1938: Brazil

No single problem in the Latin-American situation received greater prominence in the press during 1938 than the growth of totalitarianism. The spread of Nazi and Fascist influence, along familiar propaganda channels, became well-nigh universal in the Western Hemisphere south of the Rio Grande. Frequently, as in the case of Mexico, it increased with the negotiation of barter-trade agreements. That it struck at the very roots of Pan-Americanism was apparent throughout the deliberations of the Eighth Pan-American Conference at Lima, from which emerged the Declaration of Lima, affirming the solidarity of the Americas (see PERU: PAN-AMERICAN UNION). Moreover, attempts of any non-American power to undermine democratic institutions in this hemisphere are essentially thrusts at the Monroe Doctrine which, in its implications, may be interpreted as insurance against 'Ideological' as well as armed aggression, from either Europe or Asia. The New Regime. In no American country was the threat to liberal principles and democratic institutions brought so sharply to focus as in Brazil where a new regime, bearing many of the earmarks of the totalitarian state, had been set up at the close of 1937. An analysis of the new constitution and of public expressions of President Vargas and of his representatives leads to the conclusion that the basic philosophy, the 'ideology,' of the present regime bears strong resemblance to that of the corporative states of Italy and Germany. The point open to question is the degree of foreign influence behind this development. Or is the new authoritarian state in Brazil an indigenous growth? A belief in the obsolescence of liberalism is set forth in the statements of the Committee of Doctrine and Divulgation of the Regime, an official propaganda body: 'Liberalism no longer corresponds to the new sense of life'; 'Liberal democracy has gone bankrupt'; 'Individualism now is dead'; 'In the authoritarian democracy the state is not the enemy of the citizen as it was always considered in liberal democracy.' In a press interview at the end of 1937 President Vargas declared, 'The new system is the consecration of authoritarian government.' He has called his government 'neither Fascism nor Communism but democracy moulded to Brazilian necessities.' Francisco de Campos, a leading figure in the Vargas Cabinet, in an interview to Corrcio de Manha, set forth the philosophy of the new state as follows: 'Liberty in the corporative state is limited on the surface but guaranteed in the depths. It is the liberty of individual initiative within the corporation. . . . The individual has the right to services and wealth, and the state to assure, guarantee and promote the enjoyment of these services and this wealth; which include the right to engage in creative activity, to a job, to an adequate standard of living, to security, to education . . . 'To assure and insure these, the state must exercise effective control over all economic, social, political, and educational activities. . . . Central power is no longer the enemy but the servant of the citizen . . . 'Freedom of thought and of teaching cannot be confused with the lack of social and educational values and aims, unless humanity were to be compared to an academy of anarchists. At some point, some faith, belief or dogma insinuates itself into education. . . . Recognizing this, the state has assumed the function of tracing the norms which the education — physical, intellectual and moral — of youth must obey.' These statements leave little question as to the official break in Brazil with its former political traditions. Moreover, the pattern of the new state, in many respects, follows familiar totalitarian lines. It is a no-party government, the Integralistas or Green Shirts, to whom Vargas was heavily indebted for the success of his November coup, being now outlawed along with all political parties. It has strong military backing (nothing new in Latin-American history), the second most important figure in Brazil today being Gen. Aurelio Goes Monteiro, Chief of Staff of the Army. It is government without representation, the Federal Congress as well as the State legislatures and municipal councils having all been abolished. It is strongly centralized, the powers of the hitherto virtually autonomous State governments having been sharply curbed, and the functions of government being largely concentrated in the hands of the President, making for a highly personalized dictatorship. It is intensely nationalistic, with important economic controls wielded by the Government, as in the corporative state. And yet the Vargas regime has been at some pains to make clear that its government is not Fascist and that it is entirely free, even in its philosophy, from Nazi or Fascist influences. In a special statement to the press at the time of the first anniversary of the new regime the President said. 'Brazil will continue its policy against foreign `isms.' The actions of my government clearly show that. It repelled the 1935 Leftist attempt; it repelled the 1938 Rightist. Thus Brazil is free from any exotic ideology.' Its suppression of the Integralistas, Brazil's indigenous brand of Fascism, once the 1937 coup was effected, was indicative of its desire to make unreasonable any allegation of Fascist tendencies. The suspension in January of the deportation orders against some 800 or more Jews, mostly from the German Reich, who were in the country illegally, is further evidence not only of a lack of anti-racialism, but of a desire to establish its freedom from Nazi influence. The Government's action in April against German propaganda activities in South Brazil, where there is a large concentration of Germans, demonstrates a lack of sympathy with the Nazis. These measures, effective in Rio Grande do Sul. Santa Catharina and Parana, where the German element has never become culturally assimilated, call for the teaching of Portuguese and of Brazilian history and geography in the private schools, of which in one state alone there are over 2,000; require that the teachers shall be Brazilian born; insist on the display of the national flag in all schoolrooms and ban all foreign symbols; and prohibit subsidies either from foreign governments or organizations. Finally, a decree of April 19 forbids foreign residents to engage in political activities or to take part in public demonstrations. Internal Difficulties. The necessity for these measures indicates the amount of totalitarian propaganda to which Brazil is being subjected, not only German but Italian as well. The Nazis have a rest-dent commissioner in the country, and on the German Embassy staff is an 'Attache of Nazi culture.' There are fifteen Nazi newspapers, although a recent decree, prohibiting circulation of foreign-language newspapers in rural areas, will considerably reduce their effectiveness. As elsewhere in Latin America, press and radio are used to disseminate totalitarian propaganda, both Italian and German. In an effort to counteract these influences a series of pro-American supplements was published this year by Diario de Noticias, one of the leading newspapers of Rio de Janeiro. The development of Fascist propaganda in South America has been the subject of investigation by the United States Department of State, and plans are afoot, largely involving the radio, to meet its inroads by the promotion of more intimate cultural relations with Latin America. The most serious internal threat to the Vargas regime came from the Integralistas, who, though outlawed, were still active. The movement claims a membership of a million to a million and a half. Ideologically full of contradictions, it is united by two definite ideas, hatred of Communism and a belief in totalitarianism. It represents the first successful attempt in the history of the Brazilian republic to form a national political party. It was begun in 1925 by Plinio Salgado, who is still its chief, though now a refugee in Uruguay. It grew to national proportions after the 1935 Revolution, although its Green Shirts and 'sigma' flag first appeared at the time of the São Paulo revolt of 1932. It was a formidable force in the presidential campaign which the Vargas coup terminated. There seems to be little evidence of either German or Italian financial support, though it is rumored that a more extreme faction, backed by foreign interests, was responsible for the revolt on May 11. President Vargas declared that the uprising had 'foreign help,' and open charges of German complicity were made in both the Brazilian and Buenos Aires press. The revolt was put down after a few hours fighting. Within a week over 800 arrests had been made, and those found guilty by the National Security Court were sentenced to not more than ten years imprisonment. Another plot to assassinate high officials in the Vargas regime was reported by the Minister of Justice in October. Government Measures. The outstanding measures of the present government have been suspension of payments on the foreign debt, one source of conflict between President Vargas and his liberal Foreign Minister. Dr. Oswaldo Aranha, who tried to resign in June; the abandonment of the coffee valorization scheme; the reduction of the power of the States, leading at one time to ceremonial burning of State flags; the reorganization of the government service in the interests of economy, and as an effective means of breaking up political rings; and the undertaking of a large armament program. Brazil's nationalistic tendencies, not new to this regime, are expressed in the recent move to give effect to the Constitutional provision regarding 'nationalization' of the insurance companies and banks (nationalization in Brazil meaning not public ownership but control by Brazilian shareholders); in the decree of April 20 nationalizing the oil-refining industry; and in President Vargas' attitude towards foreign capital, which is one not of hostility but of restraint, with Brazil the prime consideration and the profits of capitalist exploitation secondary. In February the President issued an appeal for Brazilian capital to finance the extensive program of national development. A minimum wage decree was signed May 1, regional commissions being created at the same time to investigate living standards and costs and to recommend minimum wages for all workers. Immigration restrictions were relaxed in May, when a new immigration law, effective Dec. 22, was issued, permitting the entry of larger numbers but by a selective process, favoring agricultural workers. The new law will prevent the formation of one-nationality foreign settlements and regulates elementary education in these settlements. Bilateral treaties with countries of emigration are permitted, and the State of São Paulo, which needs 300,000 workers, especially in the cotton fields, may employ its right to propose such a treaty to renew Japanese immigration, cut to only 4,000 a year by the 2 per cent quota. Economic Problems. The chief economic problems of Brazil center on the production and marketing of coffee and cotton, which account for nearly 70 per cent of its agricultural output and export. In November President Vargas reported that his coffee policy had been so successful that he did not expect a surplus from the next crop; if true, an astonishing achievement, since the destruction of coffee in 1937 reached a high of 17,196,428 bags, making a total of 56,728,914 bags destroyed since June 1931. Coffee exports for 1938, as announced by the National Coffee Department, totalled 17,800,000 bags, an increase of more than five million bags over the 1937 figure. The removal of restrictions by the abandonment of the thirty-year old valorization scheme, in which Brazil is estimated to have sunk over $1,000,000,000, has caused consternation among competing coffee-producing nations, particularly El Salvador and Colombia, who are attempting to secure a new price-fixing agreement. Brazil is likely to cooperate only if it is assured of a quota of at least 15,000,000 bags, or 60 per cent of the world's consumption of coffee. The effect of the Government's coffee policy was to reduce the price of Brazilian coffee abroad by about 30 per cent. Cotton figures heavily in the trade with Germany, which has been so successfully promoted as a result of its barter agreement that the Reich and the United States are running a neck-and-neck race for Brazil's import trade. The barter treaty negotiated in 1935 expired in July 1937, but its terms continue in effect by 90-day extension. A new treaty has been drafted, and has been urged by the cotton interests, but at the end of 1938 was still unsigned. The system of commercial transactions in compensation (Aski) marks, by which Germany exchanges its manufactured goods for Brazil's raw materials up to fixed quota limits (the annual quota for cotton is 62,000 tons, for coffee 1,600,000 bags), has reduced the effectiveness of the reciprocity treaty with the United States and has been considered in some quarters a violation of its spirit. Through barter, subsidies, and long-term credits German exporters hold such a definite advantage over American exporters that, in 1937, Germany had a 24-per cent share in Brazil's import trade as against 21 per cent for the United States. The latter country continues to be Brazil's best cash customer, however, taking one-third of all of its exports and almost three-fifths of its coffee. On June 12 Brazil declared 2 trade war on Germany when it refused to accept more compensation marks, thus suspending German purchases. The reason given was that Germany had exhausted the treaty quotas, after which the trade agreement calls for payment in international currency. As a matter of fact, Brazil found itself flooded with Aski marks, the surplus being estimated at 40,000,000 to 50,000,000. The Reich, unable to pay cash, cut off its imports, and so forced Brazil's hand that on July 22 the purchase of Aski was resumed, except for cotton. In November compensated marks were again made acceptable in cotton deals as well. It has been charged that Germany resells, for cash, some of the commodities from Brazil, notably cocoa, on which there is no quota, while Brazil is paid in these blocked domestic marks, which can be liquidated only by the purchase of German merchandise. Thus the Reich unloads its surplus goods and, at the same time, gains much-needed foreign exchange. Similar trade arrangements with other Latin-American countries have caused Germany's export trade to Latin America to jump from 4.4 per cent in 1931 to 11.2 per cent in 1937, and its import trade from 10.3 per cent to 17 per cent. The government exchange control became effective Jan. 1, but soon the exchange embargo was partly lifted, and later exchange restrictions on imports from the United States were further eased. On Oct. 11 instructions were issued to give North-American imports preference over all others in allotting exchange. The Bank of Brazil found itself early in October forty-two days behind in exchange coverage, in spite of its increased export trade, due to the shortage of foreign currency caused by payment in Aski marks. (See also WORLD ECONOMICS.) Finances. A slight deficit in budgetary operations was foreseen for 1938, the Federal Government's budget for the year estimating revenues at 3,823,623 contos of reis and expenditures at 3,875,227 contos. The Budget for 1939, on the other hand, anticipates a surplus. A new decree bans supplementary budget credits in the first six months of 1939. The following statement from President Vargas with regard to the suspension of payments on the foreign debt, is of interest: 'We suspended the payment of the foreign debt owing to the existence of circumstances beyond our control. This does not mean that we will renege on these obligations. What we need is time to solve the difficulties which we did not create, and to readjust our economy, transforming our potential resources into tangible assets which will permit us to satisfy, without sacrifice, the demands of our creditors . . . The investment of foreign capital is, without doubt, an important factor in our progress, but we must not forget that such capital operates according to the remunerative possibilities found here as against lower earnings on capital in the countries of origin. . . .'