File No. 817.51/1006
In commenting further upon the question of the tax on capital, taxes for
local school purposes and the forestry tax, these items were purposely
left out of the law by Chamorro and the Congress. Of the $500,000 now in
circulation under agreement and in accordance with the capital tax law
enacted in 1915, up to June 30 last the amount collected and retired by
the Bank is $236,000. No provision is made in the law for the specific
application of this tax after the agreement with the Bank is fulfilled.
However, it may be that the Nicaraguan Government will request the Bank
to continue to leave part or all of the $500,000 in circulation, since
apparently there is a shortage of circulation of the córdoba. The
additional emission of that amount did not affect the exchange.
With further reference to the school and forestry taxes which will
probably amount to $70,000 per annum, these will be collected by the
Nicaraguan Government, but Chamorro informed me that the local school
board will expend the school tax. This of course then will not be
included in the budget. The Central Government will expend the forestry
tax for agricultural school purposes. I notice only $10,000 is provided
for in the budget for the Agricultural School. Of course this means that
in the future the Government will, in addition to the amount allowed by
the budget, expend the taxes to be received from these two sources.
I hope that some agreement may have been reached and a formal contract
signed between the interested parties before this despatch reaches the
Department. Conditions here have somewhat improved and I believe that
they will be better after the financial question is settled.
[Inclosure—Translation]
[Untitled]
Managua,
September 1, 1917.
The President of the Republic, to his people, Know: That the Congress
has enacted the following: Decree No. 3.
The Senate and Chamber of Deputies of the Republic of Nicaragua,
Decree:
Article 1. The Executive Power is authorized to celebrate the
contracts which may be necessary with the Foreign Bondholders of
1909, with the bankers Brown Brothers & Co. and J. W. Seligman
& Co., with regard to the Treasury bills
[Page 1139]
Agreement, with the same bankers
with respect to the amortization of the Emery claim, and with the
National Bank of Nicaragua for its credits against the State, all in
conformity with the following bases:
The National Bank of Nicaragua shall be the depository of all
Government revenues, in accordance with its concession. The
Nicaraguan Government will administer and collect all internal
revenues, such as of liquors, tobacco, slaughter tax, stamped paper,
stamps, powder, lead, cartridges, post offices, telegraphs,
telephones and all those in force in accordance with the catalogue
of fiscal accounts, and agrees to enact appropriate laws before
January 1, 1918, to improve and better this
service. The proceeds of these internal revenues shall be deposited
with the National Bank of Nicaragua each month, and shall be placed
to the credit of the Government to be disposed of as hereinafter
stipulated, it being understood that the internal revenues above
mentioned shall not be less than 60,000 dollars per month, and that
if during a period of three consecutive months they amount to less
than 180,000 dollars, except in case of unforeseen circumstances and
force majeure, the collection of such
revenues will be made by the Collector General of Customs, unless
the 1909 bondholders and the holders of Treasury bills agree to
accept some other method for increasing or bettering these revenues.
It is understood that the three months referred to shall begin to be
counted from that one in which the internal revenues do not produce
the 60,000 dollars, before stipulated.
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, Brown Brothers & Co. for the unpaid balance of
the Emery claim, and with any other creditor having a lien upon the
customs, also the bankers’ outlays for account of Nicaragua for
cable charges, legal fees, etc., etc., duly approved by the
Government. When the Exchange fund is reopened and that fund falls
below 100,000 dollars, there shall also be taken the amounts which
may be necessary for the maintenance of said fund in conformity with
the Agreement of October 8, 1913 celebrated between the Republic and
the Bank. Out of the balance of the total revenues from all sources
the Government may dispose of 15,000 dollars monthly for
extraordinary or unforeseen expenses and of 80,000 dollars for
ordinary budget expenses. If the Government should require a sum in
excess of said total of 95,000 dollars, it may draw monthly up to
the sum of 26,666 dollars and 66 cents ($26,666.66), provided that
all amounts drawn in excess of the first 95,000 dollars shall be
approved by a committee of the members of the Nicaraguan Section 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 Nicaraguan citizen, 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
Government of the United States of North America. 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 the 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
obligation of the Republic, or which in any other manner are
obligations to be paid out of her receipts. There shall be available
for the budget the amounts already mentioned. Any revenues in excess
of 1,460,000 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 any other creditor
having a lien upon the customs, as hereinbefore stated, and to the
National Bank for the replenishment of the Exchange fund, as
aforesaid, shall be disposed of as follows: 25% (twenty-five per
cent) of such excess for the redemption of certificates to be issued
for arrears of interest in the 1909 bonds; another 25% (twenty-five
per cent) for the redemption of outstanding Treasury bills, and when
these have been retired, for the liquidation of the amount which is
due Brown Brothers & Co. on the Emery claim; and the remaining
50% (fifty per cent) shall be disposed of for the service of the
Internal Bonds, and for 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
[Page 1140]
Finance. The budget
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 Government of Nicaragua agrees that it will 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 duly 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. Within five days
after the end of each month the Treasurer General, the Director
General de Rentas, all the “Jefes de Depósitos de Especies Fiscales”
or other receiving officers must send a monthly report by telegraph
or mail, or both, of all receipts and expenditures to the Minister
of Finance. The form of this report shall be prescribed by the
Minister of Finance.
The Collector General will continue to collect the customs revenues,
in accordance with existing contracts. The revenues will be disposed
of monthly in the following form and order:
- (a)
- Expenses of administration and collection of
customs.
- (b)
- Amounts payable out of the customs to the 1909
bondholders, in accordance with the agreement which 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, etc., etc., duly
justified.
- (d)
- When the Exchange fund, 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 & Co.
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. With
reference to the other debts, for example interior loans,
mixed claims, and all the other credits forming the internal
debt, they will be liquidated and paid according to awards
of the Commission on Public Credit now in operation. The
administration and collection of the customs revenues will
continue in the form already established by the Treasury
Bills Agreement of September, 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 the credits and the punctual payment of
interest.
At any time the Republic may pay or provide for the payment of 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 it may redeem the customs, as well as 49% (forty-nine 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, such controversy, question, dispute or difficulty shall
be immediately referred to the Secretary of State of the United
States for decision and award, and this shall be and is hereby
accepted by the parties, as conclusive and final, and shall be
recognized at once with the terms of said decision.
In case that an agreement cannot be reached, in conformity with that
provided for in clause (f) of the preceding paragraph, between the
Government and the bankers with respect to the Emery debt, it is
expressly agreed that it will be submitted to the judgment of the
Commission on Public Credit, to be paid according to the decision of
said Commission. In case that the collection of internal revenues
should pass to the hands of the Collector General of Customs, this
employee of the Republic must furnish bond, if agreeable to the
Government, to the additional amount of 20,000 dollars, in favor of
the Republic.
[Page 1141]
The bond must be subject to the satisfaction of the Republic, said
Collector being subject to the fiscal laws of the Republic, in every
case, in all his duties, responsibilities, rights and
obligations.
Article 2. The present law shall become effective from its
publication in La Gaceta.
Done in the Hall of Sessions of the Chamber of Deputies. Managua,
August 14, 1917. Salvador Chamorro, D. P. J. Bárcenas Meneses, D. S.
Fernando Ig. Martínez, D. S.
To the Executive Power. Chamber of the Senate. Managua, August 29,
1917. H. Jarquín, S. V. P. Sebastián Uriza, S. S. Juan J. Ruiz, S.
S.
Therefore, be it executed. Casa Presidential. Managua, August 31,
1917 Emiliano Chamorro. The Minister of Finance and Public Credit,
Octaviano César.
