BRAZIL'S BALANCE OF PAYMENTS CRISIS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80B01676R001900100044-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 3
• Document Creation Date: December 16, 2016
• Document Release Date: October 19, 2004
• Sequence Number: 44
• Publication Date: December 4, 1962
• Content Type: IM

OCI No. 3936/62
CENTRAL INTELLIGENCE AGENCY
Office of Current Intelligence
4 December 1962
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CURRENT INTELLIGENCE MEMORANDUM
SUBJECT: Brazil's Balance of Payments Crisis
Brazil's financial crisis has reached a magnitude
which can probably be dealt with only by an inter-
national consortium including the International Mone?
tary Fund.
The IMF, however, will probably require a
stabilization program so rigorous as to be unacceptable
to Goulart. Unless the IMF agrees to mere token
stabilization, which appears improbable, Goulart
would probably refuse its terms and seek to make'the
US a scapegoat for the ensuing economic collapse.-
This would commit him finally to the radical left,
leaving Brazil the alternatives of political evolu-
tion in Castro's footsteps, or intervention by the
military to prevent it.
Brazil now is moving rapidly toward financial-
chaos. By 31 December 1962, Brazil is expected to
have exchausted its gold and foreign exchange reserves
and to have commercial arrears of more than
000. In 1963 Brazil faces an estimated $900'million,
deficit in its balance of payments, with ' no financing
in sight for at least $520 million of it. The
estimated 1963 deficit comprises $650 million due in
principal and interest on'foreign borrowing, and an
expected trade and commercial deficit of $250 million.
EXPor s n recent years a
exports in value b 9 -ports nave exceeded
deficit for the - UnitedOSta
-20 tes, based .on(pe eentageent
of 1963 exports, would be $14 billion.) percentage
Probable offsets include PL 480 wheat, remain-
ing disbursements under US and other loans already
committed to Brazil, and some new foreign investment.
These offsets may total $250 million, and may be
supplemented by some $130 million in bank credit
lines and short term borrowing from foreign investors
in Brazil. Even in this event, there would remain
a deficit of $520 million for which no financing is
in sight.
SECRET State Department review
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billion and $1.4 billion but i .25
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The size of Brazil's financial deficit is
such that the United States-alone probably cannot
provide the required amount, and a consortium in-
cluding major Western European countries, Japan,
and the International Monetary Fund appears
necessary. European countries would, probably not
participate without the IMF, however, and the IMF
would undoubtedly insist on a Brazilian economic
stabilization program which Brazil would consider
harsh and politically impractical.
Brazil has in previous years made commitments
for future action on economic stabilization programs
but has failed to fulfill these commitments. For
this reason, the IMF is likely to require action
as well as commitments before consenting to a new
financial aid program for Brazil.
As a 'result in part of US representations
to Brazil, the Brazilian Congress on 28 November
completed action on a tax reform bill Which could
be a first step toward economic reform. Press
reports indicate, however, that the new budget
passed on 3O'November provides for expenditures
equal to $1:5 billion and receipts of only $1
billion. Brazil's willingness to undertake an
economic stabilization program satisfactory to the
IMF appears doubtful at best.
Without emergency US help, or the large-scale
debt postponement and important new financing which
could result only from an IMF-approved plan, Brazil
will probably have to default on its external obliga-
tions in the next few months.
Brazil is likely to Prior to default,
breakdowns and shortageo shsverelypdisruptinguthey
economy and accelerating inflation. (The cost-of-
living increase in 1962 is expected to come to
about 4percent in the cities of Rio de Janeiro
and Sao aulo, and substantially more in the cities
of the northeast. Brazil does not compile nation-
wide figures.)
Such a financial crisis would have a serious
impact on the entire population, and President Goulart
would almost inevitably seek to shift blame from
himself to the United States. In this he Would have
Communist and leftist ultranationalist support.
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The likely result would be the final commitment of
Goulart to the radical left, an intensification of
a nt i_Amer ica n sentiment and the Polarization of
domestic political forces. Goulart recently indica-
ted to the US ambassador that he believes Brazil
"has an alternative" to US aid on US terms. He
said he might have to ' accept a recent Soviet offer
of project assistance.
If Goulart, impelled by the financial crisis,
were to follow such a path to the left, intervention
by the Brazilian military would probably be the
chief alternative to a political evolution along the
lines of Cuba under Goulart or some successor.
j3i_
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