File No. 817.51/523.

The American Minister to the Secretary of State .


Your January 31. President Díaz appreciates the fair dealing of Brown Brothers and the benefits thus far derived from their methods although they may have seemed to him ultra-conservative at times; and he would like to continue dealing with them. But they will not advance another dollar nor entertain a new proposition until they are certain that the incoming administration at Washington will continue the present policy. This is deeply disappointing to President Diaz, who desires to reach a definite settlement of the financial question while the present Washington administration is still in office, as it thoroughly understands that question. Nevertheless President Diaz assures me he will not enter into a final loan contract without previous consultation with the Department.

Interests inimical to the United States have industriously circulated the rumor that after March 4 the restraining influence of the United States in Central America will be withdrawn. If so, the indications are that Salvador, by its intrigues against Guatemala and Honduras, will provoke a war into which Nicaragua may be unwillingly drawn. Therefore Nicaragua is compelled, as a precaution, to adopt strong defensive measures. But there are no funds for this purpose, and the conditions are such that, I am informed, President Díaz had personally advanced $100,000 gold to purchase military supplies and to meet interest on the tobacco and liquor loan. Ho desires to maintain peace particularly in order that the coffee crop may be gathered and shipped—a crop worth $5,000,000 gold.

The existing financial system tends to reduce extravagance and dishonesty to the minimum, as the Fiscal Agent passes on all disbursements and publishes monthly a full account of them. In a separate telegram the Legation will venture to suggest for the Department’s consideration the outline of a plan based on this system.