832.51/1481: Telegram
The Ambassador in Brazil (Caffery) to the Secretary of State
[Received 6:15 p.m.]
194. The Minister for Foreign Affairs told me last night that the Minister of Finance, who has always opposed resumption of payments on the foreign debt, came to see him yesterday afternoon and said that President Vargas had ordered him to call on Dr. Aranha and accept whatever plan Aranha proposed for resuming debt payments on July 1 next.
Aranha referred to the present weak position of the milreis (my 189, June 12, 5 p.m.22). Adding “owing to the lack of export bills at this time the milreis will probably be in a difficult position in about a month from now”. He then said “obviously if we make substantial payments on the foreign debt on July 1 the milreis will be very much affected and our carefully built up existing exchange arrangements might be destroyed”. He attempted to have me make a suggestion as to exactly what the Brazilian Government should do, observing “it is not so much the question of the money; … we have about 15 millions reserve in foreign exchange but we will need that money very badly to protect the milreis this summer: what do you want us to pay?” For obvious reasons I declined to make the requested suggestion but did suggest that he attempt to get out of the Minister of Finance today an honest opinion as to the maximum amount which could be paid on the debts on July 1 … He said that he would do so.
Aranha finally remarked “in any event I know that the bondholders do not know or understand anything about this and we must make a payment on the first of July”.
- Not printed.↩