832.5151/429: Telegram

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

132. Your despatch No. 410, August 31, 1934. We are disturbed by this information, which was not furnished Williams by the Brazilian authorities. As you know, Williams was advised by them that Brazil now has no exchange agreements in force except the arrangement with France. We have had in mind a liberal policy in exchange matters towards Brazil, refraining from insisting on a preferential arrangement in order to assist Brazil to work towards a general solution of the problem and ultimate removal of control. The action reported in your 212, September 11, 11 a.m.,62 was encouraging and in line with Souza Dantas’ policy explained to Williams of increasing the free market by making available there a percentage of the coffee bills.

However, the blocking of Brazilian credits by other Governments with Brazil consenting to use such credits only for the purchase of goods from the blocking country, even goods of doubtful necessity such as you describe, would retard Brazil’s program of exchange liberation, would constitute discrimination against us and expose American exporters and creditors of Brazil to further delays in receiving exchange. Obviously under such circumstances it would be increasingly difficult for this Government to pursue the liberal policy in exchange matters with Brazil.

Before discussing the exchange situation with Aranha we should appreciate information by cable covering (a) What Governments are now blocking exchange from Brazilian sales and what percentage of such exchange are they blocking? (b) Is it expected that on completion of arrangements described in your despatch these particular countries will cease to block Brazilian credits? (c) We would welcome your comment on any phase of this question.

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