ECONOMIC CRISIS IN BRAZIL.

Timaru Herald, Volume CXXXV, Issue 18971, 2 September 1931, Page 9

ECONOMIC CRISIS IN BRAZIL.

Barter System Introduced. FISCAL CHARGES FOLLOW. United Press Association—By Electrlo Telegraph—Copyright WASHINGTON, August 31. Mr Carlton Jackson, commercial attache at Rio Janeiro to-day cabled the Commerce Department that Brazil had barred imports of flour for the next eighteen months. The cable said that the action had been taken to protect the millers, who are to purchase from the Brazilian Government 25,000,000 bushels of wheat, for which 1,050,000 bags of coffee were traded to the United States Farm Board. FACING DIFFICULT DAYS. HAMPERED BY EMPTY TREASURY. A cable from Rio De Janeiro, published on Monday announced the suspension of payments for the amortisation of Federal loans was announced on Saturday after an arrangement by the Government with New York and Landon bankers. The suspension of payments is indefinite and contingent on the recovery of the value of Brazilian currency. Sweeping changes in the banking system, stabilisation of the milreis, and development of Brazilian industries were on the immediate programme of the new Government, declared President Vargas recently. The greatest problem, in President Vargas’s opinion, lay in the financial situation, “which is truly unsettled.” “The public coffers were exhausted,” he said. “The Bank of Brazil was functioning without coverage abroad. We do not intend to reorganise the banking system, but we do intend to reform the Bank of Brazil, making it a bank of issue and' rediscount. Our principal credit establishment will cease to compete with other banks. Its aim will be to establish equilibrium among the banks and support the national economic system, functioning similarly to the Federal Reserve Bank in the United States.” The new Government had invited Sir Otto Niemeyer to visit Brazil and report on the situation there, and after several months’ study of the position he published his conclusions last month. His chief recommendations were for the establishment of* a central bank along the lines of the United States Federal Reserve system, and the balancing of the Federal Budget and the Budgets of the principal Brazilian States. An external loan of at least £16,000,000 would be necessary to enable a Brazilian central bank to undertake the convertibility of the present Government notes, but the time was not yet ready for this, he said. For many years Brazil has not been on a gold basis of exchange, and Government bonds have been selling at from 40 to 50 per cent discount. The report offered no opinion as to whether the Brazilian Government could continue service on its external debt, which consumes about one-third of the Federal revenues. Sir Otto’s other main recommendations were directed towards the attainment and maintenance of Budget equilibrium by the Federal Government and the larger States, the avoidance of issuing Government bonds, the reorganisation of public services such as the post office and railways, alterations in the incidence of taxation, revision of the accounting system, and an independent audit. So long as Budgets were not balanced, he pointed out, public authorities would be forced into inflationary methods. Over-production of coffee, which represents 70 per cent of Brazil’s exports, has been a large factor in the crisis. A “valorisation” scheme fixing the price of coffee caused serious economic trouble on a former occasion: