832.51/809: Telegram

The Ambassador in Brazil ( Gibson ) to the Secretary of State

109. Substance Department’s instruction 23, October 24, formally presented to Foreign Office November 4th, copy immediately forwarded by Foreign Office to Finance Minister.

Finance Minister dined at the Embassy last night and told me that he had examined our criticisms of his plan and felt that he would be able to “refute them to our satisfaction” within a day or two.

I said the essential thing was not the detailed criticisms which were presented, chiefly to bear out the necessity for further consultation, but the definite request for the protection of American bondholders should be heard and have its views taken into consideration. The Minister said this was out of the question as he must, in order to anticipate a move for repudiation, put a plan into effect before the meeting of the Constituent Assembly. I suggested he would be adequately covered if he informed the Constituent Assembly of the Government’s determination to resume payments, adding that the details of the plan were under discussion with the interested parties.

Today the Minister sent Bouças to see me with two memoranda71 … taking exception to various points in the Department’s analysis [Page 92] of the plan. The Minister had sent Bouças to ask me for “the definite proposals of the American Government”. I told him we had just one definite proposal clearly embodied in my note which was that no plan should be put into effect without consultation with the Bondholders’ Commission. Bouças in evident distress said he agreed but feared the Minister had gone so far that it was difficult to turn him back but that anyway he would do his best to persuade him. He was not sanguine of success.

In view of the foregoing I went to see the Foreign Minister this evening and went over the whole matter with him, saying that so far as I could see immediate action was entirely unnecessary as the plan need not be put into effect until October 1934. The Foreign Minister said he could hardly credit the statement that the Finance Minister must act before the meeting of the Constituent Assembly as that body, under its terms of reference, has no jurisdiction in this matter. He added that after the President had set up a disinterested commission and the American Government had asked that this be consulted he did not feel that it was possible for Brazil to refuse.

I gave him verbally the penultimate paragraph of the Department’s instruction. He said that he would immediately get in touch with Finance Minister and would do his best to prevent any precipitate action.

The Minister inquired how much time I thought would be necessary for the Commission to deal with this question. If the Department can give me any guidance on this point it might strengthen Foreign Minister’s hand in discussion. I should also appreciate any indication as to how it is contemplated that the Brazilian Government and the Commission be brought into communication.

  1. Not printed. The memorandum transmitted with the note of November 29, 1933, from the Secretary General of the Brazilian Foreign Office, is a word-for-word transcription of these two memoranda; for text, see p. 98.