The Secretary of State to the Chargé in Brazil (Scotten)
65. Your 119, April 17, 5 p.m. and previous correspondence. Reference is made to points 4, 5 and 6 of the memorandum of February 17, 1939, regarding transactions in compensation currencies which was transmitted to the Embassy with instruction no. 307, March 9, 1939.59 The Brazilian representatives agreed that the cross selling rate between the compensation mark and the dollar should be maintained at not greater than 2.95 compensation marks to the dollar, and further agreed in principle that an attempt should be made to retain the existing spread between the buying and selling rate of the compensation mark, exclusive of tax, of 8⅓ percent of the selling rate, but stated in the event that it seemed advisable they would wish to feel free to amend policy in the latter matter, discussing the subject with us.
The Department notes that the present cross rate between the free selling rate of 18.500 milreis to the dollar and the selling rate for compensation marks of 6.100 milreis is 3.03 compensation marks to the dollar. The spread between the selling rate of 6.100 milreis and the buying rate of 5.700 milreis for compensation marks is 6.6 percent.
The Department assumes that the understandings regarding transactions in compensation currencies will be carried out in substance, but places at the discretion of the Embassy whether or not to take these specific points up with the Minister for Foreign Affairs. The Department notes with interest that there has been a substantial reduction in the Bank of Brazil’s bought position in compensation marks.
Please inform the Department, but without, however, bringing the matter in any way to the attention of the Brazilian Government, whether any progress is being made towards the establishment of a Central Reserve Bank and whether there are any indications that the Brazilian Government will request a loan of gold such as was envisaged in the recent arrangements.
- Neither printed.↩