The Minister in Portugal ( Dearing ) to the Secretary of State

No. 1094

Sir: I have the honor to refer to the Department’s instruction No. 642, of April 27, 1925,6 directing me to report with regard to a recent agreement whereby the Paris Stock Exchange had reestablished the quotation of Portuguese stocks and bonds, among which were the three series of the 3% External Loan, and to my despatch No. 957 of January 10, 1925,6 stating the substance of a conversation between the then Portuguese Minister for Foreign Affairs and the Belgian Minister at Lisbon in which I took part, concerning the discrimination shown in the matter of the various foreign holders of the Portuguese tobacco bonds, and to transmit herewith a memorandum of a conversation which I recently had with a member of the Ministry of Finance, Dr. Alberto Xavier, germane to the question, together with copies and translations of two interviews7 granted by Dr. Xavier to a representative of the Diario de Noticias.

I have [etc.]

Fred Morris Dearing

Memorandum by the Minister in Portugal (Dearing)

I saw Dr. Alberto Xavier, Director Geral da Fazenda Publica,8 in the Ministry of Finance, this afternoon at 5 o’clock. It had been difficult to arrange the meeting, but I was received by Dr. Xavier most courteously. I learned in my talk with him that the Government Tobacco Monopoly 4½% Bonds of 1891 and 1896 are not included among the Portuguese issues whose quotations have been reestablished by the Paris Stock Exchange.

. . . . . . . . . . . . . .

… He said there had been a misunderstanding on the part of the authorities of the Paris Bourse, but that when he had explained the state of affairs the 3% bonds of the various series outstanding were again admitted to quotation.

The situation with regard to the tobacco monopoly bonds, 4½% series of 1891 and 1896, is different, and these bonds are not yet quoted for reasons that will be set forth a little later.

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[Page 885]

Dr. Xavier said that there were two situations to deal with in France. The number of French holders of Portuguese External bonds, particularly the tobacco bonds, is not yet known, but as the time limit for stamping expires June 30th next he hopes soon to know the extent of the French holdings.9 When he does know, he will arrange for foreigners in Portugal and the colonies to have their bonds stamped so they may be treated in the same way as foreigners outside of Portugal and the colonies. He feels he cannot do this until the French situation clears up, as Portuguese holders might contrive to escape if he attempted it.

The other phase of the French situation is the fact that from the start the Portuguese tobacco monopoly has been financed and controlled by a French group. This group is in relation with a strong Portuguese group which holds many of the tobacco bonds. Dr. Xavier feels pretty sure that this group holds the larger number of the tobacco bonds in French hands. The present tobacco monopoly expires next year. In granting a new contract to the monopoly the Portuguese Government wishes to make and not to have to accept conditions. So there is a struggle going on between the French and the Portuguese, the French who hold the tobacco bonds and who control the monopoly trying to arrange the situation so as to get all they can from it, the Portuguese Government trying to escape the exactions of the monopoly backers and to make the monopoly a more fruitful source of revenue.

. . . . . . . . . . . . . .

Fred Morris Dearing
  1. Not printed.
  2. Not printed.
  3. Interviews not printed.
  4. Director General of the Treasury.
  5. In order to prevent the bonds of the external loan from passing out of the hands of Portuguese nationals, who were to be paid interest in paper escudos at a fixed rate while holders of other nationalities were to be paid in sterling or its equivalent, it was determined that all bonds should be stamped, in either London or Paris.