832.5151/1033
The Ambassador in Brazil (Caffery) to the Secretary of State
[Received March 17.]
Sir: I have the honor to refer to the Department’s telegram No. 21, February 3, 8 p.m., instructing me to address a communication to the Ministry for Foreign Affairs calling attention to the undertaking of the Government of Brazil in the Brazilian Ambassador’s note of February 2, 1935,14 to the effect that necessary exchange will be made available for payments, when due, for all imports from the United States. On February 4th I communicated the point of view of the Department, as expressed in the telegram under reference, to the Minister for Foreign Affairs and am now in receipt of a reply dated March 3, a copy and translation of which are enclosed.15
The Department will note that the enclosed communication does not contest the validity of the undertaking of the Government of Brazil, but merely evades the issue by denying that any difficulties in obtaining exchange in Brazil exist, and by asserting that it is only a question of a small delay. However, in a recent meeting between representatives of the American Chamber of Commerce and the Minister of Finance and the Exchange Director of the Bank of Brazil, when the representatives of the Chamber of Commerce brought up the assurances given in the Brazilian Ambassador’s note of February 2, 1935, the Exchange Director of the Bank replied that these assurances [Page 338] should only be read in connection with Article VI of the Trade Agreement, and that that Article, which extends to the United States most-favored-nation treatment in exchange matters, had binding force over and above the Ambassador’s letter. These remarks of the Exchange Director are of course important only as showing the slight degree of importance attached by some Brazilian officials to the undertaking of the Government of Brazil as expressed in the Brazilian Ambassador’s note under reference.
I am, of course, not losing any opportunities to impress upon the Brazilian authorities the fact that the exchange availabilities of Brazil are largely derived from Brazilian exports to the United States, and that we expect that the Bank of Brazil will do everything in its power to give adequate exchange to American exporters.
The Embassy, as the Department is aware, has been constantly working in the closest cooperation with the American Chamber of Commerce, and our joint efforts have up to the present been successful in preventing a third frozen credit situation. However, the several optimistic statements of the Minister of Finance and the Exchange Director of the Bank as to the rapid improvement of the exchange position of the Bank of Brazil have not been justified up to now, and unless the position of the Bank improves substantially through the increase of Brazilian exports or the diminution of imports (neither of which factors can be clearly foreseen at the present time), I am not overly optimistic that a frozen credit situation can be delayed for very long.
This whole question is, of course, tied up with the present program of the Brazilian Government to purchase armaments abroad. As the Department is aware, this question is of primary political importance to the present regime, and I fear that every effort will be made by the Government to keep its limited supply of exchange available for the purchase of armaments in preference to normal imports of merchandise.
Of course, the exchange situation of the Bank may at any time be altered through an automatic restriction on imports, caused by a further decline in the milreis (my 46, March 5, 1 p.m.) but for some time to come I fear that our exporters will continue to experience difficulties in obtaining prompt payment for their merchandise.
Respectfully yours,
Counselor of Embassy
- Foreign Relations, 1935, vol. iv, p. 340.↩
- Not printed.↩