832.51/2199
Memorandum for the Information of Embassy Officials in Brazil Concerned With the Brazilian Debt Question17
The “Nemeyer Plan”18 on which Brazil’s external debt service has been based during the 1934–1943 period has never been accepted by the Foreign Bondholders Protective Council on the ground that it was grossly discriminatory.
The “special treatment” accorded to the funding loans and coffee realization loans has never had a basis of equity and would be particularly unjustified in any permanent plan of settlement. The cumulative result of the “Niemeyer Plan” has been that holders of the funding loans have had their arrearages capitalized and have received interest thereon on a preferential basis, while the holders of other Federal secured issues have received neither of these benefits.
The Council’s suggestion, which is fully supported by the Department of State and the Embassy, is based on the premise that Brazil’s undertaking on any one of its secured issues is entitled to the same respect as its undertaking on any other secured issue, and that in any [Page 772] permanent settlement Brazil will want to provide equitable treatment for the entire group of bondholders, rather than to extend preferential treatment to “Special interests” such as has existed under the old Grade I and II issues.
- Copy transmitted to the Department by the Ambassador in Brazil in his despatch No. 12846, September 24, printed on p. 773.↩
- Sir Otto Niemeyer represented the Bank of England in debt negotiations with Brazil in 1933. See Foreign Relations, 1933, vol. v, pp. 76 and 87.↩