811.51/5172: Telegram

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

3303. Your 4324, October 21, 11 p.m.;79 your airgram A–390, October 1, 3 p.m. In view of the increased activity in dollar transactions it is suggested that this might be an appropriate time to take up with the appropriate Brazilian authorities the question of prohibiting the holding of dollar currency in Brazil. The issuance of a new regulation prohibiting the holding of currency would probably stimulate the deposit of substantial quantities of such currency. It is believed that such a prohibition would afford a supplementary method of drying up the dollar market in Brazil and of assisting these authorities in preventing the attempts being made by residents in Brazil to avoid the effects of the new decree requiring the conversion of Brazilian currency. The Department and Treasury have always felt that a prohibition against the holding of dollar currency, together with appropriate penalties for violation of such prohibition, was a necessary part of an effective control over dollar currency.

In issuing any such prohibition Brazilian authorities should, of course, provide that any dollar currency deposited with the Bank of [Page 814]Brazil as a consequence thereof be forwarded to the United States on a collection basis for the account of the depositor.

As far as the difficulties which such a prohibition might create with respect to American and Brazilian traveling official personnel are concerned, it is suggested that an administrative procedure, similar to the one in effect at the present time, might be evolved to permit such personnel to retain reasonable quantities of dollar currency which they might have in their possession.

Please report to the Department the result of any discussions which you may have with the Brazilian authorities on this problem.

  1. Not printed.