The Secretary of State to the Ambassador in Brazil (Caffery)
A–295. Your 3452, September 11, 5 p.m.65 The Department and Treasury have found it difficult to arrive at a wholly satisfactory solution concerning the currency deposits by the French Embassy and the Spanish Ambassador,66 in view of the political questions involved. However, the following plan of procedure is suggested:
- With respect to the deposit by the French Embassy you will be interested to know that the French have asked Treasury to make arrangements for licensing the use of blocked funds in this country for the support of their Missions in the other American republics. The request of the French was based upon the fact that they were unable to use the currency because of the restrictions imposed by the other American republics. The French have been told that before attention can be given to the problem of licensing the use of blocked funds in this country it will be necessary for them to forward to the United States on a collection basis all currency held directly or indirectly for the account of the French Government in the other American republics. In view of this development it is believed that the matter of the French deposit can be held in abeyance pending an indication from the French as to whether they will comply with the foregoing stipulation. It would seem that the failure of the French to deposit all of their dollar currency constituted a violation of the Brazilian currency controls and that consequently an adequate legal basis may exist for refusing to [Page 808]return the currency which has been deposited or to convert it into milreis, at least temporarily.
- With respect to the deposit by the Spanish Ambassador, it is suggested that you make every effort through the Brazilian authorities to persuade him to have the currency forwarded to the United States on a collection basis. In the event that your efforts in this connection are unsuccessful, it would appear that there will be no alternative but to return the currency. Before so doing, however, it is suggested that the Brazilian authorities advise the Spanish Ambassador that this Government has a complete record of the serial numbers. Also it is suggested that you discuss with the Brazilian authorities the possibility of placing some stamp or mark on this currency before returning it to the Spanish Ambassador. It is recognized that in your telegram 1975, June 10, 9 p.m. you reported that there was no legal provision in Brazil permitting this procedure, but it is thought that the fact that Brazil is now at war may afford a basis for reconsidering this possibility.
Please keep the Department advised of all developments.