Office of the Historian

832.51/2152: Telegram

The Ambassador in Brazil (Caffery) to the Secretary of State

Rio de Janeiro, June 19, 1943—2 p.m.
[Received 6:31 p.m.]

2993. My A–1183, June 12, 1943, 10:30 a.m.2 At Souza Costa’s3 request, I met with him today at the Ministry of Finance. The purpose of the meeting was to inform me that he had been carrying on conversations with the British relative to a settlement of the debt.

Souza Costa read to me his confidential report to President Vargas on the proposed debt settlement which follows along the lines of the airgram under reference. He said that he would send me on Monday copies of the memorandum to the President and of the proposed debt plan.

The outstanding features of the plan are:

1.
Transfer of the state and municipal debts into the consolidated debt of the Federal Government.
2.
Scaling down of the principal of the debt.
3.
Cash payments.
4.
More favorable rate of interest than currently being paid under the revised Aranha plan.4

[Page 766]

Souza Costa said that he had hoped to conduct debt negotiations in Washington simultaneously with the monetary conference but that, in view of the delay in convening the conference, it might be advisable to hold the meetings here.

He said that the settlement of the debt is fundamental and that it is unsound to undertake other major financial measures pending a solution of this problem. He said that once the debt problem is settled the Government would proceed with plans for a central bank with the assistance of our experts. He remarked that he has no intention of changing the exchange dates [rates?] at this time current rumors to the contrary notwithstanding. He pointed out that this is one of the many fundamental financial problems that should be undertaken only after the debt is settled.

Caffery
  1. Not printed.↩
  2. Brazilian Minister of Finance.↩
  3. Oswaldo Aranha was Brazilian Minister of Finance, 1931–34. For correspondence regarding the debt plan, 1933–34, see Foreign Relations, 1933, vol. v, pp. 75 ff., and ibid., 1934, vol. iv, pp. 602 ff. For correspondence on the revised plan, see ibid., 1939, vol. v, pp. 357 ff., and ibid., 1940, vol. v, pp. 559 ff.↩