832.5151/599: Telegram
The Chargé in Brazil (Gordon) to the Secretary of State
[Received April 29—6:50 p.m.]
110. My 106 April 25, 7 p.m. The written reply in question61 has not yet been received; it is now promised for tomorrow. I have, however, managed to secure what purports to be a draft and unless it is much changed before being presented to me I shall consider it quite unsatisfactory both on the point of a loan to cover payments to small creditors and with respect to the reimbursement of class C creditors.
In this connection will the Department please clarify the first sentence of its 68 April 27, noon? I, of course, understand that my conversations with the Finance Minister in no way constitute a formal negotiation of an agreement between the two countries but I assume that if I find the Minister’s answer unsatisfactory I should engage in further discussion with him as an endeavor to bring him around to what I understand to be the Department’s views. Please instruct me if this understanding is correct.
Further, in this connection, the Department will recall that I have on various occasions reported that American interests here would unquestionably prefer obligations of the Bank of Brazil which could be discounted by the Export and Import Bank to a direct Brazilian Government obligation. The latter could be nullified at any time by political action and although the former theoretically could be [Page 364] likewise there would certainly be much more hesitation to take such action.
I have been informed and gather from Department’s 45, March 27, 9 p.m.,62 that the National Foreign Trade Council shares this preference. Although I have reason to believe that the Brazilians will be loath to agree to this, does the Department wish me to urge this point upon the Finance Minister? While I fear that to secure this very agreement will be difficult and may require considerable pressure in Washington, I feel that I should emphasize the keen disappointment with which the omission of this feature would be received by American interests doing business here.
Further, with respect to class C credits (see penultimate paragraph of Department’s 68, April 27, noon) the Department is aware from various reports from this Embassy, that the Germans in fact enjoy a highly preferential situation due to their mark system but as I understand it the Department, for good reasons, is unwilling to insist upon a strict application of the most-favored-nation principle and to claim similar preference. On the other hand, it should also be borne in mind that in article VII of the Anglo-Brazilian agreement, Brazil agrees not to give more favorable treatment to any other country for liquidation of backlog.
I should appreciate instructions at earliest possible opportunity before engaging in further discussion with the Ministry of Finance after receipt of his written reply.