832.51/2245: Telegram
The Ambassador in Brazil (Caffery) to the Secretary of State
[Received 10:14 p.m.]
5117. We have made some progress the past 3 days in the interest problem mentioned in Department’s 4124, November 4, midnight.38
British representative has accepted our position on coffee realizations and has abandoned effort to reduce any of the dollar interest [Page 786] rates we obtained on October 16. (The Brazilians helped us on this latter point.) Phillimore is now engaged in readjusting those sterling issues which have no identical dollar issues. He proposes, relative to October 16 schedule, (1) to improve his coffee institute loan (old grade five) at the expense of sterling 5% non-funding loan (old grade three) and (2) to improve his 1898 and 1914 fundings at the expense of sterling federal unsecureds (old grade four). Brazilians appear receptive to this and I see no grounds which we can with logic oppose it. Please point out to American Council that it could adequately defend on grounds that discrimination would be entirely at expense of other sterling bondholders; that Decree-Law schedule will refer only to individual issues and that grades will not be mentioned.
The only remaining knotty issue on British problem under option appears to be proposal Phillimore made to pay 3⅜% on 1931 fundings (40 years) and only 3⅛% on 1931 fundings (20 years). Unfortunately, one member of Brazilian delegation inadvertently gave a semi-commitment on this request. We have told Brazilians that under no circumstances would either the American Council or State Department agree to such a discriminatory proviso. State Department reply to British Embassy along lines we have previously suggested might prove efficacious in preventing deadlock.
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