832.51/960: Telegram

The Chargé in Brazil ( Gordon ) to the Secretary of State

1. Rumors became current this afternoon that the Minister of Finance together with various intervenors were in conference with the President of the Republic for the purpose of discussing suspension of the foreign debt funding plan.26

I immediately communicated with Bougas27 who confidentially informed me that the matter of suspension has been discussed in inner-governmental circles during the last week or so (see my letter of December 28th to Assistant Secretary Welles28) and that, although he had not been officially advised as to the nature of the conference above referred to, he feared that suspension or drastic modification would be determined upon.

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It is only in the last hour that the Embassy has been able to get in touch with Souza Dantas29 who while he would neither affirm nor deny that the suspension of the debt plan had been definitely decided upon, explained as follows the reason for today’s meeting between himself, the President of the Republic, the Minister of Finance and the Governor General of Rio Grande do Sul who he said was only present as a close friend of the President: the non-transmittal of payments on certain state, federal and municipal loans due January 1st has caused inquiries from abroad; the states and municipalities in question have remitted the milreis due to the Bank of Brazil which however is unable to effect their transfer in foreign exchange. According to Dantas it was decided this afternoon that the foreign bankers should be informed of the foregoing and notified that when sufficient foreign exchange was available to meet these payments it would be supplied.

This explanation does not sound very convincing and coupled with the fact that Dantas clearly was trying to be as non-committal as possible without giving direct misinformation would seem to indicate a determination to abandon the present operation of the foreign debt funding plan.

Gordon
  1. See ibid., pp. 602 ff.
  2. Valentim F. Bougas, director of the Brazilian Statistical Service, a member of the Brazilian Foreign Trade Council and Secretary of and Technical liepresen-tative of the Departments of Justice and Treasury on the Commission for Economic and Financial Studies of the Brazilian States and Municipalities.
  3. Not found in Department flies.
  4. Marcos Souza Dantas, Director of Exchange Operations of the Bank of Brazil.