832.5151/495: Telegram

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

21. My 20, January 15, 2 p.m. Department will recall Aranha’s telephone interview with the local press on January 10 (reported by American news agencies here and Embassy’s despatch 530 of January 1135) in which he expressed his disapproval of the December 3 exchange regulations and asserted that large remittances by private companies for interest and similar payments (necessarily effected on the free market) had interfered with the requirements for official exchange (see Department’s 2, January 4, 5 p.m.).

These statements in the light of today’s surprise measure and the questionnaire referred to in my 20, January 15, 2 p.m., suggested the following questions: When present suspension is terminated and exchange is again allocated to banks will it be on the percentage bases of December 3 regulations; is a further restriction of the free exchange market contemplated by putting cotton, cocoa and other major Brazilian export commodities in the same class as coffee, as producers of official foreign exchange.

As to the first question, the Foreign Minister has just told me that the December 3rd regulations will remain in force until the treaty36 is signed after which the basis of exchange allocation will necessarily be altered and controlled by the operation of the treaty. Our conversation was a hurried one and the Minister had to amplify this statement. As to the second question he said that a step of this kind was not contemplated.

The foregoing does not add much to the facts in the case, and unfortunately as other conversations seeking to elicit authoritative information have only brought forth replies to the effect that the solution of all exchange questions is dependent upon the arrival of the financial delegation in Washington and its subsequent conversations there, it is more than ever clear that the Brazilian authorities are in a bad muddle concerning their exchange situation.

  1. Not printed.
  2. Reciprocal trade agreement signed February 2, 1935; see pp. 300 ff.