be affected. At the same time, he will express our desire to continue to support Brazilís development and will propose that we renegotiate economic policy targets consistent with effective stabilization, development, and reform programs.

-The AID Mission Director will take similar action at the Ministerial level and Covey Oliver will talk to the Brazilian Ambassador here.

-AID/State will coordinate closely with the IMF and IBRD, both of whom will send review teams to Brazil in early July.

-If Costa e Silva is willing to develop a more adequate economic program, we will be prepared to negotiate a new agreement with him for release of the remaining $75 million of our FY 1967 program loan. The new agreement, of course, would be submitted to you before the final approval.

-If we cannot negotiate a satisfactory agreement in 1967, the $75 million will not be disbursed and we will try to negotiate a new program in 1968./2/

/2/ Rostow added the following handwritten postscript: "It may be wiser for you to pull him up short with a personal letter expressing your anxiety." No evidence has been found that Johnson sent the proposed letter to Costa e Silva.



230. Telegram From the Embassy in Brazil to the Department of State/1/

Rio de Janeiro, August 4, 1967, 0110Z.

/1/ Source: National Archives and Records Administration, RG 59, Central Files 1967-69, AID(US) BRAZ. Confidential; Immediate; Exdis. Repeated to Brasilia.

816. For the Secretary, pass White House for President Johnson, pass Defense Department for Secretary McNamara.

Subject: Conversation with President Costa e Silva re Supersonic Aircraft.

1. I saw Costa e Silva today, Foreign Minister Magalhaes Pinto and Counselor Herz [garble] were also present.

2. I told President Costa e Silva that I had returned to Washington last week under instructions from the USG in order that I could be fully informed on problems which existed for the American Government in connection with the economic and military aid programs and the purchase by Brazil and other countries of supersonic aircraft./2/ Two days before seeing Costa e Silva I had discussed matter in full detail with Andreazza, who is Minister of Transport but who is quite clearly one of Costa e Silvaís authorized channels for discussions with me. At that time Andreazza stated that he felt request for postponement of decision of supersonic aircraft for sixty days to be an acceptable request and stated that he would recommend such a position to Costa e Silva.

/2/ On July 26 Tuthill met President Johnson "to discuss the Mirage airplanes that Brazil wants to buy from France." (Johnson Library, Presidentís Daily Diary) In a July 25 memorandum to the President, Rostow explained that the meeting would allow Tuthill "to tell Costa e Silva that he personally discussed this problem with you." Although no substantive record of the meeting has been found, Johnson evidently gave Tuthill the letter for Costa e Silva. Rostow also recommended that Johnson review the talking points for the Ambassadorís meeting with the Brazilian President. A draft letter and the talking points were attached to the memorandum. (Ibid., National Security File, Country File, Brazil, Vol. VII, 3/67-9/67) The final letter from Johnson to Costa e Silva, July 26, is in the National Archives and Records Administration, RG 59, Central Files 1967-69, POL 7 BRAZ.

It was quite evident today that Andreazza had in fact done his duty. As soon as all of the basic points of the talking paper had been covered and after Costa e Silva had read President Johnsonís letter, he said explicitly that he would agree to take no action until after October 1, 1967. He made it quite clear, however, that this was not an easy decision for him to make. He stressed the overall dangers of guerrilla activity in Latin America and the indications of an increased tempo in Brazil. He mentioned the bombing of the Peace Corps office two days ago as a symbol of this unrest. He stated that the government has arrested eleven men in the area where the states of Minas Gerais, Sao Paulo and Goias come together. These men had a supply of military equipment and bombs and were fabricating additional weapons. He said that every indication was that this was the same group that had attempted to assassinate him in Recife last July. He pointed out the relationship between this group and the Recife assassination attempt (which in fact did result in the killing of an admiral and two other persons) was not yet publicly known and asked that we hold this information close. He stated that he fully expects a stepping up of terrorist activity as a result of the LASO conference. [He indicated] that in a huge country like Brazil, Brazilian forces must have modern equipment and increased mobility. Speed could easily be of the essence in handling internal difficulties. Secondly, Costa e Silva stressed the question of morale in the Brazilian Air Force. He went over the well-known ground of the obsolescent nature of most of the equipment in the Brazilian Air Force. He stressed that the loss of morale was a constant worry to him.

3. Costa e Silva also repeated his well-known concern at the tendency of some people in the United States to think of Brazil as just another Latin American country. He asked for example how one could consider the security problems of Ecuador and Brazil on the same basis. He reverted to his war time experience when he said American equipment was shipped in such volume to the Brazilian forces that it couldnít be handled, at least temporarily. Since the war he and the Brazilian military have wished to strengthen bi-lateral relationship with the United States in the field of military equipment so that at a time of crisis, Brazilian military would be able to effectively use increased supplies of modern equipment. He stressed that only reluctantly would he go elsewhere for modern equipment, but he also once more repeated that if he couldnít get such modern equipment in the United States he had no choice but to go elsewhere. He also spoke scornfully of an armaments race as far as Brazil is concerned.

4. Despite these concerns, however, Costa e Silva stated that he recognized President Johnsonís political problems at the moment and he wished to be helpful. He said that he would write a personal letter to President Johnson outlining his thoughts and describing in some detail the nature and timing of his needs re equipment.

5. I felt it would be useful for President Costa e Silva to be able to read and to ponder over the talking points as approved by President Johnson. Accordingly, we prepared a slightly modified version of the talking points in order to remove one or two minor points which we felt might be unnecessarily irritating to Costa e Silva. A copy of this modified version was left with Costa e Silva and is being air mailed to the Department./3/

/3/ Not found.

6. Costa e Silva noted particularly point three which states that USG is prepared "to authorize Northrop to begin contract talks after October 1." He stated that he was unhappy to see that the first planes could only be received after July 1, 1969. He felt that the first deliveries should be not more than 20 months after the commencement of talks. In fact, this would only move date back to June 1, 1969 but it was clear that he wants earliest possible deliveries. He indicated that French deliveries could be made much earlier.

7. Costa e Silva said several times that in any case the purchase of advanced equipment, including supersonic planes, did not represent a serious drain on Brazilís economy. In the case of French Mirages, he said that the French had indicated a willingness to accept payments over an eight to ten year time span. (Comment: William Sweet, who apparently represents Northrop on this deal in Rio, states that the Canadians can match the French in financing of the F-5s provided of course that the United States will authorize export.)

8. Throughout conversation which lasted more than an hour, Costa e Silva was serious but always friendly. It was quite clear that he recognized the seriousness of the political issue in the United States and he was anxious to avoid complicating problems for President Johnson. The seriousness with which he considers the question, however, and his determination to resolve it via modernization of the Brazilian forces was evident throughout. He wants to stick with the United States as his source of supply and training but he will go elsewhere if this cannot be done.

9. Comment: I feel that President Johnsonís letter and talking points enabled us to pull this out of the fire at last possible moment, Costa e Silva clearly responded to what he felt was President Johnsonís personal interest in matter and perceptive approach to it. Itís now up to us after October 1.



231. Memorandum of Conversation/1/

Washington, August 29, 1967, 12:15 p.m.

/1/ Source: National Archives and Records Administration, RG 59, Central Files 1967-69, POL 7 BRAZ-US. Secret. Drafted by Oliver and approved by the White House on September 1.

Transmitting the Response of the President of Brazil to a Letter from the President of the United States

Leitao da Cunha, Brazilian Ambassador to the United States

United States
The President
Walt W. Rostow, Special Assistant to the President
Covey T. Oliver, Assistant Secretary of State for Inter-American Affairs

Ambassador Leitao da Cunha took the occasion of his meeting with President Johnson to present a letter from Brazilian President Arthur da Costa e Silva/2/ and to speak on the following subjects:

/2/ Dated August 24; attached but not printed.

1. The President of Brazil wishes the President of the United States to know that he has given the most careful and friendly attention to President Johnsonís letter to him of July 26, 1967./3/ The President of Brazil assures the President of the United States that Brazil intends to continue its relations with the United States at the traditional level of close friendship. The President and Government of Brazil, moreover, have great confidence in President Johnson personally.

/3/ See footnote 2, Document 230.

2. The President of Brazil understands the problems faced by the Executive Branch of the Government of the United States in the matter of supersonic military aircraft; and, as already communicated to President Johnsonís Ambassador to Brazil, Brazil will abstain until October 1967 from further steps toward acquisition of such aircraft. The President of Brazil, however, must express his concern about the basic problem of aircraft modernization in Brazil. Brazilís Air Force equipment is today obsolete. In the period 1947-52, Brazilís Air Force equipment was equivalent in modernity, although much less numerous, to the equipment of the United States Air Force. But from 1952 on, Brazilian Air Force aircraft have become increasingly obsolescent. Today Brazilís military aircraft are approximately 20 years out of date, and Brazilís Air Force pilots are not able to receive training on modern equipment. It is essential that Brazilian pilots have opportunities to train on updated equipment in order that Brazil should be able to meet any national or international emergencies that might arise. With the obsolescent equipment now in use, the Brazilian Air Force encounters morale and recruiting difficulties.

3. The Ambassador then emphasized the essentiality to Brazil of the M-16 semiautomatic rifle./4/ The Ambassador stressed that modern small arms of this sort are essential for the defense of Brazilís Air Force bases. At the present time, he told President Johnson, these bases and other installations in Brazil are being defended by troops armed with 1909 bolt-action, Mauser rifles that themselves were only slight modifications of the 1898 model Mauser. Thus, Brazilís small arms are nearly 60 years behind the times.

/4/ In telegram 392 from Rio de Janeiro, July 17, Tuthill maintained that "the sale of M-16 rifles is of critical importance to achievement of our overall policy objectives in Brazil." (National Archives and Records Administration, RG 59, Central Files 1967-69, DEF 19-8 US-BRAZ) In a memorandum to Rostow, July 26, Bowdler reviewed the difficulties involved in meeting the Brazilian request for the rifles, including supply requirements for the Vietnam war. Bowdler recommended that the United States supply the rifles over a 2-year period as long as delivery did not cause "domestic problems" or interfere with contracts with other foreign countries. (Johnson Library, National Security File, Country File, Brazil, Vol. VII, 3/67-9/67)

4. The Ambassador alluded to the difficulties that Brazil is encountering in getting delivery of Hughes helicopters. His implication in this instance was that the difficulties lay with the supplier, and he acknowledged that the United States Government was having similar difficulties with the supplier as to helicopters needed for Viet Nam.

5. The Ambassador developed for President Johnson the concept of cyclical swings in national conduct as to nationalism. He stated that the swing in Brazil today, in a new administration following one that was not at all nationalistic, is toward "latent nationalism." This "latent nationalism" can be moderated by intelligent and understanding collaboration between the leaders of Brazil and friendly countries, especially the United States. If not moderated, this "latent nationalism" could lead to incidents or events not typical of the general history of relations between Brazil and the United States.

6. The Ambassador closed his presentation with a return to the problem of supersonic military aircraft. He stated: "Fundamentally, Brazil is not interested in acquiring supersonic military aircraft elsewhere; but, if there is no reasonable opportunity to acquire such aircraft from the United States, Brazil will have to look elsewhere, including France, from which country Brazil has even received a suggestion that a Mirage factory be set up in Brazil."

President Johnson said that the United States Government would certainly bear the President of Brazilís views very much in mind, in the first place because of President Johnsonís very high regard for President Costa e Silva. (At this point, the President expressed to the Ambassador a degree of personal esteem for the President of Brazil that was obviously moving to President Johnsonís listener.) President Johnson expressed his gratitude to the President of Brazil for his letter and for the additional message brought by the Ambassador of Brazil. As to aircraft, both the letter and the message show that Brazil is once again acting with reason and moderation. President Johnson said that he believes that the United States Government can find some answers to Brazilís needs. Although we are having great difficulties within the United States at the present time, the President of the United States is trying to find answers to the underlying problems so that policy may be stabilized. The President of the United States wishes to avoid, however, a chain reaction about military assistance matters involving supersonic aircraft./5/

/5/ In a January 20, 1968, memorandum to the President, Rostow reported that Costa e Silva had decided to purchase F-5 aircraft instead of the French Mirage. Rostow commented: "No civilian president could have withstood the pressures he faced in the campaign to buy the French aircraft." (Ibid., Vol. VII-a, 8/64-11/68)

As to the M-16 semiautomatic rifle, the President of the United States very clearly understands Brazilís needs and regrets that the rifles could not have been supplied "yesterday." The President of the United States is hopeful that by working additional shifts and the like, the suppliers in the United States can meet both the needs of the United States and its allies in Viet Nam and some of the needs of Brazil.


232. Memorandum From the Presidentís Special Assistant (Rostow) to President Johnson/1/

Washington, December 5, 1967.

/1/ Source: Johnson Library, National Security File, Country File, Brazil, Vol. VII-a, 8/64-11/68. Confidential.

Program Loan Assistance for Brazil

Herewith are memos from Bill Gaud and Charlie Schultze (Tab A)/2/ recommending action on further disbursements of the $100 million FY 1967 program loan signed with Brazil last March. The Brazilian Finance Minister will be in town for talks tomorrow and Thursday.

/2/ Dated November 30 and December 4, respectively; attached but not printed.

In my memo to you of November 22 (Tab B),/3/ I explained the poor self-help performance of Brazil which led to postponement of further disbursements after the initial $25 million tranche in July. Since then Brazil has not taken adequate fiscal and monetary corrective measures. As a result it has suffered a serious loss in reserves (some $250 million in five months) and faces a renewed inflationary surge next year.

/3/ Attached but not printed.

The issue is whether we should make another disbursement now in anticipation of promised corrective action by next January or February or make it contingent on performance.

Ambassador Tuthill favors immediate release of $25 million to create a favorable political impact and because he is convinced that Costa e Silva is committed to stabilization.

Bill Gaud and Covey Oliver recommend tying the disbursement to prior satisfactory devaluation, credit tightening and budget trimming, leaving the timing up to the Brazilians. They would be willing to increase the tranche to $50 million if this would help the Minister take action now.

Charlie Schultze sides with Gaud and Oliver, except he questions increasing the release to $50 million in order to advance corrective action one month earlier. Secretary Fowler shares this view.

Given the importance of Brazil and your good relations with President Costa e Silva, I favor being as forthcoming as we can consistent with our overriding objectives of:

-keeping Brazilís momentum toward stabilization.

-maintaining a record on Brazil which will win continued Congressional support.

The Gaud-Oliver formula comes closest to satisfying all points. I recommend you approve it.

Gaud and Oliver also ask authorization to tell the Finance Minister that we are prepared to negotiate a Program Loan agreement for 1968. The exact amount and self-help conditions would be submitted to you for approval, probably in January. I support this request.


Approve Gaud-Oliver recommendation for $25 million after performance, with possible increase to $50 million for early action, and agree to negotiate 1968 program loan.

Approve BOB-Treasury variant of $25 million after performance, and agree to negotiate 1968 program loan.

Approve Tuthill recommendation for $25 million now.

Speak to me./4/

/4/ The President checked this option. In a memorandum to the President, December 13, Rostow explained that further discussion was unnecessary since the talks with Finance Minister Delfim Neto had resolved the matter: "$25 million will be disbursed early in January when Brazil takes the agreed exchange and credit actions" and the "remaining $50 million will be made part of the 1968 program loan." (Johnson Library, National Security File, Country File, Brazil, Vol. VII-a, 8/64-11/68)


233. Information Memorandum From the Presidentís Special Assistant (Rostow) to President Johnson/1/

Washington, February 16, 1968, 1:30 p.m.

/1/ Source: Johnson Library, National Security File, Country File, Brazil, Vol. VII-a, 8/64-11/68. Secret. The memorandum indicates the President saw it.

Brazilian Political Scene Displays Danger Signals

I thought you would be interested in the following assessment on the Brazilian situation which Covey Oliver sent to Secretary Rusk yesterday:/2/

/2/ Not found.

"As the Costa e Silva Government nears its first anniversary in office, it increasingly demonstrates authoritarian tendencies. The honeymoon Costa e Silva enjoyed during his first months in office has ended. Opposition attacks on the Governmentís lackluster performance, spearheaded by increasingly vituperative and telling thrusts from Carlos Lacerda, now seem to be severely stinging the Brazilian Military.

Although Costa e Silva can have no fear that his opposition has any chance of overturning his Government, his reactions to charges of weak leadership, corruption among some of his ministers, and Ďmilitary tyrannyí may well be to clamp down unwisely on the Congress, the press, or opposition leaders themselves. He is being pressed by key military advisors to act more firmly against Carlos Lacerda and other gadflies in the civilian opposition. We have reports of a generalized unrest among military officers over the performance of the Costa e Silva Administration to date, and some evidence of a possible plot among extremist officers to assassinate Lacerda, should he continue his outspoken attacks on the Military as an institution. While we doubt that this will occur, some moves of a more authoritarian nature are distinctly possible in Brazil during coming weeks.

I have been in touch with Ambassador Tuthill about these reports and he is deeply concerned./3/ He fears that the Costa e Silva Administration, which has conspicuously failed to build a credible civilian political base, or to give any real role to its majority supporters in the Congress, will fall back all too readily on military means to deal with its civilian opposition. Should the Brazilian Military allow itself to be so provoked, the Ambassador foresees very serious consequences for U.S.-Brazilian relations in light of the violent press reactions in both Brazil and the U.S. which would occur, and the attitudes of key U.S. congressional leaders toward Ďmilitary governmentsí in Latin America.

/3/ Reference is to a February 2 letter from Tuthill to Oliver, and a February 6 letter from Oliver to Tuthill. (National Archives and Records Administration, RG 59, Central Files 1967-69, DEF 6 BRAZ)

Ironically, our bilateral relationship with Brazil has developed more favorably in recent weeks. The soluble coffee issue seems to be headed toward a satisfactory outcome; the climate for negotiating additional economic assistance this year is favorable; and the Brazilian Foreign Minister, Jose de Magalhaes Pinto, has recently been making obvious efforts to improve his relations with the U.S., probably reflecting his hope to build U.S. support for him as a successor to Costa e Silva. It is, therefore, possible that the next few months could see contradictory trends in the political and diplomatic scenes.

Although there are no immediate actions required, I thought you should be apprised of this new set of concerns."



234. Action Memorandum From the Presidentís Special Assistant (Rostow) to President Johnson in Texas/1/

Washington, February 23, 1968.

/1/ Source: Johnson Library, National Security File, Country File, Brazil, Vol. VII-a, 8/64-11/68. Confidential. Sent by pouch to the President at his Ranch in Texas.

1968 Economic Assistance for Brazil

This package contains the unanimous recommendation of AID, State, Agriculture, and BOB, with Treasury concurrence, that you approve an economic assistance program for Brazil for 1968 of $255 million./2/ Of this amount, $170 million is FY 1968 money for program, sector and project loans, $50 million a carryover from the 1967 program loan, and $35 million of PL-480.

/2/ Attached but not printed are a memorandum from Zwick to the President, February 9, and two memoranda from Gaud to the President, both February 6.

Brazilian performance last year was not as good as we would have liked. In large part, it was due to President Costa e Silvaís new team getting its policies and priorities established. The soft spots were the large budget deficit, too rapid expansion of private credit and a sizeable depletion of foreign reserves. But inflation was reduced from 41% in 1966 to 25% in 1967. The import liberalization program was maintained. And the January exchange rate and credit actions showed a renewed commitment to stabilization.

The negotiating strategy of our assistance package has been carefully coordinated with the IMF and World Bank. The self-help conditions are hard-headed but realistic. Gaud and Oliver find that the application of the Symington Amendment is not required. Applicability of the Conte-Long Amendment will depend on whether President Costa e Silva decides to buy supersonic aircraft or other sophisticated weapon systems. The aid package is structured to permit Conte-Long deductions if this becomes necessary./3/

/3/ For an assessment of the Conte-Long and Symington amendments, "Probable Consequences of a Refusal by the US to Sell F-5 Aircraft in Latin America," see Document 66.

I recommend you approve the negotiating package as proposed by Bill Gaud and Covey Oliver.



/4/ The President checked this option and added by hand: "ask Oliver to get maximum credit with all Brazilians on this." According to another copy of this memorandum, Assistant to the President Jim Jones relayed this message to Rostow by telephone on February 24. (Johnson Library, National Security File, Country File, Brazil, Vol. VII-a, 8/64-11/68) The United States and Brazil signed the program loan agreement on May 23.


Call me


235. National Intelligence Estimate/1/

NIE 93-68 Washington, March 21, 1968.

/1/ Source: Central Intelligence Agency, Job 79R-01012A, O/DDI Registry. Secret; Controlled Dissem. According to a note on the cover sheet this estimate was prepared in the Central Intelligence Agency with the participation of the intelligence organizations of the Departments of State and Defense and the National Security Agency. The United States Intelligence Board concurred in this estimate on March 21.


The Problem

To estimate the situation in Brazil and the prospects for the next year or two.


A. The Costa e Silva administration has many things in common with that of Castello Branco, but is relaxing some of the more stringent economic controls which the latter had imposed. It is also tolerating, and to some extent responding to, a greater expression of nationalistic feelings, which for the most part have long had an anti-US cast. Yet such policies will probably not bring Costa e Silva appreciable new popular support; instead, a troubled economy, plus political restraints which are not likely to slacken, will tend to diminish his popularity.

B. Civilian opposition will probably increase, but it is disorga-nized and unlikely to coalesce very effectively in the next two years. The military establishment probably will urge further restraints on civilian political dissidence, insist upon stronger leadership by the government, and press for the present moderate program of arms acquisition. The President will probably act strongly enough in these respects to satisfy most military opinion. Hence he is likely to stay in office until the end of his term in 1971, and his administration is likely to become somewhat more authoritarian.

C. Brazilís economy showed some progress in 1967, but its problems are too fundamental, too numerous, and too interrelated to permit any great gains in the next two years. Problems of inflation, the budget, and the balance of payments will be manageable, but will nevertheless remain serious. The restraints required to maintain a reasonable degree of financial stability will keep increases in production at modest figures. Thus economic improvement will not be sufficient to provide for much higher levels of living or to permit extensive social reforms or advances.

D. Despite Brazilís increasing nationalism, the Costa e Silva government will maintain a much friendlier attitude toward the US than the Quadros or Goulart regimes did. It will not, however, follow the US lead in international matters as closely as Castello Brancoís did, and we believe it will be less sympathetic toward the US role in Vietnam. It will probably continue to oppose ratification of the international treaty on nuclear nonproliferation in its present form.

[Omitted here is the Discussion section of the estimate.]


236. Telegram From the Embassy in Brazil to the Department of State/1/

Rio de Janeiro, December 14, 1968, 1625Z.

/1/ Source: National Archives and Records Administration, RG 59, Central Files 1967-69, POL 23-9 BRAZ. Confidential; Immediate. Repeated to Brasilia, Sao Paulo, Recife, and USCINCSO.

14310. Subject: Preliminary Assessment of Brazilian Political Situation in Light of 5th Institutional Act. Ref: Rio de Janeiro 14305./2/

/2/ Telegram 14305 from Rio de Janeiro, December 14, forwarded a free translation of the fifth Institutional Act (IA-5). (Ibid.) The act allowed the President to recess the congress, state assemblies, and municipal chambers; to intervene in the states and municipalities without constitutional restraint; to suspend the political rights of any citizen for ten years; to revoke legislative mandates at the federal, state, and municipal level; and to confiscate the property of anyone who may have "enriched themselves illicitly while exercising public office." Unlike previous acts, IA-5 did not have an automatic expiration date.

1. Institutional act decreed last night amounts to a self-issued license authorizing executive to govern without trappings or inconveniences of democracy. It signals bankruptcy of an effort by Brazilian military to demonstrate that they better able than civilian elements to move Brazil toward goals of development and political stability through democratic means. Failure of effort is not due to any demonstrated inability of Brazilian people to measure up to their role, but to incapability of military to understand what democracy is and how it works.

2. Present leaders of Brazilian military are patriotic, sincere, and proud. Historic military role of keeping country on the track by changing its government from time to time has produced an attitude of self-righteousness not easily permeated by opposing views, especially when advocated by persons or groups whose orientation is different from and perhaps suspect to disciplinarian minds.

3. Current crisis had its precise beginnings in a speech by opposition deputy Moreira Alves on floor of Congress which was insulting to army. This incident, while injurious to pride of army, had no intrinsic significance and would have been ignored most places. When issue was blown out of proportion by military insistence on disciplinary action against Moreira Alves, it headed fatally for a constitutional confrontation which could only be resolved by defeat of Congress or of the military acting through weak and vacillating executive. When Congress won legal battle by refusing to remove Moreira Alvesí immunity, military felt they could only recoup by extra-legal action clothed in pseudo-legality of an institutional act.

4. This confrontation occurred against a backdrop of problems generated by governmentís failure to understand Brazilís really fundamental needs in this era. GOB failure to take imaginative and convincing steps toward improvement of woeful educational situation and relief of depressed urban and rural laboring classes produced agitation for changing these conditions, especially within the church and among students. To a conservative group which does not accept inevitability of social revolution taking place in world, such activities appear unpatriotic and dangerous, and therefore are further justification for strong measures.

5. The institutional act and the arbitrary and repressive actions being based on it have produced as much of an about face in the direction the Brazilian Government claimed to be going as would an overthrow of the government. Indeed it is reasonable to believe that if Costa e Silva had held rigidly to the constitution, he would have been overthrown.

6. Within the United States Government, I believe we should understand the situation in this light. On the other hand, we are not faced with the problem of recognizing a new government nor with the need to announce suspensions of aid, military assistance, and other programs customary on overthrow occasions. As of this moment, it appears that our long-range interests might be better served if we were to avoid such overt actions. We should, however, without any announcement, for the moment quietly withhold any pending actions on disbursements or commitments.

7. There are going to be plenty of occasions in the future when divergent GOB and USG policies and attitudes will create friction between our governments, so we will do well to avoid now any that can be avoided.

A public statement at a high US Government level deploring the setback in development of Brazilian democracy is called for, and important to encourage friends of democracy in Brazil, but it should not point the finger too accurately at the persons or groups responsible. These people, while nationalistic and narrow, are fundamentally favorable to the US and can be counted on to side with us either sentimentally or overtly in any East-West confrontation. It is highly likely they will continue in control of Brazil for a number of years to come. It is from them we must obtain cooperation in enterprises of mutual interest and through them that we must work to help Brazil emerge from the underdevelopment of which their own attitudes are one manifestation.



237. Telegram From the Department of State to the Embassy in Brazil/1/

Washington, December 17, 1968, 0038Z.

/1/ Source: National Archives and Records Administration, RG 59, Central Files 1967-69, POL 1 BRAZ-US. Secret; Priority; Limdis. Drafted by Proper and Kubisch on December 16 and approved by Vaky. Repeated to Brasilia, Sao Paulo, Recife, CINCSO, CINCLANT, and USUN.

288130. Subject: Developments in Brazil.

1) This message is first effort to assess serious impact of recent Brazilian developments on our current relations, gives initial policy guidance, and asks Embassy to focus on problems of deepest concern to us and on matters requiring decision over coming days and weeks.

2) For the moment, at least, Brazilian regime appears to have stripped itself of any disguise as military dictatorship, although possibly more akin to collegiate than one-strong-man type. Fifth Institutional Act and actions in immediate aftermath are harsh, not only in Brazilian context but also in comparison to some of hemisphereís other military regimes. We note that extra constitutional measures have no fixed expiration date and that measures against human rights are strong.

3) Would appreciate your looking for and commenting especially on following in your messages to come:

(a) Appearance of national leader or leaders who are both rational enough to understand serious problems in current situation and influential enough do something about them. Costa e Silva would obviously not seem qualify. Will he reassert himself? Will some other leader or group of leaders emerge? Or are we going to have to deal with likes of Gama e Silva, Portella, and Siseno Sarmento?/2/

/2/ Reference is to LuŪs AntŰnio da Gama e Silva, Minister of Justice; Jaime Portela de Melo, Head of the Military Cabinet; and Siseno Sarmento, Commander of the First Army.

(b) Reappearance of moderation in handling of critics and press. We consider Brazilís press to be one of countryís most important democratic institutions and believe it will provide one of the first signs of regimeís relaxation, if such is to happen. The posture, comment, and continued independence of the church and its leading spokesmen also have highest importance.

(c) Clarification of regimeís support-or lack thereof. We unable at this moment identify any major non-military group supporting recent actions. If this true, we must consider how long military will be able remain united and govern effectively.

4) We are clearly unhappy with events and do not intend sound happy. This is matter of basic policy which all members country team instructed observe. On other hand, following factors lead us to avoid expressing excessive unhappiness officially and publicly:

(a) Brazil is a big country of special importance to us on world scene, and there is no need to elaborate on range and significance of our interests there which have not changed materially as a result of last few daysí developments although ways and means of serving them may have. Brazilians are aware of their role and not likely appreciate lectures from U.S.

(b) Despite current degree of repression, Brazilian traditions of moderation run deep, and we must allow that they will begin reassert themselves shortly. In addition, arrests and censorship may begin to stop in few days and may be uncoordinated acts of lower level officials and not established central Government policy.

(c) A major problem facing us is to avoid pushing Brazilian leaders into further irrational acts affecting our relations now and in future while, at same time, not leading Brazilian democrats and others in hemisphere to believe we complacent. There probably no way of fully achieving these irreconcilable goals, but we must endeavor strike best balance.

5) Current Brazilian actions can make it extremely difficult for us to initiate or maintain our cooperation on many fronts. This is a question of fact. We do not think it would be productive for us to remind Brazilians of this in terms that could be considered threatening. On other hand, neither would we wish lessening of U.S. assistance and cooperation to come as surprise. Delicate balance also needed to arrive at equilibrium between these extremes. Among programs and activities that need prompt consideration are such things as remaining 52,000 tons of PL 480 wheat for this calendar year, authorization and negotiation of AID and PL 480 assistance for 1969, deobligations on authorized but unsigned AID project loans, ongoing AID activities, A-4 aircraft request, destroyer escorts, submarines, press release on civil aviation agreement, soluble coffee mediation efforts, Peace Corps activities, Clear Sky, and Fernando de Noronha agreement. You will no doubt know of others. As you consider and recommend position we should take on these and similar matters, and obtain Washington approval, we will be giving expression in specific terms to over-all policy stance we want to assume.

6) In addition, you should consider desirability of mounting highly selective approaches on part of five or six top USG representatives in Brazil individually and privately to 20-30 influential Brazilians. These could be certain cabinet ministers, business leaders, key military figures, political leaders, plus labor, church, university and cultural leaders. On an unofficial basis, they could be told of our true feelings about developments, and the word would thus get around in Brazil without our publicly shaking our finger at the GOB. It has been suggested that USG official could make his points by referring to questions being asked in United States about what is really happening in Brazil and natural consequences thereof.

7) It would also be possible here for high ranking USG official to meet on a background basis with selected members of U.S. and foreign press giving our true reaction on a nonattribution basis. Thus word would get out in stories to Brazil and third countries that USG was distressed, without naming names or using quotes. U.S. Ambassadors in other LA countries could also be asked to present our views to their host governments and some governments in turn might possibly exert salutory influence on GOB. Embassy views requested on these thoughts.

8) Embassy should also consider how best to refer in Brazil to Ambassadorís Washington consultation and how to use his farewell calls in Brazil to achieve desired results. He will be discussing this and other aspects this message on his return tomorrow.



238. Telegram From the Embassy in Brazil to the Department of State/1/

Rio de Janeiro, December 19, 1968, 0220Z.

/1/ Source: National Archives and Records Administration, RG 59, Central Files 1967-69, AID(US) BRAZ. Confidential; Immediate; Exdis. Repeated to Brasilia.

14464. Subject: Conversation with FonMin Magalhaes Pinto.

1. Had private meeting with FonMin Magalhaes Pinto and Secretary General Gibson Barboza tonight. As conversation proceeded it became evident FonMinís primary interest was in how USG would handle aid programs. I told him that no recognition problem exists, and USG was not cutting aid. However reaction in Washington to recent events had been very strong. Although we did not wish aggravate situation by strong public statements, general feeling when I left was that A-4 issue and aid questions should be put in freezer until we had better indication of whether Brazil would revolve towards restitution of basic democratic rights (Minister readily agreed no such rights existed any longer). Told him USG would fulfill its contractual obligations but would take "wait and see" attitude on future AID programs and those presently under negotiation.

2. FonMin then gave lengthy exposition of events leading up to institutional act. Gist was that pressures had been building up for some time. Marcio Moreira Alves didnít represent more than ten or fifteen percent of problem, but his case was poorly handled and poorly resolved. Result was that it attracted all attention. After vote it became clear that military wanted President to take action.

3. FonMin stated (and other sources have confirmed) that President resisted. First night he told military there would be no solution that day. By second day it became clear that if he didnít act he would be "passed over" (ultrapassado). Thus he chose least bad course of action, which was issuance of fifth institutional act.

4. Minister said Presidentís intention is to use massive powers he has firmly but moderately. Greatest fear of military was subversion, which would also affect economic development. Some of this was imaginary but some represented solid facts. Presidentís intention is to resist radical groups and avoid image of military government.

5. FonMin stressed fact that neither institutional act nor complementary act closing Congress had termination date. Admitted "frankly" that absence of termination dates reflected desires of two groups: radicals who saw it as opening to continue harsh action for extended period, and liberals who saw it as opportunity to abandon extraordinary powers at first opportunity. FonMin could assure us President desired no dates in order be able terminate acts just as soon as he can neutralize radicals. He presently under pressure from military and unable make public statement to this effect but "USG should have confidence in him."

6. According FonMin, President hopeful Brazil can shortly pre-sent better image. It impossible make public announcement but he hopes convene Congress on normal constitutional date, which is March 1. Reconstitution of political sector not difficult task. Congress will function, but it will of course not have powers it previously had. Press presents much more difficult problem, but demands of censors will be reduced. President desires return full freedom of press as soon as possible "but dust of institutional act has not yet settled." Biggest problem is that military hold press responsible for student agitation. It clear FonMin was at loss to explain just how press freedom can now be restored.

7. FonMin stressed that "President has taken situation in his hands." Asked that I tell Secretary Costa e Silva "will proceed on democratic road soonest but needs comprehension of USG." Specifically, FonMin said it would be useful if USG acts "with greatest prudence." Any condemnatory attitude in present excited atmosphere could permanently damage US-Brazil relations. Minister did not find it "useful to stop matters presently under consideration." Freezing them at this moment, he claimed, could lead to nationalistic reaction in army against US.

8. At this point I told FonMin yesterdayís statement by Finance Minister Delfim Neto (Rioís 14456)/2/ had been made without any consultation with us and was distinctly unhelpful. GOB was now pressing us for early action on AID programs on which it had previously dragged its feet. Attempts to use aid for political purposes could force a decision on USG which would not be in interest of either our countries.

/2/ In telegram 14456 from Rio de Janeiro, December 18, the Embassy reported that Delfim Neto had publicly stated that the United States would not restrict economic assistance to Brazil as a result of IA-5. (Ibid.)

9. FonMin claimed Delfim had spoken without consulting him. Said he believed Delfim had talked by telephone directly to Washington with "official of IDB or State Department official in charge of economic affairs." FonMin assured me he would speak to Delfim and other economic ministers tomorrow and urge them not to take precipitous action which could create political difficulties.

10. FonMin was clearly being good soldier and putting best light on bad situation. Will comment further in subsequent message./3/

/3/ Not found.



239. Telegram From the Department of State to the Embassy in Brazil/1/

Washington, December 19, 1968, 2343Z.

/1/ Source: National Archives and Records Administration, RG 59, Central Files 1967-69, POL BRAZ-US. Secret; Priority; Limdis. Drafted by Oliver, Vaky, and Kubisch and approved by Oliver.

289961. Ref.: Stateís 288130, Rioís 14464./2/

/2/ Documents 237 and 238.

1) Given the serious consequences for U.S.-Brazil relations that will inevitably follow if Costa e Silva and the military continue on path assumed over past few days, we are searching actively for some way or means to try and turn them back, even partially, from such a course. We recognize risk of a counterproductive result if we are too unskillful or untimely in our efforts. We also realize marginality of our influence and likely sensitivity of key figures in power, especially now.

2) Nonetheless, the stakes are high. A misguided and repressive military dictatorship would have grave consequences for Brazil and would set in motion a serious erosion in U.S.-Brazil relations which we must make every effort to avoid. We know that it may be necessary to endure such an erosion temporarily in order for us to remain free of identification with the Costa e Silva government and that our very long term interests in Brazil may best be served by working with what have become the disaffected groups in the country.

3) But we obviously must not resign ourselves too readily to such a regime as an inevitable consequence of what has happened in recent days. Almost all agree that Costa e Silva and the military overreacted in near cosmic terms to the provocation presented. Is it too late for them to redress the balance? Can a look by key Brazilians at U.S.-Brazil relations for the future play a part in turning the military juggernaut around, or at least in getting them to repair some of the damage already done? Is there still time to head off possibly worse acts yet to come?

4) These thoughts were behind para 6, reftel. We think following script is about right, subject to minor variations to accommodate to characteristics of person spoken to, and offer it for your urgent appraisal:

5) "Brazilians know that the United States thinks of its relationship with Brazil as a very special one, both as to the world as a whole and certainly within the hemispheric community. What Brazil does and how she does it is of very great significance. So far the changes made recently have not been taken in U.S. public opinion as marking a definitive and irrevocable transition from democratic norms. There is still time and a good opportunity to avoid the congealing of public opinion in the U.S.A. along lines that would make it very difficult for any administration in this country to continue those degrees of cooperation and mutual assistance that the needs of the Brazilian people and our own deep friendship for them make desirable. Responsible people in both countries are surely aware of forces in the world that would like nothing better than to see relations between these two great countries of the Western Hemisphere decline to the merely correct, or even deteriorate farther, in a downward spiral. The one (script user) who speaks these words does not mean to threaten, intrude, or preach. As one personally committed to the transcendental cause of that unexpressed 'Alliance within an Alliance,' he feels he must say them in the hope that it is not too late for Brazilians to be able, as they always have before, to pull back from rigidities and to face their problems with elegance, compassion, wisdom and good spirit. North Americans do not suggest what might be done, not only because we do not so conduct ourselves with Brazilians, but also because we know that no one better than the Brazilians themselves can find hopeful and salutary ways out."

6) Style of approaches would be calm, friendly and frank-no histrionics, no threats and no tutelary or directive nuance. Uniformity of line by all U.S. officials that express it is highly important especially since also desirable use officials representing various U.S. agencies.

7) If you think some special person (such as General Walters, who is now in the United States) would be able to assist you in such an effort, let us know and we will try and make necessary arrangements. Your views requested on this point./3/

/3/ In telegram 14524 from Rio de Janeiro, December 20, the Embassy concurred with the Departmentís assessment of the situation, but stressed the possible consequences of any precipitate action. In particular the Embassy recommended against sending a special emissary, which "would be viewed as interference Brazilian affairs and would be distinctly counterproductive. If emissary were a military figure would be interpreted by one & all as USG support for recent GOB moves and encouragement further movement to the right, no matter what he might say after arrival." (National Archives and Records Administration, RG 59, Central Files 1967-69, POL BRAZ-US)



240. Telegram From the Embassy in Brazil to the Department of State/1/

Rio de Janeiro, December 20, 1968, 1930Z.

/1/ Source: National Archives and Records Administration, RG 59, Central Files 1967-69, POL 23-9 BRAZ. Confidential; Priority. Repeated to Brasilia, Recife, Sao Paulo, USCINCSO, USUN, CINCLANT, and Buenos Aires.

14526. Joint Embassy/Defense Message. Subject: Developments in Brazil. Ref: State 288130./2/

/2/ Document 237.

1. This telegram is first attempt to give our tentative views on matters raised para 3 reftel. Department will no doubt appreciate that in present fluid situation with various elements asserting their influence on a greatly altered power structure, precise answers are impossible.

2. Re paragraph 3(a), recent events have not essentially changed the names of those at the top of the GOB power structure. What has changed is the structure itself which in turn has altered the relationship of one leader vis-ŗ-vis another. While we agree that Costa e Silva does not qualify as strong leader, he is probably as capable as anyone else who might take over in present circumstances. He clearly does not have the same autonomy he had before, nor is he likely to regain it. Moreover, his chances of finishing his term may have been reduced. Fact that he has publicly stated he in authority twice in as many days (Rio 14422 and 14435/3/) interpreted by many as evidence of his precarious position.

/3/ Dated December 17 and 18. (National Archives and Records Administration, RG 59, Central Files 1967-69, POL 15-1 BRAZ and POL 2 BRAZ, respectively)

3. Nevertheless Costa e Silva still President of Brazil. His freedom of action has been limited by radical military elements but fact that he holds top position gives him an advantage in any struggle that others do not enjoy. Certainly USG will have to cope more and more with likes of Gama e Silva, Portella and Syseno Sarmento, but, hopefully, more moderate elements will hold the marginal balance of power.

4. In responding to paragraph 3(c), the Embassy believes that a tug of war presently going on between radicals and more moderate elements in military. On its outcome will depend regimeís base of support. Principal issues being debated are how to deal with "subversion and corruption." Only significant military group which opposes act outright is idealistic "hardline" group led by Col. Boaventura Cavalcanti, but it not in position swing much weight. Radical element which has throughout crisis been led by Generals Syseno Sarmento, Commander of First Army; Moniz de Aragao, Chief of Veterinary Service; Henrique Assumpcao, Sysenoís chief of staff; and Portella of military household favors extended congressional recess and prolonged and thorough application of institutional act. More moderate element, which appears to be headed by Generals Lyra Tavares, Minister of Army; Reynaldo, Commander Command and General Staff School; Newton Reis and Bina Machado, both sub-chiefs of Staff of the Army, apparently favors early restoration of constitutional rights. Specifically, they reportedly respond sympathetically to pleas for reopening of Congress March 1. Costa e Silva portrayed by various sources as leaning toward moderation but unable to show his hand at present. His initial moves are simply directed towards re-establishing the credibility of his position. A key figure in this situation is General Castilho, Commander of the Vila Militar, who has been variously portrayed as a Syseno or Lyra Tavares man. Castilho was clearly one of those who transmitted the pressure from the banks, but his personal loyalties in the current struggle have not yet been defined. Basically he favors the "hard" approach and is a man of personal courage who enjoys popularity among junior officers.

5. Aside from small number of perennial pro-government politicians who have been falling into line, only major non-military group to support recent actions has been conservative-business class, particularly in Sao Paulo. Essentially, this group believes new regime will follow policies which will be more efficient and will benefit private enterprise. However, there are some influential businessmen who do oppose GOB actions and are worried about political trends. It should also be noted that a part of the educated population as always is basically apathetic and knows relatively little about recent events because of censorship.

6. It difficult to speculate at this point on signs of moderation in handling critics and press. Some prisoners have been released, some arrests are still being made and cassation lists are expected. There are those who think Congress can be reactivated on March 1 and that press censorship can be eased. We agree with Brasilia (Brasilia 3271)/4/ that reopening Congress will be uphill battle. Yesterday, for example, Senate President Gilberto Marinho, Arena President Daniel Krieger, and hardline Senator Dinarte Mariz tried to see President but were unable to. In our view most that can be expected is that some sort of emasculated Congress may begin to operate within the next few months, but even this appears to us to be an optimistic prediction.

/4/ Dated December 18. (Ibid., DEF 6 BRAZ)

7. Question of press even more difficult. Various government sources tell us plan is to ease censorship gradually. Suggestions of self-censorship have already been made. Control will then be maintained by threats of renewed censorship and economic measures (most newspapers are in debt to GOB which has newsprint monopoly). This may meet with some success but it is hardly much of an improvement over current situation. Furthermore, we believe that there are still journalists in Brazil who would be courageous enough to speak out in the face of these threats, and we have no reason to believe military activists would be willing to accept any significant criticism of what they have done. Thus, we view restoration of press freedom as a long term process. Implicit recognition of this made in yesterdayís press briefing when GOB spokesman said censorship will be maintained as long as necessary depending on cooperation of press (Rio 14500)./5/

/5/ Dated December 20. (Ibid., PPB 3)

8. Church has not yet assumed a formal position, but could be rallying point for opposition. Some prominent churchmen initially reacted with unequivocal opposition to recent developments. These include Secretary General National Conference Brazilian Bishops, Dom Aluisio Lorscheider, conservative Cardinal Jayme Camara of Guanabara and Archbishop Helder Camara of Recife, latter two of whom have issued strong public anti-government statements since December 13. Ultimate posture of church depends on future government conduct toward clergy and church prerogatives, but the prevailing tendency seems to be to speak out with greater unity in opposition to the act (Recife 1606)./6/

/6/ Dated December 19. (Ibid., SOC 12-1 BRAZ)



241. Telegram From the Department of State to the Embassy in Brazil/1/

Washington, December 25, 1968, 0057Z.

/1/ Source: National Archives and Records Administration, RG 59, Central Files 1967-69, POL 23-9 BRAZ. Confidential; Limdis. Drafted by Kubisch on December 24 and approved by Vaky.

292127. Subject: Developments in Brazil: Significance of Institutional Act (IA-5).

1) We are now proceeding on assumption that by early January situation in Brazil should have clarified sufficiently that USG will be able to establish kinds of policy guidelines and make necessary operating decisions which will undoubtedly be required by then. In previous messages Country Team has been asked to provide its assessment and recommendations on these matters by first week in January and to consider whether DCM, who will become Chargť later in January, and AID Mission Director, and perhaps others, should come to Washington for short consultation.

2) While we have been furnishing you with highlights of reactions and thinking in United States, including in USG, we thought you might also find useful some preliminary comments as to how we perceive overall Brazil situation now, eleven days after promulgation of IA-5. We recognize that both you and we are by no means fully informed on details of what happened during first important hours following congressional vote of December 12, that we do not and may never know all of pressures that were exerted and by whom, nor what the realistic alternatives were. We also realize that new phase is only beginning to unfold and that it too early to say how exceptional powers will be used by Costa e Silva. Finally, we realize that Brazilís needs and performance cannot be measured against North American or northwest European standards of constitutional democracy, nor even easily expressed in Anglo-Saxon terms.

3) But, by whatever measuring standards one might be expected to apply, political development has been dealt a hard blow and human rights, as defined by minimum international standards, have already suffered to some extent and remain under serious threat. There is no arguing arbitrariness of IA-5 and powers it gives Costa e Silva. Looks to us that he can do almost anything he wishes to almost anyone in country with only a small handful of men having power to do much about it-and they are far from an appealing lot. Moreover, proximate circumstances which brought IA-5 into being would indicate an almost paranoiac overkill response to provocation presented. Seems almost incredible to us that threats to government or countryís well being, or prevalence of subversion and corruption, were such as to warrant gross breaching of constitutional restraints and political and civil rights-or that, if so, there werenít wiser, more civilized and lawful ways of dealing with them.

4) It has become almost clichť to refer to Brazilian military establishment as being different from that of its hispanic neighbors. Undoubtedly this has been true for practically all of Brazilís modern history. Acting almost supra-Government, Brazilian military entered political arena infrequently and then only to save country when it appeared to be in last extremity. Under leadership of Castello Branco, armed forces provided backbone as impressive effort was made to establish a governmental system that would offer best blend of democratic, popular participation in a free society and authoritarianism believed needed to ensure Brazilís order and progress. Clearly, constitution of 1946, modeled after U.S., had failed and permitted the near chaos of early 60ís.

5) But, staying in power after Ď64, Brazilian military found themselves with responsibilities that go with governing. And in Brazil, like so many developing countries, there was certain to be widespread dissatisfaction with governmentís performance in many sectors, lacking as it did capital and human resources-and commitment of the society-to do all that needed doing, simultaneously. Natural consequence was criticism of military, and in Brazilian context, and in eyes of military itself, such criticism was to military like insult to flag or to nationís honor. Thus military reacted in name of patriotism and country against criticism, revealing that in this respect at least they have something in common with fellow professionals in other LA countries.

6) To us this appears to be important watershed in Brazilís political development. IA-5 of December 13 was throwback to its two predecessors of April 1964 and October 1965, but in our view has far more significance than either. Given near chaos and disorder which preceded and passion of moment that followed Goulartís ouster, April Ď64 Act could be understood. Even October Ď65 Act could be justified by Castello to some extent as he said to us morning after Act was pro-mulgated-and later demonstrated in fact-that he only assumed powers not to use them. Moreover, neither of these Acts was as extreme as one of December 13, and both had clearly specified expiration dates. Even so, as you know, in retrospect we believe we erred after October Ď65 Act in not drawing back further from our close association and public identification with Castello Government.

7) Perhaps Brazilís misfortune has been that Costa e Silva became its president twenty-one months ago instead of one of others more favored by Castello Branco. With all laws, powers and constitutional provisions apparently needed to lead his country and govern effectively he has brought it to present state. Thus, the watershed: unable to succeed with kind of open democracy Brazil attempted from 1945 to 1964, country has now also lost its chance-at least for present-to move ahead even under strongly guided semi-authoritarian democracy.

8) In our view, therefore, prospects are not good. For foreseeable future military would appear be unwilling see Brazil buffeted by pressures resulting from free expression in even semi-open society. Nor, unless they change, can military accept criticism inherent to their role as government of developing country. Some Brazilian mutation of harsh authoritarian regime, therefore, and possibly some succession of such regimes, appears be in offing.

9) But, as stated in previous messages, and this of highest importance, U.S. interests and objectives in Brazil are virtually same now as they were eleven days ago. In the new circumstances we will undoubtedly have to adapt ourselves to revised ways of serving them. We await your further thoughts and recommendations as to how best to proceed and make foregoing available to you, not as representing full consensus in Washington nor to signal kind of analysis or recommendations we want. Rather, foregoing represents preliminary views of only small number of U.S. officials who have consulted on matter, and of several consultants outside Department who have had significant experience in Brazil, and does not reflect dissent of several who believe, stated at its most extreme, that we are greatly overemphasizing importance of recent developments in Brazil and that this episode will find its way into Brazilian history without greatly affecting period immediately ahead. We hope you will find these comments helpful and in your analysis and recommended policy lines will address more important questions raised.

10) Merry Christmas.



242. Telegram From the Embassy in Brazil to the Department of State/1/

Rio de Janeiro, December 28, 1968, 1915Z.

/1/ Source: National Archives and Records Administration, RG 59, Central Files 1967-69, AID(US) BRAZ. Secret; Priority. Repeated to Recife and Sao Paulo.

14720. References: State 288130,/2/ 291004,/3/ 292127./4/ Joint State/AID Message.

/2/ Document 237.

/3/ In telegram 291004 to Rio de Janeiro, December 21, the Department suggested that the Embassy submit its recommendations on economic assistance and other bilateral matters within the next 2 weeks "if, as we expect, situation clarifies sufficiently for you to do so." (National Archives and Records Administration, RG 59, Central Files 1967-69, POL BRAZ-US)

/4/ Document 241.

1. In the absence of a clear view of what the Brazilian political future holds, the Embassy believes the basic premise on which the U.S. Government should operate is that we still want to see Brazil advance and develop, and therefore we continue to be willing to assist this process wherever the prospects for accomplishment are reasonable. In adopting this premise we are recognizing that genuine political development can only be achieved as an extremely long-range result of other fundamental social and cultural improvements, which in turn can be assisted and accelerated with outside help of the sort we are able to offer. We assume that while in certain circumstances we would cut off aid, we would be reluctant to do so, thus we assume we are involved in a process of determining first how, under the new conditions existing in Brazil, we ought to tailor our programs for maximum results, and, secondly, how to use our preparedness to continue assistance as a stimulus to encourage the GOB to relax its political extremism. Another important consideration is the political image of the U.S. both here and throughout the Hemisphere. We are aware also that our posture must be adjusted to the need for continuing support for aid programs in Brazil among those U.S. public and Congressional elements who may favor aid in general but who have difficulty with the fact that it does not buy instant democracy.

2. We anticipate it will take some weeks or even months before the pattern of Brazilian Government and politics will become sufficiently clear to enable us to make final recommendations on the shape of our aid program to reflect fully the changed situation. Until the new norms of the IA-5 become spelled out in practice, e.g., in such areas as civil liberties, freedom of press and parliamentary and judicial processes, and until we know how the GOB will perform in the economic field under the changed circumstances, we feel a wait-and-see approach on new aid undertakings to be appropriate. Such an approach in the form outlined below would reduce (but not entirely avoid) the impression in Latin America and the U.S. that the USG uncritically accepts what has happened here. Moreover, if skillfully handled it might strengthen those elements in the military and the government who are counseling restraint in the use of IA-5 and an early restoration of civil liberties, although we must recognize that our influence on internal political events is marginal at best.

3. At the same time, we do not wish to breach existing commitments. To terminate or suspend activities which have been undertaken or authorized on the basis of good faith and with the investment of energies and financial resources on both sides could create an aftermath of distrust that could circumscribe our options for the future. Thus, for the initial wait-and-see period or first phase, and unless the situation deteriorates, we recommend a policy of (a) continuing activities covered by existing agreements and (b) proceeding, in an unhurried manner, with negotiations of outstanding loan authorizations, namely, health sector, southern states road maintenance, education sector, Passo Real, IBGE, agricultural research, to the extent practicable, or we would attempt to structure the completion of negotiations on these loans so that the socially-oriented ones, such as health and education, would get signed first. If there is future political retrogression, we would once again suspend negotiations and further review the situation.

4. In all continuing activities we would seek to minimize and if possible avoid publicity. We must however expect pressures on GOB side to hurry negotiations and to generate publicity which we will be alert to combat.

5. During the wait-and-see phase we would not discuss further with the GOB the contemplated FY 1969 loan program (program loan, three education sector loans, and Manaus power). Of this package the most immediate significance for USG/GOB relations is the program loan, negotiation of which had been planned for January. These negotiations would have to be postponed sine die. The suspension of dialogue on new programs might well mean that we would not be able to authorize these loans, or at least some of them, before the end of the fiscal year. With this in mind, we may wish to reconsider fairly soon whether preparatory work on the education sector loans should not go forward as an exception to the "wait-and-see" approach, since these loans seem to us to be of high priority even under the changed political circumstances in Brazil.

6. In the meantime, we would convey the policy outlined above in broad terms to the top leadership of the GOB. We would say that, while we cannot anticipate the reaction of the new U.S. administration which will be taking office on January 20, we assume its attitude will be shaped by traditional U.S. concern for individual freedoms. Therefore, it is likely that the length of the "wait-and-see" period, particularly with respect to new FY69 assistance commitments, would be influenced by future Brazilian actions regarding civil liberties, press freedom, and the like. The Ambassadorís farewell calls on the President and a number of cabinet officers would provide appropriate occasions to get this message across, and, possibly, to learn of the GOBís plans re IA-5.

7. In specific terms we thus envisage the following U.S. position, program by program:

A. FY68 Program Loan. Because of the undesirable impact payment of $50 million tranche now due under the FY68 program loan would have, we recommend protracted delay. We can expect considerable diplomatic pressure from the GOB to release these funds. No recommendation on the second tranche can be made at this time.

B. Development Loan Projects. In an attempt to avoid the impression that we were going back to "business as usual" our tactics would be different from those formerly employed in at least two respects: (1) we would not press the GOB to take action in order to move forward on pending matters, but instead would let the initiative come from the Brazilian side and (2) even with rapid movement on the part of the GOB to bring these pending matters to a head, we would reevaluate the political situation on one hand and the importance we attach to the particular loan on the other before any signings. Undue GOB delays or failures to meet conditions of the loans will lead to early termination and appropriate deobligations or de-authorizations. The deadlines which we had previously set for ourselves would have to be extended because of the current interruption and deliberate spacing of the signatures.

C. Development Grant Projects. Continuation of ongoing activities, with a special review of public safety program to determine whether modification of the current phaseout schedule would be appropriate in light of the changed situation.

D. Counterpart Releases. We advocate continuing releases of PL 480 and program loan counterpart generated from existing agreements. As indicated in Rio 14497,/5/ further delays in a number of cases will be disruptive for projects in which we have had strong interest.

/5/ Not found.

E. Housing Extended Risk Guarantees. Follow through with closing and signatures on already authorized guarantees. On December 2, USAID requested January 24 for execution of documents. BNH has not yet responded. Our information indicates that sponsors and BNH would be desirous of postponing until early March. USAID would concur on basis of current situation, but position of U.S. investors should be ascertained by AID/W. Further authorizations are not an immediate issue as GOB has not yet indicated interest.

F. Other AID Guarantees. Follow through on applications submitted where letters of intent already issued. Would also continue process new applications as these are essentially non-concessional, private sector to private sector activities.

G. Title II-PL 480. On humanitarian grounds, continuation of planned programs.

H. Title I-PL 480. Inasmuch as Title I sales are complementary to program assistance, negotiations on new agreement will also have to be delayed.

8. We have also considered our position concerning Exim-Bank financing and assistance from multilateral agencies. We recommend no change in Exim approach toward private sector projects. Such proposals should continue to be considered on their individual merits and within normal Exim financing policies. Pending projects for publicly-owned companies, such as Volta Redonda and Rio Doce, would be used by the GOB to create the impression that the U.S. has no qualms about new economic assistance to Brazil: in general Exim should put a "slow man" on the job for the time being and final approval and announcement of each loan should be considered at the time in terms of its political impact.

9. On multilateral assistance, our recommendation is that projects being considered by the multilateral agencies be processed as per their usual policies and regulations. We should avoid actions that would lead to accusations that the U.S. is attempting to use multilateral agencies to accomplish unilateral political objectives. U.S. positions on specific projects should be taken on the merits of the individual projects.



243. Telegram From the Embassy in Brazil to the Department of State/1/

Rio de Janeiro, January 9, 1969, 2340Z.

/1/ Source: National Archives and Records Administration, RG 59, Central Files 1967-69, POL 17 US-BRAZ. Confidential; Priority; Limdis. Repeated to Brasilia, Sao Paulo, Recife, Montevideo, and CINCSO.

196. Subject: Call on President Costa e Silva. Accompanied by Pol Counselor I payed half hour farewell call today on President in presence of FonMin at Presidentís summer palace in Petropolis.

Presidentís greeting was effusive and following courtesies and rambling exchange on merits of contact lenses Costa e Silva himself broached subject of recent events by noting I would be leaving at a time when Latin America gives a confused impression: Colombia in state of siege, Peru, Bolivia, Argentina and now Brazil under "exceptional regimes." Uruguay didnít even have strength left to go into exceptional regime. It was good neighbor but has been "virtually turned over to Communists."

Costa e Silva showed considerable awareness and apparent comprehension of US criticism. Said US had "stratified life" and could not be expected understand problems of countries in development stage. Your democracy is the ideal, he noted, but we cannot pattern ourselves after your system. If US were in developing stage now it would be going through same problems we are experiencing. Even then, US had advantage of elite immigration whereas Portugal sent us its castoffs.

I assured him US did not wish to impose its pattern upon any country but I recalled that prior his election Costa e Silva had told me of three things I must bear in mind: 1) the military is the most political institution in Brazil, 2) the military want Costa e Silva to be President and 3) he, Costa e Silva would work for a return to a situation in which either a civilian or a military man could be chosen President. Told him I had used his statement in my reports to Washington, which was following present current developments with concern. Was there any message he wished me to convey?

President said that I as one who had lived here should explain "entire situation" to Washington, pointing out that there is "complete tranquility" in Brazil. (One of his favorite phrases which he used several times again today.) We have "maintained order." We had to sacrifice some of the "non fundamentals to preserve the fundamentals," but as soon as we can we will return to state of normality. This will be done "opportunely," but with the necessary caution.

President went on to castigate "political class" much along lines his New Yearís eve speech. He had worked for an understanding between politicians and military but politicians didnít want understanding. If we only were acquainted with all facts we would know that politicians wanted to undo all the achievements of revolution. "No one worked harder with politicians than I but they refused to understand."

As example of difficulties he faced, Costa e Silva cited Correio da Manha. I wanted to ease press censorship, he said, but as soon as I did Correio da Manha printed a letter I was supposed to be sending to President elect Nixon (Rioís 149)./2/ No such letter exists. This type of thing would not be permitted in US and Correio could be sued by you, but our laws are not strong enough to deal with irresponsible press ("yours in US is more responsible"). Correio even printed all the criticisms of the American and European press. For these reasons we had to seize yesterdayís edition.

/2/ Dated January 6. (Ibid., POL 15-1 BRAZ)

President noted military in Brazil have traditionally played political role. I have tried to break that tradition (he pointed to his civilian attire), but this canít be done from one hour to another. For the moment I have had to step back into my military role but as soon as possible I will resume forward progress in my civilian role.

Of one thing you can be sure, Costa e Silva said. There will be a presidential succession as provided for in constitution. Jokingly remarked that this would happen if for no other reason than that he doesnít like the job-it is too difficult.

President closed conversation by asking me to assure my government that Brazil is now a true friend of the US. This might not be the case under "the others" (presumably he was referring to the pre-1964 Goulart group).

Comment: Costa e Silva took on the attitude of a garrulous, kindly-and tolerant-grandfather worried about the wayward and disoriented members on the Brazilian political scene. He obviously wanted to give the impression that all was quiet and that he had only taken a slight-and temporary-detour from the democratic path. Following initial pleasantries, he launched into one of his long monologues and brought conversation to abrupt but cordial end after 1800 bugle sounded. It was hard to get word in edgewise.

It is difficult to know how much of this he believes himself. He is, of course, now aware of the restless forces within the Brazilian military but he may be convinced (or trying to convince himself) that he can contain them. The general impression that he gave us was that, despite his native shrewdness, he may well be underestimating the forces at work in this country.



244. Information Memorandum From the Presidentís Special Assistant (Rostow) to President Johnson/1/

Washington, January 13, 1969, 3 p.m.

/1/ Source: Johnson Library, National Security File, Country File, Brazil, Vol. VIII, Filed by LBJ Library, 7/65-1/69. Confidential. The memorandum indicates the President saw it.


A political struggle within the army continues in Brazil-with the result in doubt, and the prize being de facto control of all levels of government. President Costa e Silva issued another "Institutional Act" on December 13 under extreme pressure from his fellow generals-he hopes to use its extraordinary powers sparingly, but he is being pressed hard to widen the political purge and to clamp down permanently on the Supreme Court, the press, and other opposition expression so that the "work of the Revolution" can be finished in peace. He may be unseated by his military colleagues if he continues to resist invoking more extreme repressive measures.

Meanwhile, the country stays quiet, helpless to affect the course of events. To varying degrees labor, church, students, journalists, "intellectuals", and most politicians are shaken and temporarily cowed. Most businessmen and some politicians applaud the tougher government line on "subversion and corruption". Censorship is now technically lifted-but newspapers must practice a form of rigid "self-restraint" or face confiscation.

Moderate civilian politicians urge the U.S. to wait quietly on the sidelines-not publicly denouncing the dictatorial trend-but holding back any new aid commitments until the struggle between moderates and radicals in the army is resolved. Our Embassy in Rio de Janeiro also advocates this course. State has followed this line since December 13-while maintaining normal diplomatic, aid, and military contacts, we have been "reviewing" our assistance programs, a polite way of saying "no new commitments."

So far, the Brazilian Government has not disputed our posture on aid. The Finance Minister hopes we will soon release $50 million from the 1968 program loan-an installment due in December for which Brazilís self-help performance fully qualifies. However, we are holding up this release until the political picture clears somewhat, in part in anticipation of strong negative reactions from the Congress, should we release quickly.

Unless Costa e Silva presses for the money-which he has not done to date, Secretary Rusk believes we should hold this important decision for the next Administration.



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