Pause for Retrenchment

Two years ago, in a hopeful effort to modernize Brazil's patchwork economy, the U.S. and Brazil set up a joint commission in Rio to pass on rail, electric power, and other projects suitable for development loans. In the spacious cordiality of the hour, U.S. officials predicted that the joint commission's work would bring Brazil from $350 to $500 million in loans from the U.S. Export-Import Bank and the World Bank. Last week, with only $122 million in such loans granted, the U.S. prepared to wind up the commission and send its members home.

Though Brazilians had known about and even assented to the liquidation as long ago as last November, they protested loudly when they saw that the U.S. was quite serious about it. 'U.S. BREAKS ITS PROMISE OF ECONOMIC AID,' headlined Rio's Correio da Manha. Foreign Minister Joao Neves da Fontoura voiced official dismay. Some Brazilians even talked angrily of denouncing the mutual-defense pact with the U.S.

By week's end Washington had relented somewhat. Though most of the technicians were already heading for home, the U.S. agreed to prolong the life of the joint commission for another three or four months. Brazilian Ambassador Walther Moreira Salles also got word that another $48 million worth of electric-power loans would probably be granted before the end of June, and that the World Bank would open a special office in Rio to keep the bank up to date on the backlog of $226 million worth of pending loan projects after the commission folds.

Such concessions served to quiet Brazilian fears that the $300 million loan obtained last February to pay off dollar creditors might be lumped by the new U.S. Administration under the general heading of aid to Brazil, and thus used as an excuse to forget the rest of the joint commission's projects. They also helped make clear that, in the U.S. view, the basic question is not really whether Brazil should get development loans, but when. The Vargas administration would naturally like to start some badly needed projects right away. But Washington--notably the World Bank, which is supplanting the Export-Import Bank as the primary lending agency -- feels that Brazil must strengthen its currency, wipe out its trade deficit, and check credit inflation before it can take on any more debt, even for the worthiest of projects.

This file is automatically generated by a robot program, so reader's discretion is required.