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

No. 16868

Sir: In compliance with the Department’s Instruction Number 6051 of June 19, 1944, I have the honor to report further on the subject.

The new measure is an internal regulation of the Bank of Brazil, instituted at the request of Dr. Gastão Vidigal, Director of the Carteira de Exportação e Importação, possibly upon the recommendation of Minister Sarmanho, of the Brazilian Embassy in Washington. For reasons reported in past correspondence, both of the latter have frequently threatened to create new controls as the restrictions imposed by the Preference Request system were relaxed. As a matter [Page 662] of fact, shortly before the April 1, 1944, rollback in decentralization, Minister Sarmanho had promoted a proposal that Brazilian Consuls in the United States be prevented from visaing Consular Invoices for shipments from the United States to Brazil unless they carried Minister Sarmanho’s approval. The Embassy was successful in heading off serious consideration of that proposal by informal discussions with Brazilian officials here.

To date, the Embassy has knowledge of rejections of only three or four relatively unimportant exchange applications. However, each of these has been reconsidered and approved after verbal protest by the Embassy. At present, there is one pending case involving exchange for the importation of white cement. The Embassy plans to continue its present practice of protesting verbally all rejections coming to its attention. Also, the entire situation will again be discussed in detail with Dr. Vidigal as soon as he returns to his office from a prolonged illness.

The Embassy knows of no concerted action taken by local trade groups with a view to obtaining a rescission of the exchange regulation, nor of any complaints having been filed by them with the Carteira.

Since the measure is an internal regulation within the Bank of Brazil, and because of conditions described above, the Embassy is of the opinion that the subject should continue to be handled in an informal way until Dr. Vidigal returns to his office. The Embassy suggests that the Department impress upon Minister Sarmanho the desirability of rescinding the regulation since he, the Embassy believes, may have been responsible, together with Dr. Vidigal, for the measure.

Respectfully yours,

For the Ambassador:
Walter J. Donnelly

Counselor of Embassy for Economic Affairs