840.51 Frozen Credits/9443
The Ambassador in Brazil (Caffery) to the Secretary of State
[Received February 13.]
Sir:
[The first three sections of this despatch deal with the legal basis for controls over international financial transactions, the administration of controls, and special problems.]
D. Brazilian Exchange Controls and the First Four Recommendations of the Washington Conference.
An analysis of the current situation indicates that Brazil has a moderately workable control system for international financial transactions, but that several legal or administrative measures remain to be adopted in implementation of the first four resolutions of the Final Act of the Inter-American Conference on Systems of Economic and Financial Control.
Recent measures adopted by the Banco do Brasil at Embassy suggestion include:
- 1
- —Prohibition of the use by Brazilian Banks of foreign correspondents of Axis nationality.
- 2
- —Instructions to agencies to use special care in the examination of all applications for transactions with neutral countries.
- 3
- —Request to the police authorities that they investigate and take appropriate action in five specific cases referred by the Embassy regarding dollar currency transactions.
- 4
- —Recommendation to the Minister of Finance that regulations be adopted providing for the registration of imported securities.
- 5
- —The adoption of special controls by the Fiscalizagção Bancaria over the activities of several suspected banking institutions. (Banco National da Cidade de São Paulo, S. A., Banco Alianga do Rio de Janeiro, Bordallo, Brenha, S. A.).
The liquidation of the two German and one Italian banks in Brazil and the appointment of administrators for a number of leading Axis companies are correlative measures which decrease the probabilities of large-scale international financial transactions in the interest of the Axis Powers.
The Economic Defense Commission, on February 1, 1943, issued the following instructions, designed to establish more adequate controls over internal transactions in securities:
“Resolution No. 22–1943—The Economic Defense Commission, in order to make effective the current legal regulations regarding the inalienability of the assets belonging to physical and juridical persons subject to Decree-Law No. 4807 of October 7, 1942, resolves that the following instructions should be immediately sent to the President of the Association of Exchange Brokers (Camara Sindical dos Corretores de Fundos Publicos), Rio de Janeiro, and to the Presidents of other Associations throughout the States, recommending that the Exchange Brokers upon their own responsibility, should exercise the most rigorous investigations relative to the origin of securities presented to them for sale, under the terms of Decree Law No. 1344 of June 13, 1939, retaining them, when belonging to physical and juridical Germans, Italians or Japanese, and bringing this fact immediately to the attention of this Commission, so that the appropriate penal action may be taken, based on the exact information, relative to the bearers of these securities who intended to sell them contrary to the current laws, on the basis of which such securities are considered inalienable.
“The Commission resolves likewise that the transfer of securities or shares deposited as guarantees are likewise subject to above regulations regarding transferability, such securities and shares likewise being retained whenever the bearers of these titles attempt to transfer them without the previous authorization of this Commission.
“The Commission resolves likewise to recommend that there should be strictly observed the stipulations of article 1 of the above mentioned Decree-Law No. 1344, which stipulates that operations regarding securities handled in the exchange market must be effected exclusively through exchange brokers and transacted in public.
“This Commission through its auxiliary organizations, will exercise rigorous control so that this resolution may be effected, and its non-observance will be considered contrary to the National security under the terms of article 13 of Decree-Law No. 4807, of October 7, 1942.”
The Embassy is currently directing its efforts towards the following objectives:
- 1
- —Adoption of legislation controlling importation of securities and limitation of repatriation purchases by the Brazilian Government, states and municipalities to those made in the New York and London markets.
- 2
- —The establishment by the Fiscalização Bancaria of controls over inward transfers in the special free exchange market similar to those now in effect for outward transfers.
- 3
- —The adoption of measures designed to eliminate black market operations with Argentina and the European Continent.
- 4
- —An extension of Treasury ad hoc blocking to other objectionable persons and firms as an instrument to control and to force cooperation.
- 5
- —The development of financial watch lists of persons and firms in other American Republics and in neutral European countries who are known to have engaged in objectionable international transactions.
Future developments in Brazil’s exchange control administration will be reported to the Department monthly.
Respectfully yours,
Counselor of Embassy for Economic Affairs