Office of the Historian

832.51/1675: Telegram

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

Rio de Janeiro, December 30, 1939—10 p.m.
[Received 11:33 p.m.]

461. Department’s 249, December 29, 7 p.m. [Here follows passage commending Aranha’s good faith and his efforts in the bond payment matter with the statement that Aranha was now in a better frame of mind with respect to the situation than at any time since the suspension of payments.] President Vargas has said several times recently and repeated yesterday that he is interested in doing something for “American and Portuguese bondholders only”.

I sent my 456, December 28, 2 p.m., for three reasons:

(1)
The situation described was brought about by the fact that the European representatives remained here after the outbreak of the war and continued persistent efforts to protect their interests the best way they could. [Apparent omission] did not suspend the “negotiations with the Council” as the Department apparently believes: Costa asked Munro to remain here and continue negotiating but Munro had to return for his Princeton classes; also at the time in view of the outbreak of the war the outlook for an early settlement seemed hopeless.
(2)
In the meantime in view of Department’s No. 223, November 151 had to stand by and watch what was going on.
(3)
I felt that the Department should authorize me to “participate informally and independently” (as set forth in Department’s telegram No. 249).

[Page 379]

Aranha writes me today and telegraphed Martins37 to inform Department “in the discussions with the other creditors the Minister of Finance is endeavoring to find a reasonable basis for a solution of the debt problem which, however, will be communicated to those creditors only after an agreement has been reached with the American bondholders for the resumption of dollar payments.” The Minister of Finance is informing the European representatives that he can resume conversations with them only after some sort of understanding on the subject with the Embassy.

Referring to the last paragraph of the Department’s telegram I agree that a temporary settlement should now be envisaged.

Aranha says he will endeavor to arrange with the states and municipalities for resumption of payments on their dollar bonds only.

Caffery
  1. Carlos Martins, Brazilian Ambassador in the United States.↩