832.5151/1059: Telegram

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

81. My 80, April 4, 8 p.m. The Director of Exchange of the Bank of Brazil tells me that because of a difference of opinion which has [Page 343] arisen between Aranha, Minister of Finance and himself no definite plan for the modification of the present exchange control system has as yet been worked out. However, he indicates that several plans are being given consideration.

He stated that commercial credits covering imports from all countries in arrears up to March 31 and not already covered by exchange contracts amount to approximately $15,000,000. With a view to liquidating these credits the Government is considering a plan to ship approximately $15,000,000 in gold bullion to New York as collateral in order to obtain corresponding dollars credits. He has asked me to inquire in strict confidence whether the Federal Reserve Bank would be willing [to] establish dollars credits against this gold and if so at what annual rate of interest. He explained that he desires to obtain this information through the Embassy rather than through normal commercial channels in order that this plan may be kept secret for the time being. The Director of Exchange would appreciate a reply at the earliest possible moment.