The Chargé in Brazil (Gordon) to the Secretary of State
[Received 4 p.m.]
10. Department’s 3, January 8, 2 p.m.
- The daily exchange quota of Rio branch of National City Bank, the only American bank in Brazil, is 14 mil 620 reis of which [Page 328] 13 mil 408 reis are devoted to payment of American bills. Quota of São Paulo branch of this bank is slightly less; no details immediately available for other branches. National City Bank has been promised maintenance of the quota throughout the month of January.
- At present time exchange is being closed on an average of 83 days after acceptance of sight drafts. Payment of exchange is running an additional 103 days. Whereas in latter part of November and beginning of December closing of exchange was slower due to smaller quota, payment was running nearer an additional 60 days only. The present slower payment is due to fact that no bills have actually been paid by Bank of Brazil since December 12 when it alleges a scarcity of exchange to have occurred but Bank of Brazil states that cash payment on bills is to be resumed immediately.
- The free market is active and has ample funds.
- Total blocked American credits in Brazil estimated at $20,800,000 as of December 31st, 1934, as compared with $22,600,000 as of November 30th. In this connection, please see Acting Commercial Attaché’s economic and trade note numbered 184 of January 9th,32 being transmitted by air mail this week.
In connection with points (a) and (b) supra, please refer to Acting Commercial Attaché’s “financial trends” reports of January 4 and ll.32
If daily exchange quota is in fact maintained throughout this month it should permit closing of large quantity of bills and result in the situation in this respect being made more nearly current than has been the case for some months. On the other hand the advantage of quicker closing may well be offset by the Bank of Brazil’s inability actually to make payment on closed exchange contracts as quickly as towards end of November; even if it sticks to its promise to resume cash payments immediately there is no way of telling how large these payments will be.
As I have tried to indicate in all my telegrams since the turn of the year the financial situation has been so nervous, and governmental inability to decide upon a clear and definite program so marked, that statements of intention have proven to be most ephemeral and must be received with great reserve, day to day developments being about all that one can deal with. The Embassy was informed last night by a high official who had just come from President Vargas that the latter had been won over to the view that the exchange regulations of December 3 (my 330, December 4, 6 p.m.33) should not be disturbed but I am not prepared to vouch for the stability of this view even if the [Page 329] information is entirely accurate. One thing that is definite is that English pressure with regard to these exchange regulations, as well as to debt plan questions, remains unabated.