file No. 832.61333/104.

The American Ambassador to the Secretary of State.

[No. 46.]

Sir: I have the honor to report, referring to my cablegram of September 3, that the Brazilian Foreign Office has learned nothing further from the Brazilian Embassy at Washington regarding the rumor which Mr. da Gama cabled on the 2d of September: that the American press then reported that the Attorney General intended to revive the investigation of the legal status of valorized coffee. A careful and constant examination by the Embassy of the telegrams from abroad which appear in the local press and also of the telegraphic news from São Paulo has given no indication that such press rumors are current in the United States and for the advantage of our commercial position in Brazil this fact is a desirable one.

Not only in the State of São Paulo but throughout Brazil public opinion appears particularly and increasingly sensitive regarding valorization, and American enterprises which deal with either the Federal or State Governments would, as a result of renewed discussion of this question, probably be embarrassed, at least temporarily, in their efforts to secure new business. This would affect companies such as those which supply materials to the Government, as well as those which desire to enter into negotiations with the Government for the construction of the proposed military port.

The Brazilians believe that if the stock of valorized coffee in New York is left unmolested it will be liquidated within a year through ordinary sales. There is no intention of increasing that stock. The recent frosts in the coffee district make it certain that the present crop will be a small one and that the excessive crop of a few years ago, which was the inception of the valorization plan, will not be repeated this year.

I have [etc.]

Edwin V. Morgan.