832.51/1729: Telegram
The Secretary of State to the Ambassador in Brazil (Caffery)
44. Your 72, February 25, 8 p.m. As your recital indicates, there has been some change in the Department’s attitude since its endeavors to have the distribution based on the last rather than the first year distribution of the Aranha Plan. The Department had not fully appreciated the degree of advantage extended to Grades I and II as set forth in figures in the Department’s 36, February 21, 7 p.m., which weigh heavily with the Council and in any presentation to an informed public. These figures of effective preference for British holders and the prospect of a clearing agreement with Great Britain have influenced the Department’s present position. We are not asking for a larger total payment but for a rearrangement of the amounts allocated for interest and amortization for the first three grades which will permit Grade III loans to receive better and non-discriminatory treatment.
Your 71, February 24, 1 p.m. A commitment to amortize dollar bonds by expenditures in a specified amount over and above the expenditures promised in the official proposal would not be well regarded by the Council and commentators here in view of the frequently expressed opinon that available funds should be devoted to interest payments rather than to purchasing bonds at depreciated prices. The [Page 580] Department understands of course that the official offer may include a, statement that the Brazilian Government retains a right to apply additional funds to purchase of bonds as it did under the Aranha Plan of 1934. Favorable judgment of the proposal in this country will depend on the interest rates offered.
Have you any report on Aranha’s conversation with the President at Petropolis?