832.5151/597a: Telegram
The Secretary of State to the Chargé in Brazil (Gordon)
63. Aranha has informed the Department that the Brazilian Finance Minister in a telephone conversation yesterday told him that the Brazilian Government was prepared to proceed to deal with the question of American deferred commercial indebtedness along the [Page 360] lines previously discussed with the Department. The general outline of such a solution would be unilateral action by the Brazilian Government by which they would proceed at once (a) to furnish necessary official exchange to pay off the small debtors (the dividing line usually mentioned in the discussions was $25,000); (b) immediately furnish the amounts of official exchange required to complete the transfer on debts for which exchange contracts had already been closed by the Bank of Brazil; (c) announce a scheme of gradual though fairly prompt payment in fractions of the rest of the indebtedness without interest.
Aranha, in relaying the prospective plan of the Brazilian Government, indicated that points (a) and (b) would be handled in the preceding fashion, but that for the rest of the debts, interest bearing notes would be issued, negotiable after some unspecified date. Details were not discussed as to the maturity length of these notes, of the conditions of their negotiability, or as to the security offered in support of them.
The Department believes this method of handling the situation is satisfactory provided the details are satisfactory and do not reduce the actual treatment which the Department believes the Brazilian Government might reasonably give these American debts. It is highly desirable to avoid misunderstanding on points of detail.
Will you therefore seek an interview with the Minister of Finance and request him to give you as much detail as possible regarding the prospective action of the Brazilian Government? Please report by cable. Department would welcome your analysis and judgments of outcome of the measures contemplated.