File No. 817.51/567.
[Inclosure.]
Proposition in regard to Nicaraguan financing as
contained in memorandum handed to Sr. Cuadra August 9, 1913, and
sent to the Secretary of State August 13, 1913; amended by
letter to the Secretary of State August 26, 1913, telegram to
the Secretary of State of August 28, 1913, and at the interview
with Mr. Douglas on September 3, 1913.
Amount of Loan.—To be $2,000,000, to be
represented by Treasury Bills; or, if option on 51% railroad is now
exercised, $1,000,000.
Interest.—Interest to be at 6% per annum,
payable either monthly or through discounting bills at time of
issue. In latter event amount of loan may be increased by an amount
equal to the interest.
Term of Loan.—Loan to be for one year,
with option to Republic to liquidate same after three months at
premium of 1%.
Security.—The security to be as follows:
- (a)
- All shares of the railroad; or, if option of 51 per cent
is exercised, then remaining 49 per cent of railroad
stock.
- (b)
- All shares of National Bank of Nicaragua, Incorporated,
including those to be issued upon increase of capital out of
proceeds of loan as stated below.
- (c)
- Customs duties, subject to requirements of 1909 bonds.
Until the maturity of the new loan, however, such customs
duties in excess of requirements of 1909 loan, expenses,
etc., are to be paid over to the Government, subject,
however, to the provision made below for additions to the
Conversion Fund. Administration of customs to continue as at
present, subject to any changes in form which will not
affect in any way the complete control of the Collector
General.
Application of Loan.—The $2,000,000
proceeds of loan, or proceeds of exercise of option and of loan, to
be applied as follows:
| Liquidation of pending accounts of Bankers, expenses,
etc |
$711,000 |
| Conversion fund |
250,000 |
| Additional bank capital $200,000, or (at option of
Government) |
250,000 |
[Page 1053]
The balance, after paying expenses in connection with negotiations,
etc., to go to the Government by deposit thereof in the National
Bank; to be disbursed by means of checks on the Bank in the manner
observed at present according to the decree of October 31, 1912.
Railroad Options.—(a) Option on 51 per cent of railroad stock either to
continue for one year, and further, if loan is not paid at maturity,
until repayment of loan; or, if Government prefers, option to be
exercised at once.
(b) Preferential right to purchase remaining
49 per cent of railroad stock to continue as in Supplemental Loan
Agreement.
(c) If 49 per cent of railroad stock is at any
time sold for more than $1,000,000, the difference between
$1,000,000 and the purchase price to be divided equally between the
Government and the Bankers or in such other proportion as the
Secretary of State may determine.
(d) Bankers not to be under obligation to loan
$500,000 to railroad against mortgage bonds for improvements.
(e) If 51% option is not exercised at once but
is continued as above stated, monthly dividends not exceeding per
cent to be paid to Government on railroad capital if such amount is
earned after all expenses of operation, administration, repairs,
etc.; balance of earnings to remain in corporate treasury or applied
to improvements.
Conversion Fund.—Provision to be made
that, in the event of Conversion Fund being reduced to $100,000, 25
per cent of the customs duties will be applied monthly to this fund
until it is again brought up to $200,000; this operation to be
repeated as often as Conversion Fund is reduced to $100,000.
Conversion Fund to be administered by the Bank and deposited in a
special account in New York apart from the general funds of the
Bank.
Memorandum of subjects pending and necessary to
arrange: Controversy over wharf; oil tank; ship “Nicarao”;
right of way of Momotombo.
