President Vargas was delighted with the deal, not least because he suspected President Roosevelt had taken a personal role in the business.31 The timing and the contents of Vargas’s Navy Day speech had been instrumental in hurrying the Americans along.32 So, too, had the Germans’ ongoing interest in the project; toward the end of the negotiations, when disputes over the small print threatened to derail the deal, Vargas merely used the letters of interest from Krupp to prod the US State Department back into line.
Vargas and Aranha, the two gaúchos, had pulled off a major coup. The final deal was hugely important for Vargas, both as a symbolic economic linkage of Brazil and the United States and as a galvanic current to jump-start his hugely ambitious five-year plan for Brazil. It would be fair to say, too, that his speech to the naval officers succeeded not only in worrying the United States, but also in boosting his popularity among a branch of the armed forces that had played an outsized role in the attempted coup in 1938. This was not President Vargas’s finest hour, but it was very close to it.
On January 30, 1941, Decree 3002 approved the construction and operation of the national steel mill and the establishment of the national steel company (Companhia Siderúrgica Nacional). Soon after the decree was signed, work began at the mill’s Volta Redonda site, only ninety miles from Rio. The initial loan from the United States through the Export-Import Bank was increased to $45 million during construction, and the total cost of construction was put at $70 million.33 It was a huge project, but by the end of World War II the plant was operational and around 80 percent completed.34 When it officially opened in 1946, it was the first steel mill in South America. The original plant was expanded throughout the late 1940s and 1950s and well into the 1960s.35
The Volta Redonda mill was not the only boon of the deal. The initial project also called for the development of new infrastructure to support the plant’s operation. Brazil’s central rail network was expanded, linking Rio de Janeiro with the plant at Volta Redonda; some parts of the network were also converted to electricity, a major step toward modernity for a country whose railways were still powered predominately by steam.36 Most ambitious of all was the construction of the city of Volta Redonda, where the staff of the plant eventually lived.37 The city had new houses, schools, hotels, and churches, along with the additional infrastructure required for a large, modern metropolis.38 It remains one of the lasting legacies of the Estado Novo in Brazil.
The construction of the giant steel mill and the city of Volta Redonda, however, were not the only elements of Vargas’s five-year plan made possible by the support of the United States. As 1940 drew to a close, his plans to develop the Brazilian military into South America’s most powerful army had not progressed as smoothly as Vargas and his commanders had hoped. This plan remained crucial, however, to the military leadership’s goal of effectively overtaking their old rival, Argentina, as the major military power on the South American continent. In order to do this, however, Brazil would need all the weapons it could get. And in 1940, it particularly needed weapons from Nazi Germany.
Brazil had ordered a large shipment of weapons from Germany before the outbreak of the war, and had even settled on a fee. The weapons were to be sent from Germany to neutral Lisbon via rail, and from there via ship to Brazil. In order to reach Rio, however, the ship carrying the cargo of arms would have to run the British naval blockade off the coast of Portugal—a risky prospect that Vargas hoped to avoid if at all possible. Attempts to reach a negotiated solution with the British in order to let the ship depart Lisbon produced little in the way of progress. In the end, both the Brazilians and the British were left with a difficult choice to make about how best to proceed.
Once again, this was high-stakes diplomacy for the Brazilians and the Allies. The British and their US partners could not very well allow the Germans to continue profiting off international trade if they could help it. For President Vargas and Osvaldo Aranha, on the other hand, it was crucial that the Brazilian military receive the weapons from Germany; if the Estado Novo could not deliver the arms, its failure would seriously jeopardize Vargas and Aranha’s carefully constructed relationship with the United States. The Allies would have been denying Brazil armaments from Germany while failing to provide any themselves.
After the cargo ship had lain in the waters off Lisbon for weeks, Vargas and Aranha came to a decision and issued the vessel an order through the Brazilian embassy in Lisbon. As the Brazilian embassy worked to decrypt the cable containing the order, British intelligence was doing the same. This was nothing out of the ordinary—from 1940 onward, all communications in and out of the Brazilian embassy were intercepted by the British, who were keen to understand the movements of Portuguese shipping back and forth to Brazil. This message, however, would have tremendous repercussions—for Brazil, for Great Britain, and for both countries’ relations with the United States.
5 Discordant Allies
On November 19, 1940, just weeks after the Brazilians and Americans had signed the steel mill agreement, the Brazilian steamer SS Siqueira Campos was preparing to slip anchor in Lisbon harbor and head down the Tagus River and out into the Atlantic Ocean. The Lisbon docks were the scene of frantic last-minute preparations for the voyage. The Portuguese police opened and inspected the passengers’ luggage, and then tall cranes, which were used to carrying far greater weights, winched the personal belongings on board.
Much earlier in the day, the same cranes had loaded heavy unmarked wooden crates into the steamer’s hold.1 The operation had been carefully overseen by the Portuguese police, as well as officials from the German embassy in Lisbon. British agents from the Secret Intelligence Service (also known as SIS or MI6), meanwhile, were carefully noting all the movements of the German officials and the crates themselves, although these observers already knew the crates’ exact contents. SIS agents had bribed Portuguese customs officials for the inventory sheets, which listed a variety of deadly military hardware: machine guns, artillery pieces, and ammunition. As the Siqueira Campos left the docks and slowly steamed down the Tagus River toward the fiery red winter’s sunset, the SIS agents reported its exact departure time to the British naval frigates waiting just outside Portuguese national waters, where they planned to intercept the Brazilian vessel.2 In the tower room of the German embassy, located on a hill above the docks, agents of the Abwehr (Army Intelligence Service) watched the ship’s departure through field glasses. They hurriedly cabled Berlin, which in turn contacted the German embassy in Rio with news that the Siqueira Campos had left Lisbon at long last.
The ship’s movements were being closely monitored in London, Rio, and Washington as well as in Berlin. Earlier in the day the Brazilian ambassador to London had informed the British foreign office: “As it was found impossible to detain for a further period of time the stay at the port of Lisbon of the Siqueira Campos, the Brazilian government have decided to order the departure of this vessel.”3 The message to London had been loud and clear: the ship was going to try to run the British naval blockade.
The British had been quick to blockade Portugal and Brazil, along with many other neutral maritime powers, at the start of the war, and they had effectively enforced these measures in the year since. “Our control of enemy exports has become a symbol of our naval strength,” a British ministry of economic warfare official had argued just days before the Siqueira Campos left Lisbon, and Great Britain was keen to keep up this show of strength. By attempting to run the British blockade, the Brazilians were essentially testing its effectiveness. The British were prepared to meet this challenge with a robust response, whatever the diplomatic fallout.4 And the British understood that there would be a lot of fallout—even with their closest allies.
Prior to the departure of the Siqueira Campos, the United States had appealed to the British not to intercept the ship.5 The American warning cited three key consequences if the British attempted to stop the vessel. Firstly, the Americans feared that
such an action would lead to an appeal from Brazil to other Pan-American states, including the United States, to issue a joint protest to Great Britain.6 This would naturally be most embarrassing to the United States, which—although not yet officially engaged in the war—was overtly supporting Great Britain and was supposed to be in lockstep with London. Secondly, the Americans suggested that Brazil needed the arms for defensive purposes, and that if Brazil wasn’t allowed to get them from Germany, the United States would have to supply them—an outcome that would unavoidably hurt the British war effort, since the only arms Washington could spare were ones it had intended to supply to Great Britain.7
The third and most important American plea was that by intercepting the Siqueira Campos, the British might inadvertently precipitate “the downfall of Senhor Aranha whom the United States government had found invaluable in opposing German influence in Brazil including the Brazilian army.”8 Aranha had done what he could to encourage this viewpoint, telling the Americans, “The army is most insistent and . . . if Brazil fails to overcome the British objection, I will resign and permit the designation as minister of foreign affairs of a successor who holds views different from my own.”9 If the threat of losing the Allies’ chief proponent in the Vargas administration wasn’t enough, the Americans ended their warning with the assurance that the interception of the ship would be a serious blow to the efforts of the United States to facilitate goodwill in Latin America, so as “to drive the Pan-American team in a direction that was favorable to ourselves.”10
The British embassy in Washington forwarded the warning to the British foreign office at 8:40 p.m. EST on November 18. The message was received in London at 5:10 a.m. on November 19, the day the Siqueira Campos was set to depart. Although the ship was then still docked in Lisbon, the warning had arrived too late to be seriously considered before the ship set sail with its disputed cargo of weapons.
As soon as the Siqueira Campos reached international waters, it was stopped and boarded by British naval officers, who ordered it to sail to Gibraltar.11 The ship arrived there on November 22, 1940, and was promptly impounded.12 Prohibited from docking, it remained anchored in the bay with its 140 crewmen and 260 frightened passengers still aboard. Two bad storms and several air-raid warnings did little to improve their spirits while they were in port.13 Bouts of seasickness among the passengers were frequent, and conditions on board deteriorated quickly. To make matters worse, it appeared they were in for a lengthy stay in Gibraltar. Initial searches by British customs officials found some of the German arms in the ship’s cargo hold, but as officials noted, they needed to open and search every case.
The ministry of economic warfare, under whose remit the blockade fell, adopted a hard line, demanding that an example be made of the ship. “We are anxious not to allow these regulations to fall into disregard by letting them be flouted with impunity,” the ministry asserted.14 The British embassy in Gibraltar agreed, noting that the Siqueira Campos was “guilty of a flagrant attempt to break the blockade, and the seizure of both ship and cargo, and severe penalties against the whole line, would be fully justified.”15 As for the passengers, the ministry recommended either sending them back to Lisbon on another ship, or—if they could get Spanish visas—by train to Lisbon.
The British were worried about one passenger in particular: the secretary of the Brazilian embassy in Berlin, who had been aboard the Siqueira Campos and who remained cooped up with the other passengers. His presence made the Allied authorities skittish, and limited their options. Given the enormity of the task facing the searchers, the British ministry of economic warfare recommended that the ship be sent on to Great Britain, which had greater facilities to conduct such an operation.16 The foreign office rejected this proposal, however, for fear that any such move would further anger the Brazilians.
Osvaldo Aranha was at his desk in the Itamaraty Palace in Rio in the early evening of November 22, 1940, working through boxes of diplomatic cables, when his secretary informed him that the British navy had seized the Siqueira Campos.17 It was not the news the foreign minister had been hoping for. Aranha understood all too well that the fate of the arms on the ship had become linked to his own political future. For most of the year, the German embassy in Rio had been spreading rumors that Aranha’s influence was in decline and that he would soon be replaced as minister of foreign affairs by the chief of staff of the army, General Góes Monteiro—a man whose sympathies were, of course, much more pro-German than Aranha’s. The speculation was false and was seen as pure German propaganda by the Americans, but it put Aranha on the defensive and kept him constantly looking over his shoulder. And if Aranha could not provide the Brazilian army with the long-promised German weapons aboard the Siqueira Campos, there was a distinct possibility the rumors of his replacement by Góes Monteiro could become a reality; Góes Monteiro and Dutra, Aranha’s archenemies, were adamant that Brazil needed the weapons and would surely use this failure to try to bring down their rival.
The foreign minister’s initial reaction to the news about the Siqueira Campos was one of bewilderment. He had heard that the British ambassador in Rio and the foreign office in London had both advised against stopping the ship; little did he know that the British ministry of economic warfare, in its keenness to enforce the naval blockade, had simply ignored the advice. But what was done was done, and now Aranha had no choice but to inform Vargas.
Aranha made his way to the Guanabara Palace to bring the bad news to the president. To make matters worse, it was Alzira’s birthday, so when Aranha arrived at the palace he found Vargas dressing for his daughter’s party.18 Vargas took the news coolly: “We can’t do much this evening,” he mumbled to Aranha before going to greet guests in the lobby. He arranged to meet with Aranha and Dutra early the next day, before he left Rio to celebrate his father’s ninety-sixth birthday. Tired and worried, the president did not stay at Alzira’s party late, retiring to bed at 12:30 a.m. with the excuse that he had a long trip to make in the morning.19
On the drive back to the ministry of foreign affairs, Aranha’s mind drifted away from the beautiful, brightly lit cityscape in front of him to the spectacular vision of Brazil that Vargas had outlined in his five-year plan.20 The president’s plan hinged on strengthening Brazil’s armed forces so that the nation could leverage itself into a more secure position within Latin America and establish itself as an even bigger player—militarily, economically, and politically—on the international stage. With the Siqueira Campos and its cargo of weapons confined to port at Gibraltar, however, this dream surely seemed further away than ever on the evening of November 22.
The roots of the German arms deal stretched back to two years before Vargas had unveiled his five-year plan in January of 1940. In 1938, Brazil had signed an £8 million deal with Krupp, on the understanding that it could supply more of the weapons Brazil needed than any Allied manufacturer. The United States had agreed to supply planes and some ships, and Great Britain had committed to sending Brazil six destroyers, but with the war in Europe straining the Allies’ manufacturing capabilities, Vargas knew that any request for further armaments was highly likely to be turned down. As if to prove his point, the British eventually reneged on the deal for the six destroyers.
Brazil continued to ask for arms from the United States. In 1940, talks between US and Brazilian officials usually ended with the Brazilians outlining their need for US arms for the purpose of national defense, particularly in the event of an attack by Argentina. The standard reply from US officials turned the Brazilians’ plea on its head, acknowledging that more should be done to secure northeast Brazil from a potential attack by the Axis powers, but adding that this would be best accomplished by basing American forces in the area. Such a suggestion was anathema to Brazilian leaders, who remained touchy about America’s legacy of intervening in their nation’s affairs. When Brazilian generals presented the Americans with a shopping list of arms, which amounted to some $180 milli
on, the Americans turned them down. The Brazilian generals did not take this very well, and for some time argued that Brazil should refuse to talk with the Americans about mutual defense unless they first promised to deliver the weapons.
Following the September 1940 signing of the deal for the steel mill at Volta Redonda, however, both sides took advantage of the resulting political goodwill to come to an accord over the thorny issue of mutual defense in case of an attack on Brazil.21 In late October 1940, Góes Monteiro visited Washington to take part in a meeting of the army chiefs of staff from the American republics. While there, he agreed to talk with the Americans about the defense of Brazil as well as Brazil’s requests for arms. On October 29, 1940, these discussions produced what became known as the Góes Monteiro Draft. This draft in turn became the basis for an agreement between the US and Brazilian armies, which was signed on July 24 of the following year in Rio by the Brazilian minister of war, Eurico Dutra, and US brigadier general Lehman W. Miller.22
The agreement anticipated by the Góes Monteiro Draft was a breakthrough for US-Brazilian relations, and promised to link both nations together militarily in an unprecedented way. It stated that the United States would join Brazilian forces in the defense of Brazil only if the country were attacked before it could develop its own adequate defenses. Góes Monteiro promised to try to stop Axis subversion in the country, furthermore, while the United States promised to supply Brazil with what arms it could spare. Finally, Góes Monteiro agreed that if an American country were attacked by a non-American one, Brazil would allow the United States forces to use its naval facilities and air bases to repel the assault.23
Brazil : The Fortunes of War (9780465080700) Page 9
