Gold for Paper

Where the Dictator of China succeeded, the President of Brazil, vigorous Getulio Vargas, last week did even better. Washington last fortnight agreed to let China buy with silver an unannounced quantity of sterilized U. S. gold (TIME, July 19).* Last week President Roosevelt and Secretary Morgenthau gave Brazil the right to buy with U. S. paper currency up to $60,000,000 in gold. This coup for Rio de Janeiro marked the first time the New Deal has thus favored a foreign country excepting Britain and France. Mexico, like China, has been permitted to buy U. S. Treasury gold, but Mexico, like China, has had to pay in silver.

Brazil is the second largest world export market in South America, and President Vargas has simply obtained a golden bagatelle for use in exchange operations to keep the Brazilian milreis pegged to the dollar at its present worth of about 6^. This pegging will be "within certain limits," Brazilian Finance Minister Arthur de Souza Costa and Secretary Hull announced at Washington, without disclosing the limits. Only as needed by Brazil will the $60,000,000 in gold be sold by the U. S. Treasury, a few millions at a clip. Although earmarked for Brazil it will not leave the U. S., and according to the agreement made last week can be "used only for exchange stabilization."

In effect Washington said to Rio: "You credit us with some paper dollars; we credit you with that much gold. You tell everyone this good news and they will be so impressed that it will be easier for you to scare off speculators from your currency and secure commercial credits."

The new German Ambassador in Washington, Dr. Hans Dieckhoff, has been keeping cat-like watch on the Brazilian-U. S. treasury negotiations. It is a more or less open secret that one reason President Roosevelt was so generous last week was to enable Brazil to buy more U. S. goods and thus get along with less of the German goods she has been taking with some reluctance under the dubious trade-promoting schemes which Dr. Schacht works with his various kinds of German marks. This week Adolf Hitler openly revealed his displeasure at the Brazil-U. S. liaison, declared that Washington was "envious" of Germany's increased Brazilian trade, was trying to spoil Brazil's German cotton market by forcing Brazilians to pay higher prices for their industrial imports. Significantly the Fiihrer appointed as Brazilian Ambassador Dr. Karl Ritter, foreign trade specialist and one of the Reich's shrewdest diplomats.

*'Close guess at China's gold buy: $50,000,-

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