File No. 815.51/335.
Memorandum of the Division of Latin-American Affairs of the Department of State on the status of the loan negotiations.
Division of Latin-American Affairs , April 16, 1912 .
The relation which recent and current political developments in Honduras bear toward the pending loan negotiation appears to be as follows:
President Manuel Bonilla, at the time of his election, carefully assured the public through the semi-official Government organ of the Bertrand administration that he was in no way connected with or [Page 612] pledged to any foreign powers, capitalists or interests. This served to allay the prevalent suspicion that his last revolutionary expedition was supported by the United States. He was elected and this “plank is his platform” was skilfully used to increase his popularity.
During the interim between election and inauguration, while Bonilla practically controlled the Government although not yet in office, the Foreign Office seemed inclined to receive information regarding the loan. Meanwhile political refugees centered in Salvador and began a systematic arraignment of Bonilla in the press of Salvador and elsewhere, accusing him of partiality to the loan, etc. and fomenting several revolutionary attacks from Salvadoran territory. While easily repulsed, this military activity served to coalesce the opposition and to enhance in the eyes of General M. B. Rosales (present Minister of Fomento) the importance of holding himself ready to embrace any presidential opportunity that might present itself.
Almost immediately after his election Bonilla began to turn from his former adherents and to show a vacillating policy quite foreign to his attitude during his previous administration, and his popularity evidently began to wane. In addition his health is far from good (compare Mr. White’s recent despatches) and at one time he was so near death that only the persistent efforts of a German-American physician pulled him through. This physician, Doctor G. A. Walther, has just left Honduras for the United States (see Mr. White’s telegram and despatches) and the effect of his absence upon Bonilla will undoubtedly be great, for there is no other physician there who understands his condition.
Samuel Zemurray who had successfully completed the preliminary negotiations for the $500,000 loan and who enjoyed the confidence of the people and the marked friendship of Bonilla, expressed himself, in interviews at the Legation in July, 1911, and February, 1912, as being confident of negotiating a larger loan provided certain features of the Morgan instrument be eliminated. Recent reports from various sources appear to establish the fact that Zemurray, who apparently weakened his standing by a simultaneous request for a large concession of too great scope, which has recently been disapproved by the Government, left Honduras dissatisfied with the failure of his loan negotiations.
The opposition, with whom Juan Angel Arias is in direct communication, is aware of all these facts, and is awaiting any indication of weakness on the part of Bonilla or his death, at which time Honduras will undoubtedly become the field of a personal struggle among them. Arias states, according to advices received by counsel for Mr. W. S. Valentine, that he will willingly lead this opposition in a peaceful campaign and has expressed himself in favor of immediate settlement of the Honduran foreign debt.
In this present state of affairs it would appear to be almost political suicide for Bonilla to favor a loan convention that had already been rejected by the Congress of Honduras. It does not follow, however, that the country is not ready and willing to consider the reorganization of its finances. The recent telegram from Mr. White (817.51/424) seems to confirm this and the preamble of the recent report [Page 613] of the financial committee of the national Congress would appear to indicate a trend in this direction. I quote two paragraphs thereof.
It is likewise easy to understand that if, by means of a financial arrangement with a responsible banking institution, upon conditions similar to those accepted by countries having a well established credit, this country proves its claim to a confidence secured by its pecuniary resources and its honor, the way lies open to it for strengthening its good name by the faithful fulfillment of its promises, and this will have the further result of unlocking to it the doors of the financial world where it will find easy and advantageous means wherewith to work out a solution of the problems which upon various occasions have placed it in a most embarrassing situation.
Finally, we are of the opinion that the conditions of the country make a foreign loan necessary and that we ought to hope that those in charge of our national properties will know how to respond to the confidence reposed in them.
While it is possible that the pending convention, if ratified by our Senate, might be reconsidered by the National Congress of Honduras at its next session (January to April, 1913), provided a willing administration adroitly handled it, I am of the opinion that the failure of the Senate to ratify the present instrument would in no wise defeat the desired ends. In fact the presentation to Honduras of a new convention, differing in however small detail from the present one and supporting a contract as favorable as the present one appears to be, would entirely remove the chief and almost insurmountable objection that now exists in Honduras, i. e., the reconsideration of a convention that has once been emphatically disapproved. The manner of its rejection and the unfortunate circumstances attending its presentation to Congress are neither remembered nor considered in the present temper of the Honduran Government. (Mr. White’s telegram and the committee report, above referred to, would appear to sustain this view.)
I strongly believe, however, that a representative of the bankers who shall have no conflicting interests in Honduras and who may work in close harmony and understanding with the Legation at Tegucigalpa would succeed in his negotiations for a satisfactory loan contract far better than has Mr. Zemurray.