632.6231/313: Telegram

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

134. I am informed that the Bank of Brazil decided today that until further notice and pending further study of the economic situation between Germany and Brazil all new contracts for the sale of cotton to Germany must be closed in free exchange instead of compensation marks. As a result of this decision trading in cotton futures for Germany is at a standstill. This measure was decided upon because Germany’s purchases of Brazilian cotton with compensation marks have already reached the quota of 62,000 tons which the Brazilian Government has apparently established for 1938 pending conclusion of a new agreement (my despatch 108, Oct. 3, 193782). Another reason for this action is the recent decision of the Bank of Brazil further to reduce its present over-bought position in compensation marks.

In view of the difficulties now being encountered in disposing of this year’s record cotton crop I do not believe the Bank of Brazil will be able to maintain this position.

Please inform Department of Commerce.

Caffery
  1. Not printed.