The Ambassador in Brazil (Gibson) to the Secretary of State
[Received 2:15 p.m.]
17. Department’s 12, January 13, 7 p.m. Minister of Finance informed me that he telegraphed Aranha yesterday to the effect that the Brazilian Government will be able to pay $2,000,000 to the small creditors within 30 days provided that payments of the Bank of Brazil notes, endorsed by the Federal Treasury, to be issued to the larger creditors begin next July. He further stated that beginning next July he would be able to make payments at the rate of 100,000 pounds per month similar to the British plan, but that in order to alleviate [Page 291] the situation created by the continued lack of sufficient foreign exchange he would like, if possible, to pay less than 100,000 pounds per month as a compensation for having given Bank of Brazil notes. (From the tone of his remarks, I am convinced that this was merely a feeler and that if we do not acquiesce he will be prepared to adhere to the idea of payments at the rate of 100,000 pounds per month.) He stated that he wished to make clear that the payment of 1,000,000 pounds to the small British creditors is being made possible only by a loan in that amount from the British themselves and that if they had not been willing to advance this sum it would not have been possible, due to the lack of foreign exchange, to make this cash payment. He again stated that if American bankers were willing to make an advance to the Brazilian Government, similar to the Rothschild loan, he was perfectly willing to accept it and turn the proceeds over to the American creditors.
With respect to maturities, he stated that the British would be paid off at the rate of 100,000 pounds per month plus the additional amount which will be prorated to them after the expiration of the 1933 agreement in 1938 and that he estimates the total British credits at 4,500,000 pounds. He stated that inasmuch as the American frozen credits will probably total somewhat higher, a proportionably longer time would be taken to liquidate them on the basis also of 100,000 pounds per month (beginning next July) plus a proportionate additional amount which may likewise be allocated after the expiration of the 1933 agreement in 1938. He seems to believe that in a final analysis there will only be some months difference in the actual time necessary to liquidate the American credits.