Papers Relating to the Foreign Relations of the United States, 1894, With the Annual Message of the President, Transmitted to Congress, December 3, 1894

Mr. Baker to Mr. Gresham.

Legation of the United States,
Managua, Nicaragua, October 24, 1894.
(Received November 13.)

No. 420.]

Sir: In my No. 412, of October 11, 1894, I gave you an account of some financial changes which this Government proposed, for the benefit of its treasury.

After the lapse of a number of days the Government concluded that the basis for the liquidation of certain custom-house bonds which had been agreed upon at a conference of the merchants and other business men and the Government could not be carried out; and the latter sent out invitations to the former, inviting them to a second conference to be held at the palace on the evening of the 18th instant, in order to reconsider the matter.

It appears that very few of the bondholders attended this conference; and I think none of the foreign citizens, who happen to be in possession of the larger share of the bonds.

At this meeting the Government announced its conclusion that, in issuing the new bonds in liquidation of the old, it would not recognize the “bonuses” and “benefits” guaranteed by the laws authorizing the original issue, but would include only the principal and accumulated interest., Therefore, the new bond will represent 100 cents principal and 38 cents interest—$1.38 instead of $2.05, on the face value of the original bond, as at first agreed. The merchants are much stirred up over this action and express deep dissatisfaction.

A peculiarity of the action of the Government in this regard is found in their first declining to receive these bonds for 40 per cent of the customs, as provided for in the law authorizing their issue—cash only would be received; and when the merchants protested against this breach of contract and faith, they now declare that after the 1st of next March 30 per cent of all customs must be paid in these bonds, whether the merchant has the bond or not. All cash will not be received. The bonds are held in few hands.

I have, etc.,

Lewis Baker.

[Inclosure in No. 420.—Translation.]

The President of the Republic decrees:

• Art. 1. To name the last day of the present month for the liquidation and conversion of the custom-house bonds for obligations against the treasury. In the liquidation, the principal and interest only will be included.
• Art. 2. From the 1st of next March, the general treasury will indispensably require the payment of 30 per cent of the total amount of the policies pólizas) in said obligations.
• Art. 3. The bonds which are converted from now until the last of this month will be received as obligations in payment of the policies liquidated since the 20th of September last, at the rate of 10 per cent, the remaining 90 per cent to be collected in cash.
• Art. 4. Orders against the general treasury, which may be received in 20 percent cash payment of the policies, will [be] liquidated the last day of next February, and the remainder will be recognized and paid as a debt of state.
• Art. 5. Bonds which may not be converted during the present year will be paid in legal money from the 1st of March, 1896, by a drawing of the numbers which may not have been entered in the conversion of the bonds up to the last of December of the present year, and at the rate of $25,000 monthly, to be liquidated according to the manner which the National Assembly may designate.
• Art. 6. On the 21st instant, the minister of finance will commence the conversion according to the provisions of this reglamentary law, and he shall take all prudential measures which he may see fit.
• Art. 7. From the 1st of next December, 10 percent or more must be paid in legally coined silver for the value of the policies which exceed $200. But this will be rebated to those who pay said customs dues in national treasury notes.

Let it be known. Managua, October 19, 1894.

J. Santos Zelaya.

The Minister General,

Baca, H.