832.51/1728: Telegram

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

71. My 70, February 23, 1 [5] p.m. Aranha says that he and the Minister of Finance devoted considerable time last evening to a study of the debt situation with the end in view of doing the best they can for us. They are considering recommending to President Vargas that grade III be raised to 50% of the last year of the Aranha plan for each year of the new plan. (They calculate that they will be increasing the payments to grade III by $1,776,000 over the 4 years; also they estimate that the present plan as compared with the original plan of the Minister of Finance will reduce the amounts devoted to amortization of grades I and II by 3.6 million dollars and increase the total amount devoted to interest in all grades by 5.4 million dollars). They are considering also if the Department so desires the possibility of making a private commitment with us to amortize dollar bonds by buying in the open market in the amount of 10 million dollars over the 4 years. They believe President Vargas would authorize that amount for amortizing dollar bonds by buying in the open market but he definitely refuses to authorize them to use the amount for any other debt purposes.

The two Ministers contend that this is the maximum that they can do at this time (the remainder of Aranha’s plan of February 16 would remain unchanged).

They are to speak to President Vargas this afternoon at Petropolis on the debt situation. …