832.5151/364: Telegram

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

102. Department’s 36, April 6 [9], 4 p.m. I had expected to send full report on exchange situation by today’s air service but in view of developments of last few days have been unable to complete it; it will go forward in next air mail.

In the meantime I had prepared a preliminary telegraphic report as called for in the Department’s telegram but on submitting it to the Consul General he informs me that he disagrees with statement of [Page 585] some of the essential facts and the conclusions and that he is in possession of evidence of discrimination against American interests and preferential treatment accorded other nationalities. I feel that in view of this I must withhold any comprehensive report until the Consul General’s information can be considered.

In view, however, of the time which has elapsed since the Department called for this information, I feel that I should no longer delay in giving my own impression, which is shared by the Commercial Attaché, of the administration of foreign exchange control, tempered with a statement that the Consul General disagrees as above indicated, and subject to amendment in the light of his information.

After following situation closely for 10 months I believe that the new Exchange Director of the Bank of Brazil is making an honest effort to put exchange control on a businesslike basis. He has already taken several measures which meet complaints of American business interests, for instance from June 1st all drafts must be numbered to ensure chronological treatment and thus obviate favoritism. A further decree authorizes free trading in all exchange not derived from exports.

As regards the frequent charges of corruption, Dr. Souza Dantas has come out with a letter to a newspaper which has attacked the conduct of exchange control stating that he does not propose to tolerate corruption, discrimination or preference, that the records of the Bank are open to them and that he will take action on any evidence they can bring in as to improper activities by the Bank or its employees.

Pending consideration of the various possible solutions submitted in the written report, I propose, unless the Department directs otherwise, to go over the whole exchange problem informally with the Minister of Finance and the Exchange Director in the light of recent developments and stress to them the further improvement which would result if they could accelerate dollar remittances for current requirements, as the chief complaint now put forth is delay in receiving cash after maturity of drafts.

In this connection it would be helpful to have for my guide [guidance?] a list of complaints received by the Department.54

The long delay in formulating report is due in large measure to the difficulty in securing from Americans here precise information as to their exchange experience and present status together with conflict of opinion as to course best calculated to improve situation.

  1. A list of complaints received by the Department was transmitted to the Ambassador in Brazil in Department’s instruction No. 134, May 29, 1934, not printed.