The Chargé in Salvador ( Arnold ) to the Secretary of State

No. 51

Sir: Referring to my telegram of May 18, 9 am., No. 24, regarding the negotiating of a loan through Bloom Brothers, New York, I have the honor to report that President Melendez informed me that it was necessary that a loan be made and after full consideration the Government has come to the conclusion that it is not affecting the country’s autonomy by the appointment of a foreign controller of customs. The proposed amount of the loan will be for ten millions of dollars but if that amount is not obtainable then a loan will be made for the sum that can be secured even if it be for but five million dollars.

The object of such a large loan is that the finances of the country may be reorganized—all present indebtedness to be paid off and be converted into this one governmental debt.

The President said that after meeting all indebtedness about one million and a half dollars would remain, which would be utilized for the immediate governmental necessities as some of the governmental officials have not been paid for six months.

He also stated that [by] the appointment of an expert customs controller he expected greater returns as it would minimize the possibilities [Page 844] of dishonesty which is so difficult to prevent under the existing system, also that scientific and efficient modern methods would be introduced.

The proposed loan will be guaranteed by a percentage of the customhouse receipts and the balance of revenues will be used for governmental expenses.

The President further said that he realized that a loan upon these conditions could be obtained from other countries but that he desired to place it in the United States.

He is engaged at present drawing up a decree towards the culmination [sic] of the negotiations, the terms of which he has telegraphed to Bloom Brothers, New York, and is awaiting their favorable reply.

The President also said that he was working for the establishment of a strong bank in the Republic through the same agents and looked forward to its establishment after the culmination of the loan.

I have [etc.]

Frank D. Arnold