Office of the Historian

832.51/1495: Telegram

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

Rio de Janeiro, June 30, 1939—5 p.m.
[Received 9:11 p.m.]

206. First paragraph my 205, June 30, 4 p.m. The note received from the Minister for Foreign Affairs reads in translation as follows:

“June 29, 1939. Mr. Ambassador: Among the statements which I had the honor to make to your Government in Washington, by letter dated March 8, 1939, addressed to His Excellency the Secretary of State, there is included the following:

‘In connection with all of the phases of economic relationships between the United States and Brazil, my Government has given renewed thought to the dollar bond indebtedness of the Government of Brazil and of the Brazilian states and municipalities. The decision has been reached, as part of its general economic program, to resume payment on July 1, 1939 on account of interest and amortization on these external dollar debts. A transitional arrangement for a brief period to effect this has been discussed with the Foreign Bondholders Protective Council Incorporated. These discussions in regard to the scale and amount of payment will be continued after my return to Rio de Janeiro and subsequent announcement will be made by my Government. It is the hope and expectation of my Government that with the improvement in its foreign commerce which it now foresees a permanent settlement which will be equitable and satisfactory to all interests involved win follow upon the expiration of this temporary arrangement.’

2.
After the approval by my Government at a meeting held on March 31 last, of everything which I agreed upon with the Government of the United States of America, His Excellency the President of the Republic ordered that an examination be made of the ways and means necessary for the carrying out of what had been agreed upon in the letters exchanged between me, the Department of State, the Treasury Department and the Export-Import Bank at Washington.
3.
It has not been possible, however, for my Government, as Your Excellency is aware, due to the shortage of time and the increasing and alarming international difficulties to commence, up to the present moment, the carrying out of the general economic program in such a manner as to take advantage of the benefits of these agreements nor of the credit for the purchases on long term and reasonable interest charges offered by the Exgort-Import Bank of Washington, nor even of the collaboration promised by the North American Treasury for the creation of a Central Bank of Brazil.
4.
Without being able to use these new resources, Brazilian importations have not been alleviated—which was an objective of these agreements—and the defense of the internal and external value of the milreis and the control of credit and the monetary market, could not be put entirely into practice. At the same time that, because of the facts mentioned above, my Government has not been able to avail itself of these advantages, the fall of coffee and cotton prices, products which are subject primarily to the influence of the American market, brought about a serious reduction in the value of our exports, eliminating the expectation of improvement of our trade balance, envisaged for the first semester of 1939.
5.
The factors referred to above, and the impossibility, due to lack of time, of taking advantage of the benefits of the Washington agreements, [Page 364] have consequently brought about the material impossibility of resuming the payments on July 1, 1939 on account of interest and amortization on dollar loans, in spite of the study and efforts made by the organs of the administration in an endeavor to arrive at the scale and the amount of these payments, as I had the honor to agree with your Government.
6.
The Government of Brazil, in the situation into which it was happening, finds itself obligated, through the high intermediary of Your Excellency, to make known to the American holders of Brazilian dollar bonds that it will continue to have under consideration, with the same determination, the resumption of these payments, at a date to be announced later, and that, to this end, it has today given instructions to the Bank of Brazil, to take the necessary measures for placing in the United States of America, from its available resources, a special reserve of 1 million dollars.
7.
It would appear to my Government that it would be a great help if the Foreign Bondholders Protective Council Incorporated would send to Brazil one or more representatives to examine together with our experts the date, scale and amount to be paid; because it is the principal preoccupation of the Brazilian Government to reconcile within the shortest possible time and under a definitive debt arrangement, the situation which is imposed upon it by present circumstances, with the high and respected interests of their American creditors.

I beg to request of this opportunity to renew to Your Excellency the assurances of my highest consideration. Oswaldo Aranha.”

Caffery