I should therefore appreciate the initiation of formal representations by
our Government in order to protect the interests of our nationals.
[Enclosure]
The Director of the Bureau of Foreign and
Domestic Commerce (Dye) to the Secretary of
Commerce (Roper)
Washington, April 23, 1937.
Memorandum
The American Foreign Insurance Association, which is composed of
American insurance companies engaged in the insurance business in
foreign countries, has been perturbed by a bill introduced in the
Brazilian Congress which would nationalize insurance in that country
and establish a Reinsurance Institute.
There is inclosed copy of a letter dated March 30, 1937,53 addressed to
the Association by its representative in Brazil together with a
report of the Brazilian Committee on Constitution and Justice
indicating the present status of this proposed legislation.
Sometime ago the inclosed brief was prepared by the Brazilian
representative of the American Foreign Insurance Association. A copy
of it is inclosed.53 It is so comprehensive that no comment need be
made.
As of December 31, 1922, assets of foreign insurance companies in
Brazil were Rs. 25.164:354$000. On December 31, 1934, the latest
available figures obtainable, assets of these companies increased to
Rs. 109.086:119$000, of which Rs. 40.247:649$000 were invested in
bonds of the external debt.
These data indicate that the increase in assets in the country
increased by some Rs. 84.000:000$000 during the 12 year period. The
increase in holding of external bonds amounted to Rs. 26.000:000$000
leaving a balance of Rs. 58.000:000$000 in additional assets as
against a profit of approximately Rs. 44.000:000$000. The American
Foreign Insurance Association contends, therefore, that there was no
export of premiums on profits which was not more than compensated by
the entry of new capital. The operations of the foreign insurance
companies did not result in the withdrawal of funds from Brazil but
on the contrary brought approximately Rs. 14.000:000$000 into the
country.
The principal reason advanced for the proposed legislation is that it
would end the “export of gold” from the country as indicated in the
statement that there is need “to regulate the insurance business
between this and foreign countries by maintaining a system of mutual
advantage and reducing to a minimum the remittance of exchange.”
The data furnished by the Association definitely establishes that the
argument that the proposed legislation is needed to prevent
withdrawals from Brazil is without merit since over the 12 year
period the
[Page 365]
net effect has
been to increase the assets of the foreign companies within the
country.
It is a fair question to raise in view of this, whether the present
legislative proposal is not confiscatory in purpose rather than
designed to bring about the progressive nationalization of insurance
companies as contemplated by the framers of the new Brazilian
Constitution. It is also perhaps fair to state confiscation of
foreign interests in the insurance business under the guise of
nationalization may be only a prelude to similar action in other
industries.
Another interesting point made by the Association is that about
one-third of the present market value of shares of national
companies is held by foreigners; several national companies are
entirely owned by foreigners; and Brazilian capital would not be
able to absorb at fair prices the foreign held shares in such
national companies. In addition, additional capital would have to be
found to replace that of the foreign companies. It would therefore
be necessary to reduce the sale price of such foreign held shares
before Brazilian capital could take them over.
The American Foreign Insurance Association has learned that several
foreign governments, notably, Great Britain, France and Germany have
been making representations in behalf of their respective companies
and as no action has been taken by our government to protect our
insurance interests, has requested that our Ambassador to Brazil be
instructed to intervene.
