811.51/4208: Telegram

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

1787. Department’s circular of May 18, 4 p.m. Deposits in Rio de Janeiro total $1,119,000. Estimate for the entire country approximately $1,600,000. Embassy is reviewing Rio registration cases of late; it does not appear that all of Axis dollar holdings have been deposited.

Under the present arrangement Embassy agreed to following alternative recommendations vis-à-vis objectionable persons or firms who deposited (a) reimbursement in milreis, (b) return of dollars, serial numbers to be recorded, (c) if Axis national place milreis in controlled account under Decree Laws 3911 and 4166. Embassy is not convinced that control under (c) is enough to do much damage to Axis nationals. Alternative (a) has the advantage of removing currency from circulation but will give Axis milreis funds at normal rate of 19 milreis 300. Alternative (b) will destroy Axis assets by amount of depreciation in local black exchange. Only local market remaining is for purchases by persons who desire to hold on [for?] speculation until after war. This potential market is narrow at present due to uncertainty.

Only other possible markets are in verified areas particularly Argentina which have not adopted measures to implement amendment General Ruling 5. Will Treasury controls over imports currency from areas other than Brazil be enough to eliminate dollar market Argentine and elsewhere? Please telegraph views of Treasury and Department on alternatives.

Would the Department recommend Embassy request Bank of Brazil to stamp United States notes to be returned to Axis depositors? If so what form should the stamp take. Embassy has not discussed this question with bank.

Spanish Embassy deposited 110,343 but gave no information as to the source.

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French Embassy deposited 100,000 in the form of thousand-dollar notes with consecutive serial numbers series of 934 two B00099801 [garbled group] B00099900. For the Department’s confidential information French Embassy telegraphed to Vichy about deposit regulations reporting that it had 320,000 in the Embassy and in order to divide risks $150,000 would be deposited and balance retained Embassy. May 22 French Embassy telegraphed that it had decided to deposit only 100,000 because of risk and of understanding that deposits were being checked by Bank of Brazil with American authorities. May 20 telegram to French Financial Attaché49 requested information in regard to Treasury currency regulations and inquired whether notes would be stamped. Telegram to French Embassy Buenos Aires May 21 inquired whether Argentine was taking steps similar to Brazil’s, reply stated that only step taken by Central Bank was to report dollar holdings.

What treatment does the Department recommend for Spanish and French deposits?

Air report of names and amounts follows with request the Department telegraph in regard to cases where Washington may have adverse information to the Embassy.

  1. Pierre Cheysson.