832.51/1708: Telegram

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

45. My 35, January 22, 4 p.m. The British are making a big fight against plan now being considered by the Ministry of Finance basing payments on the relative positions of the last year of the Aranha plan (i. e. paying during the coming 4 years 41.25%, 42%, 44% and 50% respectively of the last year of the Aranha plan instead of 50% of each of the successive years of that plan). They have handed him a memorandum stating that that plan is “totally unacceptable to us and we should protest strongly against it.

It is quite inconsistent with the whole basis of the Aranha plan, as accepted by the Americans in 1933, and takes no account of the priority rights and superior security of the loans in grades I and II, as established in their respective contracts and confirmed by articles 1 and 4 of the Aranha plan decree.

If contractual rules are to be thus ignored, there is no justification for not giving grade IV as good terms as grade III, and all grades would again be subject to further debate.

Grades I and II would already be making a heavy sacrifice by giving up 50% and any further reduction, in respect of either interest or sinking fund, is out of the question.

The proposal would involve depleting grades I and II by pounds 418,000 the first year, pounds 385,000 the second and pounds 298,000 the third; all of which would be diverted to inferior and partly municipal grades.

We attach great importance to sinking funds of grades I and II and in no circumstances could agree to further reduction of these”.