Memorandum by Mr. Richard F. O’Toole of the Division of Brazilian Affairs


Subject: Status of Coffee Realization Loan of 1930

Ambassador Berle met today with the following departmental officers to discuss the above topic:

  • OFD—Mr. Livesey96
  • FN—Mr. Corliss97
  • IR—Mr. Cale98
  • BA—Messrs. Chalmers, Braddock and O’Toole

The purpose of the discussion was to consider the possibility of inducing the Brazilian Government to sell the coffee held as collateral of this loan and to pay off the outstanding bonds. Mention was made of the fact that departmental records indicate an important discrepancy in the figures of coffee stocks held, as furnished by the Minister of Finance in February 1945 and by the head of the DNC in August of the same year. There is also indication, in the Department’s records, that part of the coffee collateral may have been sold without the prior consent of the bankers. Under such circumstances it is feared that should Brazil approach our private capital markets, later on, bondholders of the Coffee Realization Loan might well raise objections to such procedure as long as no steps have been taken by the Brazilian Government, to redeem this bond issue.

Again, Mr. Cale believes that if the coffee held is of suitable quality it would be decidedly to the advantage of our coffee requirements to bring about its release for marketing in this country.

Ambassador Berle did not believe that this Government has any obligation to act as a collecting agent for these bondholders nor did he feel that it should assume the role of checking the collateral. However, since the Department and the Embassy had assisted in bringing about the debt refunding agreement he saw no reason why we should not inquire as to the present status of this loan. He further expressed the opinion that up-to-date figures should be obtained and suggested telegraphing instructions to the Embassy to procure the necessary information both as to the present aggregate of the outstanding bonds as well as the quantity and quality of the collateral held.

  1. Frederick Livesey, Adviser, Office of Financial and Development Policy.
  2. James O. Corliss, Assistant Chief of the Division of Financial Affairs.
  3. Edward G. Cale, Associate Chief of the International Resources Division.