File No. 817.51/522a.

The Acting Secretary of State to the American Minister.


The Department is informed that the President of Nicaragua wishes to know whether or not the bankers are prepared to accept immediate liquidation, thereby releasing all guaranties except the option on 51% of the railroad, which will not expire before March. President has received, it seems, an offer of financial backing, source not stated.

As to the request for immediate liquidation, you will informally say to President Diaz that it is with great surprise that this Government learns of the proposition, since the financial condition of Nicaragua is quite clearly such as to make impossible the liquidation of its obligations—incurred after long consultation with the United States—merely by applying the revenues to them. This [Page 1035] Government is therefore convinced that the proposed liquidation is possible only by assuming new obligations, which would probably be most onerous to Nicaragua.

In view of the interest, repeatedly evidenced, of this Government in the welfare of Nicaragua, and of the close relationship of the two countries—which would become even closer upon the conclusion of the proposed canal treaty—this Government could not favor any alteration in the present financial system of Nicaragua—a system that promises in a reasonable time to place the country in a stable financial condition hitherto unknown—unless this Government had examined and approved such alteration.