by Gerard Colby
As the 1945 Brazilian presidential elections approached, Dutra was showing a disarming willingness to allow foreign penetration of basic sectors of the economy that Vargas had preserved for public and private Brazilian entities.
Vargas began to have second thoughts about surrendering the presidency to this man. Ambassador Berle, meanwhile, kept in regular touch with Brazil’s feuding political factions, ears perked for even the slightest rumblings of a challenge to Vargas’s power. In February 1945, he got a signal. Major Juracy Magalhães, a rising star in Brazilian politics, visited him at the embassy. Magalhães had gained a reputation for fiery nationalism as a young lieutenant, and his meteoric career had many of the older generals, including the more conservative Dutra, worried. And with good reason.
Magalhães was the intervenor in Bahia. The intervenor was a powerful federal post, combining the duties of comptroller, supervisor, and inspector; anyone who occupied that post had a great deal of information, in this case in the one state in Brazil where commercial quantities of oil had been found.
Juracy Magalhães also led a secret life: Despite his proclaimed patriotism, he was about to become an informant for the U.S. government through Berle. He had been known to the FBI since at least 1942, when J. Edgar Hoover first identified him to the OSS as a potential cabinet member.5
The Brazilian officer pursued his penchant for intrigue with Berle. Vargas had offered him a variety of cabinet seats, Magalhães reported, but he had kept his independence. “He stated that he did not have any confidence in President Vargas, and that he and his group wanted a change of regime. He said that by this they meant a true revision to democratic government, and not a mere change of men.”
Magalhães was talking about prospects for a coup. Berle cautiously approached an explanation of what U.S. policy would be. “I said he realized, of course, that the United States Government could not intervene in local politics, nor could the Ambassador.” With that out of the way, Berle gave Magalhães cause for hope. Nonintervention, he hinted, could just as easily support those who wanted Vargas out. “I referred to a current story that the United States Government would intervene to prevent a change in government, and said that, of course, it was absolutely untrue; the non-intervention policy of the United States was well-established and would be scrupulously adhered to … we parted with expressions of mutual esteem.”6
Meanwhile, everyone in Brazil was concerned about the upcoming presidential elections. Urban professionals and shop owners feared a victory by organized labor and formed the União Democrática Nacional (UDN), choosing an air force general as its candidate.
Bankers and merchants, who saw themselves as modernists, formed another group to defend law and electoral order and backed General Dutra’s Social Democrat Party (PDS). They feared that Vargas might build a new political party that would unify the 800 labor unions that were prohibited by law from uniting into national labor confederations like the AFL or CIO in the United States. This concern was particularly important to UDN’s base of professionals and shop owners, who feared challenges from organized labor.
And over all these fears, of course, hung the specter of communism. Since Vargas had declared his intention to end the dictatorship and had restored elected constitutional government, political prisoners, including Communist party leaders, had been released. The legalized Communist party moved onto the electoral stage to win the support of industrial workers.
Latent fears erupted into hysteria when Vargas founded the Brazilian Labor Party (PTB). The PTB quickly attracted industrialists who were equally fearful of the Communist party and American corporate penetration; nationalist intellectuals; workers in the new urban industries; and Vargas’s fellow cattle ranchers, who believed that agrarian reform and a rise in industrial wages would increase meat consumption among the impoverished peasantry and workers.
Berle watched this new development with mounting anxiety. The PTB could stiffen the government’s opposition to concessions for American companies in mining and oil.
BERLE’S DIPLOMATIC COUP
In September, as the debate over the scheduling of elections for the presidency reached the boiling point, Berle received a stem warning from President Harry S. Truman: “I think it would be disastrous to interfere with the internal affairs of Brazil at the present time.”7 Yet that was precisely what Berle decided to do.
On September 18, Berle, responding to the rising clamor, sent Washington a telegram. He painted a picture of democracy in tatters and the emergence of a Brazilian government that would be “so antidemocratic as to be bracketed with that of the Argentine.”8 There were legitimate fears that Vargas would seize power or declare himself a candidate.
Berle had a solution: to send Vargas a loud message that Washington would not tolerate any postponement of the presidential elections—in effect, to bar his candidacy.
Berle hurriedly drafted a speech and sent off a wire to Washington, announcing that he would proceed unless ordered not to.
On September 29, Berle dropped his bomb on the presidential palace. Before the Brazilian journalists union, an audience chosen to give his remarks the widest possible circulation, Berle drew an analogy between George Washington’s devotion to inaugurating a democratic system in the young North American republic as its first president and the scheduled December 2 date for national elections insisted on by Vargas’s opponents, which Vargas was said to be resisting to give his new Labor party more time to organize.
“No true friend of Brazil or of the Brazilian people will interrupt that process. No true friend of the people of Brazil will be afraid of that process. No true friend of progress will accuse it of being reactionary. Opportunism, not practice of democratic institutions such as elections, is the real breeder of fascism and reaction.”9
Berle gave a provocative performance. At the heart of his arguments, of course, was the fear that Vargas, Brazil’s symbol of Latin America nationalism, would, as elected president, remain an obstacle to the Chapultepec conference’s extension of the Open Door policy to South America. “Brazil, the United States, and the other great nations are now engaged in a titanic attempt to unify the world,” Berle lectured reporters. Among the rights of “internal freedom” were “the right to access to the economic resources of the world.”
Beyond the paeans to abstract ideals, Berle made no promise that there would ever be an end to the one-way street that brought most of the benefits of trade and investment to the northern half of the hemisphere. But he did mention “the right to be free from fear of invasion,” even as a U.S. flotilla of six destroyers and two battleships began a goodwill tour of Latin America that planned to arrive in Rio de Janeiro on the eve of the scheduled elections.
Berle’s speech caused a sensation. He happily cabled Washington that it “was widely printed and well-received by substantially all papers in Rio.”10 This wide coverage was predictable. Rio’s newspapers had been financed during the war by advertising from American corporations doing business in Brazil. Much of the flow of this revenue had been directed by the J. Walter Thompson advertising firm, working in cooperation with Rockefeller’s CIAA, for which it also directly placed advertisements for CIAA radio broadcasts.
The Brazilian public, however, was vociferous in its criticism. Berle’s speech indicated that Washington was taking sides in Brazil’s internal debate.
THE COUP TURNS VIOLENT
President Vargas was getting worried. Brazil’s generals, now supplemented with the crack brigade of combat veterans from the Expeditionary Force that had fought under American command in Italy and with the renewal of U.S. military supplies to the air force, were mobilizing against him. On the evening of October 30, the principal barracks near Rio moved U.S.-trained troops in American-made tanks and armored vehicles into the city. Machine guns were set up in front of the Ministry of War. Soon they would be mounted throughout a quarter of Rio, trained on the streets.
Vargas was desperate. He had misjudged the consequences of h
is wartime alliance with the United States. As Berle later cabled Washington, the “army itself has acquired a far wider viewpoint. Rather than being local affair, its men have travelled, they have been in close contact with [the] U.S. Army, have had experience in Europe and are extremely impressed with democratic institutions of which previously they were unaware. Thus practically all officers and not inconsiderable numbers of common soldiers, instead of being merely instruments in [the hands] of anyone in power, have begun to think for themselves politically.”11
This mobilization by a politicized army paralyzed the civilian government and made the police useless—at least, to President Vargas. His ministers of interior and labor found their homes surrounded by troops. The leader of the Communist party was arrested. No one who had supported Vargas was safe.
After conferring with his military attaché on the progress of the coup, Berle attended a dinner party. At one point, one of the host’s sons slipped out to the street to see what was happening. He soon returned with the news everyone was expecting: A radio station was broadcasting that the president had resigned.
The deathwatch was over for Berle, “and I drank my coffee and cognac in relative calm.”12
SHARING NELSON’S FATE
The next day, as the Brazilian army strengthened its hold over the nation, President Vargas and his wife were flown out of Rio de Janeiro to exile. With the eyes of the world upon them, the Vargases returned unharmed to their ranch in the southern state of Rio Grande do Sul. Meanwhile, the capital’s citizens, isolated overnight by the army’s interruption of all international cable and telegraph lines, slowly crept back into the streets to find press censorship and tank crews resting on the grass. The soldiers had been up all night waiting for any signs of resistance from the unarmed population. It never came.
Now Ambassador Berle’s goal was to help the new regime consolidate its power through international recognition. He ran about town “trying to convey word delicately” that the new regime, nominally headed by Supreme Court president José Linhares, should improve its international image by ending censorship and ensuring political liberties to all parties, including the Communists. Berle’s instincts were correct. France had withheld recognition until the new regime gave assurances that the Communists would not suffer persecution.13
There were some, however, who disapproved of the coup and Berle’s role in it. Brazil’s ambassador in Washington, Carlos Martins, was particularly distraught. He called Berle’s speech “an inexcusable interference in local political matters.”14
Former Undersecretary of State Sumner Welles agreed. In a letter to the Washington Post and later in a radio broadcast, Welles warned that the State Department’s new policy was “radically undermining” the friendship between the American and Brazilian people. He criticized Berle for intervening in “an issue which solely affected the Brazilians themselves. It was a question which, as a sovereign people, they should have determined without outside interference.”15
It was Welles’s greatest crusade out of office, and his last. For speaking out, he would be sentenced to political exile.
Berle, meanwhile, began casting about for rationales for the coup. First he blamed the fascists, then a conspiracy between Vargas and Perón, and finally the Communists. In his own way, he was contributing to the ugly climate of fear growing in Washington, where critics of the new administration were accused of disloyalty to the United States and to democracy.
For the first time in American history, traditional skepticism about those in power was abandoned. The war against the Nazi evil had convinced most Americans that Washington’s policies were altruistic. A wrong or unjust policy was seen only as a mistake, something accidental, with no ulterior purpose or gain involved.
In the weeks following Vargas’s fall, Brazil’s economic concessions came hard and furious. Six days after Vargas was sent back to his home state, Rio Grande do Sul, Berle sent Washington a “basic report” on Brazil’s national iron industry, recommending American corporate penetration of the government firm, Companhia Vale do Rio Doce, as well as of its iron-ore deposits at Itabira, Minas Gerais. He made no mention of M. A. Hanna Company’s lobbying of his superiors in Washington on September 28 for State Department assistance in getting Brazilian permission to investigate iron-ore deposits in the Amazonian territory of Amapá; but his urging of American penetration of the Minas Gerais deposits implied approval of Hanna’s desire to enter Brazil, a desire he was apprised of by Washington. A week later, after the new regime graciously canceled rubber agreements that had required the U.S. Rubber Reserve Corporation to purchase rubber at fixed prices and minimum volumes for another year, Berle met with President Linhares. The ambassador reviewed a laundry list of economic issues that had remained unresolved under Vargas, among them the all-important issue of oil. But on this subject Berle was on shaky ground.
On the day of the coup, representatives of Rockefeller’s Creole Petroleum and its parent, Standard Oil of New Jersey, had pressed their case with Assistant Secretary of State Spruille Braden, who had succeeded Nelson Rockefeller. Vargas had granted concessions to two Brazilian syndicates to build refineries in Rio and São Paulo. Since Brazilian law allowed only citizens to operate in the industry and refining offered “the only substantial profit in the petroleum business in Brazil, they considered this a monopoly.” Standard wanted “to move in” and join the monopoly, it being understood that all the American companies, as well as a British company, Anglo-Mexican, “would be given an equal opportunity.” The problem was that this participation in a monopoly, locking out other American companies in the future, might be seen by the Justice Department as a restraint on trade. Braden had agreed to back the oil companies, admitting that “this might be a technical violation of United States anti-trust laws, but that it was justified … to prevent the creation of a closely held Brazilian monopoly.”16 If there was to be a monopoly on Brazilian refining, it should not be a Brazilian monopoly.
Could United States’ antitrust law be broken in order to apply its principles against a sovereign nation? Berle sensed the absurdity of his position: Big business and Washington, seizing the opportunities that this “coup for democracy” had given them, had put him in an untenable position with his own public statements. Postwar Washington was flooded with special interests fighting over the fruits of victory. Lacking Roosevelt’s purposeful leadership, Washington was adrift, without a clear sense of mission. Its vision had narrowed to that of the self-seeking syndicalist; the broader, more farsighted view Berle believed he and people like Nelson Rockefeller offered was ignored.
Berle refused to surrender to irrelevance. He would not make any suggestion to President Linhares about the Brazilian oil refinery, except that “he might want to look into the situation.”
Three days later, Berle met with representatives of the four American oil companies doing business in Brazil: Standard Oil of Brazil, Gulf Oil, Atlantic Refining Company (ARCO), and Texas Oil Company (Texaco). He argued that Brazil was a sovereign nation; that the refineries would be built in the future anyway to meet the country’s needs; that they would leave at least 40 percent (by 1940 market standards) of the market to the Americans; and, finally, that any demands would have to include British companies, too, since Washington was pressing for an Open Door to the Commonwealth.
“There were social movements building against ‘colonizing capital,’” he warned, “and the experience in other parts of Latin America with complete American control of vital national interests had not been reassuring, leading frequently to agitation and expropriation.”17
Berle’s words sounded like Nelson Rockefeller’s earlier futile plea for reforms before Standard Oil’s executives. But now the war was over, and it was back to business as usual in Latin America.
Berle got the final word from the State Department on November 23. Over the phone, he was ordered formally to protest the refinery concessions.
This order violated his political beliefs that local
capitalists were the only viable means of inoculating a country against Soviet subversion. In this case, his friendships were being violated to boot.
The UDN’s Drault Ernani headed Refinaria de Petróleo de Distrito Federal, the syndicate for the proposed Rio refinery; railroad magnate Albert Soares Sampaio led Refinaria e Exploração de Petroleo União, the syndicate backed by São Paulo banks that planned the second refinery.18
Berle made it clear to Washington that he wished “to have no part of it.… The Brazilians had a right to go into the refinery business in their own country and that any efforts on our part to oppose such a development would be construed by the Brazilians as an unwarranted interference with an internal matter.”
But that was precisely the point that Washington wanted to challenge, insisting that the issue “was not the relative size of the market but the theory of operations restricted only to the nationals of a given country.”19
At last it had been said. The Open Door policy was now being applied to South America. There would be no more peaceful accommodation with the Cárdenases of the world. Nationalizations were verboten; even reserving an industry for private enterprise by local nationals was now unacceptable. The Truman administration was effectively decreeing that all economies, resources, industries, trades, and markets in the world must be open to penetration by American corporations.
The coup did give Berle one boon: On November 23, 1945, Linhares decreed that the Congress elected on December 2 (which was expected to be PSD/UDN-dominated) would replace the Constituent Assembly and have full constitutional powers. With this in mind, Berle got the National Petroleum Council to insert provisions in the refinery concessions making all terms subject to any new constitution or congressional laws.20 Since voting was restricted to literates, about 60 percent of Brazil’s people, most of the laboring population, were disfranchised. To diminish the likelihood of organized opposition in Congress even from those who were able to vote, no party was allowed on the ballot that did not have at least 10,000 votes in each of a minimum of five states.
