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(1) That the Brazilian-Allied Governments shall agree upon a

list of German concerns operating in Brazil which should

be liquidated; (2) That the action to be taken against the German concerns,

which shall be agreed upon, shall form part of a general policy in pursuance of which the Brazilian Government will extend the process of liquidation to other German

businesses of importance in the country; (3) That it is clearly understood that the Allied Governments

reserve to themselves the right of discriminating against the residue of less important German persons and firms by the refusal of export licenses and by taking customs action against German persons or concerns whose business is not liquidated whenever they consider it necessary to do so; the method adopted for this purpose will be the inclusion of such persons and firms in a list which prevents the exportation of goods to them from the Allied countries or the importation into the Allied countries of

the products or goods which they wish to export. Has the Department any instructions?

MORGAN

File No. 763.72113/660

The Secretary of State to the Ambassador in Brazil (Morgan)

[Telegram]

WASHINGTON, September 4, 1918, 3 p. m. Your August 2, 3 p. m. Department informed Alien Property Custodian authorized to take over property in United States belonging to persons or concerns who by reason of residence in or doing business in enemy territory, or otherwise, are enemies under Enemy Trading Act or proclamation issued in pursuance of section 2(c) thereof. Such property taken over, if going concern, is managed by him until appropriate time to sell or liquidate.

Corporations incorporated in United States with stock wholly or partially owned or controlled by enemies are not taken over directly. Alien Property Custodian authorized to require such stock delivered and transferred to him. Stock certificates, if within United States, are surrendered, and new certificates issued to him; if not in United States, corporation required to transfer to him on its books all rights, title, and interest of enemies registered as stockholders. Directors then elected in proportion to amount of enemy stock taken over, Custodian thereby securing through them actual control of corporation. This stock may be sold or, if sufficient stock thus controlled, sale of corporate assets by corporation may be had.

Above applies only to property owned by enemies as defined by act or proclamations. Germans or Austro-Hungarians are not, merely by reason of their nationality, included in term enemy.

LANSING

File No. 763.72112/10101

The Ambassador in Brazil (Morgan) to the Secretary of State

[Telegram]

RIO DE JANEIRO, September 12, 1918, 2 p. mi.

[Received September 13, 4.58 p. m.] Referring to condition mentioned in Embassy's confidential telegram to Department, August 20, 4 p. m., at the urgent request of French Minister, Italian and British colleagues are willing, in the joint note to the Brazilian Government, after the words “ less important German persons and firms,” to add the words “and firms now included in the enemy trading lists.” See British Minister's telegram of today's date to British Foreign Office.

This addition will probably jeopardize acceptance of the proposition by Brazilian Government which in return for liquidating principal German houses will expect that Brazilian concerns on enemy trading lists shall cease to be penalized for past offenses. Should prefer that confidential list should contain only those Brazilian concerns which have undoubted enemy connections, and all those should be removed which have been guilty of a few instances of enemy trading, often due to ignorance or carelessness. Old offenders should be forgiven but shall be watched for new offenses in which case they should be placed on confidential list.

Since present Administration will probably not act on joint note before it leaves office on November 15, would it not be better to withhold note until new administration comes in, meantime discussing the matter with Da Gama in his character as future Foreign Minister?

MORGAN

File No. 763.72112/10146

The Ambassador in Brazil (Morgan) to the Secretary of State

[Telegram]

RIO DE JANEIRO, September 17, 1918, 2 p. m.

[Received 6.45 p. m.] British and French Ministers have sent (drafted?] joint note to Foreign Office which British Minister has prepared regarding abolition of black list in Brazil. Note contains following statement:

The representatives of the United States of America, Italy, Great Britain, and France are therefore authorized by their respective Governments to state so much importance is attached to action against the most important German concerns in addition to banks that if such action is actually made effective their respective Governments would be ready to take into favorable consideration the declaration contained in Your Excellency's note addressed to the representatives of the Allies, dated the 30th November 1917, and withdraw the statutory list, provided :

(1) That the Brazilian and Allied Governments shall agree upon a list of German concerns operating in Brazil which should be liquidated.

(2) That the action to be taken against the German concerns which shall be agreed upon shall form part of a general policy in pursuance of which the Brazilian Government will extend the process of liquidation to other German businesses of importance in the country, which in the meantime will be subject to all the actual disabilities of enemy firms.

(3) That it is clearly understood that the Allied Governments reserve to themselves the right of discriminating against the residue of less important German persons and firms and firms now included in the Allied enemy trading lists, by the refusal of export licenses and by taking customs action against such persons or concerns whose business is not liquidated, whenever they consider it necessary to do so; the method adopted for this purpose will be the inclusion of such persons and firms in a list which prevents the exportation of goods to them from the Allied countries or the importation into the Allied countries of the products

or goods which they wish to export. Italian colleague and myself believe that we should be instructed not to sign until Brazil has broken diplomatic relations with Austria and for the reasons stated in my telegram of September 12, 2 p. m.

MORGAN

File No. 763.72112/10146

The Secretary of State to the Ambassador in Brazil (Morgan)

[Telegram]

WASHINGTON, September 27, 1918, 3 p. m. First sentence of your September 17, 2 p. m., ambiguous. Department presumes, however, that you do not mean that your British and French colleagues have taken independent action by submitting to the Brazilian Government a joint note purporting to set forth what you have been authorized by your Government to do. If Department is mistaken in this view, please cable immediately.

With a view to including, in any arrangement effected, the question of withdrawing black list, liquidation of enemy property and partial lifting of embargo and settlement of important financial questions, including whatever measures may be decided upon to relieve hardship facing coffee exporters, Department instructs you to withhold note and to take no action until further instructions. Advise your Allied colleagues, however, that Department approves in principle procedure set forth in Department's August 10, 5 p. m., but insists upon postponing action pending result of conference here with Ambassador da Gama. Views of Department in this respect have been fully expressed to British and French representatives in Washington. French concur with our view. British would prefer to proceed at once with liquidation plan, but Department feels confident they will respond to our wishes in this matter.

LANSING

2

File No. 763.72113/758
The Secretary of the Treasury (McAdoo) to the Secretary of State

WASHINGTON, October 9, 1918. DEAR MR. SECRETARY: At the meeting held at the State Department on October 7 for the discussion of Brazilian matters, Sir Richard Crawford' handed to the representative of this Department an undated copy of a telegram from the Foreign Office, London, dealing with the Brazilian situation, and more particularly with the plan for taking over the German banks in Brazil. A copy was at the same time handed to Mr. Auchincloss 2 by Sir Richard.

The telegram states that the British Government is planning to have a meeting next (this?) week with a financial group in London and if that group entertains the proposals, the Foreign Office is planning to have the group proceed as soon as possible to negotiate with American financiers.

This Department has not come to a definite conclusion as to the method in which the American share of such German-owned banks in Brazil should be taken over, but inclines strongly to the opinion that the most feasible way to handle the matter will be to secure from Congress an amendment to the War Finance Corporation Act so as to permit that Corporation to take over, at least for the present, the American share of the interest to be acquired in such banks. Whatever may be the method this Department ultimately decides upon for handling this matter, it is very undesirable to have a group of British banks undertake the formation of a Brazilian bank in which they would ask American financiers to co-operate and also

1

Commercial Commissioner of the British Embassy at Washington.

Gordon Auchincloss, assistant to the Counselor for the Department of State.

2

undesirable to have British banks undertake negotiations in respect thereof with banks in this country.

In my opinion the matter should be arranged between the Governments interested who can each in turn secure the co-operation of such banks or other instrumentalities in their own country as they may respectively select. I think it desirable (subject to your approval) that this view be promptly communicated to the British Government so that our attitude may be made known before any steps are taken along the lines indicated in the telegram above referred to. Cordially yours,

W. G. MCADOO

File No. 763.72113/758
The Acting Secretary of State to the Secretary of the Treasury

(McAdoo)

WASHINGTON, October 11, 1918. MY DEAR MR. SECRETARY: I acknowledge the receipt of your letter of the 9th instant concerning the British Government's plan for the taking over and liquidation of German banks in Brazil.

I have made it very clear to the British Embassy that this Government believes it to be undesirable to arrange this matter other than by negotiations between the Governments interested. Sir Richard Crawford has advised me that he has cabled his Government your views to the effect that the group of British banks, referred to in a telegram handed to a representative of your Department by Sir Richard Crawford, should be told not to proceed further in this matter until a full agreement is reached with this Government. Faithfully yours,

FRANK L. POLK

File No. 763.72113/74142

The Ambassador in Brazil (Morgan) to the Secretary of State

[Telegram]

RIO DE JANEIRO, October 17, 1918, 1 p.m.

[Received October 18, 12.33 a. m.] At yesterday's Cabinet meeting, an Executive decree was signed canceling the right of the Deutsch-Südamerikanische Bank and the Deutsche Ueberseeische Bank, their branches and agencies, to operate in Brazil.

A short time ago the third German bank, the Brazilische Bank for Deutschland, was denied permission to extend the period during which it could operate in Brazil.

MORGAN

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