832.51/2227: Telegram
The Acting Secretary of State to the Ambassador in Brazil (Caffery)
4037. Department is greatly concerned at situation presented in Embassy’s 5027 of October 2637 and Department’s 4013 of October 27. Department is particularly apprehensive of breakdown of negotiations. This it desires to avoid if at all possible. In order that the Embassy may know the Department’s attitude, you are informed that Department believes British position so unjustifiable and unfair to great bulk of bondholders that it could not be sustained before the public opinion of any of the countries concerned.
The Department does not believe that the Brazilian authorities could possibly entertain a proposal for discrimination between sterling and dollar interest rates on identical or closely comparable issues. Such discrimination would have a most unfortunate effect destructive of the strongly favorable public reaction otherwise anticipated in this country from the lines of settlement on which American and Brazilian negotiators have appeared to be in agreement.
So strongly does Department hold this view that it is prepared to ask Brazilian Government to make agreement effective regardless of opposition of British. You are authorized to inform the Government of this position if and when in your judgment the American negotiator is unable to conclude negotiations without this assistance. While the specific method of accomplishing the purpose stated is properly a matter for Brazilian determination, you are requested to make it clear that in our opinion method chosen should be one that would definitely provide for same interest rate and cash payments on comparable dollar and sterling bonds in same group.