LBJ LIBRARY Mandatory Reviewocument tt 3
03
3
INTELLIGENCE ESTIMATE
Situation and Prospects in Brazil
Submitted by the DIRECTOR OF CENTRAL INTELLIGENCE
Concurred in by tha UNITED STATES INTELLIGENCE BOARD
A* Indlcoled overleaf tO3
The following intelligence organizations participated in the preparation,
Ths Central Intelligence Agency ond the intelligence organization* of th* Depart-nenti of Stale.he Army, the Navy, Ihe Air Force, and NSA.
Concurringj.
Director of Intelligence and Reieareh, Deportment ofDefense Inlelllgence Agency'?a'v Chief of Staff for Intelligence, Department of IheChief of Naval Operation!e lie of theChief of Staff, Intelligence,jfis of the National Securlly Agency"'
The Atomic Energy Commbsion Representative to the USIB, and the Assistant Director, Fedtral Bureau of Investigation, the subject being outsida of their jurisdiction.
.it
NATIONAL INTELLIGENCE ESTIMATE
Situation and Prospects in Brazil
TABLE OF CONTENTS
Page
I. THE BRAZILIAN
n. THE POLITICAL
The Qoulart 3
Supporters, Oppositionists, and 5
The PoUUcal 7
m. THE ECONOMIC 8
Strengths and Weaknesses ot the Brazilian
The Foreign Payments 9
The Inflation
The Administration's Response 10
Trade with the Soviet12
Economic12
IV. BRAZILIAN FOREIGN13
V. THE BRAZILIAN15
16
situation and prospects in brazil
CONCLUSIONS
evidence concerning President Goulart's objectivesand conflicting, but he is essentially an opportunistand associations are populist and leftist.Communists and their sympathizers have achievedposition from which to carryontinuinginfluence over Brazilian policy. QoulartPeronhis political power upon the labor movement,Is possible that he would, if he could, try to establish athat of Peron or Vargas or even one more
hrewd political manipulator whoolitical scene of great complexity andprobably can continue for some time the balancing actcarried on to date, but he has not shown himselfin resisting strong pressures, particularly from thehe is likely to move further leftward if that is wherevociferous and effective political opinion hasanger that he willaptive of
further leftward Goulart may move, the greaterthe disaffection of rightists, conservatives, andThe military are reluctant to overturn aregime, but Goulart would be in great danger of aeffort if he engaged in patently unconstitutionalmajor obstacleuccessful coup attempt is thegrip which Goulart is acquiring over thethrough retirements and appointments. )
is still too early to determine how effectively theprogram will be executed. In view of Goulart's pastand political inclinations, it appears unlikely thathold the line steadfastly against attempts to watervarious commitments Brazil has made.
believe that the Goulart regime will seek, by aseries of actions and negotiations, neither to satisfy allother foreign requirements nor to fall so far shortUS and other foreign sources of aid would feel unablethe necessary assistance. If aid should beeconomic and political tensions would becomethere would be serious dangerrift towardEven if aid is provided Brazil in the quantitiesbelieve thereood chance that the course ofwill continue moving toward leftist solutions for itsdifficulties.
chances still favor Goulart's retirement from theat the end of the term, and there Isairhis successor will be more responsible. Nevertheless,political and economic instability of the countrystrong positions being won by Communists, extremeultranationalists will tend to push the country towarddepartures in domestic and foreign policies. Thisultimately to the establishment of an extreme leftista strongly anti-US character.
discussion
L THE BRAZILIAN PROBLEM
L The question of President Goulart's character and alms Is the principal one troubling Brazilian politics and Brazilian-US relations today. Yet. the basic problem of Brazil, which haa brought thisto the (ore. is the profound political and economic Instabilitywith rapid economic expansion, institutional weaknesses,growth, and the political awakening ot millions of people who hitherto possessed little political power andimited means of expressing their hopes and expectations.ense, all the political crises of Brazil since the beginning of the Vargas dictatorship0 have derived from this economic expansion and political awakening.
The current crisis, precipitated by the dramatic resignation of President Janlo Quadros lnas been especially acute and prolonged. Joao Goulart succeeded to the Presidency only after awith those who distrusted him, and this distrust continues. Goulart is and always has been supported by many of the same forces, particularly on the left, which formed the basis of Vargas' power.Goulartrotege of Vargas and built up his personal political strength by utilizing the funds and authority he possessed as Vargas' adviser and Minister of Labor and as Kubltschek's Vice President. He has been suspect throughout his career to the more established and conservative elements of the society, including the military, who have feared not only the man but the forces which supported him.
A plebiscite in3 restored to Goulart those powers of the President which he had surrendered in the compromise that had brought him to office. The leadership he exercises, tlio appointments he makes, the directions he takes, the problems he encounters, have placed the character and capacity of the President even more in the limelight than before.
II. THE POLITICAL SCENE
The Goulart Regime
the figure of President Goulart now looms large inthe government is by none-man regime. Thealthough itide variety of politicala major poUUcal clement. The state governmentspowers, even including that of treating with foreigncertain matters The national poUUcal parties, though looselyand combining many heterogeneous groups, neverthelesspoUUcal forces with which the President must treat. Organized
labor, despite Goulart's very great degree of Influence within It, Is not unitedingle national organization or fully responsive to his direction. The Congress must be accommodated on various Issues of financial and general legislative policy. The press, especially ln Rio de Janeiro and Sao Paulo, Isorce to be reckoned with.
One measure of Goulart's importance Is the depth and degree to which he Is criticized and mistrusted. On the right, fear and hatred of the man ia wide and deep. Some Brazilians, including many moderates, view himemagogic opportunist seeking toeronlst-type labor movement upon which toeparture from presentrestrictions and toermanent hold upon the Presidential office for his own glory and profit. Others sec his aims as even moredestroy democracy, to dissolve the alliance with the US, toevolutionary society in Brazil, to align Brazil with the Soviet Bloc.
The evidence concerning Goulart's objectives Is varied andIn both past and present, he haslose association with known Communists, he has appointed some Communists and Communist sympathizers to high office, including to his personal staff, and he hasumber of pro-US and anti-Communist officials from office. On the other hand, he has also removed leftist officials, continued to work with groups of all political complexions, and at timesoderate course. His collaboration with Communists has contributed to the expansion of their Influence ln the labor movement. However, with the Communists threatening his long-established control over left-wing labor forces, he now appears to bethird force" labor movement loyal and responsive to him. He appears to be supporting efforts to stabilize the economy in accordance with US requirements, despite an outcry from the left. He has never put forth nor sought to develop any rationale or blueprintadical reorganization of Brazilian society. Nevertheless, hePeron andhis political power upon the labor movement, and it Is possible that he would, if he could, try toegime like that of Peron or Vargas or even one more clearly leftist.
Goulart's practice of playing off one group with another wasin the3 Cabinet changes. Heonservative economist. Carlos Carvalho Pinto, as Minister of Finance, and aAmauryllva, as Labor Minister, but he also named two extreme leftists. Evandrollva as the Minister of Foreign Affairs, and Paulo de Tarso as the Minister of Education. The removal of General Kruel from the Ministry of War pleased the extreme left but the right's concern was at least partially assuaged by theof Admiral Suzano as Minister of the Navy.
the record does demonstrate more than anything elseGoularthrewd political manipulatoronfirmedwhose primary concern has been the acquisition andpolitical power. At the same time, he has few, if any,to broad policies and little comprehension of the gravefinancial problems facing his government or of the merits ofof attacking those problems. In strictly political mattersmade few, if any, tactical mistakes to date. He compromisedthe Presidency and then manipulated his way back to fullauthority. While accepting the militaryey factorBrazilian body politic, he has progressively weakened itsby removing officers from key posts and appointing others,leftists, whom he thinks win be personally loyal to him.peopleide variety of backgrounds and politicalHe has sought support from opposition parties and groupstheir leaders or representatives in his official familysome are sworn political enemies. In short. Presidentdemonstrated political skill of high order in presiding over ascene of great complexity containing widely divergentand antithetical political interests, If he has goalspower, they are not clearly discernible.
Supporters, Oppositionists, and Subversives
a political situation as complex as that in Brazil, andpolitical modus operandi of Goulart, it Is difficult to identifypolitical forces as outright supporters, oppositionists, orwho support Goulart are in fact Communists or CommunistIntent upon the subversion of the country; some whosuch as the ultranaUonalists, are occasionally extremelysome of his policies, largely because they allege them to boInsufficiently radical. Opposition to the regime seems to runpolitical spectrum, but is predominantly on the right.Goulart's supporters seem to be ultranaUonalists and leftists ofor other, but he also enjoys support among moderates,many who are friendly to the US. The greatest potentialconstitutional government in Brazil may be theextreme left now seeking to control Goulart.
the opposition, there are of course some who can beMany senior military personnel, both active and retired,oppositionists. (The non-commissioned officers Includesupporters of the regime, but they are not at presenthe governors of two key states, Carlos Lacerda(the former Federal District of Rio de Janeiro) andBarros of Sao Paulo, are active opponents who enjoy significantsupport as well as that of their own political organizations. Of
the national political parties, Goulart's own Brazilian Labor Party and the Social Democratic Party can be counted as supporters, but both contain factions opposed to him. The other two major parties, theDemocratic Union and the Social Progressive Party, are opposition parties, but both contain factions cooperating with Goulart.
The Communlit Party has been illegal7 but has gradually acquired considerable freedom of operation. It has only0 members andympathizers. This is fewountry0 inhabitants0 eligible voters. Yet, the party and its sympathizers possess an influence and subversivefar beyond that which the size of the party membership would indicate. Communists or their sympathizersumber ofappointive offices in the government, Including militaryThey hold Important posts in the bureaucracy, labor, andgroups. They virtually control three of the country's five labor confederations. Some half-dozen Communists hold congressional seats under other party labels. The Communists work with such ultra-nationalists as Leonelrother-in-law of Goulart, and, as occasion warrants, with nationalist, organizations such as the newly-created Popular Mobilization Front. The Communists and their alliestrong influencemay bo gaining controlgovernments of the city of Recife and the state of Pernambuco in the northeast.
The Communists havetrong position from which to carryontinuing expansion of influence over Brazilian policy. However, at the moment the Brazilian Communist Party probably should be classifiedupporter of the regime. One of Its prime objectives is to regain legal status. Closely responsive to Moscow control, the leadership ison-revolutionary course and Is limiting its activity to penetration and subversion of other groups and of the military and civil services, and to agitation on behalf of radical reform. The party's present emphasis upon the gradual approach lias led to the splintering oftmall revolutionary faction ofho call themselves the Communist Party of Brazil. This group and those peasant leagues which Francisco Jullao leads have received Castro's blessing and, at least until recently, financial support. The rank and file members of the Brazilian peasant leagues, including those controlled by the Communists and Jullao. appear to be primarily Interested in social and economic betterment and not in revolution.
The most Immediate threat to the Goulart regime comes from the right. Those who most mistrust Goulart's character and aims are rightist civilian politicians like Governor Lacerda, and retired military leaders like Marshal Denys. who led the opposition tohe reasons for their distrust are simple and clear; they regard himangerous leftist oroutright Communist.
Moreover, he is charged with favoring andariety ofcharacters who if not all Communists are equally dangerous. He is also deeply distrusted by the bulk of active military officers.in this group are many who have been deprived of influential positions. This conservative and rightist opposition is located largely in the populous Rio de Janeiro and Sao Paulo areas. Its only real hope for displacing the Goulart regime lies in obtaining the support ol key military elements in order to bringoint civilian-military coup.
There are two major obstacles to its success. One is theof the military toonstitutional government, and Goulart will probably continue to avoid actingatentlymanner. This deep-seated military tradition of legality clashes directly with military opposition to political extremism and anything associated with Communism. The issue so divided the officers corps1 that It was unable to prevent Goulart's succession to the Presidency. The other obstacle is the gradually tightening grip which Goulart is acquiring over the military services through theto key military posts of his own followers and of career* minded opportunists. The political views of the new Minister of War, General Jalr Dantas Rlbelro, are unknown, but he is almost certainly loyal to Goulart. Command of the First Army in the key Rio de Janeiro military district is in tho hands of leftists loyal to Goulart. Somecommands still are held by enemies of Goulart, but the gradual retirement or reassignment of senior officers is eliminating or isolating from command many who are not entirely loyal to him or are most disposed to Joinoup. Through these measures, Goulart has gone some distance toward neutralizing the power of the military to move against him.
The military constitute the only security force which couldthe regime or, alternatively, protect it from subversion from any other source. The Brazilian Armed Forces' personnel strength Isabout as follows:;nd Airhe militarized police consist of0 men and In an emergency form part ol the Army; they are, however, organized in state units and controlled by state governors. The civil police forces of0 are under state control and are not designed for dealing with major subversive action.
The Political Outlook
Goulart conducts himselfrincipal key to theBrazilian politics. If there is any clear purpose in his policy,to be to weaken the centers of opposition and to preventof new centers of power. This can explain his removal of military
leaders he deems untrustworthy, his support of extreme leftists in conservative strongholds, and his recent effort to develop ato Communist predominance in the labor movement. Hecan, tf he will, continue for some time the delicate balancing act he has carried on to date. If he continues this kind of approach, he can probably preserve his freedom of action in the political arena andightist civilian-military coup. Within this framework,it is extremely difficult to confront such important policy problems as the containment of inflation.
There is, of course, no guarantee that he can or will continue his present course. We cannot be certain that he is not already so Involved with the extreme left as to be its witting or unwitting prisoner, although this does not now appear to be the case. He may also be forced further to the left by shifting political forces which he cannot control. The Communists, extreme leftists, and iiltranationalists may succeed in organizing large and hitherto politically inarticulate groups toegree of effectiveness as to confront Qoulart with extreme pressure. He has not shown himself to be notably resolute in resisting strong pressures, and he Is likely to move further leftward if that is where the most vociferous and effective political opinion has been mobilized.
The further leftward Goulart may move, the greater will become the disaffection among rightists, conservatives, and some moderates, and at some point even those military now disposed not to interfere with constitutional government might join hi plots against the regime. If Goulart should embark upon aas an effort to close Congress and rule by decree or to prolong his term of office beyond the end of the original Quadros term in Januarycl carryby the military, those who are not close adherents of Goulart would seek to overturn him. In such circumstances It is possible that civil disturbances and even civil war might erupt. If he took actions which were not clearly unconstitutional but only of dubious constitutionality, the situation might become very confused, and the outcome would depend greatly upon the balance of political forces within the military establishment at the time.
Brazil's political future will also depend greatly upon Brazil's economic condition and upon its relationship with the US. TheGovernment Initiated, inn economicprogram designed to gain US and other foreign economic assistance. This program, as we Indicate in the succeeding paragraphs, deals with difficult problems and faces serious hazards, both political and economic.
III. THE ECONOMIC SITUATION
Strengths and Weaknesses of the Brazilian Economy. Theeconomy expanded rapidly throughout the postwar period and has considerable potential for sustained growth over the long run.01 real gross national product (GNP) increased at an average annual rate of about six percent or nearly three percenter capita basis. Investment, including foreign investment, has been large and has been concentrated in the industrial sector, whose output has expanded at an annual rate of nine percent. These very large growth rates dropped sharplyhen GNP Increased byercent Foreign investment, which contributed significantly to economic growth, has declined ln the face of nationalistic policies that increasingly limit investment opportunity and security. During this period of rapid expansion Brazilian industry made rapid strides,ln chemicals, plastics, machine tools, motor vehicles, cement, and paper.
The Brazilian economy, however, has serious imbalances.power is in short supply, transportation and communication services are inadequate, and the level of technology In much of industry is low. Food production for domestic consumption has been increasing at the rate of four percent per year, which barely exceeds the annual rate of increase in population, now over three percent, and is below the rate of expansion of urban population. Postwar economic progress, moreover, has been unevenly distributed among the major regions and economic classes in Brazil. Tho area in the triangle of Belo Horizonte-BJo de Janeiro-Sao Paulo has been the principal beneficiary, whereas in the northeast ofcontains one-third of the totalthe per capita level of GNP probably has been declining over the past decade. In the generally prosperous South the large number ofunderemployed slum dwellers is Increasing, since urbangrowth exceeds employment opportunities.
The Foreign Payments Problem. Economic expansion in Brazil has been accompanied by chronic financial crises. Brazil hasajor foreign payments problem since thes, and this is the most urgent economic problem facing the Goulart administration. The foreign debt now totals nearly S3 billion, most of which Is maturing in the near future. Payments now estimated at0 million due30 million owed to private and official US creditors. In3 Brazil had virtually exhausted its unpledged reserves of gold and foreign currency.3 balance of payments deficit is now estimated at0 million.
The present magnitude of Brazil's payments crisis is ln large part attributable to Brazil's drive for rapid industrialization and its use of short-term funds to finance long-term development objectives. Since
ne balance of payments obligation has been piled on top of another in order toelatively constant volume of Imported petroleum, semlfabrlcated metals, heavy machinery, and other products essential for urban-oriented development. At the same time, world prices for coffee and other exportsacao, cotton, and sugar) declined.of resources from export production and the use of inflation to finance development reached new heights under Kubitschek, who favored industrial production for the domestic market andew capital at Brasilia. All these factors, combined with the absence of new investment in export industries, have caused Brazils foreign exchange earnings to stagnate.esult, the country isto finance needed imports, torowing burden of currentcharges (profit remittances, freight, insurance, and commissionnd to meet heavy obligations on foreign debts.
he final year of the Kubitschek administration, Brazileficit on current account8 million.efault was averted onlyajor rescheduling of paymentsarge infusion of new credits from the US, the International Monetary Fundnd other foreign creditors. Quadras committed himselfajor financial stabilization program designed to reduce the size of the deficit on current account, but failed to implement it fully; the program collapsed after Quadros' departure. The current account deficit Increased3 million15 million
The Inflation Problem, The recent high rate of Inflation in Brazil has aggravated the problem of foreign payments, not only byexports but also by discouraging foreign investment and encouraging flight of domestic savings. The level of prices ln Brazil rose by an average of aboutercent per year during the periodThis caused little concern since politically articulate groups in Brazil have generally believed that inflationary policies are anto economic development.owever, prices have been increasing at twice the previous pace or more.rices rose by overercent, and in the first four months3 prices rose byercent.
The primary vehicle for Inflation In Brazil has been the policy of covering the budgetary deficits of the federal government throughof the money supply. Budgetary deficits grew ever larger toward the end of the Kubitschek administration, when government spending was accelerated under his "program of goals" withoutincreases in budgetary revenues.2 the government's cash deficitillion cruzeiros (well0 million at the free exchange rate which prevailed toward the end of the year) orhird of total budgetary expenditures.
The Administration's Response. Goulart took no decisive action toward alleviating the mounting domestic financial and foreigncrises until assured of restoration of the full Presidential powers. Before turning to the US for assistance Goularthree-year plan for economicrafted by aadviser. Celso Furtado, and converted by San Thlago Dantasorking program for resolving Brazil's problems. The plan sought to maintain rapid economic growth while gradually reducing domesticeven percent annual rate of growth in GNP Is to be supported by annual foreign loans and capital investmento maintain developmental imports at the levela of recent years. The rate of Inflation was to be cut back toercentercentndercent5 through various measures of internal reform, including decreases in government expenditures and increases in revenue, the reduction of subsidies, and the use of "nonlnflBtlonary" means to finance government deficits.
In2 andhile exploratory conversationsto the procurement of US assistance were being held in Brazil, the Goulart administration raised taxes on income and consumption, devalued the cruzeiro, and removed subsidies on imported wheat,and petroleum. In March, Dantasentative UScommitment of0 mill km ln support oi Brazil'sof stabilisation and development throughhiswas granted in recognition of the Goulart administration's undertaking to carry out various stabilization measures and tosubstantial assistance from the IMF from Europe and Japan. As of early June the US hadotalillion ln aid toillion of which was used to repayday short-credit loan negotiated earlier In the year. Release of further US aid remainsupon achievement of satisfactory arrangements for the purchase of US public utility properties as well as upon Brazilian performance on stabilization and the progress of Brazilian negotiations with the IMF and the European creditors. The IMF hasillion tofor declines ln export prices for agricultural products but is awaiting evidenceustained antl-lnflationary effort beforetandby agreement with Brazil.
While the stabilization plan initially appeared to meet theof Brazilian politicsof the financial crisis withoutfact It has encountered stiff politicalRestrictions on credit to check inflation have produced ain the Industrial sector of the economy, particularly in theIndustry, and have antagonized industrial and commercialThe military and public employees opposed the restriction of their wage Increase loercent as envisaged in the Dantas program. In May the administration responded by agreeing0 percent wage
increase but is seeking legislationorced loan in the form of higher Income taxes to finance this new budgetary cost. Nevertheless, theleftist-nationalist forces, led by Brlzola, are out in full cry against the administration's stabilization program, tho US-Brazilianthe negotiations with the IMF, and the negotiated purchase of foreign public utility holdings. The Issue of land tenure,roposed constitutional amendment permitting compensation forlands over an extended period of time, has also exacerbated political frictions.
Trade with the Soviet Bloc. Concurrent with its effort to resolve Its financial and development problems through US and other foreign assistance, Brazil has been exploring the possibility of broader economic relations with the Soviet Bloc. Trade with the Bloc totaledmillionhichercent of Brazil's foreign commerce. In April3 Brazilive-year trade and paymentswith the USSR to increase the value of Brazilian-Soviet tradeabove2 levelillion The agreement calls for values0 million0 million5 millionnd Brazil received concessions that could facilitate trade with the Soviet Blochole. The major commodities to be exchanged are coffee, cotton, and rice from Brazil, and petroleum, wheat, and machinery and equipment from the USSR.f the projected trade volumes are met, the USSR could provide up to one-third of Brazil's estimated Import requirements of crude oil and petroleum products.
Economic Prospects. It Is still too early to determine howthe stabilization program will be executed. The plan appears economically sound, it has been publicly endorsed by severalleaders, Including new Finance Minister Carvalho Pinto, andparts of It have already been Implemented. On the other hand. President Ooulart himself has yet to make an open and full commitment to it, and In view of his past performance and political inclinations, it appears unlikely that he will hold the line steadfastly against concerted attempts to water down the various commitments which Brazil has made.
Should major US and IMF financial aid be withheld, Brazil would be faced with critical balance of payments problems during the next two years and would be forced to take drastic measures. Much of the foreign debt might be defaulted if not repudiated, remittances would be cut and perhaps prohibited, foreign private Investment would virtually cease, and Brazil would probably resortolicy of extreme economic nationalism. Relief from remittance and debt payment obligations would permit the country to maintain atinimum level ofwith current proceeds from exports, although lower growth rates, Increased unemployment, and even more severe inflation could be expected.
The USSR, even with the collaboration of the Communistcould not be expected to fill the gap caused by the disruption of normal economic relations with the US and Western Europe. However, the USSR could at least ensure that the goals ol the Soviet-Brazilian trade agreement are met. In the event of prolonged US-Brazilianthe Soviets would probably consider that the situationufficiently attractive opportunity to lustily considerable efforts to help. They would be particularly eager to do so if antl-US agitation was widespread and led by the Brazilian Government itself. Although the USSR would be reluctant to takearge program, especially in view of its heavy commitments ln Cuba and elsewhere, Brazilian needs may be such as to permit the Soviets to make an important contribution without assuming major obligation for Brazil's economic viability. For example, the Soviets could supply much, If not all, of Brazil's oil Import requirements (equal toercent ol total Imports) although this would divert supplies from other markets. In any event, whether or not the USSR and other Communist States moved in to help, Brazilian politics would almost certainly take on an mcreasingly radical tone, US-Brazilian relations would become acrimonious at best, political tension would rise between leftist and conservative elements, and the internal political situation would become more >
Even with US aid, Brazil will have persistent economic andproblems. Programs for the northeast and for land reform will still require difficult decisions and effective administration; foodand production for export will need to be stimulated; much ol the economic infrastructure will need to be modernized and expanded. If economic growth is to bethe Brazilians are determined that it shouldcapital investment, substantial technicaland probably some kind of balance of payments support will be required for some years to come. In view of the very considerable political, economic, and social instability which seems likely to plague the country for many years, the climate Is unlikely to be very favorable for private foreign investment.
IV. BRAZILIAN FOREIGN POLICY
foreign policy and Brazilian-US relations will beaffected by such domestic developments as the extent togovernment adopts radical policies, the reaction ofand moderate forces, the will and ability of the government tothe stabilization program, and the degree to which Westerneconomic aid. It should be recalled that Brazilian foreignthe past decade has become increasingly nationalist andThe "made-in-Brazil" label was present under Vargasevident under Kubitschek. Quadros launched Brazil upon"independent" policy with much fanfare. Goulart has been less
noisy than his predecessors ln asserting Brazil's claim to international stature, but he haa continued the basic policy of his predecessors.
US-Brazilian relationsigh point during World War Jj after moreentury of harmonious relations. They have declined partly from the growing nationalism of Brazilians of all politicaland the belief that Brazil is on the threshold of great power status, and partly from the conviction that the US after Worldid not reciprocate adequately for Brazil's close cooperation during the war. Tbe decline in relations has been hastened by pressure from ultranatlon-allsts and extreme leftists who picture the US as responsible for Brazil's economic difficulties and as desirous of keeping Brazilubordinate relationship with the US. Whatever the relations which developthe US and Brazil during the next few years over financialBrazil is unlikely to abandon its national and Independentoderate or rightist regime might cooperate more closely with the US but It would continue Brazilian assertions of independence lnaffairs and leadership ln Latin America.
In particular, tho Goulart regime will probably not significantly alter Brazilian policy regarding Cuba, and Goulart might seek again to liave Brazil play the role of mediator (as ho attempted during the2 missile crisis) between Cuba and the US. He might go so far as to seek Cuba's readmlsslon to the OAS and theof diplomatic and economic relations between Cuba and other American nations. To dramatize further Brazil's aspirations forof Latin America, Goulart will probably continue to makeand suggestions for Joint Latin American action, especially on economic questions. He seems unlikely to be deterred by the fact that, except in Mexico. Brazil's ventures in Inter-American relations have aroused jealousy and not won much approval ln Latin America. In general, we believe that Brazil under Goulart will Increasingly seek to limit the scope of the inter-Amcrlcan system and toarger rolo upon the world stage.
We do not believe that the Goulart regime will align Itself closely with the Soviet Bloc. It will probably expand Its economic relations with the Soviet Bloc within economically feasible limits; indeed. It would probably be advantageous for the Brazilian economy If It could in this manner Increase Its export market and reduce its need for imports from the dollar area.
There does not seem to be much chance that Brazilian-USwill significantly improve during the Goulart regime. Indeed, further deterioration could result, not only from circumstancesexecution of the financial agreements, butariety of other matters as well. Goulart will be particularly susceptible to
sure from leftist and ultranatlonalist elements and will probably follow anti-US courses on such questions as measures designed to isolate Cuba, some aspects of the Alliance for Progress, and the status of US-owned enterprises.
V. THE BRAZILIAN FUTURE
The longer term futureBrazil dependsariety ofevolving character of Brazilian politics, the manner in which economic problems are attacked and the degree to which they arc surmounted, and the way in which Brazilian-US and Brazilian-Soviet relations develop. The character and alms of the Goulart regime and the execution of the US-Brazilian financial agreements will greatly affect the character of these longer term factors.
As we have indicated, Goulart is essentially an opportunist whose inclinations and associations are populist and leftist His political power rests heavily upon the labor movement, and he Is subjected to heavy pressure from extreme leftists and ultranationalists. If,esult of these Inclinations and pressures, he cannot or will not prevent the Brazilian stabilization program from falling short of US requirements, and ifonsequence needed foreign assistance Is not provided,economic and political tensions will indeed become critical. In this event, official pique and leftist pressure might cause Brazil to move rapidly down the path toward ultranationalism and an authoritarian solution,onsequences for US-Brazilian relations. On the other hand, It could also lead Goulart and his associates to take the drastic measures necessary to meet US and other foreign requirements.it could also leadoalescence of conservative and moderate elements in an effort to remove Goulart and toegime more likely to win foreign confidence and to carryore austere economic policy.
We are inclined to believe that if needed foreign assistance should not be forthcoming and particularly if current aid should be cut off, there would be serious dangerrift toward authoritarianism. The extreme outcry against the US which would come from theand extreme leftists wouldesponsive chord in many shades ol Brazilian opinion. Most Brazilians are nationalists and have long felt some disappointment about the extent of US help to Brazil, and the economic hardships and dislocations which would resulteepening economic crisis would affect large numbers of peoples ln all classes. It would, therefore, be difficult to mobilize much support for an effort to remove Goulart in what would appear as an effort to please the US, and it would be much easier to gain support foras repudiation of debts, seizure oi US properties, andcooperation with the Sovietwould discomfit the US and move Brazilian policy further leftward.
believe that the Goulart regime will seek, by aof actions and negotiations, neither to satisfy all US andnor to fail so far short that the US and otherof aid would feel unable to provide necessary assistance.aid is provided Brazil In the quantities needed, we believe there ischance that the course of Brazilian politics will continueleftist solutions for its Internal difficulties.
believe that the chances still favor Goulart's retirementPresidency at the conclusion of his constitutional termnd that there isair chance that his accessor winmore responsible and perhaps more steadfast in adheringand hemispheric cooperation. On the other hand, thepolitical and economic Instability of the country and thestrong positions being won by Communists, extremeultranaUonalists will tend to push the country toward morein domestic and foreign policies. This could leadthe establishment of an extreme leftist regimetrongly
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DISTRIBUTION;
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