File No. 817.51/376.
[Inclosure.]
Brown Brothers and Company and J. and W.
Seligman and Company to the Secretary of State.
New York,
February 21, 1912.
Sir: We beg to refer to our letter of
November 2, 1911, informing you of our temporary loan of $1,500,000
to the Republic of Nicaragua. The purpose of that loan was to enable
the Government to withdraw from circulation its depreciated paper
currency, to substitute therefor a stable currency and to establish
a government bank. We were assured, at the time, that the paper
currency
[Page 1097]
outstanding
represented a total of 32,000,000 “pesos,” and the amount of the
temporary loan was made upon that basis.
In accordance with the loan contract, a copy of which accompanied our
letter to you of November 2nd, Messrs. F. C. Harrison and Charles A.
Conant, currency experts, went to Nicaragua to study currency
conditions and to prepare a plan for introducing and maintaining a
stable currency system. Upon their arrival in Managua, Messrs.
Harrison and Conant ascertained that, since the visit to that
country of Mr. Ernest H. Wands in March of 1911, the Government had
issued additional currency amounting to 16,000,000 pesos and that
the outstanding circulation, instead of being 32,000,000 pesos as we
supposed, was in reality 48,000,000 pesos. It soon became apparent
that the $1,500,000 which Nicaragua had borrowed from us would be
insufficient to meet the situation. Messrs. Harrison and Conant also
reported to us that the Government was in immediate need of funds
for its current expenses. We thus found ourselves face to face with
a situation which had been forced upon us, and much against our will
we took up negotiations with the Government for the purpose of
helping it out of its embarrassments. As a result of such
negotiations, we have offered to make further temporary loans not
exceeding $755,000, to be secured by certain revenues and properties
of the Government. In consideration of the loans thus to be made,
the Government has offered us an option for the purchase of a 51 per
cent interest in its railway and steamship lines; these lines it
proposes to transfer to an American railway corporation which shall
receive a concession substantially similar to the railway concession
“Schedule D,” annexed to the “Treasury Bills Agreement” of September
1, 1911, a copy of which is on file in the Department.
No agreement has as yet been signed for the new loans, but the terms
upon which these are to be made are fully set forth in a proposed
Act of the Nicaraguan Constitutional Assembly, a copy if which is
embodied in a cablegram to Messrs, Harrison and Conant dated
February 16th last. We enclose, for your information, copy of
transition of that cablegram1 into English.
As further bearing upon the subject, we also enclose copy of the
translation of another cablegram to Messrs. Harrison and Conant,
dated February 20th.
One feature of the proposed concession is in the improvement of the
San Juan River and in the construction of small canals suitable for
barges to connect the two Great Lakes of Nicaragua with each other
and also to connect the San Juan river with the Atlantic ocean. The
suggestion as to these provisions emanated from the Government of
Nicaragua, and the purpose of such provisions is thus explained by
Messrs. Harrison and Conant, who in a cablegram addressed to us say
substantially as follows:
“Your railway (referring to the railway which it is suggested we
shall help the Government to build and which it is intended shall
connect Lake Nicaragua with Rama, near the Atlantic Coast) ends
either on the Great Lake or at Managua. In the first case you are at
the mercy of a lake system; in the second case you are entangled in
through rates. If you can control the present railways and steamers
you can command the Pacific and Atlantic traffic, and until the
Panama Canal is opened up you will be placed in a strong position
for Pacific, Honduras and Salvador business and can probably retain
the traffic once gained. The engineer who managed the lake steamers
for years was with both Canal Commission surveys and has estimated
that the cost of connecting the lake and the river San Juan fit for
seagoing barges of five-foot draft will be somewhere between two and
three million dollars. If this estimate should be corroborated by a
competent engineer, the highest cost would presumably be less than
the Rama route.”
We do not know whether the above views are sound, and we have as yet
formed no opinion as to the value or desirability of such a system
as is suggested. As, however, our acceptance of the security and of
the option in no way commits us to take action in the premises, we
have seen no objection to the inclusion in the concession of the
special features referred to.
Very respectfully yours,
Brown Brothers and Company.
J. and W. Seligman and Company.
