The Secretary of State to Mr. Fred I. Kent, Supervisor of Exchange, Federal Reserve Bank of New York

Dear Mr. Kent: I have your letter of May 19,35 received here May 23, regarding the question of American frozen credits in Brazil, and appreciate the information and suggestions contained therein.

We have just completed a series of conferences with the Brazilian delegation to the World Economic Conference. In these discussions we raised quite frankly the question of exchange control and the prevalent opinion on the part of American interests that they were not obtaining fair treatment in the allotment of exchange in Brazil. You have doubtless seen in the press the declaration which the Brazilian delegation made on this subject, a copy of which I am attaching hereto.36 During our conversations Dr. Numa de Oliveira, who speaks for the delegation on monetary questions, told us in strict confidence that the Bank of Brazil hoped to obtain a loan in England of some six million pounds for the purpose of liquidating blocked commercial credits. The Rothschild credit has either already been paid off in full or will be shortly. Evidently it is the intention of the Bank of Brazil to contract another credit in Great Britain, using the proceeds to pay off frozen commercial credits. Dr. Numa made it clear that if this loan was obtained in England the proceeds would be used without discrimination for the liquidation of frozen commercial credits held by the nationals of all foreign countries. He estimated that the sum of six million pounds would clear up the total of such frozen credits. We questioned this, pointing out that our figures indicated about $26,000,000 of American frozen commercial credits alone. (Your letter of May 19 had not come to hand at the time of these discussions, but your figures bear out those that we have obtained.) Dr. Numa stated that he was convinced that part of this total of twenty-six million dollars consisted of credits representing unsold stocks of American companies, particularly oil companies, in [Page 51] Brazil. The purpose of the Bank of Brazil, he said, was to liquidate only the frozen commercial credits representing actual sales.

In your letter you raise the question whether the State Department could make an arrangement with the Brazilian Government under which the latter would agree to apply a stated percentage of the dollars received by Brazil from exports to the United States which could be so set up as to make a satisfactory collateral for a loan, enabling the Reconstruction Finance Corporation to advance funds for the repatriation of accumulated American credits awaiting transfer from Brazil. The State Department, of course, could not undertake to negotiate any such arrangement as this. However, I am told that in private talks which Dr. Numa de Oliveira had with some of our experts he stated that he intended to explore the possibilities of obtaining for the Bank of Brazil a credit from American commercial banks which would permit unfreezing of American commercial credits in Brazil. I understand that you are planning to have a talk with Dr. Numa in New York and I shall be interested in hearing your views after you have discussed this exchange problem with him.

Sincerely yours,

Cordell Hull
  1. Not printed.
  2. See memorandum of May 23 by the Chief of the Division of Latin American Affairs, supra.