PROBABLE DEVELOPMENTS IN BRAZIL

Created: 1/8/1957

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PROBABLE DEVELOPMENTS IN BRAZIL

THE PROBLEM

To assess the character of the present regime, and to estimate its probableand probable policies over the next two years.

CONCLUSIONS

Kubitschek administration, which came intoear ago withhird of the popular vote andackground of extreme political tension, is trying to restore harmony in Brazil byiddle-of-the-road course.ombination of army, labor (led by Vice-Presidentltra-nationalistic, and Communist elements is attempting to organize an extremist-oriented regime around War Minister Lott. The majority of the air force andortion of the army, and rightist civilian elements oppose the presentand particularly desire to remove Lottosition of power.

This tense atmosphereeflection of President Kubitschek's inability to consolidate his political position.serious handicaps, however, theis able to takeroad range of economic and foreign policy matters.)

Kubitschek will probably be able to stay in office over the next two years However, it is unlikely that he will be able to build up disciplined politicalin congress or to curb effectively the army's political influence.)

4 The Kubitschek administration has serious economic problems. Although the government will probably continue to make moderate progress in theof basic services, the rate of economic growth is unlikely to increase appreciably. Inflation will almostcontinue, but will probably not exceed the high rate of previous years.)

The Kubitschek administration isto continue Brazil's traditional pro-US foreign policy. It is cooperating with the US on major internationalissues However, on matters of economic and military cooperation, it generally has to defer to congress and the armed forces, both of which aresensitive to any development which appears to infringe upon BrazilianThis situation will probably continue. )

Although the Communist Parly isthe Communist movement is

organized and well-financed. Theare able to cooperate effectively withn-Communist ultranational-ists in both congress and the army in exploiting the already highly developed nationalistic sentiments of theHowever, they do not bypossess snifncienl strength toa serious threat to the Kubitschek regime.d)

DISCUSSION

The situation In Brazil over the next few years will affect important US strategic,and economic interests. At stake arc military base requirements, strategic rawcooperation on international Issues, and levels of trade and Investment. Brazils attitudes with respect to these US interests will depend upon the relative influence of various competing domestic groups, upondevelopments, and upon US policyBrazil.

THE POLITICAL PROBLEM

he Kubitschek administration, which came Intoear ago withhird of the popular vote andackground of extreme political tension, is attempting to restore political harmony to Brazil bya middle-of-the-roadhea member of the moderate SocialPartys attempting toorking relationshipivided congressenerally uncooperative and in part hcaUle military organization He is alsolo curb the ultranatlonalists and the Communists.

9ombination of army, labor, ultranationalist. and Communist elements Is attempting to undermine Kubltschek'sby organizing around General Henrique Toxclntolitical movement of extremist orientation. Lott, soon after becoming War Minister, revealed himself as awith no pronounced political convictions, but his recent statements and activitiesthat he is increasingly disposed toward the labor-ultranationalist positionJoao Goulart. the ambitious head of the

Brazilian Labor Party (PTB) and generally considered as Vargas1 political heir, iscloser relations with Lott in an effort to enhance his own opportunities. Labor, which ordinarilyassive political role, would probably respond to Ooulart'sin the eventolitical crisis.

It Is largely the weakness of thepolitical position and the increasing boldness and outspokenness of the civilian and military opposition that have encouraged the faction of the army led by Lott to expand its politicalott's preventive coup ofhich ensured theof Kubitschek, split the military, and resultedro-Kubltschek army-civilian alignment opposed by predominantlyarmed forces-civilian elements. Since then, the army has provided protection against antiadministration groups in the armed forces, but it has also Intervened in politics by insisting upon curbs on rightist opposition acUvities and advocatingpolicies with respect lo development of Brazil's natural resources.

Lott's political activities and theinfluence of the army In Brazilianhave Intensified the bitter friction already existing among the armed forces. The main outlines of the various divergent militaryare: (a) the majority of the air "force and navyortion of the army are hostile to the present regime in general and to Lott in particular;mall but highly Influential army group Is backing Lottmany of this group probably look upon Goulart as their real political leader.

A forfct round

Theof the Armed forcea are diseased in Appendix B

i

izable military group, consisung mainly ol army and police, strongly supports the present administration.

' Party SUenKlh Inn Rlslalure

Administration Bloc

Social Democratic Party

<PSD) Bra jilt an Labor PartyPTB I

Social Profreuive Party PSPi

Republican Part? iPR) Otrvrra

Opposition Bloc

National Democratic Union

(UDN) Liberator Party Oincr*

Indications that Lott may be inclined toabor-ultranationalist government are also cuuslng uneasiness among civilian conservatives who are concerned for theof established institutions and fearfuleftist political trend. They axe publicly demanding that both Lott and Kubitschek be replaced. President Kubitschek isto restore political calm by curbing the activities of pro- and anti-Lott political

This tense political atmosphere Is aof President Kubitschek's inability, after one year in office, to consolidate his political position. He is seriously handicapped In his efforts to carry out his programs by the lackisciplined politicalThe so-called "administrationhich holds over two-thirds of the seats in both houses of congress, does not provide the President with sustained support. Theparties of the bloc tend to unite for the purposes of organizing congress andserious opposition blows to theprestige, but they frequently fall to respond to the administration's efforts toIts program in congress. Within thebloc, the Brazilian Labor Partyhe Social Progressive Partynd the Republican Parlyntil recentlyeparate "minority" grouping. This arrangement permitted leaders of theparties to further partisan politicalby enunciating their own pro-labor, reformist, or highly nationalistic platforms, often in opposition to Kubitschek's program. While the "minority" disbanded int may still operate on an ad hoc basis on specific Issues. By aligning itself with the regular opposition, this group can defeat any measure the administration proposes.

urther handicapped by the growing schism within his own (PSD) party Here the struggle for power continues between the established moderate leadership of the partyyounged by chamber majority leader Tarcllo Vtelra de Melo. which believes that the PSD mustrooder, lower-class base if it is to remain in power. Accordingly, the young wing has tended to vote with theon issues thataffect the lower income groups, and It further embarrasses the adhunistratlon by generally adopting ultranatlonalislic

The opposition, dominated by the National Democratic Unionakes fullof the divisions and weaknesses in the administration bloc. It generally employs tactics designed to split the administration parties or force the government toolitically unpopular position. However, the moderate-conservative UDN cooperates with Kubitschek and the PSD moderates tolabor-leftist advances. The PSD and UDN recently Joined forces toTB-PSP-sponsored effort to extend urban labor legislation to rural workers.

Despite tho situation described above, President Kubitschek is able to take some positive action. He has secured from congress new tax laws to cover, in part, sharplygovernment expendituresby virtue of special authority vested in the executive, Kubitschek Is able to operate Independentlyroad range of economic matters, Including regulation of exchange rates, restriction of bank credits,of foreign private enterprise in some fields, and negotiation of development loans

lthough the Communist Party Isthe Communist movement Is welland well-financed. Through itsof various agencies of theand through Its Influential press. It Is able to cooperate effectively with the non-Communist ultranationalists in both congress and the army in exploiting the already highly developed nationalistic sentiments of the population. However, the Communists by themselves do noterious threat to the Kubitschek regime. Incampaign, they threw the entire weight of their propaganda machine behind the Kubitschek-Ooulart ticket, andthey claimed credit for the election victory. However, in view of therefusal to extend political amnesty to them, they are forced to operate on the fringes of the political scene. While the Communistsirm "united front" policy, theyto assume an ambivalent attitudethe present regime, opposing lis pro-US gestures while applauding its efforts to curb the rightist opposition. *

THE ECONOMIC PROBLEM'

ubitschek's political problem isby Brazil's serious economic difficulties. The administration's basic economicis toatisfactory rate ofgrowth and development. Although Brazil has experienced rapid economic growth since World War II, the rate of growth has slackened over the past two years. *is being handicapped by distortions and lack of balance In the domestic economy resulting from divergencies in the rate of growth among the various sectors. Brazil's rapid Industrial growth has not beenby adequate development ofand power and of mining andproduction for export. Kubitschek Is attempting toevelopment program designed to rectify these maladjustments. His primary effort is being devoted toof power and transport facilities.

Recently, the Exlmbank agreed to consider loans up0 million to Brazilian railroads conditioned on consolidation of the railThe Exlmbank also provided loans ofillion for other developmentHowever, since these loans are far from sufficient for meeting Brazil's growingneeds in the field of basic services, and since adequate domestic financing for such projects Is unavailable, the administration is seeking additional foreign assistance.

ontrol of inflation Is the administration's most pressing Immediate problem. Brazil's post World War II economic growth hasunder conditions of uninterruptedThe annual average Increase in the cost of living for theercent, but formonth period endingt rose toercent This rise partly reflects thepolitical difficulties. Major factors contributing to the current inflation include;arge budgetapidin the moneyercent during the period, largely due to Central Bank financing of the budgetary deficit, (c) liberal pay increases for the armed forces and for civilian government personnel and an increase of over SO percent in the legal minimum wage inndapid expansion of commercial and consumer credit. The administration is now attempting to hold the line on inflation by reducing ad*

'In the 1MS-1WS period, the grots nations)(GNP calculated on the basis ofprices converted to US dollar*5 tofrom JIU bUUoisillion,capita product73 Thisan annual expansion ratethe OMP andercent per capita.same decade cress investment amountedIS percent of the ONP annually.the rate of growth has slackenedthe past, two years.he OXPslowed loercent, the perercent, and the ratio of grossto ONPercent. Though thethey probably are not

below those

At the end of the Brat nine monthshe deficit was someillion cruulroa on totalof SO billion eru*elras. This deficit was somewhat leas than the administrationat Ihe beginning8

mlnlstratlve expenditures, tightening credit, improving collection of taxes, and increasing tax rates. By such measures, inflation Ismoderated but by no means corrected.

In the past, Brazil's Insistence ona high rale of industrialization, even at the cost of severe inflation, has contributed heavily to recurrent foreign exchangeExport earnings have been generally inadequate to meet the growing demand for imports, despite the efforts of successiveto curb nonessential imports.34 Brazil averted foreigncrises only by0 million from government and private bankingin the US.S,esult of the imposition of tight import restrictions and the resurgence of world demand forBrazil was able toavorableof payments0 million, and under the Kubitschek adrnlnlstration, the exchange position is continuing to show improvement. However, this favorable trend Is threatened by the approaching maturityargeof outstanding foreign loans. By the endrazil is scheduled to2 million outotal ofillion inloans and credits. Thesought to obtain long-term refunding of Its medium-term obligations with the Exim-bank. However, the Eximbank declined to consider such refunding, but agreed to aof repayments whenever Brazil's dollar availabilities deteriorate materially. For the moment, Brazil's exchange position Is relatively favorable.

Increasingly heavy fuel imports also threaten the nation's exchange position. Over one-third of current dollar receipts areto petroleum imports, and requirements are growingny increases in crude oil prices or transport costs resulting from the Suez crisis will result In an additional drain on Brazil's dollar receipts. Finally, an ever-present threat to the Brazilian economyossible sharp fall in the price of coffeeerious crop failure, for coffee exports now uccount for two-thuds of Brazil's foreignearnings andercent of its dollar earnings. Present coffee shipmentsigher rate than4nd prices have risen somewhat5 levels. -

BRAZll AND THE US

The Kubitschek administration, keenly aware of the advantages to be derived from cooperation with the US in political, economic, and military matters, is attempting toBrazil's traditional pro-US foreignIt is most successful with respect toon major international politicallargely because these issues do notany question of Brazil's sovereignty or appreciably affect the domestic scene. Thus far it has been able to resist leftistpressures to detach Brazil from its close ties with the US and to resume or establish diplomatic relations with the USSR (which Brazil severednd other members of the Sino-Soviet-Bloc.it was able to overcome certainand congressional reservations and push through authorization for Brazil to contribute troops to the UN forces in the Suez Canat area.

The President is far less successful in the realm of economic and military cooperation. In these matters, he must generally defer to the army and congress, both of which are highly sensitive to any developments which

December

"Brazil maintains diplomatic relations with only two members of the Blocand

advantages of foreign private development of domestic petroleum resources has long been recognized by many prominent Brazilians, in 'lew of the lack of good coal reserves anddeveloped hydroelectric resources.owever, extreme nationalists and Communists spearheaded passage of legislaUonovernment petroleum monopoly (Petrobras) and excluding foreign capital, and they have since prevented modification of the legislation by succeeding administrations. Petrobraa has ambitious plans for expansion of domesticproduction and within four years expects to satisfy half of the national requirements, bui It will almost certainly be unable to do so. 'Average Coffee Prices Table: (Santos 4's>

appear to Infringe upon Brazilian sovereignty. Their ultranaUonaiisltc influence is largely responsible for the recent Brazilian National Security Council recommendation that Brazil withdraw from its atomic mineralsand thorium sales agreements with the US and setovernment monopoly onheir influence is also largelyfor the President's inability to alter the government petroleum monopoly so as to permit foreign private capital to develop the nation's oil resources. Kubitschek favors the expansion of foreign private investment in other sectors of the Brazilian economy, but there is strong opposition in congress toolicy. Some business interests support the current nationalist campaign because they fear competition from foreign enterprises.

matters dealing with militarywith the US. the President oftenat odds with the armed forcesis forced to accept their views.protracted negotiations over militarythe Brazilian military isIts position of influence in theIn order to obtain maximum amountsfrom the US. Both theand the armed forces are attemptingcongress in these negotiationsfears the latter would reject any newagreement. Accordingly the currentaro being handled underrazil-US MDAP agreement.

OUTLOOK

long as the power struggle amongmilitary and civilian elementsthe possibility Is always presentBrazilian political situation mayeitheresultilitarynew coalition of competing civiliana notable increase in the administration's Influence over the armed forces and congress.

The persistence of the split in theorganization makes it improbable that the armed forces will be able to take concerted political action, but it is possibleoup might be attempted by one of the military factions. If General Lott, with backing of labor-nationalist elements, should attempt to seize power, or If the air force, the navy, and the anti-Lou faction of the army, with the backing of conservative civilian elements, were tooup, we believe the chances of success in either case would be less than even. Lett's withdrawal or removal from thewould tend to heal the breach In the armed forces and reduce the possibility of military Intervention over tho short run.

8 state and congressional election campaigns will subject the presentto additional political strain.for influence and power by partiesthe "administration bloc" is likely to reduce further the political viability of the regime and to increase the threat of military

Nevertheless, we believe that the delicate balance that exists among the competingand the great risks Involved for any element that attempts to upset this balance make it likely tliat the present situation oftension and Instability will continueKubitschek will probably be able to stay in office over the next two years. However, the great political handicaps under which he labors are likely to continue. It is unlikely that he will be able to build up disciplined pci'.tical support in congress or to curbthe army's political influence.

The Communists will probably continue to display an ambivalent, opportunistictoward the present regime. The party will continue to exploit social discontent and anti-US nationalist tendencies. It has no prospect of gaining direct control of Brazil by electoral means or by force within the foreseeable future. However, the persistence of political tension and instability In Brazil will enhance Communist opportunities totheir influence.

Inasmuch as Brazil is so highly sensitive to and dependentumber of virtually unpredictable international economicno firm estimate of domestic economic developments can beharp upswing in oil prices and transport costs, resulting from the Suez crisis, could reverse Brazil's currently favorable foreign exchangeharp price decline in coffee would quickly result in serious economic maladjustments. In this latter situation the Kubitschekmight require outside assistance in order to survive.

Assuming no severe adverse economic shocks induced from the outside, thewill probably continue to make progress in the development of basic services,transportation and power. However, the rate of economic growth is unlikely to increase appreciably over the next two years. Inflation will almost certainly persist, but will probably not exceed the high rate ofyears.

The present ad ministration will almost certainly continue to support the US on major political issues between the US and the Soviet Bloc and will cooperate with the US on most important political issues in HemisphereHowever, the persistence of ultranation-alistic influences in congress and the armed forces will continue to impede certain types of foreign investment. There may be some moderation of the recent nationalistic trend in the atomic energy field, but thepetroleum monopoly will almostbe preserved.

Brazil is likely to agree to grant the major portion of US base requirements, but only after exhausting every effort to obtainmaterial benefits. The base agreements, if concluded, will probably be subjectedoncerted Communist-nationalist attack, but we believe the Kubitschek administration, with army backing, would be able to weather such an attack.

POLITICAL BACKGROUND

political history over theentury has centered around the late President Gclullo Vargas. He was an astute politician who shrewdly manipulatedfactions and successfully posed as the friend of the common people. During his first period inethe quasi-fascist "New State" as an ideological facade for his strong personal rule. He espoused cultural and economicestablished federal control over the states, abolished political parties, suppressed allof both the left and right, encouraged government Intervention and Initiative indevelopment, promotedconcerned himself with amelioration of the living conditions of the urban masses, extended the franchise, and sought toand control urban laborolitical force through government-sponsored labor unions. It was during this period that urban lower income groups began to become anfactor In Brazilian politics.

n responserowingto totalitarianism, the Brazilian army quietly deposed Vargas and established afree political system with OeneralGaspar Dutra as constitutionally elected president. The two principal political parties which emerged were the moderate SocialParty (PSD) and theNational Democratic Union (UDN) Both were heterogeneous In composition, but received their direction primarily from upper middle class elements. The PSD was led by men who had been prominently associated with Vargas in the "Newhile many leaders of the UDN had opposed Vargas.

Largely because the Dutra administration Called to cope effectively with the growing economic hardships suffered by lower middle class and labor groups. Vargas was able toolitical machine centered around the Brazilian Labor Partynd win0 presidential elections. However, he was no more successful in coping with Brazil's mounting economic difficulties than hishad been. By adroit politics, Vargas was able for four years to withstand strong moderate-conservative opposition. However, ininding himself unable to stop the country's rapid economic anddeterioration and confronted with the direct threat of intervention by the armed forces, he resigned under pressure andsuicide.

Political power In Brazil then passed to moderate-conservative civilian forces backed by military leaders interested primarily In preserving political order and establishedThis new regime, headed by former Vice-President Cafe FUho. was expected to enact the unpopular measures required tothe deteriorating economic situation and to curb the growing labor-leftist political trend. However, President Cafe provedor unable to exert decisive leadership. Instead hearetaker role, and his brief administrationas dominated by the presidentialcampaign. During this period political leaders maneuvered frantically to form party coalitions and find candidates for thecapable of attracting popular support and acceptable to the armed forces, andfour slates of candidates were

The Kubitschek-Ooulart ticket, backed by the PSD. the leftist PTB, and thewon5 presidentialalthough Kubitschek receivedhird of the popular votes. His principal opponent, General Juarez Tavora. theof the UDN and most of the armed forces and conservatives, polledercent. More than one-quarter ol the votes were cast for Social Progressive Party (PSP) candidate Adhcmar de Barros. who was competing with

Kubitschek for the late President Vargas' labor-leftist following.

PSD leader Juscelino Kubitschek. at the time of his election, had overearsIn local, state, and national politics,eputation as an ambitious, effective politician and able administrator. While he had held appointive office under Vargas, he was not closely associated with the Vargas regime. Much of Kubitschek's appeal to the electorate stemmed from the confidence he conveyed in Brazil's economic future. This also enabled him to secure the strong support of nationalists, including financial backing from large commercial-industrial interests. However, as he was relatively unknownhis home state of Minas Gerals, he had to rely heavily upon the PSD machine to deliver the rural vote and upon his alliance with the PTB to ensure the allegiance of the urban working class.

PTB leader Joao Goulart. who wasconsidered Vargas' heir, wasell-known, powerful, national political figure prior to the elections. He controlled the PTB bloc in congress, and, more than any other Individual, commanded the loyalty of the urban working classes. Despite PTB-Commu-nist rivalry for control of the lower classes, Goulart had at times collaborated with the Communists, and this largely explained why the Communists supported the Kubitschek ticket. Though he began to cool toward his erstwhile Communist colleagues soon after the election, he was still regarded withby the bulk of the army and remained unacceptable to the air force and navy.

olitical tension, already severethe campaign, mounted during the weeks following the election. The more moderate opposition elements pressed technicalto the Kubitschek-Goulart victory andormal appeal to the Supreme Court. However, extremist forces, bothand military, openlyoup to prevent the victors' Inauguration While there was little enthusiasm for the winning ticket among the military. War Minister Lott insisted that the armed forces should abide by the results of the election. Apparently convinced that an anti-Kiibitschek-Gou!art coup was imminent, Lott on5ounter-coup which placed the army In effective control of the Brazilianuntil Kubitschek's Inauguration.

The Brazilian armed forces, organized and trained on US lines, have an over-all strength of. Theonsistsrmoredirborne division nucleus, and numerous separate combat units and supporting troops- Inthere0 militarized police available tor local and regional use. The navy,ersonnel strengthombat forceightldandervice, patrol, and auxiliary vessels. It is scheduled to receive twoon loan from the US and hasan aircraft carrier from the UK. The air force,ersonnel strength of more0ighteconnaissance,ransport squadrons. It hasircraft,et fighters.

The operational effectiveness of the armed forces has increasedesult of theirand operational experience with US forces hi World War II and of theof US military missions, and is high by Latin American standards. Over-allis impaired, however,ack ofsupport facilities, poor maintenance, and general obsolescence of equipment, and dependence on foreign sources for resupply of material, munitions, and fuel.

Brazil participates in the Inter-American Defense Board andilaleral military assistance agreement with the US. The latter document specifies that Brazil will, as aof primary responsibility, defend its coastal sea communications and defend and maintain air communications, including the bases and air facilities ol Its air force located in its territory. Particular attention is to be given to the routes and bases between Recife and the Brazil-French Guiana frontier. InBrazil is to provide certain units which will assist the United States in the protection of the Panama Canal and the sea and air communications in the Caribbean Sea,the territorial waters of other states. With NfDAP support, the equipment andof these units is being improved.

The Brazilian armed forces are adequate to maintain internal security and to deter aggression by any neighboring power. They could notajor overseas invasion without US assistance. In the event ofwar they could probably protectImportant installations and facilities from extensive sabotage and from possible raids. The Brazilian navy and air force have limited convoy escort and antisubmarinecapabilities, but effective patrol of the long Brazilian coast would require the active participation of US forces. With US logistic support Brazil couldmallforce.

THE COMMUNISTS

stimated PCB strength. The presently reduced estimate Is Based, not upon an actual decline In PCB membership, but rather upon more reliable6

' The foUowing map shows more fully theof Communist strength In Brazil.

The illegal Communist Party (PCB) is the largest in the Western Hemisphere. It is now estimated to0 membersuch larger number oft is well-organized and well-financed. It draws its chief support from urban labor and lower middle class groups, although the leadership of the party is composed largely ofmen and Intellectuals. TheParty not only maintains numerousfor the dissemination of propaganda but also runs an extensive school system for the Indoctrination of party cadres. Itsstrength is concentrated in and around the city of Rio de Janeiro, and the important state of Sao Paulo.1

The Communists have had some success in infiltrating various agencies of theespecially the Ministry of Labor. That the military has also been penetrated isfrom the known Communist sympathies of some lower-echelon army officers. TheBrazilian National Security Councilto suspend Its atomic minerals prospecting and sales agreements with the US was partly the result of Communistin government agencies and in the army. Communists have also infiltrated severalorganizations. The ability of the PCB to direct student activities to their ownends was demonstrated in the violent Rio de Janeiro streetcar riots of

The basic PCB objectives appear to be to strengthen international Communism, and more particularly, to serve the interests of the USSR by weakening the US position in Brazil. The Communists attempt, at every opportunity, to impair relations betweenand the US, to neutralize Brazil as an effective component in the military defense of the Hemisphere, to prevent or hamper the procurement of strategic materials by the US in Brazil, and to promote Ineutralist position in inl-ernational relations.the announced objective of the PCB is the formationdemocratic peoples'based on an alliance of urbanand peasants. To this end they haveirulent attack on "feudal" landholders and pro-US domestic capitalists, whom they describe as "servile instruments of North Americanhey are willing to cooperate with any group which endorses all or part of their program.

resent Communist strength is insufficient toerious threat to theregime. Although Communist labor leaders stillinority in the trade union organization, they have considerable influence within many important local unions. The PCB lacks the dedicated popularwhich would enable it alone to seize the government by force. Nevertheless, thecontinue to exert their influence on both Brazil's foreign and domestic policies by exploiting the nationalist tendencies anddiscontent In the non-CommunistIt is too early to determine what effect the results of the XXth Congress of theParty of the Soviet Union, the de-Stalinlzatlon campaign, or the revolt inwill have on Party capabilities. TheParty line will probably be determined at the Fifth Congress of the PCB, for which preparations are now in progress.

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Brazil's principal economic lies are with the US. Trade normally amounts tonnually, which amounts tof Brazil's total trade, and US private investment in Brazil Is overillion. The US is Brazil's most Important -source of needed financial and technical aid. The Exlmbank has authorized credits of0 million in the past Ave years. Brazil also receivesassistance for economic development undergreements signed5 andnthe International Cooperationfurnishes technical assistance.

Brazil's trade with the Smo Soviet Bloc,exclusively with Czechoslovakia, Poland, and Hungary, doubledillion5 as comparedhis still amounts to only three percent of Brazil's total foreign trade. Trade with the Bloc6 has continued to expand butuch less rapid rate thanuring therazil's trade with the Soviet

Bloc amountedillion, or four percent of total trade. Brazil's trade with the Sino-Soviet Bloc Is not likely to Increase appreciably over the next two years.

illi Western Europe Brazil is attempting to increase its commercial ties in order to strengthen its International economicBilateralism is being abandoned inof multilateral arrangements in Western Europe. Inrazilumber of Western European countries established the Hague Club, modeled after the European Payments Union. The Hague Clubmeans that in trade with Brazil, the currencies of the West European countries are freely Interchangeable, so that thefor Brazilian exports and sources ofof Brazilian requirements are considerably extended. The Kubitschek administration is continuing the policy of the previousin attempting to broaden commerce with nondollar areas.

Original document.

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