File No. 817.51/797
The Financial Agent of Nicaragua to the Secretary of State
Washington, D. C., July 17, 1916.
Your Excellency: I regret that I have to trouble Your Excellency upon a matter of so particular an interest to the Republic of Nicaragua that only the legal antecedent and the kindly interest shown by the American Government in the reconstruction of my [Page 899] country constitute an excuse for presenting it for your consideration. This matter is the more troublesome, inasmuch as the unfortunate economic condition of my country makes the problem almost impossible of solution, because due to the kindly interest which I have mentioned it is imposed upon the Department of State for its necessary collaboration in the distribution of the three million dollars which Nicaragua is to receive by virtue of the Canal Convention entered into between the United States of America and Nicaragua, in the exchange of the ratifications of which I have had the honor to serve.
There is in the Department of State a complete record of the amount of the debt of the Republic of Nicaragua, payment of which should long ago have been made, and which has occasioned the different claims and demands not unknown to Your Excellency. Among these there are certain ones which have titles which might be called binding and guaranteed by the good faith of the Republic to receive preferential treatment in payments from the proceeds of the convention. These contracts, which were sent in due course to your Department for Your Excellency’s information are as follows:
- a.
- One with Messrs. Brown Brothers & Co. and J. W. Seligman and Company of New York, which binds Nicaragua to pay to the parties mentioned one million dollars which they loaned to us, together with the interest thereon up to the date of its payment.
- b.
- Another with the Ethelburga Syndicate, of London, for the payment of interests and sinking fund on the loan of £1,200,000 due it from the Republic of Nicaragua, for one and one-half years it has failed to pay.
- c.
- Another with the National Bank of Nicaragua, for advances of money made to the Nicaraguan Government, which with interest amounts to about $90,000, and lastly
- d.
- Another with Messrs. Amsinck and Co. of New York, our agents in that city, for advances of money, merchandise and provisions to the Republic for a period since terminated, amounting to $282,164.71.
The honor of the Republic of Nicaragua and the best interests of her future are pledged to the carrying out of these contracts, in justification of which your excellency will permit me to present the excellent reasons which actuated the Government in effecting them.
contract with brown brothers and seligman
The initial loan contract with the bankers in New York was for a million dollars for the term of one year. This very short period was accepted by Nicaragua only because at that time it believed that the Canal Convention would already have received the approval of the Senate of the United States, so that it may be said that the loan, for the contracting parties, was just an advance made by the bankers, with the approbation of the State Department, on the proceeds which it was expected would be received from the convention, to relieve the pressing needs of Nicaragua. At the termination of the period of one year when it was found to be impossible to pay off this loan, the bankers, relying always upon the approval of the convention by the Senate of the United States, granted us another term, which has been renewed when it has been necessary.
I would present to your attention the fact that in all of these contracts which have arisen from our failure to pay, the circumstance [Page 900] of binding them to the three million dollars of the convention makes manifest what I have before stated to your excellency that the bankers effected this negotiation having in mind this special revenue which the Republic was expecting. The Government of Nicaragua, therefore, believes itself obliged to make this payment in its entirety, and preferentially, in view of the legal rights which have been mentioned. Your excellency knows perfectly how important it is for a country to preserve intact its credit and those commercial relations which may thereafter prove useful. In paying the bankers it cannot be said that Nicaragua casts away her financial power in which she appreciates the amount which is paid, because upon effecting this she will be in even better position to obtain the same amount, or even more, on better conditions, either with these same concerns or with those others who understand our methods of procedure; because it must be borne in mind that, in effecting this payment, the Republic is freed from the collateral guarantees now held by the bankers.
contract with the ethelburga syndicate
The reasons which existed for making this contract are obvious and convincing. The Ethelburga loan is guaranteed by a first lien on the customs revenues, the principal source of revenues upon which the Government is maintained. At the outbreak of the war in Europe, the customs receipts having diminished to an extent which made it impossible to pay the interests and sinking fund of that loan, the Government asked the Ethelburga Syndicate to suspend the payment binding itself to effect such payment from any special revenue which the Republic might have, making special mention of the three million dollars expected from the Canal Convention. The customs houses of Nicaragua are in the possession of a General Receiver, appointed by the Government of Nicaragua and designated by the Secretary of State of the United States, with the object of guaranteeing a better compliance in the payment of the loan of this syndicate. So that if there had not been this contract the Receiver General would have been obliged to retain these funds for the Syndicate mentioned, leaving the Republic in a difficult and precarious situation. This contract was therefore of an urgent and unavoidable character and so must also be its conclusion.
contract with the national bank
The National Bank is an institution which has only a capital of $300,000, and it was created for the purpose of extending our commerce and bettering its conditions in the country. One of its struggles has been to lower the rate of interest which, previous to the establishment of the bank, reached 18% and 25% in Nicaragua. In order that it may be in a position to better effect its mission and to do yet more than it has done, the Government is obligated not to keep back funds which it can return and which would increase productive measures to the reach of private persons. To obtain the full meaning of this it is necessary to realize that if this debt is not paid [Page 901] the Government will retain almost one-third of the capital of the bank with manifest injury to the agriculture and commerce of the country, those productive sources of prosperity.
contract with messrs. amsinck
It may be said that the account with Messrs Amsinck of New York is an account current, of constant renovation. As I stated in the beginning, they are our agents who constantly furnish us the merchandise of all kinds indispensable in the daily administrative course of the Republic. On account of the war in Europe and of the diminished condition of our revenues we have not been able to make the payments when due and we were obliged to make this contract in order not to lose the commercial relations which are so important and so necessary for the economic life of the Republic, and therefore we cannot leave unheeded this obligation.
After these payments have been made, for which the honor and good faith of the Republic are pledged, and the completion of which will be of such excellent result for the future of the Republic, there will remain in the neighborhood of one million dollars from the three million comprehended by the Canal Convention. The Government believes that with this money and an issue of bonds, payable from resources which will be designated in due course, it can cancel the rest of the debt of a preferred character, for the determination of which it will with pleasure hear the suggestions which the Department of State may wish to make.
Assuredly the Republic, after the receipt of the three millions of the Canal Convention, whatever be the manner of its distribution, will have benefited to this amount its economic condition and its beneficial effect will be felt as much in the sphere of private life as in the increased revenues of the Government. This, together with the fact that there will remain in the possession of the Government those guaranties free from the hands of the bankers, that is, 49% of the stock of the Ferrocarril Pacifico, which is at present valued at $3,604,640.00, and the 49% of the National Bank which are worth to the Republic $147,000 place the Government in a position to advantageously negotiate in the near future a loan, which, at the present time, in view of existing circumstances, equally those of the outside world as of our own individual case, it would be impossible to obtain; besides which it is unnecessary to anticipate the advantages which the three million of the Canal Convention are called upon to produce in the country. To desire renovations or obtain loans at this time when the country finds itself hemmed in by so many economic difficulties, would be to subject ourselves to depressing conditions with no benefit whatever for the Republic.
As the principal contracts are due since the last of June, just past, giving us the right to freely dispose of the customs receipts, these since that date have been retained by the Receiver General of Customs for delivery of them upon requisition of the bankers, either for the Ethelburga or for themselves, whichever has the right. Without these receipts my Government is passing through a precarious situation, which places in danger the normal life of the Republic, by reason of which I have been given instructions to address your excellency, [Page 902] in order that, appealing to your well-known benevolence, you may if you so desire give the preferred creditors of whom I have spoken, as soon as possible, the assurances of payment, in order that they may leave free our Customs Houses and permit the Administration to meet its normal expenses.
I avail [etc.]