Coffee Loan

Many years ago the Brazilian Gov ernment undertook a policy of "coffee valorization," which in simpler English means rigging the world market for coffee, of which Brazil is the chief producing nation. Every now and again, high prices thus established would cur tail consumption and encourage large production, and a large surplus would result which would have to be held off the market lest its sale smash the artificially high prices set.

The Brazilian Government has not hesitated to use its own credit to help its coffee growers. In 1922 a loan of -L-9,000,000 was floated in London to hold off the market 4,535,000 bags of coffee. The British drink tea, not coffee, and so were indifferent to the purposes to which the loan funds were to be put. But curiously enough, a considerable pro portion of this 7 1/2% coffee loan was sold in the U. S., the greatest coffee-consuming nation in the world. U. S. investors consequently helped to supply the funds needed to rig the coffee market, and thus had to pay higher prices for their coffee.

Recently, it again became necessary for Brazil to raise money to rig the coffee market further. The Federal Government of Brazil passed the proposition along to Sao Paulo, the State in Brazil which grows most of the coffee. Sao Paulo sent representatives to Manhattan to secure a loan of $30,000,000 to $40,000,000. But by this time common sense had returned to the State Department and the Manhattan bankers alike. The Sao Paulo officials were politely informed that from now on it would be against U. S. policy to provide funds to put up prices on imported materials.