832.5151/1177: Telegram
The Ambassador in Brazil (Caffery) to the Secretary of State
[Received 6:15 p.m.]
203. Referring to my telegram No. 81, April 7, 8 p.m., and Department’s 51, April 8, 5 p.m., I am in receipt of the following letter [Page 354] dated August 24 signed by the President and the Exchange Director of the Bank of Brazil:
“In accordance with the formal authorization of His Excellency the Minister of Finance, we wish to request that through your good offices there be initiated the necessary arrangements between the Bank of Brazil, as executive organ of the Government, and the Federal Reserve Bank, as fiscal agent of the Government of the United States of America, to constitute a gold reserve in the United States with a corresponding credit concession to the Brazilian Government.
The reserves of metallic gold have been heretofore accumulated in the country, in conformity with decree No. 23535 of December 4, 1933.
By a confidential decree, the Brazilian Government has ruled that the excess of 28 tons be remitted abroad, at the discretion of His Excellency the Minister of Finance.
The Bank of Brazil wishes, therefore, to submit to Your Excellency the final plan to have these shipments made in such a way as to constitute in the Federal Reserve Bank a special fund in metallic gold, for the free use of the Brazilian Government, the latter to avail itself of the offer submitted in the letter of July 15, 1937, from His Excellency Secretary Morgenthau to His Excellency Minister Arthur de Costa.
It is the intention of the Bank of Brazil, along general lines, to open with the Federal Reserve Bank an account guaranteed by the gold in deposit, the Federal Reserve Bank to grant to the Bank of Brazil, for the period of 1 year, a credit renewable with an advance notice of 30 days, in order that the latter may obtain a liquid fund with which to comply with the attributions assigned to it by decree No. 97 December 12 [23], 1937.33
The interest on the amounts drawn from this account, which the above mentioned letter sets at one-half of one percent per annum above the average rediscount rate of the Reserve Bank during the immediately preceding month, will be paid every 6 months.
We would like to request that when you transmit the initial terms of our proposal, serving as an intermediary for these arrangements, that you obtain not only the opinion of the Federal Reserve Bank regarding their feasibility but also the details that must be considered for their execution.
We would also appreciate it if you would request the Federal Reserve Bank to express an opinion regarding the possibility of having the gold which is shipped refined in New York for account of the Brazilian Government, and also as to what would be the cost of such work.”
The Exchange Director informs me that if the plan set out in this letter is realized it will ease the strain upon the exchange resources of the Bank and should be beneficial to American trade by making possible to reduce present delays in the allocation of exchange. The Bank of Brazil requests an answer by telegraph.