Memorandum by the Economic Adviser (Feis) of a Conference With Brazilian Representatives

There were present besides the Ambassador and Mr. Muniz,37 Mr. Crane and Mr. Williams of the Federal Reserve Bank of New York; Mr. Hansen,38 Mr. Heath,39 Mr. Edwin Wilson40 and Mr. Feis of the Department of State.

We had spent the morning preparing the basis of an agreement in regard to foreign exchange with the Brazilian authorities but it was decided that rather than advance our own ideas we would first endeavor to secure the Ambassador’s regarding the nature of the agreement between the Federal Reserve Bank and the Banco do Brazil which was to come under discussion.

The substance of the discussion that occurred is as follows:

The Ambassador reiterated repeatedly that his Government had the strongest desire to regularize trade with the United States, to supply all the exchange necessary for both current trade and for the present deferred indebtedness due to American interests.

His first suggestion as to method was that the present deferred indebtedness should be cleared up by an advance either from the Federal Reserve Bank or from some other American bank, which advance should then be gradually paid off out of the receipts from the sale of coffee in the United States. As for the payment of current trade, he conceived an arrangement by which all dollar exchange accruing to the Banco do Brazil would be deposited in an American banking institution and used to pay current trade, the balances to be periodically limited to the Banco do Brazil—in short, a clear-cut unilateral clearing agreement.

We discussed both phases of this matter at some length and stated that our tentative point of view was rather to look forward to a gradual clearing up of the exchange indebtedness and for an immediate arrangement short of a clearing agreement—some such type of system of information and report as was outlined in the attached41 (which was not shown to the Ambassador).

It was left that we would formulate our ideas more definitely and discuss them with Mr. Welles tomorrow and would have something definite in shape for discussion with him on Wednesday morning. [Page 333] He wished to leave probably Wednesday night to meet the mission and before talking with them wanted to have definite proposals which he promised he would try in every way to have accepted.

  1. Joao Carlos Muniz, Commercial Counselor of the Brazilian Embassy.
  2. Alvin H. Hansen, Chief Economic Analyst, Division of Trade Agreements.
  3. Donald R. Heath of the Division of Latin American Affairs.
  4. Edwin C. Wilson, Chief of the Division of Latin American Affairs.
  5. Not printed.