832.51/1729: Telegram

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

72. Department’s telegram No. 38, February 24, noon. I very respectfully submit that I feel that I must report that Aranha is being very critical and has reminded me with emphasis that early in December I told him that “The comparative position of the dollar issues including state and municipal issues should be recognized as they were in the original Aranha plan which was accepted as being relatively fair as between the holders of different issues”. I quoted this from Department’s telegram No. 235, December 12, 4 p.m.13 Around the [Page 579]middle of January I carried out instructions in Department’s telegram No. 13, January 18, noon as follows “Indicate to Aranha that an offer … based on schedules for the last year of the Aranha plan … would be a step forward”, and a few days later instructions in Department’s telegram No. 14, January 20, 4 p.m. as follows “We greatly hope that the Minister of Finance will use instead as the basis of his offer the fourth year of the Aranha plan which yields distinctly improved percentages to the holders of grades III to VIII”.

Some days later the Council’s own suggestion in telegram No. 18, January 25, 5 p.m. was “grade I 50%, grade III 30%”; then on February 17 instructions in telegram 33, February 17, 3 p.m. as follows “the grading relationship in the last year of the Aranha plan appears to provide a fairly equitable and reasonable distribution as among all parties concerned. The Department therefore in so far as concerns distribution among the grades would interpose no objection to any proposal based as regards dollar bonds on the last year of the Aranha plan”.

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Caffery