832.51/1286
The Ambassador in Brazil (Caffery) to the Secretary of State
[Received April 11.]
Sir: I have the honor to refer to the Department’s instruction No. 106 of March 25, 1938, regarding the Brazilian foreign debt situation.
In this connection, the Department will be interested to know that in conversation with Senhor Bouças55 this morning, he stated confidentially that although, as reported in my No. 381 of March 7, 1938,56 the Minister of Finance had stated his intention of calling a meeting of Brazil’s creditors, in Rio de Janeiro, after the termination of the financial discussions with the Secretaries of Finance of the different States, the Minister has now changed his mind. Bouças added that the initiation of conversations with the creditors in the near future is no longer contemplated. He explained that during the discussions between the Minister of Finance and the Secretaries of Finance of the various States, which have been going on for a period of about two weeks and which have just finished, it was agreed that the milreis deposits which have been made against debt plan instalments, under the Aranha plan, may be utilized by those States in productive public works. He added that several of the smaller States were going to take advantage of this immediately, and that although the State of Sao Paulo, for example, has not signified that it will do so at the present time, it is reasonable to believe that eventually this State, and other large States, will also take advantage of this decision.
Notwithstanding this rather gloomy picture of the situation, as portrayed by Senhor Bouças, I will continue to urge upon the Brazilian [Page 377] authorities the desirability of commencing conversations with the creditors as soon as possible.
Respectfully yours,
Counselor of Embassy