832.51/850: Telegram

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

6. Clark in cable No. 2 of January 4 raised the question of whether the Department would give assurance to the Brazilian Government that in the event any arrangement were reached at Rio which had the prior endorsement of the Council and the approval of the Department, support would be withheld for any claims of bondholders against [Page 611]the Brazilian Government based merely on dissatisfaction with such arrangements.

Yesterday Pierre Jay, a member of the Executive Committee of the Council, consulted the Department regarding this matter. Mr. Jay was told that it seemed in the Department’s judgment rather premature to enter into this phase of the situation now since it was completely hypothetical. It was explained to Mr. Jay that the Department was of course cognizant of the fact that the Council had been brought into existence in response to the initiative of various branches of the Government and that the Department had every intention of cooperating with it within proper limits as situations shape themselves.

It seems to the Department that the purpose which Clark had in mind would be served if you, when and as you believed it necessary or advisable, would give to the Brazilian Government assurances that the relations between the Council and this Government were excellent. You might explain the fact that the Council was itself a product of Government initiative and that the Council had undertaken to discuss the Brazilian debt situation with the Brazilian Government with the full knowledge and trust of the Department. In short, you may feel free, without committing the Department as regards any hypothetical situations that might arise, to make it clear to the Brazilian Government that the Council is a responsible agency for protecting the interests of American holders of Brazilian bonds.

Phillips