832.51/961: Telegram

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

1. Your 2, January 3, 4 p.m. For your information and guidance, Aranha yesterday informed us of receipt of advices from his Government to the effect that while it had been impossible to remit funds for interest on British loans due January 1, funds had in fact been remitted for payment of American loans. He also assured us, after conversation on the telephone with the Brazilian Finance Minister, that there had been no decision to suspend or modify the debt plan and that it was merely a question of temporary shortage of exchange.

Later in the day we were advised from New York of the receipt by the paying agents there for issues due January 1 of advices from the Bank of Brazil that the states and municipalities had deposited milreis but the bank regretted that as no exchange was available it was unable to remit funds at that time; no indication was given when payments would be made. When we informed Aranha of this he was greatly disturbed, stated that he intended to communicate at once with his Government in order to clear up the misunderstanding and would advise us further today in the matter.

We have impressed upon Aranha the serious concern with which we regard this situation and our expectation that the Brazilian Government will be able to deny categorically the reports that it is intending to modify or suspend the debt plan.

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For your further information, we understand that the Foreign Bondholders Protective Council cabled the Brazilian Finance Minister last night31 expressing the hope that the Council might be authorized by the Brazilian Government to announce to bondholders in the United States that remittances of foreign exchange for the January 1 coupons would be made as soon as exchange was available, naming if possible the date when such remittances might be expected; the Council also pointed out the importance to Brazil of maintaining the debt plan and expressed the hope that the Brazilian Government would announce its intention of fulfilling integrally the terms of the plan.

  1. See Foreign Bondholders Protective Council, Inc., Annual Report, 1935 (New York, [1936]), p. 26.