818.51/985: Telegram
The Minister in Costa Rica (Scotten) to the Secretary of State
[Received May 7—2:03 a.m.]
224. Referring to Department’s 174, May 5, 9 p.m. The Costa Rican Minister is apparently correct in his statement that the approval of Congress would be necessary for the increase of the existing credit. Paragraph 16–A of article 73 of the Costa Rican Constitution assigns to Congress the right to authorize the Executive to negotiate loans or make other contracts and to mortgage the national revenues as security therefor.
It is clear that the President desires to avoid congressional discussion of a loan, fearing that it would bring to light at least incompetence and mismanagement and possibly dishonesty on the part of the present administration. This situation was reported in my personal letter of April 27 to Mr. Bonsal and in the last paragraph of my despatch No. 135 of April 29.26
The President would naturally prefer a secret loan with which he could tide over the present financial crisis of his administration.
I doubt the wisdom of granting such a credit however which might result in a situation similar to that following the loan to the Tinoco Government by the Royal Bank of Canada in 1917 or 1918 which was followed by arbitration by the Chief Justice of the United States27 who I understand decided that as the loan had not had the approval of the Costa Rican Congress it was not an obligation of the Costa Rican Government.
While a secret loan or even gift to a friendly government or a government which the United States wished to keep on friendly terms during the war might in some cases be advisable from the standpoint of expedience I do not consider such a situation to exist here as even if the present Government should fall the entry into power of any group unfriendly to the United States and consequently dangerous to our war effort is most unlikely.
Should no financial assistance be accepted by the President at present it is possible that the political crisis might become so acute as to cause his resignation. However, I believe it likely that should we offer no alternative to some proposal involving congressional approval, such approval would be obtained. No doubt the congressional debate would include some violent criticism of the Government but its large majority would in all probability ensure the acceptance of the loan.
- Not printed.↩
- See Foreign Relations, 1921, vol. i, pp. 663–668.↩