The Secretary of State to the Chargé in Brazil (Scotten)
57. Your 107, April 9, 7 p.m., and 109, April 10, noon. Comparison of the text of decree-law no. 1201 with the draft decree-law furnished the Department by Aranha, a copy of which was transmitted to the Embassy with instruction no. 307 of March 9, 1939,50 indicates three principal differences:
- The proportion of export drafts which must be sold to the Bank of Brazil at the official rate has been increased from 10 to 30 per cent.
- Article 9 of Aranha’s draft, prohibiting the Bank of Brazil from maintaining a bought position in compensation currency, has been eliminated.
- Article 11 of Aranha’s draft regarding non-commercial exchange transactions has been eliminated.
It is also noted that the initial official buying rate has been set at 16.500 milreis, whereas it had been the Department’s understanding that this buying rate would be established initially at the going rate, or 17.300 milreis.
Can you inform the Department why these changes have been made, and if it is the intention of the Brazilian Government to devote the additional 20 per cent of official exchange to external debt service and the transfer of earnings? In connection with the latter, reference is made to Section 1 of the letter of Aranha to the Secretary of State, dated March 8, 1939,51 and to the memorandum52 regarding the interpretation of Article 11 of the draft exchange decree, as regards the transfer of earnings of investments in Brazil of United States citizens, which was transmitted to you with instruction no. 307 of March 9.
Please inform the Department also what buying and selling rates for compensation marks are being maintained, with especial reference to the understandings indicated in the memorandum of February 17, 1939,53 which was also transmitted with instruction no. 307 of March 9. Moreover, please inform the Department regarding movements of the “free” buying and selling rates for dollars.
Your telegram No. 110, just received, refers only to the first point mentioned above.