832.51/2193: Telegram
The Ambassador in Brazil (Caffery) to the Secretary of State
[Received 7:05 p.m.]
4465. My 4417, September 17, noon. The Finance Minister yesterday informed Embassy that American representatives’ original suggestion for a debt settlement as reported my telegram under reference was definitely not acceptable.
At meeting this morning with Brazilian and British representatives, the former requested a memorandum of our reasons for stipulating regrouping, which we are now preparing. In view of Souza Costa’s previous expression of indifference on this point, it is believed this request originated with British representative.
[Page 771]While Brazilian representatives indicated that on alternative A, in contrast to alternative B, they were not prepared to go beyond a total debt service of 30 millions, they would study any “alternative A” schedule presented by us based on $33 million total service. Such a schedule is being prepared within framework of Council-Department’s memorandum of understanding and providing for approximately $22 million interest and $11 million amortization, such schedule being entirely contingent on our regrouping. This schedule will be presented at next meeting Tuesday morning, solely, however, as a basis for discussion.
It is clear from discussions to date that Brazil is essentially interested only in debt reduction and, therefore, in the “B” option.
It now appears that settlement acceptable to bondholders is largely dependent on regrouping and it is suggested that Council and Department make it clear to London that our position on this point is firm and mutually accepted by Council, Department and Embassy. Please telegraph when this has been done.
Please inform Council.