832.51/1522: Telegram
The Ambassador in Brazil (Caffery) to the Secretary of State
[Received 5 p.m.]
219. For the Under Secretary. My 218, July 17, 7 p.m.30 Unless the Council changes its belligerent attitude it will not be possible to accomplish anything satisfactory on the debts. If their telegrams do nothing else, they give Aranha an opportunity for building up a case [Page 368] for washing his hands of the whole business. … Aranha has talked so much about the telegrams that there is now a very hostile atmosphere created toward the Council even all over the Foreign Office. …
Whether Aranha is sincere or not every time he gets a telegram from the Council it takes me considerable conversation to get him back into the mood of saying that he will go ahead with making arrangements for the negotiations with our bondholders.
Aranha finally went on to say that his present plan is to lay down a policy that Brazil will pay debts out of her commercial capacity to pay having regard to her balance of trade with each separate country. The result in our case of course would be that our bondholders would be favored; the French also to some extent; and the British not at all.
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