832.51/1039: Telegram
The Secretary of State to the Chargé in Brazil (Gordon)
53. Your 87, April 11, 2 p.m. The information concerning liquidation of sterling claims for which contracts have been closed has been communicated to the National Foreign Trade Council. On the basis of the questionnaire which the Council has been circulating, it tentatively estimates the total of deferred credits to be about $21,000,000. This total however includes that portion of deferred credits arising between September 1934 and February 1935 which must look to the free market for exchange. When this deduction is made, the Council estimates the total to be around $15,000,000, of which some millions are covered by exchange contracts already closed with the Banco do Brazil. Aranha has repeatedly stated that the total to be met by official exchange would not in his judgment be over $11,000,000. The idea that the American deferred indebtedness could be cleared up by Unilateral action on the part of the Banco do Brazil as provided in the exchange of notes is still receiving serious consideration here. The action of the Banco do Brazil which you report in the last paragraph of your No. 87 gives encouragement as to the practicability of some such line of action. The National Foreign Trade Council however holds the view that a plan involving the issue of new securities will be necessary.
Your opinion as to how rapidly the total of American deferred credits could be cleared up from the Banco do Brazil’s reserves and Government’s quota of exchange would be of interest.