Office of the Historian

832.51 Sa 6/111: Telegram

The Secretary of State to the Ambassador in Brazil (Morgan)

[Paraphrase]
Washington, May 3, 1928—5 p.m.

15. With reference to report No. 105, April 7, 1928, from Consul Cameron4 regarding vicinal bonds of the Itararé-Fartura Railway, the bankers are convinced that the State of Sao Paulo is under legal obligations to carry out its agreement with them. The bankers state, however, that they will not take the case into court, since they realize that years will be required to get a final decision. They say that even if such a decision were to be in their favor—and they consider this certain—an appropriation by Congress would still be necessary. The Department has been informed by the bankers that if the State of Sao Paulo will not agree to make a settlement which will be satisfactory to the American interests concerned, influence will be brought to bear by these American interests on bankers’ associations both in the United States and in Europe to prevent the flotation of future loans by the State of Sao Paulo, on the ground that the State of Sao Paulo does not live up to its financial obligations.

With the information at its disposal, the Department is not prepared to pass on the merits of the controversy between the State of Sao Paulo and the bankers; nevertheless, because of the serious consequences which may result if this matter is not settled in a way which will be mutually satisfactory to both parties, it is the belief of the Department that you would be justified in discussing this matter informally with President Washington Luis, whose influence with the State Government of Sao Paulo, according to the bankers, is considerable. You will express the hope that for the best interests of all concerned a satisfactory settlement may be reached. The bankers are willing for you to use any information transmitted herewith with regard to their intentions and views as you see fit, and in such a manner as you may think most likely to produce a favorable effect. You will take care not to appear to be making any threats on behalf of the bankers.

Kellogg
  1. Not printed.↩