832.51/1743: Telegram
The Ambassador in Brazil (Caffery) to the Secretary of State
[Received March 5—4:45 p.m.]
86. My telegram No. 79, March 1, 3 p.m., Department’s No. 48, March 2, 5 p.m. and 51, March 4, 9 p.m. Confirming my conversation with the Economic Adviser the reason Aranha gives for being forced to improve grade IV to 45% is to pacify the French for losing [Page 591] further application of the gold clause in franc loans. The French have been claiming a 1 to 13.8 ratio instead of a 1 to 5 ratio and have the Hague Court decision of 1928 [1929]23 in their favor to back their claims. However the Brazilians are assisting in [insisting on] the 1 to 5 ratio.
In order partly to meet the increase in grade IV and our much larger increase amounts were deducted (in the face of strong British opposition) from the amortizations in grades I and II. As I have previously reported the Brazilians are perfectly willing to spend an additional $10,000,000 in amortization of dollar loans in the next 4 years in the United States.
As I have previously reported we hold only 35.4% of the entire delet [debt?] and are to receive 38.9% of the payments to be made while the British hold 60.8 and are to receive only 58.4; the French 3.4 and to receive 2.4; and the Dutch .4 and are to receive .3.
Aranha promised me this morning that he would not object to the proposed statement to be made by the Bondholders Council as set forth in the Department’s No. 51 of March 4, 9 p.m.
- Brazilian Federal Loans Case, Permanent Court of International Justice, Judgment 15, July 12, 1929, ser. A, nos, 20/21, p. 93; II Hudson, World Court Reports (1935), 404.↩