File No. 817.51/614.
[Inclosure.]
Statement to the press concerning Nicaraguan
finances.
The capital stock of the National Bank of Nicaragua has been raised
from $100,000 U. S. gold to $300,000 U. S. gold, all of which has
been paid in, in cash. Of this amount, 51% is owned by Brown
Brothers & Company and J. & W. Seligman & Co., New York;
49% is owned by the Republic of Nicaragua.
The Bank was organized for the twofold purpose of acting as Fiscal
Agent of the Government and of doing a strictly commercial business.
It operates in two Departments: The Issue Department, which has
charge of the issue of the new currency on behalf of the Government,
and the Banking Department, which is charged with the ordinary
commercial business of the Bank. The two Departments are entirely
distinct.
In connection with this matter, a short statement of what has been
accomplished through the Issue Department of the Bank since its
organization and of the present condition of the Issue Department
and the Reserve Fund will be of interest.
The Issue Department has, by purchase and in exchange for its córdoba
notes and silver córclobas, retired the bulk of the old national
currency consisting of paper pesos (billetes) until the amount
outstanding on November 15, 1913, had been reduced to a sum
estimated at about 9,500,000 pesos, having a total gold value of
about $760,000. On that date there were also outstanding $1,570,683
in córdoba notes of National Bank of Nicaragua and córdoba silver
coins. This issue of currency (bank notes, silver and billetes) of a
gold value of $2,330,000 is exchangeable for drafts on New York on
presentation at the counter of the Issue Department. The Issue
Department, on November 15th, held in its Reserve Fund the sum of
$932,693 U. S. gold (equal to 40% of the outstanding currency). Of
this, the sum of $829,100 was on
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deposits in, or in transit to, New York as
special deposit to meet any drafts of the Issue Department that may
be drawn for the purpose of redeeming Nicaragua currency. This
Reserve Fund can not be used by the Bank in its commercial business,
the balance, $103,590, consists of the bullion value of the silver
coins. It will thus be seen that there are ample reserves for
redemption of outstanding bank notes, silver and billetes. As
additional currency is from time to time required by the expanding
commerce of the country, that currency will be issued by the Bank
and simultaneously there will be added to the Reserve Fund, by
deposits in New York or London, an amount equal to the new currency
so issued as additional bank notes are thus from time to time put
out, the Reserve Fund will be correspondingly strengthened and will
bear a progressively higher relation to the total amount of currency
issued. The Reserve Fund will be further increased by interest and
commissions earned.
In order further to strengthen the Reserve Fund, provision has been
made that in the very unlikely contingency of the Fund at any time
declining to $100,000 U. S. Gold, there shall be added thereto 25%
of the Customs Revenue until the Fund amounts to $200,000 and this
reinforcement of the Fund will be repeated as often as the Fund
shall so decline in amount. Any such additions from Customs Revenues
are to be permanent additions to the Fund. The present arrangements
thus put the National currency of Nicaragua on an abundantly safe
permanent basis.
The value of the córdoba is equal to $1 U. S. Gold.
The value of the old peso is equal to 8c U. S. Gold.
National Bank of Nicaragua, Inc.
November 21, 1913.
