832.5151/589a
The Assistant Secretary of States (Welles) to the Brazilian Ambassador (Aranha)
Memorandum
Referring to conversations that have taken place in the Department with the Brazilian Ambassador and the Commercial Attaché of the Brazilian Embassy, I take this occasion to summarize and confirm the views and suggestions that have been made by the Department in regard to the problem presented by the deferred payment of commercial credits due to Americans in Brazil. I am sure the Brazilian Government shares the opinion of the Department that it is highly desirable that this matter receive prompt disposition in order that the animating purpose of the Brazilian-American commercial accord may prove effective and that trade relations between the two countries may develop in the harmonious spirit envisaged. The expeditious settlement of this question seems all the more justified by the fact that an agreement now has been entered into by the Brazilian and British Governments dealing with a similar situation, and that this Department understands that arrangements are in force affecting deferred credits owed to Italians and Germans which effectively take care of these interests.
From the conversations that have taken place, it has appeared that two different methods of handling the situation are worth consideration. The first and simplest would be, in my judgment, that the Brazilian Government should proceed on its own initiative and merely by its own action to announce a plan of gradual liquidation of these deferred debts, payment of which has been delayed because of the Brazilian exigencies and exchange control. The alternative would appear to be the negotiation of a plan of payment between the Brazilian Government and the representatives of American creditors, wherein suitable provisions for the assured discharge of this indebtedness would be included.
[Page 359]The Department believes that an effective solution can be found in either of the above-mentioned alternatives, and requests the Brazilian Government to act on one or the other decisively.
In its consideration of the matter, as already expressed in the conversations, the Department sees substantial advantages in the first line of procedure. It understands that the Brazilian Government has already undertaken to pay off at once those deferred debts for which exchange contracts had already been closed with the Bank of Brazil—which action has also been pledged towards British creditors in the same position. The completion of payment of this class of American credits would appear to leave a further total indebtedness of an amount that could be handled by Brazilian initiative. Such initiative might take the form of announcement of prompt and full discharge of payment to the small creditors (the estimates available to the Department of the total in this class would seem to indicate that it is of moderate dimensions), and the declaration would state dates at which fractions of payment might be made to those other creditors still awaiting payment. The execution of some such plan of action would avoid the acceptance by Brazil of any new element of interest payment; it would also be received in both countries as a mark of the harmonious and trustful relations which exist between the two countries.
However, the Department has merely put forward these suggestions for the consideration of the Brazilian Government. It may prefer to proceed along the other line suggested, in which case the Department has reason to believe that American interests concerned are ready to undertake negotiations at once. It hopes that this matter, the existence of which obscures the much broader and beneficial trade relations between the two countries, will receive expeditious settlement, and that immediately these broad trade relations can rest undisturbedly on the groundwork of the Brazilian-American commercial agreement.60