by Gerard Colby
If not totally in substance, certainly in style, it was the CIAA mode of operation all over again. Nelson set up another chart room and ordered all agency heads to give weekly command performances. HEW became involved in intelligence matters that included not only the integration of the educational, health, sanitation, and technical assistance programs into overall foreign policy goals, but HEW serving as the CIA’s first conduit for its “mind control” experiments.
Code-named Project ARTICHOKE and subsequently MKULTRA, the CIA’s search for ways of modifying and controlling human behavior was given cover by both HEW and its subagency, the National Institute of Mental Health.2 The CIA was anxious to learn why some American prisoners of war refused to be repatriated after the Korean War. Convinced that the GIs had been brainwashed, Allen Dulles, who was himself the father of a badly wounded GI, authorized the CIA to investigate mind-altering drugs and hypnosis, allegedly as a defense against the Soviet Union, but actually for the CIA’s own use. The mind-control experiments would continue for twenty years, involving over 750 subjects.3
While HEW lent its facilities for CIA purposes, Nelson dismissed some 1,200 HEW employees. The Bureau of Indian Affairs also fell under the axe. An aging John Collier, still head of the Institute of Ethnic Affairs, fought back against federal efforts to “terminate” government protection of Indian land and services.4 His efforts were in vain. Eisenhower soon authorized states to replace the federal government in Indian matters to override tribal constitutions, abolish tribal authorities, and distribute Indian assets, including lands that held oil deposits.
John Collier once again came under attack as a “radical,” just as he had thirty years before. His defense of Samoan indigenous rights against the navy’s testing of the atomic bomb on Bikini was the last straw. Conservative colleagues at City College of New York castigated him for stirring “violent controversies,” and he was forced to resign. Collier, now seventy, left New York, his spirit broken. He ended up in Taos, New Mexico, decrying that Eisenhower’s Public Law 280 was delivering the Indians into “a kind of social, cultural, and spiritual self-genocide.”
Nelson, of course, was keenly aware of the witch-hunt against Collier. One of his aides, Victor Borella, brought it to his attention in 1955. But there was little that Nelson was willing to do for anyone in the prevailing atmosphere of loyalty oaths and witch-hunting.
There was, however, something he could do when tensions began to rise in South America in the wake of budget cuts in foreign aid.
NELSON’S BRAZILIAN PROBLEM
Nelson’s biggest private worry was Brazil. He was depending on that country’s great economic potential to boost the fortunes of his ailing International Basic Economy Corporation (IBEC). In Venezuela, the American oil companies, including his own Creole Petroleum, and the Pérez Jiménez dictatorship had withdrawn their financial participation in IBEC’s schemes by 1952, as did seven Venezuelan state governments from programs sponsored by IBEC’s philanthropic arm, the American International Association for Economic and Social Development (AIA); within four years, three more state governments would desert AIA, along with the oil companies. The dictatorship had so deteriorated political conditions that it was impossible to carry on any supervised credit program.5
Already desperate in 1952, Nelson had swallowed his pride and turned to his father for help. He asked for $1 million to save IBEC. The president had enough confidence in Nelson to give him the task of reorganizing the United States government, but Junior would not lend him a penny unless he agreed to close up shop.
Nelson went to seek the money elsewhere.6 He found it with his brother David at Chase National Bank. David was the bank’s major proponent of increased investment in South America. Laurance was also on the Chase board.
Nelson liquidated his more troubled companies in Venezuela and Brazil and focused on making what Fortune magazine called “the normal Latin American profits” of anywhere from 30 percent to 100 percent.7
But Nelson still had a familiar problem in Brazil, Getúlio Vargas. Five years after the 1945 coup that had removed him from office, Vargas was once again president of Brazil. He had run an emotional campaign in 1950 on the theme “O petróleo é nosso” (“the oil is ours”) and had blamed Adolf Berle and American oil companies for his overthrow. Now the sixty-eight-year-old nationalist had returned to his old mission of keeping Brazil’s energy resources Brazilian. In 1952, Vargas succeeded in having the Brazilian Chamber of Deputies, by almost a unanimous vote, establish the government-owned Brazilian Petroleum Company (known popularly as Petrobrás). The following year, Vargas, confronted by an angry Senate dominated by export businesses, sought to reserve for Petrobrás all rights to oil exploration, exploitation, and new refining.
The American companies, led by Standard Oil, fought back. Brazil was one of the hemisphere’s largest oil markets, and Standard, Shell, Gulf, Texaco, and Atlantic controlled it all. If Vargas expanded Brazil’s small refining capacity under Petrobrás, the companies would be locked out of all growth in this crucial market.
More than 100,000 motor vehicles were imported into Brazil in 1951. Vargas was planning to introduce diesel locomotives to “modernize” the railroads. Basic industrial expansion would also draw on oil. Fuel imports, accordingly, had risen 20 percent each year since 1949, costing $200 million in 1951, all of which, on the insistence of the oil companies, had to be paid in U.S. dollars. This “dollar drain” policy by the oil companies hemorrhaged Brazil’s foreign-exchange reserves, of which 70 percent were earned each year by a single export, coffee, whose largest market was the United States.8
Probably none of Eisenhower’s top officials understood the role that American coffee importers played in Brazil’s economy better than Nelson Rockefeller. The former CIAA chief in Brazil, Berent Friele, now one of Nelson’s closest IBEC aides, had been president of the American Coffee Company and a director of A&P, one of the largest buyers of Brazilian coffee.
So when the Vargas government raised Brazilian coffee prices after storms damaged crops in 1952–1953, Room 5600 was quick to take advantage of the howls from A&P and other American importers who feared that Vargas was pricing them out of the American housewives’ market.9 During the Korean War, Nelson had set up a powdered coffee company in El Salvador to exploit the market that had been stimulated among GIs. Now, as a more frugal alternative to fill coffeepots and as a manufacturing process that allowed the mixing of less expensive beans from other lands, powdered (instant) coffee took root in the marketplace. And as profits from IBEC’s instant-coffee subsidiary grew during the Brazilian coffee crisis, Nelson’s contributions through AIA to small Brazilian coffee growers and ranchers steadily declined.10
This cutback was also the result of Nelson’s new conservative fiscal policies that dictated belt-tightening in the non-profit-making sector of his operations. Brazil’s credit squeeze was another problem. The coffee squeeze on Brazilian earnings threatened Nelson’s profit-making operations, too. His hybrid seed company was promising to score 3,000 metric tons in sales by 1955, a huge increase over the 35 tons sold in 1947, its first year of business. Likewise, Nelson’s Inter-American Finance and Investment Corporation (IFI), IBEC’s joint venture with Chase National and fourteen leading commercial banks in Brazil, was crippled by limited borrowing capacity. Brazilian bankers, feeling that IFI was competing for scarce investment capital, limited their willingness to underwrite IFI’s loans.
Nelson grew frantic over the credit crunch after Brazil’s ambassador, Walther Moreira Salles, visited him in Washington in February 1953. A loan to Brazil had been arranged, but the Eisenhower administration was thinking of canceling it.
Nelson caught a flight to New York, conferred with family members and advisers, and then called Adolf Berle. He hoped Berle could influence the Jackson Committee, Ike’s special review board on intelligence operations chaired by former CIA Deputy Director William Jackson. Berle agreed to try.
Berle took Brazil’s deepening finan
cial crisis before the committee. He described the disastrous predictions for the coffee crop and the pressure these predictions put on the Brazilians’ ability to finance their imports, debt payments, and industrial expansion. Within two months, psychological warfare adviser C. D. Jackson, another member of the committee, came up with a plan to send Milton Eisenhower, the president’s brother, to Brazil to talk with “responsible Brazilians” about the country’s deteriorating economic situation and President Vargas’s handling of it.
Nelson Rockefeller, it was noted, “would have extreme difficulties in carrying on these exploratory conversations, but he could be extremely valuable once the situation was crystallized in liaison activities with the major oil companies.” Milton Eisenhower, on the other hand, “has all the requisites, i.e. is a trusted and responsible member of the White House staff who can speak with authority, and also has no connections with the major oil companies.”11
Milton Eisenhower’s trip to Brazil turned out to be a great success as far as the oil companies were concerned, albeit a delayed one. He arrived in late July in the midst of an uproar in the United States over rising Brazilian coffee prices. Rumors were circulating that high Brazilian officials were speculating in the coffee-futures market.12 Therefore, the Brazilian government was on the defensive when Eisenhower discussed trade relations.
Milton Eisenhower ended up infuriating the Brazilians by refusing to honor loans for high-priority projects. He even denied that the United States had ever made any commitments. (In fact, final decisions had been made—years earlier—by the Joint Brazil-U.S. Development Commission on a $1 billion program that required $300 million in promised U.S. loans and politically risky tax increases already introduced by Vargas to finance the cruzeiro portion of the program. But that was before Vargas pressed ahead for the Petrobrás oil monopoly.)
A month after Milton Eisenhower left Brazil, Vargas was still in a state of shock over the freeze on American loans. Desperate now for capital, he was more committed than ever to recovering the revenues Brazil spent on imported oil. To strengthen his base among nationalists, he appointed Juracy Magalháes as Petrobrás’s first president.
It was his first serious mistake. Juracy Magalháes had been an informer during the last Vargas administration and had confided to Adolf Berle that he had plotted against Vargas in 1945. Now, almost a decade later, having just completed a stint as Brazilian military attaché in Washington, he was being handed one of the most sensitive offices in the Vargas government.
VARGAS’S UNIFORMED FRANKENSTEIN
At this point, Vargas’s Frankenstein monster from World War II rose up again. Veterans of the Brazilian Expeditionary Force who had fought under U.S. command in Italy had a wide following in the army, navy, and air force owing to U.S. military aid. These officers had gained additional prestige when the Pentagon helped them establish a replica of the U.S. National War College, the Higher War College. In 1949, the Brazilian military established a secret military protocol with the Pentagon, pending Washington’s review of a formal military pact proposed by the Brazilians. Vargas was able to delay implementation of this pact until 1953 and to prevent the military from sending the infantry division to Korea that Truman had requested. More important, public outcries held up a U.S. survey authorized by the treaty even after it was signed. This survey aimed at “preparing topographic maps and air charts of Brazil,” and ruled that original negatives and field observations “by the technical organs of the U.S. will be kept in their own files.”13
The Brazilian generals seethed over the delays. Standard Oil, meanwhile, fretted over Petrobrás’s inroads in supplying Brazil’s internal market with state-controlled oil. In Manaus, the former rubber capital on the Amazon, Petrobrás even planned a new oil refinery. Though small, the refinery would within a year carry the seed of Petrobrás’s potential for the Amazon basin, tapping Peru’s Ganso Azul field for crude. Here also was the focus of Vargas’s hope that the Amazon forest hid a great pool of oil. Petrobrás’s geologists were directed to study the area carefully and, indeed, in April 1954, they reported finding indications of oil near Manaus at Nova Olinda; they would actually strike oil there, again within a year.
This was not good news to Standard Oil, which controlled refining and used Brazil as a consumer for Venezuelan crude exported by its Creole Petroleum subsidiary, Nelson Rockefeller’s old haunt. Nor did it please the generals and admirals who used Standard Oil’s crude. They had depended on Washington’s largesse to fuel their ascent to power and had argued that Petrobrás’s founding condemned Brazil’s oil to stay in the ground. (In fact, Petrobrás would boost production more than tenfold by 1960.) In June 1954, General Juárez Távora attacked Petrobrás in a speech at the Higher War College, calling again for the participation of foreign capital.
Unfortunately for Vargas, Távora’s attack coincided with an uproar in Brazil’s business community over Vargas’s pressuring the state government of Mato Grasso to nullify private titles to 21 million acres of Indian lands, which it had illegally sold to real estate companies and land speculators.14 These lands, Vargas insisted, had been set aside for the Indians. The slash-and-burn techniques used by settlers had already been the source of Indian misery in similar colonization schemes east of Belém, transforming the zone’s forests into the semidesert described by one Brazilian scientist as a “ghost landscape.” Unlike the Indians’ shifting cultivation system, the settlers’ intense land-use system destroyed the canopy forest and with it, the source of most of the nutrients and protective cover used by the Amazon basin’s poor soil base.
Equally restrictive was Vargas’s 1954 Mineral Code, which separated soil rights from subsoil rights, the latter requiring federal licenses. The code left the exploitation of any subsoil riches, whether oil or solid minerals, to Brazilian companies.
In June, General Távora, eyeing his future presidential candidacy, called for the reversal of Vargas’s policies. Carlos Lacerda, leader of the Democratic National Union (UDN) that had allied with Adolf Berle to unseat Vargas from his last presidency in 1945, went further, leading an impeachment drive against Vargas. Lacerda charged (falsely) the president with misappropriating funds and secretly collaborating with Argentina’s Juan Perón to set up a Peronist labor syndicate type of government. At the same time, with U.S. credits suspended until Vargas surrendered on the oil issue and income from coffee exports diminished, the financial situation deteriorated. Prices rose. The opposition blamed it on incompetence and corruption in the Vargas administration. The impeachment effort failed, but Lacerda did succeed in forcing Vargas’s labor minister, João Goulart, to resign.
On the night of August 5, 1954, shots were fired in front of Lacerda’s Copacabana apartment just as he was returning home. Lacerda was wounded in the foot. Vargas’s son, a federal deputy, was held responsible for the incident, along with the head of the presidential guard. More charges of corruption emerged, and Vice President Café Filho, an opponent of Petrobrás, suggested to Vargas that they should both resign.
“From here I’ll leave dead,” Vargas replied.
Rio’s air force general and half the generals of the army then demanded his resignation. Naval and air units stood at alert, and army police surrounded the palace. The war minister warned Vargas of the likelihood of “much blood, a lot of bloodshed.” After a two-hour meeting with the cabinet on August 24, Vargas agreed to ask Congress for a leave of absence to allow the pressures to cool. But the war minister told the generals the following morning that Vargas’s leave was to be immediate and permanent. Vargas had been betrayed.
“This means I’m deposed?” Vargas asked his brother Benjamin on learning the news. Vargas’s family had armed themselves, ready to face death.
“I don’t know,” Benjamin said. “But this is the end.”15
Just before 8 A.M., Vargas appeared outside his bedroom, still in pajamas. He walked to the presidential office and then returned, closing the bedroom door behind him. Fifteen minutes later, a sho
t rang out. He had chosen the familiar option of the doomed gauchos of his homeland: suicide. On the bed stand, his family found his last letter to the Brazilian people:
Once again, anti-national forces and interests, coordinated, have become infuriated with me.… After decades of domination and exploitation by international economic-financial groups, I made myself the chief of a revolution, and I won. I initiated the work of liberation and I inaugurated a regime of social liberty.…
I returned to the government on the arms of the people. The underground campaign of the international groups allied with national groups revolted against the regime of guarantee to the worker.… They do not want the workers to be free.… I wanted to create national freedom in realizing oil wealth through Petrobrás.… They do not want the people to be independent.
… I choose this means to be with you always. When they humiliate you, you shall feel my soul suffering at your side. When hunger beats at your door, you shall feel in your breasts the energy for the struggle for yourselves and your sons. When they slander you, you shall feel in my thoughts the strength for reaction. My sacrifice will maintain you united and my blood shall be your banner of struggle.16
The damage to Washington’s propaganda goals against Petrobrás was irreparable. As Vargas’s body lay in state, his letter was released to the world press. Cuba declared a three-day mourning period. So did Argentina. The United Nations flag was flown at half staff in New York. Thousands of Brazilians followed Vargas’s coffin to Rio’s airport, where it was flown to the president’s home in Rio Grande do Sul for burial.
An era had ended, not only for Brazil, but for Washington’s prestige in Latin America. Coming on the heels of the CIA’s overthrow of Arbenz in Guatemala, Vargas’s suicide gave official Washington reason to pause and ask how the damage might be controlled. Despite dark reports from intelligence sources that the Communist party had grown since Vargas’s return to power, there was no way that Vargas could be painted as another Communist sympathizer as Arbenz had been. With Vargas, the issue was clear: The struggle for economic independence and national sovereignty was the fundamental problem Washington was facing in Latin America.
