File No. 852.51/62

Spanish-American Financial Agreement of August 29, 1918 1

Memorandum of an Agreement made this 29th day of August, 1918, at San Sebastian, Spain, by and between the United States of America by its Special Financial Delegate in Spain, Norman H. Davis, and the Banco Urquijo, having its principal office in Madrid, Spain, by its Managing Director, Luis de Urquijo, and the Banco de Barcelona, having its principal office in Barcelona, Spain, by its General Manager, Jose Maria Martinez Marques.

Witnesseth:

First. The Banco Urquijo and the Banco de Barcelona hereby jointly open a credit of seventy-five million (75,000,000) pesetas in favor of such bank or banks in the United States of America as may be hereafter designated by the Treasury Department of said United States, or by the Federal Reserve Bank of New York.

Second. Said credit of seventy-five million (75,000,000) pesetas shall be available to such designated bank or banks upon presentation of bills of exchange, drawn as follows:

  • Twenty-five million (25,000,000) pesetas, or any part thereof, on or after September 5, 1918;
  • Twenty-five million (25,000,000) pesetas, or any part thereof, on or after September 20, 1918; and
  • The balance, or any part thereof, on or after September 30, 1918.

Provided, however, that any part of said credit of 75,000,000 pesetas not originally availed of within three (3) months of the date of this agreement, shall be no longer available hereunder.

Third. The bills drawn under this credit shall be at ninety (90) days’ sight, one-half in amount of said bills to be drawn on each of said banks. Each bank shall accept all drafts drawn against it under this agreement, and shall receive for such acceptance a commission of one-eighth (⅛) of one (1) per cent of the face of each ninety (90) day bill.

Any original bill drawn under this agreement may be renewed at maturity one (1), two (2), or three (3) times by the delivery of new ninety (90) day bills. The respective bills shall be drawn in denominations of two hundred fifty thousand (250,000) pesetas, or fractions thereof.

Fourth. Each of said banks, when requested, shall discount, or procure the discount of, any bill drawn under this agreement at the rate of four and one-half (4½) per cent per annum.

Fifth. Each bill drawn under this agreement is to be secured by the deposit with a trustee in New York City, United States of America, of obligations of the United States, to the amount of the face of such bill. Said trustee shall be jointly acceptable to the Treasury Department of the United States and the Spanish Ambassador to the United States, or his duly accredited representative. Said obligations so deposited as security shall be duly authorized and legally issued, obligations of the United States Government, payable in pesetas, or, at the option of said Government, in gold coin or gold bars at the rate of twenty-nine decimal point naught three twenty-two (29.0322) grammes of fine gold per one hundred (100) pesetas, in not more than one (1) year from their date, and bearing interest at not less than four and one-half (4½) per cent per annum. Any obligations, so deposited, maturing before the bill or bills for which they are deposited as security may be withdrawn by the substitution of like obligations with later maturities approximately coinciding with the final maturities under this credit.

Sixth. The Banco Urquijo and the Bank of Barcelona agree respectively to pay one-half of any stamp or any other tax required under Spanish law on any bill drawn against them under this agreement.

Seventh. It is understood that the American banks to be designated as eligible to draw bills on the Spanish banks against the credits herein established are to be members of the Federal Reserve System.

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Eighth. On or before September 25, 1918, the Banco Urquijo and Banco de Barcelona, or bankers which the Spanish Government will designate, furthermore agree to form a banking syndicate or consortium of Spanish banks or bankers, which shall establish an additional credit up to the amount of one hundred seventy-five million (175,000,000) pesetas in favor of such bank or banks in the United States of America as may be hereafter designated by the Treasury Department of the United States or by the Federal Reserve Bank of New York. This credit for one hundred seventy-five million (175,000,000) pesetas, or any part thereof, shall be made available under the same conditions of interest commission, acceptance, discount, security, bills, renewals, and otherwise, as are provided herein for the credit of seventy-five million (75,000,000) pesetas. The bills under the larger credit may be presented for acceptance and discount at any time after October 1, 1918, and before June 1, 1919, but not in excess of fifty million (50,000,000) pesetas in any term of thirty (30) days.

The Banco Urquijo and Bank of Barcelona, or the Spanish Government, will on or before September 25, 1918, furnish through the Ambassador of the United States of America in Spain the names of the additional banks against which bills may be drawn under the one hundred seventy-five million (175,000,000) peseta credit, and the amount of bills which may be drawn against each respective one.

Ninth. The credits under this agreement are established with the authorization of the Government of His Catholic Majesty and in accordance with an agreement executed between said Government and the Government of the United States of America. It is contemplated that the bills drawn under the within agreement will be paid at the final maturities indicated with pesetas received in payment for cotton, petroleum, machinery, etc., exported from the United States of America, but it is understood and agreed that if for some unforeseen reason this is not done, the bills, or any part thereof, may be paid in gold which will be received by the Spanish banks on the basis of twenty-nine decimal point naught three twenty-two (29.0322) grammes of fine gold for one hundred (100) pesetas. If, however, the drawer of any such bills so elects to pay same in gold at final maturity and the Bank of Spain at such times refuses to receive gold at the parity basis as above stipulated, then the accepting bank of the corresponding bill reserves the right—instead of thus receiving gold in payment thereof—to renew the respective bill or bills, or any part thereof, at the option of the drawer, up to six (6) months (in two periods of 90 days each). Such renewals shall be accepted and discounted at the same cost to the drawer as the original bill and renewals thereof.

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Tenth. It is understood that there is no obligation on the part of the American banks to avail themselves of the above-mentioned credits or any part thereof.

In witness whereof the parties hereto have affixed their signatures by the hands of their representatives as above set forth:

The United States of America,
By its Special Financial Delegate,
Norman H. Davis

Banco Urquijo,
By its Managing Director,
L. de Urquijo

Banco de Barcelona,
By its General Manager,
J. MA Martinez Marques

(This agreement is executed in triplicate in
both the English and Spanish languages.)

  1. Received Sept. 20, as enclosure to despatch from the Ambassador in Spain, No. 1305, Sept. 1, 1918.