832.5151/782: Telegram
The Ambassador in Brazil (Gibson) to the Secretary of State
Rio de
Janeiro, December 21, 1935—1
p.m.
[Received 2:10 p.m.]
[Received 2:10 p.m.]
346. Department’s 214, December 20, 2 p.m.
- 1.
- As the Department is probably aware the present proposals between the Brazilian Government and Thomas contemplate immediate payment of £1,000,000 to match the English agreement. This sum will be applied first to make complete payments to our small creditors but as the latter’s claims aggregate only about $500,000 there will remain a large sum cash to be distributed at once to our large creditors. This is conditional, however, upon the Brazilian Government arranging a loan for this purpose with the Rothschilds. Negotiations in this connection have been under way for the last fortnight and Souza Costa has informed me today that he believes they will be successful.
- 2.
- It is possible that if this loan does not materialize on terms acceptable to the Brazilian Government it may consider discussing with Thomas an arrangement similar to that reached in 1933 under which the small creditors will receive 120-day notes to clear up their claims and the large creditors Bank of Brazil notes endorsed by the Brazilian Treasury maturing monthly over a period of 5 years bearing interest at 6 percent.
- 3.
- The maturity of the Brazilian Treasury notes which will be issued if the Rothschild loan is forthcoming to render the Thomas settlement effective is fixed at 3 years, however, the time may run longer if the total amount of claims put in under the settlement is unexpectedly large. The English arrangement runs for over 4 years and I learn that they are still insisting upon treatment equivalent to our own.
- 4.
- I have been informed confidentially by Bouças that the Minister of Finance has not yet transmitted the official text of the draft containing the Brazilian counter-proposals to Aranha. The whole matter hinges upon the Rothschild loan which Sir Henry Lynch again discussed with Souza Costa this morning. He seems to believe his principals will grant the loan but not until after the holidays.
Gibson