832.51/961: Telegram

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

2. My 1, January 2, midnight. In further conversation this morning Souza Dantas reiterated and amplified his explanation of what transpired yesterday. He stated that no definite decision to suspend the debt plan had been arrived at but emphasized that recent coffee shipments had been so low that there simply had not been enough foreign exchange to satisfy the requirements of payments under the debt plan and for imports and backlog. He added that he was not in favor of sacrificing the two latter in favor of the former.

Although it is true that November and December coffee export figures have fallen off markedly and to that extent some color is lent to the excuse for the present default, the fact would still seem to remain that the possibility of being unable to continue the present schedule of payments under the debt plan is under intensive discussion by the responsible Brazilian authorities, there is considerable speculation here as to what part Aranha30 has played in the discussions concerning [Page 323] suspension of the debt plan. In view of the close contact he is credited with having with the Department and of the fact that any impairment of the debt plan presumably would have an immediate repercussion upon the commercial treaty negotiations (let alone the fact that it is Aranha’s own plan that is in question) it is supposed in some quarters that he probably had discussed this matter with the Department; from there it is not a long step to the suggestion that our Government would not offer serious objection to the suspension or at any rate the modification of the debt plan. While this latter is a loose one in which I do not attach any weight I still think it worth recording.

In any event I trust that for my guidance the Department will instruct me in the premises at the earliest moment possible.

Will Department please see that both this telegram and my telegram under reference are communicated to the Department of Commerce as the Acting Commercial Attaché collaborated in both.

  1. Oswaldo Aranha, Brazilian Ambassador in the United States.