832.5151/611: Telegram
The Chargé in Brazil (Gordon) to the Secretary of State
[Received 2:47 p.m.]
121. My 120, May 6, 5 p.m.63 I had a long conference with the Minister of Finance early this morning at his house.
He made it apparent that both he and other Brazilian authorities concerned with this matter were much confused as to the exact nature of the negotiations. Aranha had telegraphed last week that the American Government “agreed” to the scheme envisaging an exchange of communications between the Bank of Brazil and the class C creditors. In its 73, May 1, 8 p.m., the Department instructed me to present suggestions including that idea to the Finance Minister as representing the Department’s best judgment of the most satisfactory way of dealing with the situation. Subsequent instructions, however, referred to this idea as “Aranha’s plan.” Accordingly I endeavored to make it clear to the Finance Minister that the Department had not agreed to anything and that as I understood it it had merely been willing, in an effort to find the best solution of the problem, to explore fully such suggestions as had been made to it by Aranha.
The Minister then said that what he wanted to know was exactly what the American Government desired from Brazil. In view of the Department’s latest telegrams I again sought to impress upon him that any definite proposals he would make could not form the basis [Page 372] of an agreement with our Government but must be passed on to the American creditors for their approval or disapproval.
The Minister still seemed puzzled as to why I, on behalf of the Department, should be conducting with him what to him seem virtually negotiations if our Government can enter into no agreement and the final word lies with the Foreign Trade Council. I trust, however, that my understanding of the Department’s different instructions in the premises is correct; may I ask urgently for instruction on this point before I submit my next aide-mémoire to the Minister.
Passing then from matters of procedure to those of substance the Minister said that he was at this moment endeavoring to raise a loan through Rothschild to take care of our small creditors. He repeated that if he could not get this loan he of course could not pay the small creditors but he indicated that he anticipated no difficulty in raising the loan.
As to the credits covered by closed exchange contracts he said again that he intended to pay those off at once.
As to class C creditors the Minister said that he quite understood that if the proposed exchange of communications did not constitute a negotiable instrument it would not be satisfactory to our creditors; he added that as far as he was concerned he did not see how this proposed exchange could constitute a valid negotiable evidence of indebtedness. In accordance with some of the Department’s instructions (70, April 30, 6 p.m. and 77, May 4, 3 p.m.) and with what I have always understood would be the most acceptable settlement to the creditors I said that if that idea could not be worked out and if American creditors could not be paid in a short time (see Department’s 63, April 24, 5 p.m.) the most satisfactory solution would be an emission of interest bearing Bank of Brazil notes. For the first time the Minister expressed no opposition to this idea.
I then again took up the point that if an issue of interest-bearing notes were decided upon, I understood that he could definitely devote the equivalent of £800,000 a year to the service thereof and he unconditionally agreed.
In conclusion the Minister asked me to submit another aide-mémoire embodying all the points hereinabove set forth.
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