File No. 817.812/209

The British Ambassador to the Secretary of State

My dear Mr. Secretary: In my note No. 393 of the 28th October last12 I referred to the contracts entered into between the Nicaraguan Government and certain American banks in regard to the disposal of a portion of the three million dollars to be received by Nicaragua from the United States under the Treaty of August 5, 1914, when ratified.

I am now informed that the Nicaraguan Official Gazette of the 24th March last contained the text of two new contracts between the same parties, prolonging the moratorium in the debt which was provided for in the earlier contracts adding to the sum total the interests which had meanwhile accrued. It appears, however, that in the new contracts the clause charging the United States Government to pay over the amount of the debts out of the three million dollars now contains the words “with preference over each and every other claim against the Republic”.

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This stipulation has been interpreted to imply that the payment of the sums claimed by the American bankers in virtue of the contracts in question will be given precedence over the payment of all other claims against the Nicaraguan Government. In my note of the 28th October reference is made to the various claims on the part of His Majesty’s Government against the Nicaraguan Government, and to the guaranties given that these claims would be met out of the first money receivable by Nicaragua. I presume that the execution of the contract between the American bankers and the Nicaraguan Government will not be carried out in such a way as to prejudice the settlement of the claims of the creditors of other than American nationality, but in view of the wording of the new contracts I should be grateful for any indication which you might be able to give me on this point.

I am [etc.]

Cecil Spring Rice