832.51/850: Telegram

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

2. For Executive Committee from Clark. Referring to Executive Committee telegram January 2, 6 p.m.

Finance Minister resigned December 28th; rumored he will be reappointed shortly; Minister for Foreign Affairs also resigned.
Referring to your paragraph (3), you will appreciate that my position as a negotiator is so attenuated and it may not be possible to carry on any effective negotiations. However, I understand and approve such position.
To give more substance to Council’s position and to negotiations here, I suggest following for consideration of the Council and Department of State: Could Department not support any arrangement reached here which had the prior endorsement of the Council and approval of the Department, such support to take the form of an assurance from the Department to the Brazilian Government that the Department would not support as against the Brazilian Government the claim of any bondholders which is based merely on dissatisfaction with such arrangement? Such an assurance from the Department would relieve Brazil from possible Department pressure on behalf of dissatisfied bondholders and at the same time destroy the substance of any objection that negotiations with us would be futile because wholly nonresponsible.
Your paragraph number (4) (B). Hague award not before me but on assumption my understanding of award is correct—that award merely covered point of currency of payment (gold francs instead of paper francs)—it would seem bonds covered by award did not acquire from the award any priority nor any special sanctity save on the one point of service currency.
I shall see what, if anything, I can do and will keep the Council advised of developments. [Clark.]