832.5151/1368: Telegram

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

126. Department’s 65, April 20, 4 p.m. The Director of Exchange informs me that he intends gradually to bring the cross selling rate between the compensation mark and the dollar and the spread between the compensation mark and the dollar into line with the agreements arrived at in Washington. He would not make a definite promise as to when this will be accomplished as he states that the bank wishes to avoid perturbing rudely trade between Brazil and Germany and working hardships on Brazilian firms who already have contracts for purchases of German merchandise. (In my opinion a contributing factor is the strong pressure of the Sao Paulo cotton interests to protect their sales in Germany) the Director assured me that he will continue to maintain a strict control of the commerce between the two countries and to prevent the Banco do Brasil’s “bought” position from becoming too large.

Commercial banks are purchasing export drafts on the free market at 18.740 to 18.750 and selling free exchange for payment of import drafts at 18.900 to 3 milreis.

The selling rate for the compensation mark remains at 6.100 and the buying rate at 5.700.

While I understand that the question of the Central Reserve Bank is being studied no great progress appears to have been made and from present indications the Brazilian Government will not request the loan of gold in the near future.