832.51/1735: Telegram
The Secretary of State to the Ambassador in Brazil (Caffery)
51. Department’s 48, March 2, 5 p.m. The Executive Committee did not meet today. We did however have a very thorough discussion of all aspects of the Brazilian debt situation with Mr. White this afternoon. He still finds the Brazilian proposal inadequate in the total and unsatisfactory in distribution between sterling and dollar bonds. [Page 583] It is the Department’s view that since in your judgment this is the best available offer in present circumstances it is desirable that the way should be cleared to the bondholders. An agreement was finally worked out with Mr. White to the effect that should the Brazilian Government proceed with the offer precisely as outlined in your cables 63 of February 16 (as amended with regard to Grade III by your 71 of February 24), and 78 of February 29 (second paragraph), the Council would refrain from passing upon the merits of the offer, but would call the attention of the bondholders to it in the following terms
“Without passing in any way on the merits of the Brazilian proposal, which was not negotiated by it, the Council limits its comment on the proposal of the Brazilian Government, received through the Department of State, to the remark that negotiation at present would seem to hold no favorable prospect of obtaining any better offer. The Council must leave it to the bondholders to determine whether or not they will accept what is now offered”
In conveying this information to the Brazilian authorities you may make quite clear the fact that the Department has exerted itself to the utmost to bring about this possible arrangement but it is by no means easy for the Council to refrain from analytical comment on an important bond offer of this type.
Mr. White must submit this arrangement to his executive committee for confirmation. He will endeavor to do so as soon as possible tomorrow morning and at the latest by 1 o’clock.
This was the best form of statement we could work out this afternoon. Naturally we would not want to come to an issue over a phrase and would accordingly be prepared to engage if necessary in further discussions of the text.