The Acting Secretary of State to the Chargé in Guatemala (Thurston)
Communicate the following to President Estrada Cabrera:
On September 27, 1917, the Special Mission of Guatemala requested a loan of $30,000,000 from the United States Government. Referring to efforts made by President Estrada Cabrera to reform the financial situation of Guatemala, the Commission stated that the one serious obstacle to the work of reform had been the high and constantly varying rate of exchange of the Guatemalan currency, which not only made commercial transactions very difficult, but also discouraged immigration and the introduction of the foreign capital which was indispensable to the development of the Republic’s natural resources. The establishment of a monetary system based on a gold standard was shown to be absolutely necessary for the future prosperity of the Republic.
Although it was impossible for this Government to make such a loan, under the laws governing advances of money for war purposes, this Government nevertheless feels the keenest interest in assisting Guatemala in the solution of her financial and monetary problems. It believes that the reform of the currency, which in itself will do much to stabilize the financial situation of Guatemala and to encourage foreign commerce and the introduction of foreign capital, should be undertaken as soon as possible. A reform of this kind involves such very complicated technical questions, and at the same time such far-reaching social and economic considerations, that other countries under similar circumstances have found it necessary to call upon economists of world-wide reputation to study the condition of their currency and their special needs, in order to ensure that the reforms should be permanent and effective, and that the broader interests of the Government and of the people of the country concerned should not be injured by the change.
If Guatemala still desires the cooperation of the United States in establishing a currency based on a gold standard, this Government would be pleased to suggest the name of an expert to study the existing situation and to recommend the most desirable method of reform, and it would further be pleased to exert its good offices to enlist the assistance of American banking interests in putting the recommendations of the expert into effect. This Government feels that its cooperation in this manner would not only make possible the formulation of a sounder and more beneficial plan of reform, but would also greatly facilitate the obtaining of funds for the execution of the reform.
Confidential: The Department is not accurately informed regarding the extent of the activities of Mr. Catlin or his principals, or as to the activities of Ferla and his associates. Officials of the Department have conferred informally with Mr. Lionel Stahl, who has in preparation a tentative plan to establish a national bank. Certain features [Page 274] of this plan do not meet with the Department’s approval, but it is not felt that the Department is in a position to offer any definite recommendations as to just how the rehabilitation of Guatemala’s finances should be undertaken owing to the lack of accurate information.
The suggestion that an expert be sent to report upon conditions in Guatemala is made because it is hoped that such a report would make possible the accomplishment of the monetary reforms Guatemala needs.