832.51/3–2448
Memorandum of Telephone Conversations, by the Assistant Chief of the Division of Brazilian Affairs (Clark) With the Ambassador in Brazil (Pawley)
On Tuesday, March 23, I telephoned the Ambassador in Rio de Janeiro and discussed with him, among other matters, the problem of the renewal of the Brazilian Stabilization Agreement with the U.S. Treasury. I advised him that arrangements apparently had progressed in a satisfactory manner between the Brazilian authorities and the Federal Reserve Bank in New York City and that the Federal Reserve [Page 379] Bank was willing to take over the $80,000,000 from the U.S. Treasury. Presumably this credit, which is backed by Brazilian gold, would be repayable in the amount of $40,000,000 in nine months and the balance of $40,000,000 at the conclusion of the annual period.
Reports have been received that the Federal Reserve Bank in New York City on March 12 sent a telegram to the Bank of Brazil in Rio de Janeiro outlining its tentative acceptance of the Brazilian credit and requesting certain information. No reply has so far been received to this telegram from the Bank of Brazil and I mentioned this to the Ambassador in the hope that he or some one else in the Embassy might be able to discuss this subject with possibly Vieira Machado in the Bank of Brazil and encourage the Bank of Brazil to reply to the Federal Reserve Bank in New York without further delay. In the course of our conversation, the Ambassador mentioned that shortly before his departure from Washington he had discussed this subject with the President and the President had indicated his desire that the Treasury continue its arrangement for Brazil rather than have the Brazilians go to the Federal Reserve Bank in New York City. The Ambassador suggested, therefore, that before any mention was made of the Federal Reserve Bank telegram to the Bank of Brazil authorities it would be best to query the appropriate authorities in the U.S. Treasury Department as to whether or not a final definite decision had been taken on this matter.
I subsequently talked with both Mr. Wiggins1 and Mr. Southard of the Treasury Department. Both stated that it had been decided that it would be preferable for the Brazilians to deal with the Federal Reserve Bank in New York City. Mr. Southard stated that he personally had handled the matter at the request of Secretary Snyder and that the Secretary had assured him that he was quite confident that the President would be satisfied if the arrangement with the Federal Reserve Bank in New York gave the Brazilians the same facilities as those afforded heretofore by the Treasury Department.
Mr. Southard explained that, while the Treasury has no desire to close the door definitely on the Brazilian request for a renewal of the Agreement, the Treasury is desirous of mobilizing those funds which are available in anticipation of a drain from European sources. Mr. Southard stated that he had the assurances of the Federal Reserve Bank in New York City that an advantageous deal could be worked out with the Brazilians and that the cost, in actual fact, would be less than if the Agreement was to be renewed by the Treasury. Mr. Southard also added a confidential mention of the fact that the Treasury finds itself in a rather anomalous position with Brazil, that is, carrying [Page 380] such a credit while at the same time Brazil has made no attempt whatsoever to participate in the International Fund. Mr. Southard implied that Brazil’s position was inconsistent, to say the least, and that while no one wished to force Brazil into joining the Fund, he did feel that the Brazilians could maintain independence of action much better if the Stabilization Agreement was transferred to the Federal Reserve Bank in New York City on a more or less strictly commercial basis.
On Wednesday, March 24, at approximately 2:15 p. m., I again telephoned the Ambassador at Rio de Janeiro and informed him of the results of my conversations with Mr. Wiggins and Mr. Southard of the Treasury Department. He seemed perfectly satisfied and stated that, after all, it was a decision which would have to be made by the Treasury. At my request, he indicated that some one from the Embassy would immediately get in touch with the people at the Bank of Brazil to attempt to see that a reply to the March 12 telegram from the Federal Reserve Bank in New York City is despatched without further delay.
- Under Secretary of the Treasury.↩