File No. 817.51/969b

The Secretary of State to Minister Jefferson


A plan for the adjustment of the financial difficulties of Nicaragua is being cabled you. Contemporaneously with presenting this plan to General Chamorro, you will communicate to him the following message from the Secretary of State:

The Government of the United States after earnest and patient efforts has induced the secured creditors of Nicaragua to accept a plan for the gradual liquidation of their indebtedness which will afford Nicaragua an opportunity to improve its financial and economic status, and which will leave it certain funds immediately available wherewith to effect a settlement with its other creditors.

A statement of this plan will be presented to General Chamorro contemporaneously herewith. General Chamorro will note that this plan is substantially that already discussed between him and Minister Jefferson, and that it is wholly consistent with the sovereignty and dignity of Nicaragua. Among the immediate and substantial concrete benefits which will result to Nicaragua from the adoption of this plan may be noted the following: (figures only approximated).

The 1909 bondholders have a lien upon the custom receipts of Nicaragua. The plan will relieve Nicaragua from the obligation to pay to these bondholders during the next three years the full annual interest amounting to 286,395 dollars, which, with a sinking fund of 60,000 dollars makes a total annual payment of 346,395 dollars. In lieu of such payments Nicaragua will pay during 1917 only 84,487 dollars; during 1918 only 110,835 dollars; and during 1919 only 136,323 dollars. This three years’ respite should enable Nicaragua so to revivify her financial and economic life that at the end of this period she will be able to meet in full her obligations to these 1909 bondholders.
The New York Bankers under existing agreements, are entitled to exact out of the Treaty moneys payment of the entire principal and interest owing on their Treasury Bills. Under the proposed plan these bankers will allow one-half of the principal of said bills, namely, 500,000 dollars to remain outstanding at the present rate of interest of 6 per centum per annum such balance to be paid only out of the 25 per cent excess income mentioned in the plan. Thus Nicaragua avoids the necessity of the immediate payment of 500,000 dollars, and is permitted to pay this amount gradually after her other necessities have been met.
Under the existing protocol between the United States and Nicaragua, Brown Brothers as part owners of the Emery claim are entitled to exact the immediate payment of over 600,000 dollars. The owners of this claim are willing to accept on account of the above sum less than 400,000 dollars in cash, the balance to be paid gradually by Nicaragua after the Treasury Bills have been completely retired with the understanding that the amount still due on the Emery claim will be secured by a second lien upon the security fixed by the Treasury Bills Agreement, and that the unpaid balance thereof will ultimately be retired through the application of the 25 per cent surplus of receipts.
After the pressing secured indebtedness of Nicaragua has been adjusted, as indicated above, the balance of the Canal funds as well as amounts now held in Nicaragua by the Collector General of Customs for the account of the 1909 bondholders will be free to be applied to the liquidation of National Bank indebtedness and the awards of the Mixed Claims Commission and to other claims as passed upon by the Public Debt Commission now in operation. The disposition, above mentioned, of the pressing claims of Nicaragua and the stabilization of collections and expenditures of revenue should permit of giving a real and market value to such internal bonds as may be issued for the purpose of funding the remaining obligations of the Government.

In general it may be said that the plan should assure the economic stability of Nicaragua, and should enable it hereafter to obtain credits for the development of its resources, and for the carrying out of public works.

The Government of the United States hopes and indeed expects that the plan above referred to will be heartily accepted by the Government of Nicaragua, and takes this occasion to felicitate General Chamorro upon the opportunity [Page 1130] which is presented to him to inaugurate and carry out a constructive program, the benefits of which to the people of Nicaragua will unquestionably become increasingly notable with the passage of time.