Memorandum by Mr. W. R. Manning of the Division of Latin American Affairs

Special Conference With the Brazilian Delegation Regarding the Distribution of Exchange Cover

At 3:00 P.M. the three officials of the Latin American Division who had been present at the morning conference,32 accompanied by Mr. Grosvenor Jones, Chief of the Finance and Investment Division of the Department of Commerce, and Mr. Corliss, the Latin American Specialist in that Division, attended the arranged second conference with the Brazilian delegation in the Secretary’s Office to consider the matter referred to above. Mr. E. C. Wilson stated at some length the seriousness of the situation with which the two interested Departments represented and their officers in Brazil were confronted, growing out of numerous recent reports regarding increasing difficulties experienced by United States interests in Brazil in obtaining what they considered fair and adequate exchange cover to transfer to this country their accumulated milreis credits. He referred to the predominant role the United States plays as a consumer of Brazilian products, pointing out that we take about 50% of Brazil’s [Page 47] exports and furnish only 25% of Brazil’s imports. In 1932, for instance, we bought over $83,000,000 from Brazil and sold only $32,000,000 of goods, thus furnishing Brazil with $50,000,000 of her total favorable merchandise balance of $72,000,000 for that year. Mr. Wilson also mentioned the recent British-Argentine agreement and stated that we were opposed to such preferential treatment as was given by that agreement, but that if this indicated a tendency on the part of the various countries to profit by the special position they occupied in trade with other countries, the United States could not ignore this situation. He said that personally he felt convinced that if in the long run American interests were unable to obtain equitable treatment in exchange matters this Government would be obliged to put into effect an arrangement under which it would retain in this country a certain percentage of the dollar exchange arising from its purchases from abroad.

At the request of the Brazilians Mr. Wilson presented a draft statement giving his views of what the Brazilians might wish to embody in a declaration regarding equitable treatment by Brazilians of United States interests in the allotment of exchange.

Dr. Eulalio stated briefly that he personally believed the delegation would have no hesitation whatever in making such a statement as that which Mr. Wilson had suggested; and that they would communicate regarding the matter with their Government. They hoped for a reply by Monday.

Dr. Oliveira spoke for probably half an hour, asserting that there was a serious misunderstanding with reference to the distribution of exchange in Brazil, that the interests of this country had received and are receiving an equitable share of the exchange available, that Brazil is keenly alive to the fact that the United States is by far the best customer for Brazil’s exports and that, therefore Brazil is even more concerned in giving fair treatment to the interests of this country than these Departments or their representatives could be. He pointed out that the Rothschild credit had been obtained from England primarily because American bankers had called in their credits in Brazil, and that now with the proceeds of the Rothschild credit the American banks had been paid off in full. He said it was contemplated that when the existing Rothschild credit is paid off (and he thought the Bank of Brazil was prepared to pay it all and probably would do so the next day) a new credit of six or six and a half million pounds Sterling now under negotiation would, it was supposed, be obtained through Rothschilds and if so the proceeds would be used to release the frozen milreis credits. Dr. Oliveira having expressed a belief that this would be adequate to cover all existing frozen credits in Brazil Mr. Wilson observed that reports reaching this Department indicated that United States interests alone had in Brazil accumulated milreis [Page 48] credits which were conservatively estimated at more than that amount, naming $25,000,000 to $50,000,000 as the reported values of such United States frozen credits. In response a belief was expressed by the Brazilians that this large amount probably included stocks of unsold goods in Brazil belonging to United States interests instead of being confined to milreis actually obtained for goods already sold.

In conclusion a tentative agreement was made for another conference with the Brazilian delegates early next week, probably Monday, at which general economic matters to come before the conference in London would be given further consideration (yesterday morning’s conference having dealt pretty exclusively with monetary and other financial matters); and a definite hour for this conference was to be communicated later to the delegation.

W. R. Manning
  1. Of May 19, 1933.