832.51/1219: Telegram

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

172. My 171, November 21, 6 p.m. In the face of the Minister for Foreign Affairs’ statement that no unilateral action would be taken, the Government decided on Saturday evening to interrupt debt payments. However, as the Department will observe, the Government no longer talks (my telegram No. 155, November 12, 2 p.m., in regard President Vargas’ radio broadcast of November 10) of a prolonged moratorium. Boucas informs me the Minister of Finance will initiate conversations with the bondholders at an early date, possibly the end of this week. Furthermore the Government has instructed the states [Page 359] and municipalities, as well as the Bank of Brazil, to continue to collect all funds payable under the Aranha plan and held in a special account pending conclusion of negotiations with the bondholders.

Boucas informs me confidentially that Brazil’s capacity of payment of the foreign debt since the abolishment of the 35% exchange quota means a reduction in foreign currencies of approximately 30%.

Caffery