832.51/2264: Telegram
The Ambassador in Brazil (Caffery) to the Secretary of State
[Received 5:29 p.m.]
5401. Embassy is informed that Finance Minister has approved Decree-Law (my 5396, November 20, 1 p.m.) and attachments and that they are being submitted to President Vargas today and to Brazilian Cabinet tomorrow for ratification. Plan is to telegraph text Decree-Law and summary of attachments to Brazilian Missions Washington and London Monday evening. Simultaneous release Rio, Washington and London is planned immediately after closing of stock market Tuesday afternoon—probably immediately after 4 p.m. Rio time (3 p.m. Washington time).
Department will be informed of any changes in above schedule.
I plan to give American correspondents here a brief statement and Embassy is preparing an interpretive summary for their use.
Embassy was given this morning copies of attachments to Decree-Law which are based on bonds outstanding November 1. The following summary of their contents as they relate to dollar bonds is transmitted for use of Department and Council in preparation of press releases:
- A
- —Attachment 1—bonds outstanding—$286,065,645; Plan A—interest $8,137,370; amortization $3,415,115; Plan B—cash payments—$35,948,921; reduced circulation $189,872,016; interest $7,120,197; amortization $5,031,612.
- B
- —Attachment 2—offer to purchase at 12% Ceará—amount outstanding $1,980,000.
- C
- —Attachment 3—pre-February 5, 1934 (10% of last year 2085) $337,849; July 1, 1939 to December 31, 1943 (25% of last year 2085) $2,248,308; arrears during effective period 2085 (at full rates—state of Rio de Janeiro) $165,030.
Of total dollar and sterling bonds included in plans A and B, dollar bonds represent the following percentages—bonds outstanding 34.2%, plan A interest 39.3%, amortization 34.2%, total service 37.6%; plan B cash payments 39.2%, 36.4% for reduced circulation, interest, amortization and total debt service. Approximately 50% of the dollar bonds and 30% of the sterling bonds are improved qualitatively under plan B by federal assumption of responsibility for state and municipal issues.
For dollar bonds, plan A provides interest rates of 3⅜ and 3½% for federal issues and coffee realization; rates varying from 2% to 2½% for state issues and from 17/8 to 2⅜% for municipal issues. Plan A amortization is 45.5% of interest for federal issues and coffee realization and 35.5% for state and municipal issues.
[Page 794]Plan B provides a reduced principal of 80% for federal and coffee realization issues and 50% for states and municipals with uniform interest rate of 3.75% and amortization uniform at 2.65% of new principal. Cash payments are designed as offset both for (a) loss in principal and (b) common interest rate. Cumulative amortization features are contained article XII Decree-Law.