Something Practical

Among dozens of ideas about how the U. S. should conduct its foreign relations, there is at least one policy on which nearly all citizens agree. It is a policy now 115 years old, first expressed in the Monroe Doctrine: The Americas must belong only to North and South Americans. For most of the 115 years, U. S. policy has been confined mainly to the negative side of this doctrine, keeping foreign nations out. Recently Pan American conferences, the "Good Neighbor Policy," etc. have attempted to give it some positive substance. Last week in Washington a concrete step was taken to make this policy something more than a benign theory.

The biggest (3,275,000 sq. mi.) South American nation and potentially the greatest in reserves is Brazil. In recent years Brazil has become a commercial battleground between the U. S. and Nazi Germany, on which the stakes are trade and cultural supremacy. The U. S. might already have lost the war had it not been for a Brazilian campaign squabble in 1930. That fight ended in a revolutionary coup d'etat by the two powerful leaders of the State of Rio Grande do Sul: dressy little Getulio Vargas and his backer and right-hand man, handsome, dashing Oswaldo Aranha. Vargas as President, Aranha as Ambassador to the U. S. and later as Foreign Minister, have been Latin America's most consistently friendly apostles of the U. S. and its works.

Last week urbane Apostle Aranha, an ex-cowboy who still carries lead in his shoulder from the 1930 Presidential campaign, completed a profitable month's stay in the U. S. Under the auspices of his friend Cordell Hull he had not only talked business but done business with Secretary of the Treasury Morgenthau, and Export-Import Bank President Pierson. Before cameramen these gentlemen cordially sealed the deal which they had made in a month's negotiations. Its terms:

Secretary Hull and friends promised Brazil:

1) A $19,200,000 credit from the Export-Import Bank to pay off by June 28, 1941 outstanding indebtedness to U. S. exporters, an estimated additional $50,000,000 credit to be available for future exports.

2) $50,000,000 in gold (subject to Congress' approval) to establish a central reserve bank and a currency tied to the dollar, to protect importers & exporters from exchange fluctuations.

In return, Secretary Hull asked and Brazil promised:

1) To break down its bars against the shipment of foreign exchange out of Brazil, which has played into the hands of the Nazi barter program.

2) To resume servicing of Brazil's $357,000,000 dollar bond debts to U. S. nationals, in default since November 10, 1937.

3) To cooperate with the Department of Agriculture experts in developing, instead of cotton, noncompeting products which the U. S. can depend on in wartime--rubber, quinine, hardwoods, etc.

4) To accord U. S. investors the same treatment as Brazilian investors--an important concession because of the Vargas Government's current trend toward economic nationalism.

The importance of this deal to the U. S. consists of its importance to Brazil. A credit of $120,000,000 is no great matter for the U. S. Government, accustomed to living on an $8,000,000,000 budget, but it means a great deal more to Brazil whose 1939 budget is $203,000,000. More significant than its size is the fact that the purpose of this credit is to enable Brazil to cut loose from Germany's economic apron strings, particularly Nazi Germany's barter policy.

That would please no one more than the Vargas Government, because in practice the Germans, to get foreign exchange, have ruthlessly resold in other markets the coffee and cocoa they got from Brazil by barter, depressing prices at the expense of Brazil's best cash crops. One quick effect of the deal was felt in Wall Street, where Brazilian 1941 8's jumped from 15 1/2 to 28 3/8.

With U. S. exporters now able to obtain payments for goods sold to Brazil, the resumption of payment on Brazil's bonds, the possibility of the U. S. obtaining rubber (an essential war material) from the western hemisphere, the solidarity of the western hemisphere was brought a good step closer.

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