832.51/963: Telegram

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

5. My 4, January 5, 1 p.m. I have just seen the Minister for Foreign Affairs and have explained to him that even if the January 1st payments were all remitted today our Government still would view this situation with serious concern; that it hopes and expects that the Brazilian Government can deny any intention of modifying or suspending the debt plan and that no difficulties will arise in carrying it out integrally.

During our conversation the Minister was informed that a full Cabinet meeting which had been convoked for this afternoon was awaiting his arrival. The Minister who had, therefore, confined his remarks to going over the same ground in explaining the delay in effecting transfer of the January 1st payments then left after making an appointment for Monday morning; he said that he hoped to be able to discuss the matter better with me on that occasion as undoubtedly the subject would be taken up at this afternoon’s Cabinet meeting. It was apparent that he was in no position today to say the Government could deny reports that it intended or might find it [Page 326] necessary to suspend or modify the debt plan, in this connection I should say the problem at the present time appears to be envisaged here as one between Brazil’s commercial creditors as opposed to her financial creditors. Souza Dantas this morning frankly expressed his opinion that it was impossible to continue scheduled payments under the debt plan without materially reducing the amount of exchange available for current imports and backlog and again made it clear (see first paragraph my 2, January 3, 4 p.m.) that he was not in favor of such reductions. In this general connection I should say that Dantas this morning stated that yesterday he had been offered a 10 million dollars New York loan and this morning a Rothschild loan but he considered that a false way out of the difficulty and was definitely opposed to accepting these proposals.