832.5151/604: Telegram
The Chargé in Brazil (Gordon) to the Secretary of State
[Received 4 p.m.]
116. Department’s 70, April 30, 6 p.m., 73, May 1, 8 p.m. and 74, May 2, 2 p.m. Finance Minister was engaged all yesterday and could only see me at noon today.
Minister is in agreement as to immediate payment of closed exchange contracts.
I explained to the Minister the Department’s view that the immediate payment of small creditors should be unconditionally undertaken by the Brazilian Government and not be dependent upon any arrangement for a loan. The Minister repeated (see my 106, April 25, 7 p.m.) that he could not undertake such payment unless he secured a loan. I replied in effect that how or where he got the money was necessarily his concern but that we felt strongly that these payments should be unconditional. The Minister insisted that in his negotiations [Page 368] with the British he had made payment of this class conditional upon securing a loan (although, of course, this is not stated in the terms of the British agreement).
The Minister was inclined to construe our attitude as that our Government did not wish to enter into any commitments enabling him to secure this loan. I replied that there could be no question of Government commitments and reminded him that in our former interview he had told me that through the Rothschilds he could secure a loan (probably through the Guaranty Trust Company) to cover these payments; if he secured the loan on his own initiative there would seem to be nothing to prevent his complying with our view and undertaking unconditionally to make these payments. While the Minister did not answer this last argument directly he stated that as a practical matter he felt there would be no great difficulty in reaching agreement on this point.
As to the classification of small creditors the Minister said that although this would not be definitely decided under the British agreement until the tabulation of their total backlog was completed (which is now expected for May 10), the understanding was that £1,000,000 would be applied to this backlog and divided up as far as it would go among the smallest holders. He indicated that he was quite prepared to do the same with us and as I understand it that would meet the latest alternative suggestion contained in the Department’s 73, May 1, 8 p.m. Moreover if such a classification be adopted it would automatically reduce the amount of class C indebtedness from what was contemplated by the Department’s 68, April 27, noon, third paragraph.
As to class C credits I expounded the substance of the Department’s telegrams 73 and 74 above mentioned emphasizing the necessity of the communications in question constituting a negotiable evidence of indebtedness. The Minister then said “What about interest? We have to pay interest to the British but Aranha says that we won’t have to pay any to you”. I replied that I was not prepared to discuss that question in detail and the Minister who then had a luncheon engagement asked me to give him an aide-mémoire covering the points raised in our conference.
I had already prepared such an aide-mémoire and left it with him and he promised me a prompt answer (which I trust will be forthcoming).
Without saying so directly the Minister during the course of the conversation implied that Aranha’s estimate of the total amount of class C indebtedness was on the low side.