832.5151/788: Telegram

The Secretary of State to the Ambassador in Brazil (Gibson)

9. Your No. 3, January 4, 1 p.m., and No. 4, January 4, 2 p.m. The Department has been discussing the possibilities of a prompt disposal of this frozen credit situation with Aranha. The Ambassador [Page 284] told the Department that he had suggested to the Minister of Finance that cash payments to British creditors be reduced to 2½ million dollars and that the other half of the Rothschild credit be used to make a similar payment to the American small creditors, but that the Minister of Finance had vetoed this suggestion.

Today representatives of the Council indicated to Aranha that if it proved impossible for the Brazilian Government to make an immediate cash payment of $5,000,000, the Council would be willing to take under consideration an arrangement whereby $2,000,000 were provided to clear off the frozen credits smaller than $25,000, on condition that the Banco do Brazil would give its endorsement to the frozen credit notes. They are continuing discussion of that idea with Aranha this afternoon.

Incidentally the Department would welcome your comment as to whether the resident American business community in Brazil who have apparently been carrying on independent discussions regarding frozen credits, represent any substantial portion of the total and have the authorization of their home offices to press for a different settlement than that under negotiation by the Council.