File No. 817.51/923

Minister Jefferson to the Secretary of State


With reference to appointment of Financial Adviser. I again fully discussed the question with President Chamorro. He informed me that he had given the matter mature consideration and that it would not be politic nor possible for him to make the appointment. He stated that all he wished was to be permitted to supervise his own internal expenditures and that he would promise to live within his budget and that he should like to see matters go on as before in the hands of the Collector General of Customs and the bankers secured in their investment; but in case the Department should not care to eliminate the appointment of Financial Adviser he would be willing for the secretary to pay the bankers and Ethelburga and apply the balance of the Canal money as he deemed best.

With reference to the objection raised by President Chamorro, in order that a solution of the difficulty may be reached if it entirely meets with approval of the Department, I would suggest that some such clause as the following be inserted in all the contracts:

If in case a budget deficit is incurred thus seriously threatening the economic life of the Government and impairing its credit with bondholders or other creditors the internal revenues shall be administered by the Fiscal Agent who shall pay from available customs revenues and from the excise revenues amounts not to exceed 125,000 dollars per month and all surplus excise revenues over this amount shall be retained by the Fiscal Agent for the purpose of paying the budget deficit and after that for the purposes of bond redemption in addition to other revenues pledged under these contracts.

Have not discussed above clause with President Chamorro as I am awaiting decision of Department.