The memorandum is so exact that I am glad to transmit it in its original
form.
[Enclosure]
Memorandum by the Financial Adviser to the
Government of Honduras (Young) of a Conversation with President López
Gutiérrez
[Tegucigalpa,] September 28, 1920.
I advised the President that the existing financial situation is very
grave, pointing out the serious effects of the non-receipt of
revenue from the custom house at La Ceiba, owing to the strike, and
indicating that the Government has about reached the limit of its
ability to borrow from the banks and from private commercial houses.
I mentioned to the President that the peril to the Government was
less likely to be from revolutionary movements such as the one
coming to a head on September 24th–25th,21 than
from the financial situation. At this point the President mentioned
that he considered that the attempted movement had been a thorough
failure. He expressed the opinion that if the Government needed more
funds it might be able to obtain a loan in the United States, but I
emphasized the view that until the fundamental financial situation
had become sound it would be idle to think of borrowing money
abroad.
The discontent of unpaid civil employees, whose salaries are in
arrears for two or three months or more, may become a source of
peril to the Government, I pointed out. The President replied that
in previous administrations there had been times when employees had
not been paid for nearly a year without serious results.
I proposed that the President should call a special conference to
consider means for effectively reducing the expenditures of the War
Department, at which should be present the Minister and Subminister
of War, the Minister of Hacienda, Señor Suazo and myself. I
suggested holding such a conference within two or three days to
begin to formulate a definite program even though it might not be
possible to reduce the expenditures of the War Department for a
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brief time. However, the
President was disposed to postpone calling such a conference for
five or six days. He expressed the view that within two to four
weeks it should be possible to commence a radical reduction in the
army. He expressed the view that at present he needed very few
forces on the border of Salvador, but that it was necessary to
maintain large forces on the border of Nicaragua. He believes that
if President Chamorro should imprison or concentrate in Managua
those guilty of conducting marauding expeditions against Honduras
the greater part of the difficulty would be solved. Commenting on
the Nicaraguan election,22 the President believed that three-fourths of the
people of the country were opposed to Chamorro, but that the
latter’s control of the elections might be sufficient for him to
win. In that event he anticipated a revolutionary movement against
Chamorro on the part of the coalition forces.
The President admitted the point I made that without radical reforms
in the Department of War no fundamental financial reform was
possible since any money saved in the other departments would only
go to increase the spending capacity of the War Department. He
accepted my proposal that I proceed with the elaboration of a
definite program of economies in the Department of War to serve as a
basis for discussion in the conference of next week. In this
connection I expressed the belief that the expenditures of the War
Department were not adequately accounted for, pointing out that an
army as large as that existing ought to be had at considerably less
expense.
I also mentioned the possibility of fixing a definite limit month by
month, on a declining scale, to the expenditures of the Department
of War, and the President expressed his approval in principle.
[No signature indicated]
