File No. 817.51/524.

The American Minister to the Secretary of State.


My February 2. It is proposed that Brown Brothers immediately exercise their option by purchasing the entire railroad for $2,000,000 and also advance a loan of $2,500,000, for 10 years at 6%, guaranteed by the customs revenue; proceeds to be disbursed as at present (under supervision of the National Bank); the Bank to investigate all “gold debts,” and the Mixed Commission to pass on all claims; debts and claims less than 3,000 pesos (Nicaragua currency) to be paid in cash, and larger items half cash and half in “income bonds” (6%, no fixed date of maturity); interest, and sinking-fund charges on Ethelburga settlement and on the new loan, would amount to about $70,000 per month—about half the customs receipts—leaving Nicaragua an equal sum for current expenses; internal revenue to be collected and applied as at present by the National Bank, which might also be made Collector General of Customs for the sake of economy and efficiency.

The most important advantage of this plan is that it would immediately establish the security and authority of the Mixed Commission and win the confidence of the people by payment of the thousands of small awards now ready for publication. The strengthening of the Foreign Claims Tribunal would relieve the [Page 1037] Government of the undue pressure now being brought against it, especially by Germany, Great Britain and Italy, apparently working in concert.

President Díaz and his Financial Adviser approve the proposed new loan.