The Secretary of State to the Ambassador in Brazil (Gibson)
92. Your 105, October 25, 6 p.m. Department does not understand Minister’s reference to lack of offer of American guidance. A bulletin of the “Institute of International Finance,” published June 3, 1933, under the auspices of the Investment Bankers Association of America printed text of a memorandum delivered May 17 to Mr. Bouças by the American Committee on Brazilian State and Municipal loans suggesting possible bases for treatment of these loans and asking further discussion. Department understands that the first year of the Niemeyer plan would alter treatment only of State and Municipal bonds, contemplating transfer of 10 or 15 percent of their current interest and additional (unlimited) transfer to redeem them by purchase in the open market, while interest on national bonds would continue to be paid in scrip under 1931 funding plan until September 30, 1934.
Department’s position as fully stated in air mail instruction of October 24 should be communicated formally to Brazilian Government in view of its apparent misunderstanding of position.
Department perceives certain objections to the proposed omnibus mission by Kent. The problem of foreign obligations is to be referred to bondholders organization. Trade conversations are pending at Washington. Department has avoided implication in questions of unfreezing exchange. Department appreciates your suggestion and may develop alternative procedure.