Memorandum by Mr. Donald R. Heath of the Division of Latin American Affairs

Conference: Mr. E. P. Thomas, President, National Foreign Trade Council,
Mr. William S. Culbertson and Mr. Micou, Counsel of the National Foreign Trade Council, and
Mr. Warren Lee Pierson, Counsel of the Export-Import Bank.
Mr. Duggan,39
Mr. Feis40 and
Mr. Heath.

Mr. Micou explained that they had wished to talk with the Department before proceeding to a conference with Ambassador Aranha on American frozen credits in Brazil. He said that certain American’ businessmen, resident in Bio with no home office connections in the United States, had succeeded in complicating the Council’s negotiations with the Brazilian Government on behalf of the American holders of frozen funds by insisting on Bank of Brazil notes in place of [Page 285] Brazil Government obligations provided for in the tentative agreement reached by the Council and the Brazilian Government.

Mr. Micou said that certain members of the American business committee in Rio had obtained the impression that the Council was not efficiently conducting negotiations and was responsible for the delay in reaching settlement. He said that the Council was making every effort rapidly to conclude an agreement and was prepared, if the Department saw no objection, to waive a five million dollar cash payment to the American creditors which would be equivalent to the cash payment promised the British creditors, provided that Brazil would obtain Bank of Brazil endorsement of the American frozen credit notes and make cash payment of holdings of less than $25,000, which are estimated to total some $2,000,000. He said that if it proved impossible to obtain even $2,000,000 that they might waive cash payment to the small holders provided the latter would be paid off in 120 days. He said that Aranha had informally broached the possibility of eliminating a cash payment providing Bank of Brazil endorsement of the frozen credit notes as compensation. He said, however, that Aranha had indicated that there would be a reduction in the previously agreed upon interest rate of four percent on the notes if the Bank of Brazil endorsement were added to them.

Dr. Feis stated that the Department still regarded the matter as one to be handled primarily by direct negotiation between the Brazilian Government and the American creditors and he thought that the Department would interpose no objection to a settlement along these lines provided it was satisfactory to the American creditors. Mr. Pierson thought that the Export-Import Bank would maintain its offer to discount such notes.

Mr. Micou asked the Department to lend its good offices to promote a rapid conclusion to the long pending negotiations and Dr. Feis said that he was certain that the Department would do so.

D[onald] E. H[eath]
  1. Laurence Duggan, Chief of the Division of Latin American Affairs.
  2. Herbert Feis, Economic Adviser of the Department of State.