832.51/1735: Telegram

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

78. Department’s 44, February 28, 6 p.m. It is becoming more difficult to deal with Aranha on the debt question. (President Vargas leaves on March 6 for Rio Grande do Sul for at least a month and the whole business should be settled before that time.) Has the Department in mind dropping it until after the war if the Brazilian Government is unwilling or unable to meet the Council’s terms?

Aranha is now willing to stand by his offer of February 16 (my 63, February 16, 6 p.m.) with the improvement of increasing grade III to 50% of the last year of the Aranha plan for each year of the plan, in other words he is willing to accord grade III similar interest treatment to grades I and II under the last year of the Aranha plan.

As I endeavored to set out in my 71, February 24, 1 p.m. although Aranha and Costa had an engagement to talk to the President about the debt that afternoon … They told the President merely that they had nothing to report: Negotiations were proceeding. If the Department is able to persuade the Council to make no public adverse statement they are willing to suggest to the President and to the subsequent and necessary full meeting of the Cabinet that grade III be improved in the manner set out in my previous. And they confidentially believe they can secure their approval.