Memorandum by the Assistant Economic Adviser (Livesey)

The New York Times of July 2 announced that claims aggregating $13,490,000 had been filed up to June 30, the final date for subscribing to the Brazil transfer agreement. A total of 110 claims, accounting for roughly $1,000,000 of this amount, was filed by companies having less than $50,000 blocked in Brazil and therefore entitled under the agreement to transfer within 90 days. This would mean that the amount loaned to the Bank of Brazil, repayable over 72 months, was about $12,500,000. The article adds:

“The amount of American funds blocked in Brazil was estimated at $25,000,000 at the time the agreement was signed in June, but the export officials, who negotiated the plan, now believe that the total involved is covered entirely by the claims already submitted.”

The article speaks throughout of these claims being filed by “exporters”. It is possible, however, that they include some five or six million dollars earnings of Brazilian public utility companies, subsidiaries of the American and Foreign Power Company, one of whose officials [Page 63] was a member of the committee of three which sponsored the agreement.

It is understood that British and French interests having frozen funds in Brazil expect to make similar agreements. Mr. Kent estimated their holdings in blocked milreis as equal to some $30,000,000. In view of the precedents of the British agreement with the Argentine and the French agreement with Chile in making which Great Britain and France demanded that these countries having a favorable balance of trade with them, respectively, as Brazil has with us, should make the sterling and franc proceeds of their export sales available for allocation to British and French interests, respectively and solely, the obtaining by British and French interests of six-year equality of preferential treatment with the big American corporations in respect of the proceeds of Brazilian sales in the United States, should please Great Britain and France. Our example will perhaps shame and reform them.

Department of Commerce Bulletin No. 767 of 1931 estimated American long term investment in Brazil as $216,166,000 direct investment and $346,835,000 portfolio investment (the latter comprising $139,643,000 of Brazilian National Government bonds, $142,049,000 Provincial Government bonds, $62,260,000 Municipal Government bonds, and $2,883,000 private corporate bonds). The total American long term investment was thus $563,001,000 which may be compared with an estimate in the South American Journal, May 27, 1933, that at the end of 1932 no less than £274,659,569 of Brazilian Government, State and Municipal bonds, railways and other securities were quoted on the London Stock Exchange. The latter article did not show how much of the British investment was direct investment such as might be benefited by an agreement like the present American agreement.