832.5151/534: Telegram
The Acting Secretary of State to the Chargé in Brazil (Gordon)
29. Your 49, February 22, 6 p.m. We have discussed this situation with the Brazilian Ambassador. His view is that the preferable solution is for the Bank of Brazil to take the time necessary to obtain accurate information as to the existing deferred commercial indebtedness and to work out a sound plan for the orderly and gradual liquidation thereof. The only other feasible solution in his view is a credit operation with the Export-Import Bank, but he prefers gradual liquidation of this indebtedness without the necessity of resorting to a credit. He argues that it would be most unwise to begin immediately small payments for the liquidation of the commercial indebtedness, as to do this without first obtaining accurate information and adopting an orderly plan would merely increase the existing confusion. He showed us a cable sent to his Government on February 12 urging that a plan be adopted for obtaining the necessary information within a period of 45 days, at the end of which period allocation of exchange for the deferred commercial indebtedness would be begun. He pointed out that during this period the Bank of Brazil would of course be building up a reserve of exchange which would permit payment at an accelerated rate.
We said that we did not feel that we could argue against the Ambassador’s view as to the best solution of this problem, although we pointed out that a 45-day period for obtaining information and setting up a plan was a long period and that pressure on the Department and criticisms from American companies would become very strong during this time. We asked whether the Brazilian Government might not find it possible to make announcement of a definite date on which exchange would begin to be made available for liquidation of this indebtedness. The Ambassador agreed that this would be helpful and said that he would suggest it to his Government, as well as inquire whether steps had yet been initiated to obtain the necessary information and to set up an orderly procedure to deal with this matter. We indicated that if pressure should become too great because of delay in making exchange available we might find no other course open than to suggest consideration of a credit operation with the Export-Import Bank, in view of his expressed willingness to give such consideration.