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

Dear Mr. Secretary: Your letter of the 26th inst. with enclosure received and carefully noted and I am very much gratified at the manner in which you have handled the matter.

Dr. Numa De Oliveira called upon me yesterday and I spent two hours with him going over the Brazilian situation. We found ourselves in complete accord as to the necessity, from the standpoint of the interests of Brazil as well as the United States, to have the matter of blocked milreis deposits belonging to American exporters and investors released. Then I suggested to him a method by which this might be done provided the Reconstruction Finance Corporation was willing to take part.

The plan that I suggested, without going into detail, was that a loan of say $30,000,000 be developed under which the Government of Brazil would agree to allot some stated percentage of dollars made by exports from Brazil to the United States monthly to the retirement of the loan, including interest and sinking fund, and further that all future exports from the United States to Brazil be paid for as the milreis became available in Brazil.

Dr. De Oliveira agreed with me that this would solve the problem if the Reconstruction Finance Corporation would be willing to make advances against the loan carrying agreements of this character. He stated, however, that he would like to have the detail handled a little differently, namely that the Bank of Brazil be the borrowing agent instead of the government but that the government guarantee the loan of the Bank of Brazil and that in the loan agreement the Bank of Brazil would utilize the dollar bills of exchange received by it for exports from Brazil to the United States monthly in such stated amounts as would retire the loan in six years. Further, he stated that he believed it advisable to have the agreement handled by the regular American bankers from Brazil, which of course is sound as there is no excuse for us to demand any change in the fiscal agents with whom Brazil has worked in the past.

While I talked over this question with the President of the Reconstruction Finance Corporation just before the change of the administration, yet I have not taken it up with the present officers and consequently do not know what their opinion may be. It did not seem wise, however, to do this until I had some tangible evidence that the Brazilian Government would be interested.

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At the close of the conference yesterday Dr. De Oliveira stated that he would cable to the Brazilian Government and request them to reply in such manner as to carry authority to close the operation, provided it could be accomplished in this country. We are to take luncheon together Monday, when Dr. De Oliveira hopes to have a return cable, after which I will write you again and let you know what developed.

Sincerely yours,

Fred I. Kent