832.5151/440: Telegram

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

274. My 273, October 10, 4 p.m. … the following information about the conversations with the German mission.

This mission first spent 2 months in the Argentine Republic and arrived in Brazil only last week. For the present, the Brazilian authorities are limiting themselves to receiving German suggestions toward facilitating commercial transactions. There is no plan under discussion for the conclusion of a commercial treaty but merely the establishment of a clearing arrangement to facilitate reciprocal payments. The German proposal is, in substance, that exports from [Page 596] Brazil to Germany will be paid for in marks which will be credited to the Bank of Brazil in the Reichsbank. The Bank of Brazil will use these funds in paying for imports from Germany without obligation on either side regarding the movement of these transactions, which will be made exclusively by private initiative of the exporters and importers. The German mission contends that this procedure is necessary and that it is not open to objection in view of the fact that there is normally a close trade balance in business between the two countries.

In compliance with the request received from Aranha, the Brazilian authorities will not make any statement or commitment, as they desire first to await the development of Aranha’s conversations.

The Government is fully alive to the importance of Brazilian-American commerce and will reach no decision with regard to Germany or any other country which might be prejudicial to Aranha’s negotiations.

While there is no immediate intention of concluding a trade agreement with Germany it is considered urgent to dispose of the negotiations with the United States as a necessary preliminary to any further steps on the part of Brazil, as owing to the present difficult situation Brazil must find some way to assure the liquidation of her exports in those countries which are blocking exchange. In conclusion I was told definitely that no commitment would be made until Aranha had had an opportunity to conclude his negotiations in the United States.