1941: Brazil

Political Situation.

The Vargas administration is now in its tenth year. The 1937 Constitution, creating a corporative state, the Estado Novo, and extending President Vargas' term indefinitely, has not yet been submitted to the promised plebiscite and is, therefore, in suspension. Still continuing the state of emergency proclaimed after the 1937 coup, the President has centralized control in his own hands and instituted a personal rule which bears the distinct earmarks of dictatorship. Government by executive decree, official control of press and radio, the annulment of court decisions, the use of secret police, the abolition of political parties — all these characterize the present régime. Yet the standard of living has been raised, better health standards introduced, illiteracy reduced somewhat, and social legislation profitable to the masses decreed. Hence President Vargas has the support of the masses. Communism is ruthlessly suppressed. What opposition exists is found among the intellectual élite. Reasons of national defense may, in part, explain the relative lack of internal division. Even the traditionally hostile Paulistas seem reconciled to the régime.

Foreign Policy.

Dictatorial though the Vargas rule may be, Brazil's foreign policy, as indicated in several public utterances of the President during 1941, clearly favors the democracies in the world line-up. The pro-United States attitude of the Government is especially significant in the case of this Latin American neighbor because of its strategic position, the 'bulge' of South America making Natal, in Brazil, much closer geographically to Europe than to the United States. From Dakar, on the West African coast, to Natal is only about 1,600 nautical miles, or six to seven hours' flight for a fast bomber, whereas the distance from Natal to New York is some 3,600 miles. This puts Brazil in a key position in hemisphere defense, and explains the lend-lease agreement signed Oct. 1 for about $100,000,000, the largest single loan to any Latin American country in recent years, which is to be applied to defense purposes. It accounts, too, for the South Atlantic bomber ferry announced by President Roosevelt in August. It gives prime importance to the United States' blacklisting, in July, of the Condor airline, a subsidiary of Lufthansa, and of the Italian trans-Atlantic Lati, which links the Axis powers with South America. The Brazilian Government keeps close watch on the German Condor, and a Brazilian subsidiary of Pan American Airways, Panair do Brasil, flies nine-tenths of Condor's mileage. Moreover, Condor and Lati services are both being crippled by lack of fuel, Standard Oil of Brazil having cut off all gasoline supplies immediately following the United States' entry into the War.

In his address to the nation Dec. 31, President Vargas declared Brazil's 'solidarity with the United States.' Unquestionably, Brazil's decision seems to have been to cast in its lot with the United States, although, unlike the Caribbean and Central American republics; it had not declared war on the Axis states. By a decree of Dec. 9, President Vargas froze Axis funds in Brazil, and steps have been taken to muzzle the pro-Axis elements of the press.

Even before war actually came to the Western Hemisphere, Brazilian troops, cooperating with the United States, reinforced the garrisons on the southern boundary of Surinam (Dutch Guiana), to maintain 'military vigilance,' when, on Nov. 24, by agreement with the Netherlands Government, the United States established a base there, thus completing the string of Atlantic bases from Iceland south. The official reason offered by the United States was protection of the important bauxite mines, which furnish over 60 per cent of the requirements of the United States' aluminum industry. Surinam's proximity to the 'bulge' and to French Guiana, and the colony's potential air threat to the Panama Canal and to South American shipping lanes if controlled by the Axis, add further strategic significance to this move.

The third Conference of American Foreign Ministers, called by Secretary Hull in accordance with Article 15 of the resolution for hemispheric defense adopted at Havana, met in Rio de Janeiro Jan. 15, 1942. Undersecretary of State, Sumner Welles, represented the United States. The chief question before this consultative gathering was a joint cessation of diplomatic relations with the Axis powers on the part of the twenty-one American republics. The agenda included both political and economic matters. The measures adopted by the Rio Conference (1) approval of the Atlantic Charter which had been proclaimed by President Roosevelt and Prime Minister Churchill; (2) a resolution calling for the suppression of wire and radio communications with aggressor nations, which was approved over the objections of Brazil and Chile; (3) the setting up of an Inter-American Economic Committee in Washington to study inter-American economic problems and post-war planning, and (4) the severance of political, diplomatic and commercial relations with the Axis by all of the South American nations. This last measure was carried out by all of the nations involved except Chile and Argentina. (See also NEW WORLD ORDER.)

Trade and Finance.

The export licensing system especially affected Japan's trade with Brazil, which assumed considerable importance during the year, both as a Japanese source of strategic materials, especially mica, and as a means, via transshipment, of lessening the restrictive measures adopted by the United States on its trade with Japan. The Japanese Empire became Brazil's best cotton customer, and the upward trend of cotton sales, principally to Japan, China and Canada, is one of the reasons for the marked improvement in Brazil's foreign trade in 1941, which shows a favorable balance of over $70,000,000. Closing of the Far Eastern market now creates anxiety over the disposal of this year's bumper crop. Western Hemisphere markets have absorbed increasing amounts of Brazilian products, however, 80 per cent of 1941 exports going to the Americas as compared with 51 per cent in 1940. Recent trade agreements with Chile, Paraguay and Argentina (See ARGENTINA) point to an expansion in sales to South American neighbors. In July, the United States agreed, for two years, to buy the entire export surpluses of fourteen strategic materials. North American defense needs have created a heavy demand for Brazilian manganese, iron ore, crystal quartz, mica, industrial diamonds and rubber. Shipping problems loom large, however, necessitating the conditional purchase of Axis ships in Brazilian ports. On Dec. 8, the Government announced that Italy would permit conditional purchase of eight Italian vessels tied up in Brazil, to be returned after the war.

The favorable trade trend has strengthened the milreis. The national currency has also been strengthened by the gold purchase program, inaugurated in 1933, which resulted in a gold coverage at the end of July 1941, of 27 per cent on banknotes then in circulation. The improved foreign exchange situation is further reflected in the reduction of the external bonded debt.

The Inter-American Coffee Agreement established in 1940 was put into operation April 15, 1941, with the signature by eight Latin American coffee-producing nations and the United States of a special protocol, which will run until October 1943. The decision on Oct. 23 to reduce the 1941-42 coffee quotas to 110 per cent of the basic allotment agreed on solved satisfactorily a serious problem before the Inter-American Coffee Board.

The total amount of coffee permitted to enter the United States during the quota year ending Sept. 30. 1942 is fixed at 17,640,255 bags, as compared with 16,239,240 bags for 1940-41. Of this, 17,246,431 bags may be shipped by the American republics: the small balance by non-signatories of the Coffee Agreement. Current price levels are about 100 per cent above the rock-bottom rates of the early months of 1940, and will yield a larger coffee income this year for Brazil in spite of the short 1941-42 crop, the smallest in years due to drought in the São Paulo region. A sacrifice quota, fixed at 35 per cent of the total, will be purchased by the government and either destroyed or put to a new and encouraging industrial use, the production of a plastic, called cafelite, which is already begun in a government experimental plant in São Paulo. If successful, this use of Brazil's troublesome coffee surplus will save the Government an annual loss of about $20,000,000. The basic weakness of the coffee quota system is its failure to hold production down to approximate world requirements.

Nationalistic measures against foreign capital have been eased twice during 1941. A September decree amended the constitutional ban on the foreign ownership of mines. In the same month the decree of April 9 prohibiting foreign banks from accepting deposits after July 1946 was revoked. The principal banks affected are the National City Bank of New York, the Royal Bank of Canada and the London South American Bank.

New Developments.

A huge land reclamation project in the Baixada Fluminense, marshy territory around Rio de Janeiro about the size of New Jersey, is to be completed about 1945. It is part of a program to remove the hazards of a monocultural economy, in Brazil's case hitherto based on coffee, and is designed to eliminate the heavy food imports from São Paulo and Minas Geraes to the Rio district. The rubber potentialities of the Amazonas area have interested the United States Departments of Agriculture and Commerce, which have cooperated in a plan for the promotion of agricultural settlements in that region. A Rockefeller Foundation report that the ten-year fight against malaria and yellow fever was meeting with success lends encouragement to hopes of opening up tropical Brazil. See also CHILD LABOR; PAN-AMERICAN AFFAIRS.