The Acting Secretary of State to the Ambassador in Brazil (Gibson)
Washington, January 8, 1934—7 p.m.
5. From Executive Committee for Clark:
- “First. Number our long cable through Department 1 and straight cable number 2.74 This cable number 3.
- Second. Point (2) your cable of 4th. While legal position is as stated paragraph (3) our number 1, practical situation is that Brazilian Government would have real element of protection if it presented a plan which Council could join in describing as fair and reasonable under circumstances. Presumably there is no practical legal recourse for bondholders against Brazilian obligors which are public bodies. Hence what the Government needs to achieve through plan is not legal protection but program which will enhance its credit here and obviate friction with its large group of American bondholders. [Page 608]Such friction would be almost inevitable if attempt made to impose a plan which Council viewed as discriminatory or inadequate. This should give you a real basis for negotiation. Further you can indicate orally that if plan is put through in its present form Council would be forced to state that this was done on sole responsibility of Brazilian Government and without Council’s acquiescence.
- Third. Your point (3), Embassy note and memorandum of November 475 indicates Department’s view of plan as originally proposed. We are ascertaining whether Department willing to give some informal indication through Gibson that Department would not be disposed to raise objection to the plan if so modified as to meet Council’s views. We have not yet had opportunity to go into this phase of the matter with the Department.” (Signed) Executive Committee.