The insurrection of the integralist “green shirts”, on 11 May 1938, took place after a series of acts considered contrary to the ideology and interests of the totalitarian states; laws: on citizenship, of April, which, by reiterating the principle of ius soli, made the children of foreigners Brazilians; on immigration, of 4 May, which introduced the 2% quota for each nationality, on those who entered in the period 1884-1933; and above all the measures taken directly against the fascist and National Socialist organizations, the press and foreign schools. After the repression (which was reflected in the August convictions of the communist rioters in Pernambuco), Vargas’ accusations of foreign propaganda irritated Italy and Germany.
The crisis worsened when the foreign minister O. Aranha (recalled to power in March and representative of the “democratic” or “left” tendency in the president’s circle) withdrew, in October, the title of “grateful person” to ambassador Karl Ritter, provoking German retaliation. Meanwhile, Vargas, who in April had decreed the nationalization of the – still very modest – oil industry, began to abolish internal duties, thus further reducing the financial autonomy of the states, already shaken since November 1937, when, having failed to make other producing countries accept a quota system, Brazil, tired of “acting like Befana”, had reduced the duty export on coffee (the income of which went largely to the states) causing the collapse of prices. He also continued the policy of “good neighborliness” with the United States and other American countries, in the Inter-American Conference in Lima, with the visit of the Aranha to Washington in February 1939, and with the agreements of March for the granting of loans especially for the development, including technical assistance from the United States, of the steel and metallurgical (nickel) industry and of rubber production, as well as for public works; moreover, with the agreements with Holland and Venezuela (of December 1938, with the first, for the delimitation of the borders of Surinam, and with the second, for the peaceful solution of disputes); with the commercial treaty with Uruguay and the negotiations with it, Paraguay and Argentina, on customs and trade issues. And the vigilance on foreigners continued. But trade with Germany was resumed as early as November 1938; interposed, improve relations, Italy.
At the outbreak of the Second World War, Brazil declared its neutrality on 6 September 1939 and in 1940, while Rio became the seat of the Inter-American Committee of Neutrality created by the Panamá conference and despite the fact that England made important purchases on the Brazilian market, the way it enforced the blockade, provoked Brazil’s protest. This firm attitude and the intensification of the propaganda in favor of the “Axis” following the German victories, led many to interpret the speech as a manifestation of solidarity with totalitarian countries – in more than one point echoing clichés of Nazi-fascist rhetoric – held by President Vargas on 11 June. But immediately explanations came; and on the 29th the Vargas gave another speech, all in favor of Pan-American solidarity. In concrete terms, Brazil was preparing to make the most of the circumstances which, by isolating the American markets from Europe, opened them up to those countries of the continent which were able to develop the manufacturing industry. An agreement with Argentina, in October, established a reciprocal system of opening credits and customs exemptions for goods not yet produced in the two countries; as regards exports to England, a special agreement was reached for payments; projects for the development of heavy industry were on the way to completion; the Inter-American agreement for coffee was reached (November 1940), thus making it possible to regulate production; and, having removed the immigration restrictions of the Portuguese, refugees who had entered irregularly and who, according to some calculations, would have imported capital for a total of 25 million dollars were authorized to stay and work. In 1940, the government (March and July) expropriated Belgian, French and British railway companies and prepared to resume foreign debt service. An attempted insurrection in São Paulo in March was attributed to Communists and resulted in numerous forced labor sentences. But the constitutional changes we were talking about did not come yet; on May 1, 1941, the Vargas inaugurated the labor courts, in application of the constitution of 1937 and a law of 1939; in September, the work of children under the age of 14 was prohibited; a decree of April, for the protection of the family, established measures for the protection of children, the pre-nuptial medical examination and the unmarried tax. Diplomatic relations began in May, and in October a trade agreement was concluded with Canada; in April a new agreement with Argentina. The requirement for banks to have Brazilian capital was suspended in respect of American banks, as was the exception for the United States for the prohibition on exporting raw materials. The friendship between the two countries was manifested in the support given by Brazil to the Roosevelt declaration that the Azores should remain in Portuguese hands; with the participation of Brazil in the agreement whereby forces of this country joined the Americans for the protection of the bauxite mines of Dutch Guiana; with the agreement for the sale of “rent and loan” materials; while shipyards were developed for the construction of small units, naval and air bases were built in agreement with the United States; and on September 7, celebrating the 119th anniversary of independence, Vargas spoke of the need for Brazil to arm itself for the common defense of the American continent.

Thus, despite the presence of Italian, German and Japanese colonies, Brazil was ready to show its solidarity with the United States after the Japanese assault on Pearl Harbor.
The Rio de Janeiro Conference, in which O. Aranha played an important part, resulted in the agreement (whose execution by Brazil and other republics was announced in the final session, January 28, 1942) for the breakdown of relations between the American states and the “tripartite” powers. Solidarity with the United States took place, granting them the treatment of non-belligerent, provided for by inter-American international law; with agreements to intensify rubber production; the extension of “rent and loan” concessions; the measures against the citizens of the Axis, through the “freezing” of bank credits, the requisition of Italian and German steamers and with the intensified surveillance. Since February the sinking of Brazilian ships had begun, why Brazil protested in Berlin; and continuing the sinking, in March he decided to redeem the damage suffered on the property of German and Italian subjects; in April he had the merchant steamers armed and in August, to join his planes to the North Americans in patrolling against the submarines; finally on 22 August he declared war, definitively confiscating the ships. A joint Brazilian-US defense office was immediately set up and new economic measures were taken, required by the state of war. While some ministers were withdrawn – including that of justice, Francisco Campos, sympathizer with the integralists and author of the 1937 Constitution – the government implemented a real economic mobilization, under the orders of a coordinator with full powers, introducing price controls, authorizing the increase in working hours, rationing gasoline and, despite the increase in the production of cereals and meat, various other kinds; the “freeze” of the rent was established; and the coastal cities remained partially obscured until May 1944. However, the increase in mining production and the increase in artifacts, especially textiles, began to be widely exported. The trade balance became active again in 1941; but the increase in prices was matched by a decrease in quantities: the United States, absorbing 59.9% of exports and supplying 60.3% of Brazilian imports, (instead of 42.6 and 51.8, respectively, for 1940) and, to a much lesser extent Argentina and other American states,
Also granted to Brazil, by the other American states and by Portugal, the status of “non-belligerent”, having already broken relations with Romania and Hungary in March and May 1942, Minister Aranha visited Chile and the Argentina, concluding agreements for cultural and commercial exchanges; in the same month, a raid by the German police at the Brazilian Embassy in Vichy also caused a break with that government. In February 1943 Brazil adhered to the Atlantic Charter and the declaration of non-recognition of the transfer of ownership in the territories occupied by Germany; in August it also renounced its extraterritorial rights in China. In October 1944 it recognized that of General De Gaulle as a provisional government of France; in April 1945.

Several of these measures were discussed at the Natal meeting, January 28, 1943, between Presidents Vargas and FD Roosevelt, returning from the Casablanca conference. After it, Brazil’s participation in the war was also intensified with the dispatch of aviators to the theaters of operations (the first contingent left in January 1944), and finally with an expeditionary force, whose first nucleus landed in Naples on the 16th. July 1944.