832.5151/494: Telegram

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

20. Rumors of yesterday afternoon that the allotment to banks of official foreign exchange would be suspended were officially confirmed this morning by the Bank of Brazil. This action is taken in spite of the promise made to the banks that their quotas would be maintained throughout the month of January (see my 10, January 9, 2 p.m.).

I have called upon the new Exchange Director of the Bank of Brazil who stated that this measure was necessitated by the confused exchange situation which he found confronting him upon assuming his new post. He said the measure was of a transitory nature and that allotments would be resumed when the bank had completed the general study of its exchange position involving all of its branches. He denies rumors current here that remittances yesterday of some £324,000 under the debt plan were partially responsible for this suspension of the quota.

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Local banks yesterday received a questionnaire to be filled out in 24 hours showing their dealings in free market exchange from last May down to date.

I shall cable again later today. In the meantime I presume that the Department [apparent omission] wish to communicate with the National City Bank.