The Ambassador in Brazil (Caffery) to the Secretary of State
[Received 2:52 p.m.]
150. The Bank of Brazil today closed exchange for maturities and daily quotas for February 17 and 18.
The Director of Exchange informs me that although he has not yet received the letter from the Continental Illinois Bank and a final decision regarding the participation of the Guaranty Trust Company he has decided to proceed with plans for liquidating the arrears of American firms. If the Guaranty Trust Company continues to reject the proposal he will either give their quota of $2,000,000 to a new bank or distribute it among the banks already included in the group. Before doing so however he will consult the Export-Import Bank.
The Bank of Brazil’s original estimates of American firms exclusive of earnings and dividends totaled $47,000,000. The Embassy pointed out that this figure was too high and that it probably included commercial arrears of other countries which invoice merchandise to Brazil in dollars. At the request of the Embassy the Bank of Brazil reexamined the records and is checking with all the commercial banks operating in this country.
The revised estimate of American arrears now approximates $26,000,000. The Director of Exchange states that in order to make up the difference between the acceptance credit of $19,200,000 and the foregoing figure of $26,000,000 the bank will use part of its current credits in New York and London which amount to $16,000,000 and 600,000 pounds (sterling) respectively.[Page 393]
The Director states he will send to the Export-Import Bank on May 13 a letter outlining the procedure for the liquidation of American arrears. He states that it is his intention to make a public announcement next week both in the United States and Brazil concerning the payment of American arrears.
Please repeat first paragraph to Department of Commerce.