File No. 817.51/969a

The Secretary of State to Minister Jefferson

[Telegram—Extract]

The Department has fully considered and discussed at length with the interested parties, the plan for adjusting the indebtedness of the Government of Nicaragua which plan is set out in your telegram to the Department of May 25, 10 a.m. This plan has finally been accepted, provided it is modified to read as follows:

The despositary of all Government funds shall be the National Bank of Nicaragua in accordance with its concession.

The Nicaraguan Government will administer and collect all internal revenues, such as liquors, tobacco, telegraph, telephone, post-office stamps, stamped paper., ammunition, powder, el cetera, and agrees, by the enactment of appropriate laws not later than January 1, 1918, to further improve this service. The proceeds of these internal revenues shall be deposited with the National Bank of Nicaragua each month and shall be credited to it to be disposed of as hereinafter stated, it being understood that the internal revenues above mentioned shall not be less than 65,000 dollars per month and that if during any three months’ period they should aggregate less than 195,000 dollars the collection of such revenues will thereafter be made by the Collector General of Customs.

There shall first be paid from the customs revenues such amounts as may be agreed upon with the Council of Foreign Bondholders for the 1909 bonds, with the New York bankers for the unpaid balance of Treasury Bills, with Brown Brothers Company for the unpaid balance of their Emery claim and with any other creditors having a lien upon the customs; also the bankers’ outlays for account of Nicaragua for cable charges, legal fees, et cetera, and when the exchange fund shall have been reopened, such amounts as may be required under the October 8, 1913 agreement between the Republic and the Bank for the replenishment of said fund when it shall fall below 100,000 dollars. Out of the balance of the total revenues from all sources, the Government may dispose monthly for extraordinary expenses, of 15,000 dollars, and for ordinary budget expenses, of an additional 75,000 dollars. If the Government should during any month require a sum in excess of said total of 90,000 dollars, it may draw further sums up to $26,666.66, provided, however, all amounts drawn in excess of the first 90,000 dollars shall be approved by a committee of the members of the Nicaraguan Section of the International High Commission, and of the Permanent Nicaraguan Group of the International High Commission established during the Pan American Financial Conference in Washington in 1916. This committee shall consist of two persons, namely a member of the Nicaraguan Section of the International High Commission appointed by the Government of Nicaragua, and a member of the Permanent Nicaraguan Group of the Commission appointed by the United States, the first appointee to be Mr. Lindberg. There shall also be appointed from the same group, by the Secretary of State of the United States, a third person to act as umpire in case of disagreement between the two members above mentioned.

The Minister of Finance shall, before the opening of each regular session of Congress of Nicaragua, prepare a detailed statement of the probable receipts of the Republic for the ensuing fiscal year from every source, and of the amounts required during that fiscal year for the service of any outstanding Government loan and for all other amounts which are payable under the laws now in force or by engagements entered into by the Republic, or otherwise in any manner against her receipts. There shall be available for the budget the amounts already mentioned. Any revenues in excess of 1,400,000 dollars per annum, plus the amounts payable to the Council of Foreign Bondholders, to the New York bankers, to Brown Brothers on account of the Emery claim, and to other creditors having a lien upon the customs as hereinbefore stated, and to the National Bank for the replenishment of the exchange fund if required, as aforesaid, shall be disposed of as follows: 25 per cent of such excess for the redemption of certificates to be issued for arrears of interest in the 1909 bonds; another 25 per cent for the redemption of outstanding Treasury Bills, and after all Treasury Bills [Page 1128]have been retired to the liquidation of the amount due Brown Brothers and Company on the Emery claim; and the remaining 50 per cent shall be disposed of for the service of the internal bonds and such public works as may be found necessary after this bond service has been adequately taken care of, or for unforeseen expenses made necessary through acts of God, or disturbance of the public peace.

Upon approval by the Minister of Finance, the budget statement, to be prepared as aforesaid, shall be submitted to the National Congress, through the President of the Republic, at the beginning of that body’s session, and it shall constitute the official estimate of receipts and fixed charges of the Republic for such fiscal year. The Congress shall not authorize expenditures beyond those contemplated herein. The Minister of Finance shall, within ten days following the adjournment of the Congress, prepare a statement of all the regular and special appropriations which shall have been authorized and shall file the same with the National Bank of Nicaragua.

Under penalty of law every “Jefe de Depósito” or other receiving officer of the Government of Nicaragua is absolutely prohibited from disbursing the funds in his possession for any purpose whatsoever unless by check signed by the Minister of Finance.

A monthly report by telegraph or mail, or both, shall be made, within five days after the end of each month, of all receipts and expenditures, to the Minister of Finance by the Treasurer General, by each “Jefe de Depósito de Especies Fiscales” or other receiving officers or by the “Dirección General de Rentas.” The form of this shall be prescribed by the Minister of Finance.

The Collector General will continue to collect the customs revenues in accordance with existing contracts. The following monthly disposition will be made of the same, in the order given:

(a)
Expenses of administration and collection of customs.
(b)
Amounts payable out of customs to the 1909 bondholders in accordance with such agreement as may be made with the Council of Foreign Bondholders;
(c)
Past and future outlays of the bankers for account of Nicaragua for cable charges, legal fees, et cetera.
(d)
When the exchange fund (now closed under Article 5, Section 6 of the agreement between the Republic and the National Bank, dated December 2, 1914) shall have been reopened, such amounts as may be required for the protection of the exchange fund under the existing provisions of the agreement between the Republic and the National Bank dated October 8, 1913.
(e)
Amounts payable out of customs to the holders of the Treasury Bills in accordance with such contracts as may be made with them;
(f)
Amounts payable out of customs to Brown Brothers and Company on account of the Emery claim in accordance with such agreements as may be made with them.
(g)
The balance shall be disposed of as part of the budget in accordance with the provisions hereinbefore contained.

The administration and collection of the customs revenues will continue in the form already established by the Treasury Bills Agreement of September 1, 1911, and the agreement with the Council of Foreign Bondholders of May 5, 1912, until the payment, redemption or cancellation of the obligations with the bankers, with the holders of the 1909 bonds, with the owners of the Emery claim, and with the holders of the consolidated internal bonds which it is proposed to issue; and also for the better guaranty of the obligations for the payment of these credits and the punctual payment of interest.

At any time the Republic may pay part or all of its obligations such as are set forth in the preceding paragraph and in case of such complete cancellation of these credits may redeem the customs as well as 49 per cent of the shares of the railroad and the bank, now pledged as a guaranty for the Treasury Bills Agreement.

It is agreed that in case of any controversy, question, dispute or difficulty whatsoever arising regarding the interpretation or performance of this agreement any such controversy, question, dispute or difficulty, shall by either or all of the parties hereto be immediately referred to the Secretary of State of the United States for decision and award, and after such reference this shall be and is hereby accepted by such parties as conclusive and final, and shall be recognized at once, with the terms and specifications thereof.

Lansing