The Chargé in Brazil ( Thurston ) to the Secretary of State

No. 4110

Sir: I have the honor to report that official announcement has been made of the payment, in advance, on May 31, 1933 of the final installment due the British banking firm, N. M. Rothschild & Sons, by the Government of Brazil, resulting from certain overdrafts incurred by the previous constitutional government.

The total amount paid by Brazil in disposing of this special credit is stated to have been £6,906,137–16–0, which of course includes interest, commissions, and other charges.

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The local newspapers have greeted the liquidation of this account with commendatory editorials, the general trend of which is that the overdrafts in question constituted a debt of honor which it was essential that Brazil should meet at any sacrifice in order to safeguard its credit.

The withdrawal of the Bank of Brazil from the exchange market, to which it has had recourse during the past year to the extent of an average of £500,000 monthly for the Rothschild service, as well as the reports from New York which indicate that a workable plan for the liquidation of frozen milreis accounts of American enterprises operating here is about to be concluded have been very encouraging to local businessmen. While no change has yet been made in the official rates at which the Bank of Brazil handles Dollar transactions—namely, 13$040 and 13$300—the illicit exchange market has responded to a notable extent, Dollar check transactions having dropped from a recent rate of 18$500 to a quoted rate today of 15$000 and 15$800.

Respectfully yours,

Walter C. Thurston