File No. 882.51/783
The Secretary of State to the Secretary of the Treasury ( McAdoo)
Sir: I have the honor to enclose a copy of a communication from the Consul General of Liberia at Baltimore,1 in which an appeal is made on behalf of the Liberian Government for a loan of at least $5,000,000 from the United States, to enable that Government to refund the loan of 1912, to develop the interior resources of the country under American supervision, and to give practical aid and assistance in the war.
For the satisfaction of the loan, Liberia offers “among other things,” material assistance to the nations at war with Germany by furnishing labor, a base for the operation of the Allied fleets along the west coast of Africa, food and communication facilities, and internal revenue and customs levies.
With respect to the loan of 1912, the refunding of the amount of which is stated to be one of the objects for which the applied-for loan is desired, I beg to explain what probably is already known to you that this loan was made in pursuance of an agreement between the Republic of Liberia of the first part, and J. P. Morgan & Co., Kuhn Loeb & Co., the National City Bank of New York, and the First National Bank of New York City, of the second part, for the purpose of adjusting all of Liberia’s then existing internal and external indebtedness, and that the loan is chargeable as a first lien on all customs revenues of Liberia receivable on and after May 1, 1912, whether in respect of imports or exports; on the revenues receivable on or after said date from the tax on rubber; and is a lien subject only to an existing charge thereon in favor of the firm of A. Woermann on the revenues receivable on and after said date from head monies; and was secured as a first charge on all such [Page 525] customs duties and rubber revenues of the Republic, and subject only as aforesaid on such head monies of the Republic.
Liberia agreed to create “the 5 per cent sinking fund gold bonds of the Republic” to an aggregate principal amount not exceeding in any event $1,700,000 in gold coin of the United States. These bonds mature in 40 years from their issue and bear interest at the rate of 5 per cent per annum, payable semiannually.
For the purpose of securing the 5 per cent bonds, the control of the administration and collection of all customs of the Republic and of the said rubber tax and head monies was, during the life of the loan, placed in the control of a customs receivership to be administered by a general receiver to be designated by the President of the United States, and three receivers to be designated by the Governments of Germany, France, and Great Britain; and it was covenanted that the assigned revenues in each year shall be applied:
- (1)
- First, to the payments, as they arise, of the costs and expenses of the collection, administration, and application by the Customs Receivership, of the assigned revenues, including the cost of exchange in making remittances thereof for the service of the loan;
- (2)
- Thereafter to the payment by the Customs Receivership to the fiscal agents of the loan monthly, on the first day of each month during the life of the loan, of an amount equal to twenty per cent of the gross receipts from the assigned revenues during the preceding month, but never less than eight thousand six hundred dollars United States gold; such amounts to be applied by the fiscal agents to the expenses of the service of the loan, including the cost of exchange in making remittance to Europe for payment of interest or other purposes, to the payment of the interest on the five per cent bonds as such interest matures, and thereafter to the creation of a sinking fund in pursuance of Article Fifth;
- (3)
- Thereafter to the payment, by the Customs Receivership, of any other amounts which the Republic has agreed to pay, or may hereafter become liable to pay, under this agreement, or to the fiscal agents of the loan;
- (4)
- Thereafter to the payment, by the Customs Receivership of any other amounts which, in pursuance of legislation or agreement, may be made, or may become, payable by the Customs Receivership out of the assigned revenues otherwise payable to the Republic;
- (5)
- Thereafter to the payment, by the Customs Receivership, of any residue to the Republic.
- If the assigned revenues shall be insufficient in any month to meet the payments called for by the foregoing clauses (1), (2), and (3), any deficit shall be made up out of the assigned revenues of the succeeding months otherwise payable pursuant to the foregoing clauses (4) and (5).
Principally from the natural decline of her trade caused by the war, but also because of trade restrictions by the British Government and the deportation of Germans and the consequent closing of their business houses and factories, the revenues of Liberia have greatly decreased, her customs revenues alone dwindling from $485,576 in 1913, to $163,634 in 1917, so that she is not only in arrears on account of interest, sinking funds, and charges under the loan agreement of 1912, but she has been for some time past unable to meet in full the running expenses of the Government. It was mainly by favor of an agreement with the Bank of British West Africa that the Republic was able to continue in operation in 1917. Under this agreement which went into effect February 21, 1917, no further advances are to be made by the bank when Liberia’s indebtedness to the bank reaches $100,000, a limit which it is expected will be reached by July 1 next.
[Page 526]The financial situation of the Republic is critical, and it would appear that there are but three sources from which assistance to face the crisis could be obtained: (1) the Bank of British West Africa, (2) an agency representing the Governments of France, Great Britain, and the United States; or (3) the Government of the United States. This Department, not only because of this Government’s historic interest in Liberia, but for political and commercial reasons as well, is of the opinion that a larger share of foreign control of the finances of Liberia would be undesirable, and that the Government of the United States should alone assume responsibility for the conduct of the affairs of the Republic.
I therefore beg to commend the application of the Liberian Government to your serious consideration, feeling confident that you will be disposed to grant the assistance desired by Liberia if the making of the loan comes within the powers vested in you by law and no obstacle opposes.
I have [etc.]