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File No. 763.72113/757A
of Great Britain, France, Italy, and the United States 1 to the Brazilian Chargé (De Ipanema Moreira)
With reference to the desire which the Government of Brazil has expressed to the effect that she wished to cooperate more closely with the Allied Powers and the United States of America in the prosecution of the war against the Central Powers, and with further reference to the proposal which was made to that Government by the Governments of Great Britain, Italy, France and the United States, in order to meet Brazil's above-mentioned desires, namely: that a conference would be called in Washington of their representatives to discuss with the Brazilian Ambassador the adoption of a plan so that Brazil might utilize her resources in the most effective manner in the prosecution of the war, it is now desired to inform the Government of Brazil that conferences have been held with the abovementioned purposes in view and that the following is the consensus of opinion of the Governments of Great Britain, Italy, France and the United States:
1. That the above-mentioned Governments pending further consideration of the financial assistance which they may be able to afford Brazil either by direct loans, or by advances in respect of possible purchases of Brazilian commodities consider it desirable to impress upon the Government of Brazil the importance of taking immediate steps for the liquidation of enemy banks and other enemy concerns in Brazil.
2. For this reason it is the opinion of the Governments of Great Britain, France, Italy and the United States that the Brazilian Government should at once announce publicly its position with regard to the three German banks and all other important enemy concerns in Brazil, and should give formal assurances that these enemy interests shall be promptly and effectively liquidated, in which case the Allied Governments and that of the United States are prepared to associate themselves with Brazil in the taking over of these enemy interests and for their replacement by Brazilian and Allied organizations which will continue to afford the same support to the economic life of Brazil as that hitherto furnished by such enemy institutions. Furthermore, the Allied Governments and the Government of the United States will be prepared to give formal assurance to the Government of Brazil that at such a time as it shall be able to complete the liquidation of the above-mentioned enemy interests, or their taking over, they will be prepared to withdraw published enemy trading lists for Brazil, it being understood that
A note attached to the memorandum of Nov. 2, post, p. 355, shows that these representatives were the following: representatives of the United States-L. S. Rowe, of the Treasury Department, Paul Fuller, Jr., of the War Trade Board, J. H. Stabler, of the Department of State; representative of Great Britain—Sir Richard Crawford; representative of France—Major Grimprel; representative of Italy—G. B. Ceccato.
as a war measure it is to the interest of the Governments concerned that during the period of liquidation and taking over the trading lists should continue to remain in force as a notice to the public.
3. The Associated Governments feel that they may properly ask Brazil to take such action without delay as part of the policy which Brazil might be expected to pursue as an Allied co-belligerent. They feel furthermore that unless such action is effectively taken there is no assurance that such assistance as may be afforded by them by the purchase of commodities or otherwise will not indirectly benefit the enemy interests. As soon, therefore, as the Government of Brazil has definitely assured the Allied Governments and publicly announced such policy and procedure with regard to the liquidation of enemy interests in Brazil, and the taking over of the three German banks as hereinbefore outlined, the Allied Governments are prepared to submit to the Brazilian Government further proposals.
File No. 763.72113/767
WASHINGTON, October 31, 1918. MR. SECRETARY OF STATE: By order of my Government I have the honor to submit to Your Excellency's due attention the following telegram just received by me from the Minister of Foreign Relations in reply to that which I sent on the 23d of this month transmitting the memorandum presented on that date by the representatives of the United States, England, France, and Italy at the conference held here on the subject of the cooperation of Brazil in the prosecution of the war:
I have, as was my duty, laid before the President of the Republic the declarations just sent us by the Allied nations through the United States making the suppression of the black lists and any assistance that might be extended to Brazil in the way of direct loans or advanced payment for purchases conditional upon the immediate liquidation of enemy banks and concerns.
The Federal Government is surprised at the terms of that notification and begs leave to answer that self-interest never guided its policy and that it entered the war of its own free will, with its own resources, at a doubtful moment for the Allied arms, owing to the defection of Russia and the severe ordeals experienced on the Italian front.
The Federal Government further begs leave to remark that as early as June 7 it decided of its own accord to liquidate the enemy banks and concerns with parent firms in Germany. The Minister of Foreign Relations declared on that day that we were not deprived of definite authority for such action by the fact that, as distinguished from powers which, under the pressure of extraordinary circumstances and in accordance with their laws, had, in this war, gone so far as to take confiscatory measures, Brazil, true to her constitution and the liberal spirit of her laws, had always made it a point of honor to enforce respect for foreign enemy property and domestic business. She could not, on that account, allow herself to compromise with actions that would change her status as a belligerent, such as tolerating, on the one hand, that enemy concerns should operate here and draw from this country profits with which to carry on the war, or, on the other, that nations with which we are associated should continue to maintain in Brazil, because of our inaction, the black lists or other methods of control or prohibition which appertain to her strict sovereignty. Thus it was that the Government of Brazil, from the beginning of its belligerency, prohibited the foreign commerce of German firms, notified the ocean steamship companies not to give them space on their ships and the custom houses to hold merchandise imported on neutral vessels; thus it was also that, after canceling all the contracts of Germans with the public authorities of the Union and of the States, from the contract with the Krupp firm for army supplies down to the railway concessions and surveys, the Government de cided to revoke the German banks' license to do business, finally granting them a period of six months in which to liquidate.
Brazil continues to carry out the policy that she has followed, but on her own initiative, of her own free will, within the limits of her voluntary engagements as an Ally, without laying any claim whatsoever to the compensations that she may have earned for her attitude, and affirming once more, in this frank and friendly exposition, the solidarity of her policy and arms with the common cause of the independence of the nations. Nilo Pecanha. I have [etc.]
A. DE IPANEMA MOREIRA
File No. 763.72113/767
of Great Britain, France, Italy, and the United States to the Brazilian Chargé (De Ipanema Moreira)
The Governments of Great Britain, France, Italy and the United States fear that the reply of the Brazilian Government, presented by the Brazilian Embassy to the Department of State on October 31, 1918, is based on an entire misconception of the letter and spirit of the memorandum submitted on October 23, 1918, to the Brazilian Ambassador [Chargé] at Washington for transmission to his Government.
In that memorandum there was no suggestion that the Brazilian Government should confiscate enemy property, but there was a recommendation that steps should be taken by the Brazilian authorities for the liquidation of enemy banks and other concerns, and for their replacement by Brazilian or Brazilian and Allied organizations. This recommendation was submitted in order that it might be possible for the Associated Governments to withdraw their black lists for Brazil, so that their subjects might resume trading transactions with Brazil without fear of infringing the laws of the respective Associated Governments as to enemy trading; and furthermore, that the Associated Governments themselves might proceed to offer financial assistance to Brazil by way of advances or otherwise with the conviction that in so doing they would not be indirectly benefiting important non-liquidated German interests.
In proposing the plan outlined in the memorandum of October 23, the Associated Governments also had in mind the importance of assuring Brazil that her economic life need not suffer by reason of the liquidation of the enemy owned banks and other enemy owned concerns. For this reason they declared themselves ready to cooperate financially with Brazil, in order that there should be an immediate and adequate substitute for the financial and commercial services of the liquidated institutions and concerns.
The Associated Governments learn for the first time that the Brazilian Government had on June 7 taken steps under decree of November 16, 1917, for the compulsory liquidation of the three German banks and other concerns operating in Brazil, and for their replacement by Brazilian institutions. They would be glad if they might be furnished with the date of the official public announcement of such compulsory liquidation, and with the terms thereof, and they would likewise be pleased to learn whether similar action has been taken in the case of other enemy concerns, such, for example, as the firm of Theodor Wille.
File No. 763.72113/79142
WASHINGTON, November 9, 1918. MR. SECRETARY OF STATE: Having telegraphed my Government, on the 2d instant, conveying the sense of the memorandum which was communicated to me on that date by the representatives of the United States, Great Britain, France, and Italy at the conference held here to consider Brazil's cooperation in the war, I have to bring to Your Excellency's knowledge that I have just received in reply the telegram transcribed below:
The Federal Government, after giving due consideration to the reply of the Allied nations, understands that those nations did not have a knowledge of the economic means for reprisal and defense which Brazil has taken against the common enemy. Referring here only to the principal measures, we cite the following: In November, 1917, the Minister of Finance sent instructions to the customs houses prohibiting commercial relations (importation and exportation) between citizens of Brazil or foreigners resident therein and enemy subjects resident in countries other than Brazil. Also in November, 1917, by decree No. 12709, the Government instituted the taking over of the German banks, including affiliated banks, branches, or agencies in all the Republic. The instructions which were sent by the Minister of Finance for the execution of this decree invested the fiscal officers with true functions of directors of these banks. In November, 1917, by decree No. 12710, the Government of Brazil established the special and permanent taking over of insurance companies which have head offices in Germany. Also in November, 1917, the Minister of Finance organized the taking over of all enemy companies, considering as such all those more than one-half of whose capital belongs to German subjects. In the Federal Capital the taking over was entrusted to a central bureau, and in the different States to fiscal delegates of the Treasury. Also in November, 1917, the Minister of Finance instituted the taking over a posteriori of operations of international exchange with special reference to the movement of funds which might give aid to the enemy. On the 9th of July, 1918, by decree No. 13110, the taking over a priori of transactions of international exchange was instituted. On the 4th of January, 1918, in accordance with the law of the 16th of November, 1916, the Government declared void the contracts which were concluded between the Ministry of War and the firm of Krupp, of Essen, represented in Brazil by Haupt & Co. On the 6th of March, 1918, by decree No. 12907, the Federal Government canceled the contract for the building of the Santa Catharina Railroad, which had been made with the German company. On the 6th of September, 1918, by. Decree No. 13177, the Federal Government canceled the authorization for the establishment of a German submarine cable at Pernambuco. Finally on the 16th of October last, decree No. 13235 was issued canceling authorization for all the German banks to do business in Brazil and giving to them a period of six months to finish their liquidation.
The Federal Government begs leave to advance the consideration that, both on account of the institution of these measures and on account of the loyalty with which they have been executed, it is not to be understood why the black lists for Brazil should be kept in force; besides being of no necessity today they have caused a feeling of antipathy to the policy of commercial penetration and expansion of the Allies in Brazil-a policy which interests us so much that we desire to see it prosper and increase. Nilo Peçanha. I have [etc.]
A. DE IPANEMA MOREIRA
WASHINGTON, December 28, 1917, 5 p. m. Your December 6, 12 noon. Department has given careful consideration to question of Upmann's bank and feels that it can do no
* Not printed.