by Gerard Colby
One unfinished project that required the new president’s immediate attention was the transformation of the United States’ foreign-aid policies. Kennedy’s emphasis on direct government-to-government assistance through the Alliance for Progress and AID had never been popular with the business community, and now it was incumbent on the Johnson administration to provide a transition that would more readily promote private corporate investments under the rubric of U.S. government aid.
CIA Director John McCone had someone in mind to achieve that transition. He urged Johnson to return Robert B. Anderson, a fellow Rockefeller associate from the Eisenhower era, to Washington. Nelson Rockefeller’s former ally in business and the Special Group’s counterinsurgency operations would be the perfect person to head the Alliance for Progress.
McCone recommended a host of other Rockefeller allies, all of whom were attuned to the prerogatives of American business, to assist Anderson’s work for the Alliance. In particular, he persuaded Johnson to bring Thomas Mann back from Mexico, to replace Puerto Rico’s Teodoro Moscoso as administrator of the Alliance.4
Mann’s return to Washington as assistant secretary of state, head of the Alliance for Progress, and White House special assistant (“to emphasize his control,” Johnson explained to Berle5) was viewed with trepidation by many Latin Americans.
Mann’s experience included running the Bolivian desk at the State Department during the grim days of Indian tin miners’ strikes in 1942, heading up the Platte River development program in Uruguay, overseeing American interests during the Perónist threat from the Argentine south, helping Nelson Rockefeller and the FBI draw up a blacklist of suspected Axis sympathizers, heading up petroleum affairs at the postwar embassy in the Venezuela of Creole Petroleum and other oil companies, assisting the CIA’s new dictatorship in Guatemala as U.S. consul in 1954, and promoting U.S. big business in Latin America first as assistant secretary for economic affairs and then as acting assistant secretary for Latin America. Mann was the quintessential leader of the Old Guard in Latin American affairs.
Experience often breeds cynicism. Some Latin Americans worried that the idealism that had promoted the Alliance for Progress had died with Kennedy. Some Brazilians would later blame Mann for the coming military coup. But they were wrong, Gordon would argue. “The Brazilian revolution, or coup … was already in the making.”6
ISLANDS OF TREACHERY
Preparations for that option had begun as early as 1961, when Vice President João Goulart managed to succeed President Jânio Quadros despite opposition from Brazilian generals.
A stocky, handsome man with a large popular following, Goulart viewed himself as Getúlio Vargas’s spiritual successor in the struggle to rid Brazil of foreign domination. For that reason alone, he made Washington nervous at every step in his rise to power. As Vargas’s minister of labor, he had built himself a base among Brazil’s growing, restless working class. In gestures all too reminiscent of Argentina’s Juan Perón, he found every opportunity to deliver rousing, populist speeches to the masses. As Brazil’s vice president, he showed no hesitation in cultivating friendly ties with Communist regimes. He was, in fact, on a diplomatic visit to China in 1961 when Quadros was deposed.
To the dismay of the Brazilian right, no amount of secret plotting could prevent Goulart from returning from China and assuming the presidency of Brazil. He was simply too popular with the people. To have stopped him would have meant risking civil war. The Kennedy administration’s avowed stake in promoting constitutional governments for the Alliance for Progress was an additional consideration. Brazil’s generals finally came up with an unconstitutional compromise: Goulart would be allowed to return if he accepted a presidency with only titular powers. Unwilling to test the army’s power, Goulart had reluctantly agreed.
Adolf Berle kept careful track of Brazilian developments from his personal command post in Manhattan. Like an eagle flying high above its perch, scouting for trouble, Berle scanned his list of Brazilian friends and then invited them to his townhouse. Though powerless now to act in any official capacity, Nelson’s old “Brazil hand” could not resist one of his favorite political pastimes: gathering intelligence.
One visitor that fall was his old friend and confidant on Brazilian rightist intrigue: Carlos Lacerda. Lacerda was now governor of the influential state of Guanabara, created in 1960 as political compensation to Rio when the overcrowded “Fabulous City” lost the seat of national government to Brasília.
The same man who had successfully conspired against Vargas and then Quadros was now telling Berle, over drinks, that Goulart was not expected to last.
“Lacerda thought the situation was in transition,” Berle wrote in his diary. “Goulart would hardly accept a position as figure-head President. He [Lacerda] himself was joining with several other Governors … to make a ‘Governors’ block.’”7
For a while, official Washington had watched Goulart warily but did not intervene. To head the U.S. Embassy, Kennedy had appointed Lincoln Gordon, a Harvard economist who had worked in the Marshall Plan under Averell Harriman and was completing a major book on U.S. manufacturing investment’s impact on postwar Brazilian government policies. Gordon had been a consultant to the Rockefeller Brothers Fund’s Special Studies Project. Goulart’s people at first were glad to see Gordon in place of the vexing John Moors Cabot, a member of the Boston clan whose Cabot Corporation exported black carbon out of Brazil. Before he left Washington, Gordon was briefed on the American International Association for Economic and Social Development (AIA) in Brazil by Nelson Rockefeller’s top aide, Berent Friele, who then arranged some briefings in Brazil by AIA’s Brazil director, Walter Crawford, and Minas Gerais’s governor, José Magalhães Pinto.8
Washington seemed even friendly when Goulart visited Kennedy in April 1962, to court U.S. opinion and financial aid. When he left Washington, Goulart had an agreement from the Agency for International Development (AID) for $398.5 million in loans, including $131 million in assistance to Brazil’s impoverished and potentially unstable Northeast.
AID attached so much importance to Brazil’s Northeast, in fact, that it set up the only AID mission especially devoted to a region within one country. Recife, the region’s commercial capital, became the U.S. administrative seat for AID, Washington beefing up not only its consular staff, but its CIA “security” operations there. What Goulart did not know was that the CIA had an additional objective. Its Recife-based operations were overseen in Washington by Colonel J. C. King. The CIA spent anywhere from $5 million (Gordon’s estimate) to $20 million (former CIA officer Philip Agee’s claim, citing a Brazilian congressional investigation9) to support anti-Goulart activities in 1962 alone.
The Brazilian Congress, unaware of these intrigues, was jubilant over Goulart’s successful trip to Washington and restored him to full presidential powers following a January 1963 national plebiscite. The generals looked outflanked. Goulart’s populist speeches, however, only triggered more secret meetings between Brazilian military and business leaders and top U.S. officials, including Washington’s newly posted military attaché, Vernon Walters. Walters was the perfect man to keep an eye on Goulart. He was a top intelligence officer and veteran of the U.S. Embassy in Brazil in the days of Adolf Berle and William Pawley. He had also been a close friend of Brazil’s powerful General Humberto de Castelo Branco since both had served in the invasion of Italy during World War II. When Walters arrived at Rio’s airport, he was met by fourteen old friends, all of them now generals. One of them, Castelo Branco, would replace Goulart as the next president of Brazil.
Goulart’s undoing began the day his brother-in-law, Governor Leonel Brizola of Rio Grande do Sul, expropriated a subsidiary of International Telephone & Telegraph (ITT) in Pôrto Alegre and assigned its broken-down properties a value of $6 million for compensation purposes. The response from American business leaders was swift and merciless. ITT President Harold Geneen led the charge, lobbying for an amendment to the 1962 foreign-aid
bill that would suspend all aid to any country that nationalized an American company. Even if a country merely repudiated a contract with an American company or specially taxed or regulated an American company, the results would be the same: no aid.
Such a Big Stick approach appalled President Kennedy, who worried that it would further enflame Third World nationalism, appear to corroborate Soviet propaganda about “U.S. imperialism,” and force the United States to take the side of American companies more often than was merited. He frantically worked behind the scenes, including lobbying Governor Rockefeller, to try to defeat the amendment. He sent his brother Robert to Brazil to urge Goulart to settle. Either settle or face the cutoff of aid, Robert Kennedy warned. To add to the pressure, the president directed AID to fund projects that would benefit potential political rivals of Goulart—Brazilian gubernatorial candidates identified by the State Department and the CIA as reliable.10
Goulart came around. He agreed to pay ITT $8 million. ITT, in turn, agreed to reinvest 15 percent of that amount in Brazilian nonutility interests. In April 1963, Goulart, seeking to control inflation by capping energy rates, then offered to buy out all American-owned utilities. He offered American and Foreign Power Company, for example, $70 million for its Brazilian telephone subsidiary, with the condition that 75 percent of this amount would be reinvested in Brazilian nonutility interests. The company accepted.
Kennedy endorsed the idea. He wanted to avoid Brazilian anger at rising electric bills. “It’s that damned U.S. company,”11 he thought Brazilians would say when their monthly bill arrived.
Carlos Lacerda was not happy. Charging that the company’s equipment was obsolete, Lacerda led a right-wing nationalist attack that soon had Goulart reeling. More than $450 million would be needed, Lacerda argued, to upgrade the company to meet telephone orders. Goulart eventually canceled the deal. Four cabinet members—the ministers of finance, war, justice, and foreign affairs—were sacrificed in the turmoil and forced to resign.
From then on, the noose tightened around Goulart. All U.S. aid to the Brazilian government was cut off. Instead, Washington focused its largess on governors who were opposed to Goulart, hailing their states as “islands of sanity.”
Lacerda’s state of Guanabara was one such island. Guanabara, made up essentially of the city of Rio de Janeiro, had only 4 million citizens and had the highest standard of living of any state in Brazil. It had received $71 million in U.S. aid from the end of 1961 to 1963. In comparison, the impoverished seven state governments of the Northeast, with 20 million people trapped in one of the worlds lowest standards of living, received only $13 million.’12
AID officials, defending themselves against criticism by the General Accounting Office in the mid-1960s, explained why: “The governor of the state of Guanabara was then Carlos Lacerda, who had an active development plan for the state, was an able administrator, and was favorably disposed to the U.S.”
Lacerda was also a shrewd politician. He placed signs on AID’s projects reading “Works of the Government of Carlos Lacerda.”13
The states of Minas Gerais and São Paulo, both governed by critics of Goulart, also were favored.
Meanwhile, Goulart was left out to dry. Brazil’s per capita gross national product, which had reached a postwar high of 7.2 percent in 1961, collapsed to 2.3 percent the following year. By 1963, it registered at -1.3 percent.14
To stem Brazil’s hemorrhage of capital, Goulart ordered his new finance minister to apply “rigorously” a 10 percent ceiling on the remittance of foreign profits.15 Then, in a bold attempt to restore federal authority over foreign-aid policy, he insisted that all states that wanted U.S. aid must channel their requests through the federal government. To Governor Lacerda, that requirement meant a budget paralysis on his home state.
Foreign development projects came under equally harsh scrutiny. Hanna Mining’s rich iron-ore holdings in Minas Gerais were targeted for nationalization, a reversal of Hanna’s fortunes that could not go unnoticed in Room 5600, given recent Rockefeller investments in the Hanna–National Steel–Chrysler industrial complex.*
The Rockefellers’ AIA† also became vulnerable, including its colonization plan in Minas Gerais, aimed at “providing new settlement opportunities for rural families from the over crowded … dry northeast zone.”16
PLANNING PLANALTO: PHASE I OF THE SHINING DREAM
Goulart’s Ministry of Agriculture wanted to gain control over AIA’s rural credit association. Over the years, AIA had launched seventeen branches of the credit association, expanding the AIA’s credit program and colonizing unsettled lands with peasants from the turbulent Northeast.17 AIA also had negotiated for the colonization schemes with the Inter-American Development Bank—and the World Bank.18 AIA’s original proposal was made the month Kennedy was elected. It called for the United States to lend Brazil $10 million to develop the west-central region, encompassing the states of Goiás and Mato Grosso, including the area where Nelson had his million-acre property.19
The Goulart government was not opposed to colonization schemes in principle. Its regional agency for the Northeast, SUDENE, had earmarked highway construction into the Amazon as one of the top priorities of its colonization plans to drain off peasant unrest. The problem was that Goulart now favored development of the Brazilian Amazon by Brazilians.
AIA successfully thwarted Brazil’s efforts to control its credit associations,20 but not without learning a valuable lesson about Brazilian nationalism. If AIA was to continue unimpeded in its plans to develop the frontier, it would have to submerge its identity behind a “Brazilian Foundation.” The foundation could be both the recipient of, and conduit for, American aid. It would further remove any Brazilian suspicions that American corporations were pushing their own agendas in the Amazon. “It is my feeling that the Foundation should be entirely a Brazilian organization,” AIA’s Walter Crawford wrote Nelson’s longtime confidant, Berent Friele. “I would hope it is still possible to get some of Brazil’s leading citizens [involved].”21
By 1962, AIA had scaled back its proposed project area for developing the Brazilian interior, but its plans remained ambitious, starting with large-scale cattle ranching. IBEC had already conducted a soil survey to determine the feasibility of using grass seeds for pastureland. The Planalto, as Brazil’s vast central plain was called, encompassed a huge piece of territory the size of Texas. It included most of western and northwestern Minas Gerais, southern Goiás, and eastern Mato Grosso.
This was the edge of the frontier. Indians had already been pushed into the tropical Xingu valley or met death on the plains or the swamps of the Planalto. The region was also long known to IBEC, with holdings in deposits of phosphates and newly discovered deposits of nickel. Later, projects would be launched to mine vanadium, lead, silver, diamonds, and niobium as well.22 By 1962, an AIA survey team identified the Planalto as “a prime candidate for large scale economic development.”
Part of the area’s attractiveness, according to a preliminary report, was its strategic location “near the principal industrial and consumer centers of Brazil.” As such, it was the “natural gateway for extending the more technologically advanced agriculture in the south to the still unsettled reaches of northern Goiás, Mato Grosso and southern Pará.” Roads to the area had already been built, and more were on the way. The Rockefeller survey concluded that the area could absorb “appreciable numbers of new people”—350,000 “new farm families,” an equal number of “non farm families” providing support services, and another 100,000 families “employed by a fully developed forest products industry.” Development of the area would also require “the establishment of a domestic fertilizer industry” that could “supply the demands of an industrialized agriculture.”23
And here, on the crucial question of how to develop a fertilizer industry, “an infrastructure investment comparable to roads, electric energy, etc.,” the report finally arrived at the subject of oil, specifically the Bolivian oil lands to the west
of Rockefeller’s and Moreira Salles’s Bodoquena ranch in Mato Grosso—the very oil lands in the Santa Cruz region that had been targeted by Moreira Salles’s União oil firm for development: “Bolivian oil … could have agricultural impacts as well as industrial aspects.… A refinery for Bolivian crude oil located in Mato Grasso could have an accelerating effect on the westward expansion of agriculture, both as a source of tractor and truck fuel and as a source of agricultural nitrogen.”24
The report brimmed with specific recommendations, including “a search for fertilizer raw materials”; a survey of all the resources in 220,000 square miles, requiring extensive mapmaking based on 250,000 aerial photos; educational programs for farmers; development of a professional and semiprofessional labor force specializing in banking, agricultural planning, and management; and the “relocation of people from surplus population areas.”
It was like settling the Wild West in a decade, with the value of hindsight and large sums of money to carry it out. Concern for winning the Cold War also lent the colonization scheme an air of urgency and political purpose. The impoverished Northeast offered the necessary pool of surplus labor. “Time is of the essence and we ought to get moving before it is too late,” Berent Friele wrote Berle. “The Castro forces are very active in this area.”25
In anticipation of nationalist rumblings over U.S.exploitation of Brazil’s natural resources, AIA’s Walter Crawford had already approached “a number of influential people—both Brazilian and American”—to discuss the AIA’s concept of creating a Brazilian foundation. His listeners, carefully chosen from among a Rockefeller network of allied businessmen, reacted favorably to the idea.
Crawford eventually found the perfect sponsor for the foundation—a Brazilian mining conglomerate, called Companhia Auxilar de Emprésas Mineração (CAEMI), that had been founded by Augusto T. A. Antunes. The Antunes complex mined manganese in partnership with Bethlehem Steel in Amapá, site of some of the largest manganese and bauxite deposits in the world.