The Ambassador in Brazil (Caffery) to the Secretary of State
[Received June 23—3:34 a.m.]
2160. (Section 1) My 1975, June 10; Department’s 1597, June 19; circular of June 19, 11 p.m.53 Program contained in Department’s [Page 799]circular telegram under reference comes at a very late date insofar as Brazil is concerned and places me in embarrassing position before the Brazilian authorities because of their prompt and unqualified cooperation following receipt of the Department’s circular telegram May 18, 4 p.m. Aranha,54 Souza Costa, and the Director of Exchange are responsible for Brazil’s collaboration with us in this matter and have frequently pointed to the lack of cooperation of Argentina in controlling the movement of American banknotes. The Bank of Brazil’s deposit currency plan of May 21 (see my telegram 1742, May 21 ) appeared to be highly satisfactory to the Department of State and Treasury Department as evidenced by Department’s congratulatory telegrams 1321, May 21  and 1323, May 23.55
(Section 2) Failure to express opposition or criticise in any way details of the plan left me with the impression that the Treasury Department approved and that if it raised any objections in the future that they would not be retroactive.
After an administrative review which included checking of names with the Foreign Office, Bank of Brazil, Proclaimed List Section, Political Section, Military, Naval Attaché, Consulate, and friendly diplomatic missions in regard to their own nationals, Embassy approved 335 deposits totalling $163,973 for liquidation in milreis. Bank of Brazil has purchased the dollars and has paid milreis to the depositors. Conversion of additional deposits of less than $100 each has been approved after consular investigation in cases of recently arrived American tourists, naval and army personnel, merchant seamen, ferry command personnel, this has totaled 10,875.80 in Rio de Janeiro for 150 individuals. There have been many more cases especially in northern Brazil. Is the Embassy correct in assuming that Treasury will automatically license importation of these sums by Bank of Brazil with Embassy certificate?
(Section 3) It is believed that for the following reasons plan adopted in Brazil is more practical than that outlined in Department’s circular of June 19 especially in view of tardiness of latter:
- Brazil plan provided for an immediate and short period of deposit which minimized opportunities for use of cloaks and which automatically created a presumption of Axis origin for any future currency which might be presented.
- The plan provided on [an] expeditious method of handling small deposits made in many cases by bona fide holders who were in need of prompt settlement of their cases.
- Brazilian plan has enough elasticity to take care with Embassy or Consulate approval of a multitude of special problems which inevitably arise in bona fide cases having no immediate monetary assets [Page 800]other than American currency, that is ferry command personnel traveling via Brazil en route to Africa or returning from Africa to the United States; American merchant marine and Allied Nations marine personnel; American naval personnel from the numerous naval vessels calling at Brazilian ports; other American Government personnel; official visitors from other American Republics such as the Chilean Military Mission which has just arrived in Rio with no funds other than American currency. It is pointed out that under Department’s plan the Bank of Brazil would not run the risk of converting currency in these cases even with Embassy or Consulate approval.
If the Department so desires Embassy will adopt new plan for the balance of deposits which have not been liquidated. Under existing legislation in Brazil this means giving the depositor the option of having his dollars returned to him or of forwarding by the Bank to the United States on a collection basis as prescribed. It should be recognized however that taking this action appears inconsistent to Brazilian authorities who have cooperated so effectively to date; that it makes no provision for the handling of consular fees and future meritorious cases in which it is in the interest of the United States to request the Bank of Brazil to purchase American currency for milreis; and that the inevitable delays which this centralized procedure entails will create ill will among the many small depositors who acted in good faith in making their deposits. It will be recalled that the original Brazilian plan made provision for forwarding to the United States for deposit in special accounts of dollars held by objectionable depositors.
Please consult with Miller56 and the Director of Exchange of the Bank of Brazil who are scheduled to arrive in Washington June 23 in regard to this matter. I refer especially to my telegram 2005, June 12, and telegram No. 2069, June 16.57
- Department’s circular telegram of June 19 not printed, but see footnote 52, above.↩
- Oswaldo Aranha, Brazilian Minister for Foreign Affairs.↩
- Neither printed.↩
- Edward G. Miller, Jr., of the Department’s Foreign Funds Control Division, who had been on a special mission to Brazil and other American Republics.↩
- Neither printed.↩