832.10/10–754
Memorandum of Conversation, by the Deputy Assistant Secretary of State for Inter-American Affairs (Woodward)
Subject:
- Future Assistance in Solving Brazil’s Exchange Problem
- Participants: Secretary of the Treasury
- Under Secretary of State
- Mr. Andrew Overby, Assistant Secretary of the Treasury
- Mr. Kalijarvi, Deputy Assistant Secretary for Economic Affairs
- Mr. Woodward, ARA
Mr. Hoover had requested the conversation with Secretary Humphrey in order to arrive at a preliminary position with respect to possible future assistance to Brazil in solving its exchange problem. When the meeting was suggested, it had been expected that the Brazilian Finance Minister might come to Washington briefly before his departure for Brazil. Before the meeting took place, however, it had been learned that the Brazilian Finance Minister had departed from New York for Brazil that morning, fairly well satisfied with the success of his mission in obtaining an additional gold loan of $80 million and provoking serious thought among high officials of the United States Government concerning methods of giving future assistance to Brazil. Therefore, the meeting with Secretary Humphrey assumed less urgency.
Secretary Humphrey conceded that we would have to face the problem of further financial assistance to Brazil because of the inevitable exchange deficit in 1955. Secretary Humphrey emphasized, however, that the data received from Brazilian officials in the past had proved to be so unreliable that the first important step would be to make certain that reliable and detailed information is obtained concerning the precise exchange position of that country. Mr. Hoover agreed, and as a result of thorough discussion, it was decided that Assistant Secretary Overby and Assistant Secretary Waugh would be responsible for consulting with the Presidents of the Eximbank and the IBRD in order to select two or more fully qualified persons who could go to Rio de Janeiro and examine into the precise exchange situation of Brazil. Mr. Hoover said that these persons would be given every facility by the Embassy and that it might be desirable to have the principal officer formally designated as a Treasury representative.
Mr. Overby mentioned, in the course of the discussion, that Senhor Paraguaná1 of the IMF, who carries out special assignments for the [Page 662] Brazilian Government, had given him a tabulation of the Brazilian exchange situation with the outline of a pian2 by which Brazil could refinance the amounts of repayments on the loan against gold as these repayments become due, by borrowing equivalent amounts against gold from commercial banks in New York. By this system, Mr. Overby said that Senhor Paraguaná had demonstrated with his calculations that Brazil could maintain its exchange situation without other loans until the middle of 1955—provided, of course, that the Brazilian Government carries out certain measures to reduce the dimensions of the problem by further curtailment of imports. Even this plan would only postpone the necessity for further assistance to Brazil in maintaining its exchange position, unless Brazil should succeed in taking measures which would attract large amounts of additional foreign capital for exploration for Petroleum.
- Octavio Paraguaná, Executive Director for Brazil, IMF.↩
- Reference is to the “Paraguaná Plan”, a proposal whereby Brazil would raise $216 million to cover deficits through 1955 by postponing certain payments due on Export–Import Bank loans, obtaining loans against gold from private banks, and drawing an additional $50 million from the IMF.↩