The Ambassador in Brazil (Caffery) to the Secretary of State
[Received 5:50 p.m.]
2260. My 2160, June 21 , 9 p.m., and Department’s 1668, June 25, 10 p.m. I am of the opinion that the plan suggested by the Department’s telegram under reference requires some modification in order to meet the actualities of the current situation in Brazil. Of the 1306 depositors throughout Brazil 986 had deposits of less than $500 but these represent less than 20% of money deposited. I am of the opinion that the United States has much more to lose from the standpoint of public relations in Brazil than it could possibly gain in regard to Axis funds by requiring that any of these smaller deposits other than those held by objectionable persons be forwarded to the United States on a basis of collection. The reasons for this conclusion are:
- That the declaration form stipulated in paragraph 2 of Department’s circular of June 19, 11 p.m.59 is not identical with the form used by the Bank of Brazil and it would be necessary for the 986 depositors to make a new trip to the bank, go through the routine once again and submit to a long period of discussion concerning the advisability of having their funds forwarded to the United States;
- That the Bank of Brazil does not have the administrative facilities available to enable it to certify whether the facts stated in the application are true;
- That many of these small deposits are held by Brazilians who acquired them while in the United States or other American Republics on business or pleasure trips, and they naturally will be irritated at the additional red tape and delay;
- That many of the other small depositors are European refugees of small means who are already panic-stricken over the possibilities of confiscation;
- That other depositors are nationals of other American Republics who were caught in Brazil on business or pleasure trips and who have borrowed milreis funds on the expectation of a prompt settlement of their cases;
- That the foregoing factors would create a fertile field for anti-American agitation if the plan is adopted. Furthermore, a study of declaration statements of these small deposits indicates that current Axis interest is confined to exceptional cases which will not, of course, be liquidated in milreis.
I therefore urge the immediate adoption of the following plan:
- That the Treasury agree to license the importation into the United States of shipments by the Bank of Brazil of all deposits of less than $500 made by unobjectionable depositors;
- That the Embassy will follow the procedure outlined by the Department for all deposits of more than $500. It is suggested, however, that instead of the 25% limitation on conversion into milreis on these larger deposits, a flat maximum of $500 be established. (This to be used only in cases of necessity and after agreement to send balance as collection to the United States.)
- It will be necessary in some cases to exceed the $100 limitation for new cases. For instance, the Consulate at Natal has reported that ferry command personnel and travelers en route to the United States from Africa for war purposes are frequently held over in that city for 2 weeks or more. The Embassy has pending at the present time other diplomatic cases of travelers who arrived in Brazil recently with no funds other than American currency.
- Whether the Bank of Brazil is willing to adopt any alternative other than the return of dollar currency to persons who refuse to have their deposits forwarded to the United States on a collection basis is a question which can only be decided by the Director of Exchange, Doctor [Santos] Filho, who is now in Washington. He is the only Brazilian official in a position of authority in regard to dollar control and it is suggested that the Department and Treasury arrive at a decision with him in regard to the proposal made in section 3 (a) of Department’s telegram under reference.
Pending decision on the disposition of the larger deposits, an immediate decision is requested in regard to the Embassy’s proposal for deposits of less than $500.
I refer again to Aranha’s repeated affirmations in my 2005, June 12, and my telegram No. 2069, June 16.60