740.00112A E.W./24511: Telegram
The Secretary of State to the Ambassador in Brazil (Caffery)
483. You’re A–134, January 21 and your despatch 9822, January 22,82 concerning the deletion of the Axis banks.
1. The Proclaimed List Committee voted to delete the three Axis banks from the List and to publish the following footnote in the February supplement: “Vested by the Brazilian Government and presently in active liquidation”.
In addition, we expect to include the following statement in the press release accompanying the publication of the supplement:
“The deletion of the three former enemy-controlled banks in Brazil—Banco Alemão Transatlântic, Banco Germânico da América do Sul and Banque Franaise et Italienne pour l’Amérique du Sud S. A.—appears in this supplement. The effective action of the Brazilian Government in vesting these banks and in putting them into active liquidation, pursuant to Decree Law No. 4612 of August 24, 1942, has made this step possible”.
You will note that the two changes from your proposed footnote involve an indication that the liquidation is “active” and the replacement of the phrase “National Patrimony” by some other appropriate language. We believe that this latter phrase might not be fully understood outside of Brazil.
Please let us have your views on the proposed statements by Thursday, February 11.
2. With respect to the unblocking of the banks funds in the United States, we have had further discussions on this matter with the Treasury and the British. The accounts of these banks in the United States would technically remain frozen because the Banque Française et Italienne was blocked as a national of France on June 17, 1940, and subsequently designated as a national of both France and Italy on June 14, 1941, and both the Banco Alemão Transatlântic and the Banco Germânico were blocked as nationals of Germany on June 14, 1941. All of these dates are prior to the date when the banks were included on the Proclaimed List. Technically, once blocking has occurred because of nationality, the assets cannot be unblocked without a Treasury license.
The principal reason, however, for our desire to continue the frozen status of these assets after deletion emanates from the broader question of conflicting custodial claims. As a matter of fact, the British are more concerned than we are about this issue due to the fact that the assets of these banks in Great Britain are alleged to be substantial and there are substantial claims of British creditors. One of the biggest difficulties in the settling of conflicting custodial claims is that of discrimination among creditors, including creditors of the head offices of these banks. Both we and the British have deemed it expedient to avoid decisions in specific cases of this type until some steps have been taken to settle the problem on a general level. We suggest, therefore, that you advise the Brazilian authorities at this time that the assets of these banks in the United States will continue to remain frozen because of the technical reasons stated above and the presence of the general problem of settling conflicting custodial claims. At the same time you should emphasize that our desire to continue our controls over these assets is in no way motivated by any lack of confidence in the Brazilian controls or in the present methods of liquidating these banks. You may tell them that we will give sympathetic consideration to specific applications for licenses to utilize those assets until such time as the general problem of conflicting claims can be settled.
We are fully aware of the difficulties that may be involved in such a procedure. If the Brazilians feel strongly concerning the release of these specific accounts and if you believe that the continuation of United States controls over these accounts would adversely affect the willingness of the Brazilians to cooperate with us in effectively implementing [Page 752] their program of economic warfare, we will then reconsider our position.
3. We quite understand the difficulties involved in obtaining the blocking in Brazil of payments to Proclaimed List nationals, particularly where those nationals are located in Brazil, and in clearing communications by the liquidators with such nationals outside of Brazil. You are authorized to work these problems out as best you can.
You may wish to suggest to the Brazilian authorities that with respect to Proclaimed List nationals located outside Brazil, they might check the freezing laws of the countries in which such nationals are situated before making any remittances to them. In a situation where a Proclaimed List national in another country would be blocked if he were in Brazil, it seems to us that the Brazilian authorities should not permit the banks to make a remittance to any such national unless they are convinced that the proceeds of such remittance would be as effectively blocked in the country where the national is located as it would be if made in Brazil. In this connection, the possible difficulties arising from discrimination between various countries on the effectiveness of their controls and the fact the blocking of payments to Proclaimed List nationals outside of Brazil might not involve the political difficulties inherent in the recognition of the Proclaimed List for Brazil may, as an administrative matter, make it expedient for the Brazilian authorities to block all payments to all Proclaimed List nationals outside the country.
With respect to communications with Proclaimed List nationals outside Brazil, the Brazilian authorities may find it to their interest to notify you in advance, so that you can make the necessary arrangements with the appropriate United States mission to avoid any local censorship difficulties.
4. The Department approves the suggestion in you’re A–134 that for the time being no formal agreement along the lines of the Mexican agreement83 be made with the Brazilian Government and that you proceed informally on a case by case basis.