832.51/794
The Brazilian Ambassador (Lima e Silva) to the Secretary of
State
[Translation]
No. 85
The Ambassador of Brazil presents his compliments to the Honorable the
Secretary of State and has the honor to transmit to His Excellency the
enclosed memorandum of which he spoke in the conversation of August
29.45
Washington
, September
5, 1933.
[Enclosure]
Memorandum
Brazil, being a new country without capital, can only progress and
equilibrate her balance of payments with the entrance of foreign
capital which has been interrupted for various reasons since October
1929. In the two years 1930 and 1931 she has exported all her gold
reserves, about 160 million dollars, to meet her foreign
obligations. Notwithstanding this sacrifice and the exhaustion of
these reserves she continues to owe to foreign bankers about 35
million dollars for commercial importation, etc. The increasing
world depression has
[Page 67]
not
permitted Brazil to borrow new capital in foreign countries, and the
uninterrupted low prices of her principal products of exportation
obliged her to suspend payment in specie of the greater part of her
external debt and contract a funding loan of 8 million, which was
entirely executed. In order to pay the bankers the 35 million
abovementioned and to obviate a catastrophe resulting from the fall
of exchange the Brazilian Government was compelled to give the Banco
do Brasil a monopoly of the exchange. Within its own means the Banco
do Brasil sought to impede evasion of capital and the sending of
funds to Brazilians residing abroad, or for trips, thus
demonstrating its determination to reserve disposable exchange of
the country for commercial necessities and external obligations. It
could not, however, make all the above payments but only amortize
totally the bank credits with fixed terms and it has just made
agreements in New York and London on frozen credits in Brazil owned
by nationals of the United States and Great Britain. Notwithstanding
this action the situation was not bettered as had been hoped,
principally because the price of coffee, which represents 75% of the
Brazilian exportation, suffered a tremendous decline in the past
three months. A bag of coffee which had the value five years ago of
one hundred shillings gold, and three months ago forty-four
shillings, is now valued at only thirty-three shillings. For a
country like ours which cannot equilibrate her international debts
without the help of foreign capital it is necessary again to have
this help which can only be obtained with the restoration of free
foreign exchange, which will be controlled only in the sense of
avoiding speculation. The Government will have the right to reserve
a quota of not more than 30% of all the exchange offered for her
foreign obligations. This will be the only restriction of free
exchange. This seems to be the opportunity to work a credit for the
purpose of acting as an exchange fund, since recent agreements on
frozen credits have relieved the exchange pressure. The minimum
credit to be asked must be fifty million dollars for the exclusive
purpose of paying for imported merchandise. The annual quota for the
interest and amortization of this credit must not exceed six million
dollars. It is sufficient for Brazil to honor the drafts of the
Banco do Brasil until that amount is reached. These drafts must be
issued monthly over a period of sixteen months in equal amounts, but
in case of emergency there may be drawn in one month an amount equal
to four months. Paper money received in payment of these drafts of
the Banco do Brasil will be taken out of circulation. The Brazilian
exchange situation will be eased with the realization of this
financial transaction and the stability of exchange would be
guaranteed at about 4 pence per milreis.
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The Brazilian Government may justify the request for the opening of
this credit by several reasons, among them the following:
- 1.
- Different countries such as Austria, The Union of South
Africa, etc., got important loans from various European
countries for the purpose of guaranteeing continuation of
their commercial transactions and bills of exchange.
- 2.
- Brazil has once more proved her desire to intensify
commerce with the United States of America by making the
recent agreement of the so-called frozen credits which
amounted to 177 thousand contos, when in London the same
agreement amounted to 260 thousand contos: Of Brazil’s total
imports 30% come from America and 19% from England.
- 3.
- The Brazilian Government has done its best to reduce her
expenses principally on imported goods. In spite of this the
commercial trade has not permitted Brazil to secure the
balance of her accounts, because she does not possess the
resources which she is now requesting.
- 4.
- With the opening of this credit Brazil could inaugurate a
new trade policy with the United States.
