832.51/1039: Telegram
The Chargé in Brazil (Gordon) to the Secretary of State
[Received 2:30 p.m.]
87. I have just seen a copy of circular letter number 2 dated March 14th from National Foreign Trade Council to owners of deferred commercial indebtedness in Brazil. The circular specifically advises conversion into relatively short term interest bearing notes of obligations on which exchange contracts actually have been closed.
I trust that this advice has been withdrawn as a result of publication of British agreement.57 Will Department please advise me in the premises and inform me whether it has communicated with the National Foreign Trade Council in the sense of my telegrams 74, March 28, 7 p.m. and 75, March 29, 6 p.m.?58
[Page 356]As Department will have noted I am much concerned about this point. There is no valid reason why these closed contracts should not be liquidated just as quickly as the British closed contracts—that is to say currently and without further interruption—and Brazilian officials in private conversation admit this. I feel strongly that to include this category of debts in the negotiations would have a very prejudicial effect here and would set a premium upon the policy of procrastination and unfulfilled promises which the Brazilian financial authorities have pursued ever since February 2nd.
My 79, April 4, 7 p.m.: Bank of Brazil has extended the liquidation of this category of debts to all banks in Rio but not yet to banks in other parts of the country. In past week National City Bank has cleared up about 40% of its closed dollar contracts.