811.51/4243: Telegram

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

1668. Your 2160, June 22, 9 p.m. The Department is, of course, most anxious to avoid placing you in an embarrassing position with the Brazilian authorities and as previously indicated this Government is most appreciative of the cooperation of the Brazilian Government and intends to do everything possible to minimize possible [Page 801]difficulties. As was indicated in the latter part of the Department’s telegram no. 1597, June 19, 10 p.m., it was recognized that the prior prompt and unqualified cooperation of the Brazilian Government in instituting currency controls would undoubtedly necessitate special arrangements in order to integrate its controls with proposed Treasury program.

The Brazilian authorities should be assured that, if the Treasury’s problem were merely that of dealing with currency from Brazil, it would be very easy to solve. However, this Government has the problem of dealing with currency from a large number of countries, including all the American Republics. If a uniform general procedure had not been adopted by the Treasury, it would have been extremely difficult for the United States to place effective controls on those countries refusing to cooperate or whose cooperation was merely nominal. It is believed that the procedure adopted is flexible enough to permit sympathetic cooperation with Brazil.

In line with this approach, and in view of the fact that Brazil has severed diplomatic relations with the Axis powers and has instituted extensive economic and financial controls pursuant to Resolution V,58 the following procedure has been adopted:

1:
Treasury will accept the $163,973 of dollar deposits already liquidated in milreis with the approval of the Embassy.
2:
Treasury will accept the $10,875 already liquidated in milreis. In addition, it will accept
(a)
Additional and future deposits of less than $100 converted, after investigation by the Bank of Brazil, the Embassy, or the Consulate in such cases as recently arrived American tourists, Army and Navy personnel, merchant seamen, ferry command personnel, et cetera.
(b)
All other deposits already made of less than $100 after a similar investigation.
3:
With respect to other deposits not yet liquidated, Treasury has suggested that the Treasury procedure be followed and has suggested integrating the Brazilian procedure and the Treasury procedure along the following lines:
(a)
If Brazilian regulations do not authorize the Brazilian authorities to forward all United States currency to the United States as contemplated under Treasury procedure, such currency should be placed in a blocked account in Brazil until the owner consents to shipment to the United States through the Bank of Brazil. If this blocking of currency is not possible in all cases under the Brazilian regulations, a strong effort should be made to have the owner voluntarily forward it to the United States under Treasury procedure, advising him that failure to comply [Page 802]will be a factor which the United States will consider in passing on the currency at any later date, and that the United States has the serial numbers of the currency to enforce observance. The owner should also be cautioned that, as the Treasury procedure indicates, the Treasury expects to refuse applications for the release of currency which is not promptly forwarded to the United States and that consequently, it is to his own interest to act at once.
(b)
Wherever it is at all possible under the Brazilian regulations, United States currency should not be released to persons in Brazil even for subsistence purposes. When the Department previously suggested that United States currency might be returned, it was with the thought that it would be perforated by Brazilian authorities and its origin thus clearly indicated. In this connection it should be noted that the return of dollars condones the existence of a black market and is inconsistent with the prohibition which the Department understands exists in the Brazilian law; namely, that all dealings in dollar currency are illegal. Where a person is actually in dire need of funds for subsistence purposes (including a friendly refugee) and such person has complied with all provisions of the Brazilian decree, the Treasury would be prepared to accept the following arrangement: such person should place all his United States currency in a blocked account. The Bank of Brazil might then agree to sell him sufficient milreis for subsistence purposes (holding the amount to a minimum) and accept dollars therefor; provided that in no event would more than 25 percent of such person’s currency be permitted to be acquired pursuant to this arrangement. Dollars acquired by the Bank of Brazil under this arrangement would be accepted by the Treasury. Moreover, this procedure would be conditioned upon the person involved promptly authorizing the forwarding of the balance of his currency to the United States under the Treasury procedure.

The Department is discussing the matter with Treasury and would appreciate your telegraphing your views as to whether the above outlined procedure is possible of adoption in Brazil. Should there be any difficulties, political or otherwise, we will attempt to deal with them sympathetically.

With respect to the question which you raised in point 1 of section 3 of your telegram under reference, your attention is called to the fact that the Treasury recommendations for currency controls contemplated the fixing of a particular date for the deposit of dollars in the same manner as Brazil has done. However, problems may arise in connection with deposits made after any such date either by persons entering the country after such date, or by persons in the country having a change of heart with respect to currency in their possession.

Hull
  1. See footnote 47, p. 790.