Memorandum by the Chief of the Division of Latin American Affairs (Wilson)

General Palmer E. Pierce, of the Standard Oil Company of New Jersey, telephoned to say that representatives of American interests doing business with Brazil had been having conversations with Dr. Numa de Oliveira in New York regarding ways and means of liquidating frozen commercial assets and dividend payments in Brazil. They have been discussing an agreement under which the Bank of Brazil would pay immediately all accounts up to the amount of $50,000 at the official rate of exchange, 13.3 milreis to the dollar, and would discharge accounts in excess of $50,000 by delivery of bills of exchange which would be paid monthly over a period of six years with interest at four percent. In the text of the agreement which they were discussing with Numa de Oliveira they had proposed the following:

“The Bank of Brazil agrees that payment of any and all bills of exchange accepted by it hereunder shall be provided as a first charge on exchange made available from exports from Brazil to the United States.”

General Pierce said that Dr. Numa de Oliveira was objecting to the above-quoted proposal on the ground that in the discussions which the Brazilians had held in Washington we had pronounced ourselves as opposed to the principle of such an arrangement as that embodied in the recent Anglo-Argentine agreement regarding allotment of exchange.39 General Pierce said that they had decided to omit at the end of the paragraph the words “to the United States,” so that the first charge in favor of the bills of exchange would be simply against “exports from Brazil”. General Pierce inquired what the views of this Department would be regarding such an arrangement. I told General Pierce that I could not express any views offhand on behalf of the Department, and that if he wished our views he should submit the [Page 55] complete text of the proposed agreement. I said, however, that of course this Government would not at this time negotiate any agreement with Brazil based on the principle of allotting exchange according to purchases from Brazil. We were opposed to this principle as it appears in the Anglo-Argentine agreement and hoped that at London we might be able to take steps looking towards the ultimate removal of this whole paraphernalia of exchange controls. Furthermore, I said that the agreement which was being put up to Dr. Numa de Oliveira obviously provided exchange for the commercial and public utility interests dealing with Brazil and was silent as to the interests of American holders of Brazilian bonds. I said that this Government would not take any position which would favor one group of American interests in Brazil as against another.

General Pierce said that he appreciated that this Government would not wish to have one set of American interests discriminated against in Brazil, but that the Brazilian Government was anxious to clear up these frozen commercial credits, believing that would be the initial step in improving trade with Brazil, and that once trade improved there would be an opportunity to take care of the bondholders. He said that the arrangement he had mentioned was of course one between private interests in this country and the Bank of Brazil and that this Government would not come into the picture.

I asked if there was any thought that commercial banks or the Reconstruction Finance Corporation would take part in this arrangement. He said no, that the banks wished to keep out of it and that this would be simply an arrangement between the commercial and public utility interests and the Bank of Brazil. I said that I wished to make it clear again that this Department was expressing no opinion in the matter.

Edwin C. Wilson