61st Congress. 3d Session.
Senate Doc. (Executive Series C.)
Message from the President of the United States transmitting a Loan Convention between the United States and Honduras. 1
[Read January 26, 1911; Convention read the first time and referred to the Committee on Foreign Relations, and, together with the Message, ordered to be printed in confidence for the use of the Senate. Made public August 5, 1911]
To the Senate:
I transmit herewith for the consideration of the Senate, with a view to eliciting its advice in regard thereto and obtaining its consent to the ratification thereof, a convention between the United States and the Republic of Honduras concerning a loan which the Republic contemplates making with citizens of the United States, to provide for the refundment of its debt and the placing of its finances on a sound and stable basis.
The weighty considerations of national and international policy which counsel the consummation of such an arrangement are so rational and just as not only to commend themselves to earnest attention, but to call for such elaboration and support as it is my duty to give in the fulfillment of my constitutional obligation to consult the coordinate treaty-making power on a matter so intimately concerning the policies of this country in its relations with the neighboring nations of the Caribbean region.
From a very early period of our history it has been alike the policy and the moral obligation of the United States to lend, when required, appropriate countenance and counsel to the Commonwealths of the [Page 556] West in all that tends to increase their stability, to promote their welfare, and to maintain and fortify their relations with one another. Emulating the example of the people of the United States in establishing independent statehood, the people of Latin America were not slow to achieve in turn independence of colonial control and to mold their schemes of government on the lines of constitutional subjection to the popular will on which the United States had effected its own enfranchisement. Thus bonds of sympathy were created at the outset, between the several other emancipated nations of Latin America and, naturally, between all of them and the United States. The march of Pan American progress has seen this mutual inspiration and confidence signalized in the splendid position attained by several of the great Republics akin to our own. It has been but natural that this community of sympathy and purpose should find expression, at any time of exceptional need, in trustful recourse to the impartial counsels of the United States, and that the successive administrations of this country, obeying the sentiments of the American people, should feel it appropriate in the spirit of reciprocal good will to befriend those States upon fitting occasion, within the necessary limitations of our own sound national policy.
For nearly a century the history of this country affords many examples of the readiness of the United States to lend its moral support to the Latin-American Commonwealths in their great task of promoting individual welfare and common harmony. In this our course has been responsive and sincere and our aim has been to do good for good’s sake, ever bearing in mind that the interests of our country are affected by the common well-being of all and benefited by the maintenance of fraternal amity among all.
This disposition on our part has naturally been more particularly availed of and evidenced with respect to the Central American Republics. Their propinquity, the direct intimacy of intercourse with our shores, the field they afford for the mutually beneficial influence of the enterprise of our citizens, all tend to foster a feeling of interest as well as of sympathy. We can not but feel solicitous for their welfare, inasmuch as the interests of our own people are sensitive to all that may adversely affect Central American stability.
For three-quarters of a century the earnest solicitude of the United States for the well-being of the Central American countries has been shown unhesitatingly, and upon frequent occasions the offices of the United States have been exerted to assure to them the internal and external tranquillity so necessary to their very existence as sovereign Commonwealths. The action of this Government since 1834 in checking and controlling invasive policies in that region culminated in the Clayton-Bulwer treaty and in the coincident treaties of Great Britain in 1859 and 1860 with Guatemala, Honduras, and Nicaragua by which the integrity of those States was affirmed for the future. While the alluring prospect of eventual inter oceanic communication across the Central American territory was an obviously important factor in determining the conventional arrangements then effected, it was but a factor in the problem, the principle at stake being that the integrity, stability, and peace of Central America was a world necessity if a highway for the world’s commerce were to be made between the Atlantic and Pacific. Now [Page 557] that the linking of the oceans by the Isthmian Canal is nearing assured realization the conservation of stable conditions in the adjacent countries becomes a still more pressing need, and all that the United States has hitherto done in that direction is amply justified, if there were no other consideration, by the one fact that this country has acquired such vast interest in that quarter as to demand every effort on its part to make solid and durable the tranquillity of the neighboring countries.
One of the most practical applications of this policy was the initiation and consummation of the peace pact between the Central American States, which was accomplished by the Washington conventions of December, 1907. By no act of the last half century has the active and impartial friendship of the United States for that neighboring group of Republics and its jealous regard for their integrity, peace, and welfare been more manifest than in the part taken by us with the cooperation of Mexico in those conventions, for the fulfillment of which we thus become morally sponsors and have ever so earnestly striven. It behooves the United States to do all in its power toward the full fruition of the benevolent purposes of those engagements, and in no way can our moral accountability be so potently met as by a practically helpful policy tending to insure peace among all the Central American States.
In the instance of Honduras, the occasions for this have been more numerous and more urgent than in the case of other States in a similar stage of development but more favored by circumstances and better equipped to cope with the difficulties of domestic unrest, political intrusion and financial embarrassment. The kindly counsels and aid of the United States have been frequently invoked in behalf of all of them; but it is Honduras, perhaps more than any other, that we have again and again assisted in the honorable composition of its differences. Outside of its relations with the other Central American States, the path of that Republic has been beset also with more than ordinary obstacles in its intercourse with foreign nations. Although richly endowed with natural wealth, its political weakness, its continual internal disturbance and its frequent unsought controversies with its neighbors have paralyzed its just development and impoverished its resources.
The financial embarrassment of Honduras has long been noteworthy. Insufficient revenue has induced repeated foreign loans, incurred without adequate provision for meeting the high interest exacted thereon, resulting in default of payment and in the incurment of still more onerous debts through still more burdensome loans placed on European markets at a large discount. As a consequence, Honduras is to-day a hopeless debtor to foreign countries, tottering under a heavy obligation which it is not within its power to satisfy. That Honduras is absolutely incapable of acquitting anything like the face value of its indebtedness is fortunately evident to its creditors. They have long been disposed to acquiesce in a compromise for the adjustment of their claims, upon terms which obviously would be the more favorable as the security for the refunded obligations should become more substantial through the acquirement of some tangible assurance that the normal revenues of the State, pledged for the payment of the debt, would be integrally devoted to [Page 558] the assigned purpose without danger of impairment by internal turbulence or external pressure.
That Honduras has long been the weakest link in the hitherto fragile chain of Central American peace is an obvious fact, suggesting an equally obvious remedy. In an address which I delivered in Pittsburg in May last, I said:
Turbulence and unstable conditions in Central America have been a perennial occupation to the Department of State. By the Washington conventions, to which the United States morally has the relation of a party, it was sought to guarantee the neutrality of Honduras, because it has always been felt that a strong and stable Honduras stretching across the center of Central America would contribute more than anything else to the progress and prosperity of the five Republics, the peaceful welfare of which the United States has always promoted.
The strength and stability, so imperatively needful if Honduras is to play its due part in advancing the interests of all Central America, are incapable of realization if Honduras is to remain in its present condition, paralyzed by poverty and resultant unrest at home and a helpless defaulter to importunate creditors abroad. I had these considerations vividly in mind when, in my Pittsburg address, I said:
Honduras has a heavy foreign debt and its finances are disorganized. American citizens have now an actual interest in the railways and wharves of the country. An American banking house has finally undertaken to refund the debt, rehabilitate the finances, and advance funds for railway and other improvements contributing directly to the country’s prosperity and commerce. Such an arrangement has long been desired and our State Department is cordially supporting the project.
It is high time that Honduras should cease to be the football of the contending elements of unrest and ambition in Central America. Its moral, physical, and financial regeneration, under the strongly helpful influence of the United States, would make its conventional neutrality a positive fact and remove it from its present deplorable position as a focus of Central American disturbances. I feel that I can not do better in this relation than quote the emphatic utterance of the Secretary of State in an address upon “The spirit and purpose of American diplomacy,” which he made in Philadelphia in June of last year. Speaking of the constant effort of the United States to assist the weaker Republics of this hemisphere in attaining a stature of equality as real as the equality of their sovereignty and in reaching the high level of stability, justice, moderation, and mutual responsibility which characterizes their more fortunate sisters, Mr. Knox said:
One of the aims of the diplomacy of the United States has been to contribute as much as possible in helpfulness to these ends. True stability is best established not by military but by economic and social forces. A certain area of Central America has been notoriously racked by revolution, and, by a sad history of turbulence and instability, had been robbed of that flourishing prosperity which should be its natural heritage.
While the greater American Republics have long since acquired an industrial and governmental credit comparable to that of the oldest nations, the treasuries of some of the most backward republics have at times virtually succumbed under the weight of exorbitant foreign loans, which, with improvident financial administration, have sunk them deep into debt. The problem of good government is inextricably interwoven with that of economic prosperity and sound finance; financial stability contributes perhaps more than any other one factor to political stability.
The Republic of Honduras is typical as a country laboring under the disadvantages referred to. It has a heavy bonded debt, held in Europe, for which [Page 559] it has in its national wealth no proportional return. The interest fell in arrears and it became absolutely necessary that the debt be refunded and the finances placed upon a sound basis. At this juncture a group of American bankers came forward prepared to offer terms more advantageous to Honduras than those offered on behalf of the actual creditors. Believing that a strong Honduras would tend enormously toward a stable and prosperous Central America, this Government is heartily supporting the plan for its financial rehabilitation. If the arrangement made proves, upon the closest scrutiny, to be just and equitable, then this Government will be prepared, with the consent of the Senate if a treaty is desirable, to give it such sanction as shall afford the bankers legitimate security for their investment by recognition of such relation as the Government of Honduras may create between the payments due the lender and a proper portion of the customs revenues.
That the domestic welfare of Honduras will be assured by a sound reorganization of its fiscal system is a self-evident proposition. Wastefulness and inefficiency in the collection of revenues can not fail to decrease the income of the State in even greater ratio than economy and efficiency operate to increase it. The good results of effective and safe fiscal reform are shown in the Dominican arrangement under which the augmented revenue not only adequately provides for the governmental needs but now yields a positive surplus actually greater in amount than the total revenue of the State prior to the initiation of the present system of collection. Moreover, the removal of the collecting function from local control takes away one of the main incentives to revolutionary disturbance, when the cupidity of turbulent malcontents is often excited by the material profit to be gained by an even brief control of the customhouses. In its political aspects, too, the Republic is freed from apprehension of intervention on the part of creditor nations. Such intervention is an inherent right of sovereignty and, if unattended by territorial acquisition of American soil by a foreign power, this Government would not necessarily oppose it, especially if our own offers of help had been put aside. It is no part of the broad national policy of the United States to champion repudiation by its neighbors or to encourage them with the prospect of immunity for the irresponsibile contraction of debts which they are not in a condition to discharge; but sound policy counsels our aiding them to get out of debt and keep out of debt. It can in no wise better our good repute to turn a deaf ear to their appeals for a helping hand to lift them from the slough of default into which misfortune may have plunged them; nor could it improve the good will in which we wish to live with our American congeners were we to leave them to make probably harsh terms with their alien creditors, with the alternative of remaining responsible to such international right of redress as the injured parties might invoke.
Besides the considerations of propriety, expediency, and interest which make the present arrangement with Honduras alike desirable and mutually advantageous, its wisdom as an evolution in the direction of far-sighted international policy is to be borne in mind. Honduras is not alone in financial embarrassment. The continual disturbances of other Central American States put them, also, although to a less degree, in the category of prospective borrowers. Within a year past, Guatemala has sought the friendly counsel of the United States regarding the terms of a projected foreign loan, and it is announced, as part of the program of national recuperation [Page 560] put forth by the newly installed constitutional Government of Nicaragua, that the aid of the United States will be asked in effecting a readjustment of the debts of that Republic. It needs no profuse argument to show that the financial rehabilitation of the greater part of Central America will work potential good for the stability and peace of all, and lead to that development of internal resources and expansion of foreign commerce of which they are all capable, and of which they all stand in need.
It is to be observed that the convention now laid before the Senate was drawn, was signed, and now stands binding upon the Governments of the United States and of Honduras, when by them ratified, only in respect to a loan contract when one shall have been negotiated which shall be finally found satisfactory by both Governments and shall consequently be admitted under the protection of the convention.
When the representative of Honduras shall have signed the contract which has long been under negotiation with American bankers, the Department of State will subject it to final scrutiny, whereupon the Secretary of State will furnish the Senate a more detailed account of the negotiations, together with a copy of the contract, in order that the Senate may have available the fullest information for its guidance in the consideration of this important convention.
I commend the submitted Honduran convention, with all earnestness, to the favorable action of the Senate, with a view to the advice and consent of your high body to its ratification at an early day. Taking into account the existing and prospective conditions in Central America, timely action is importantly desirable.
Washington , January 26, 1911 .