Papers Relating to the Foreign Relations of the United States, With the Address of the President to Congress December 4, 1917

File No. 817.51/973

Minister Jefferson to the Secretary of State

[Telegrams]

American Legation,
Managua, July 4, 1917, 9 a.m.

Department’s June 21, 5 p.m. The Nicaraguan Government accepts the plan of the Department with the following recommendations:

1. Elimination of clause with reference to the National Congress.

2. With reference to the Emery claim, that Brown Brothers agree not to collect interest and that the Government of Nicaragua will pay on account 300,000 dollars. The balance, or 250,000 dollars, they will commence to pay as per plan, that is, when the Treasury bills have been paid.

3. The secured debt, that is, the 1909 bonds and the Treasury bills, will be paid as per plan. With reference to the other debts, for example, loan from National Bank, interior loans, mixed claims, and all the other credits forming the internal debt will be liquidated or paid according to awards of the Commission Public Credit now in operation.

4. Of the three items which the plan details for the administrative budget to increase the item of 75,000 dollars shall be increased to 80,000 dollars so that the monthly total for expenses of the budget will be $121,666.66.

5. In case the internal revenues fall below 65,000 dollars per month for three consecutive months the Government will make a new contract with the 1909 bondholders and the bankers for the purpose of increasing or bettering these revenues.

6. Beginning with and including the current year the proceeds from the direct [tax?] on capital are to be applied to the debt service for the proposed internal bonds as well as a twelve and a half per cent surcharge on the import duties.

My observations and recommendations concerning amendments offered:

1. “The Congress shall not authorize expenditures beyond those contemplated therein.” In lieu of “The Congress shall” insert “The Government of Nicaragua agrees that it will, etc.” This will obviate objections raised by the Congress and Cabinet regarding violation of constitutional powers of the Congress.

2. Regarding Emery claim the Credit Commission is endeavoring to disallow interest wherever possible. Many creditors voluntarily have agreed to waive interest. For above reason Chamorro informed me that he had submitted this plan which he believes would be acceptable to the bankers.

3. Regarding the proposal for the equal payment of claims the National Bank debt need not be included in this arrangement if the bankers object.

4. The increase of 5,000 dollars I believe should be allowed. The slaughter tax has been doubled and will therefore increase the results sufficiently to cover that amount.

5. In order to prevent delay and possibly future controversies I would suggest that the amount be made 60,000 dollars instead of 65,000 dollars provided that the Department’s plan in this particular is accepted.

6. I do not consider this point objectionable.

If above suggestions meet the Department’s approval I believe this matter can be promptly settled.

Jefferson