816.51/84: Telegram

The Secretary of State to the Minister in Salvador ( Schuyler )

25. Your telegram No. 37, August 13, 3 [8] p.m.

Messrs. Keilhauer and Keith have succeeded in interesting certain American bankers in the loan proposition, but before accepting the option contract definitely the Department is informed preliminary [Page 847] negotiations with the English bondholders would be necessary which the bankers are unable to undertake without an extension of the option contract for 2 to 3 months. Mr. Keith states that with such an extension granted he has ample assurances from the bankers that they will negotiate for at least 5 million bonds in addition to bonds to cover English debt. The bankers do not, however, wish to interfere with the efforts of the Salvadorean Government to obtain ready cash at once by means of the acceptance by Salvador of a small temporary loan from any other source, provided the Government retains the right under any such temporary loan to repay it at any time after it is negotiated. In view of the Department’s interest in seeing Americans secure the larger loan, you will endeavor to see the President again informally and seek to obtain the extension of 2 months desired. There are, of course, obvious advantages for Salvador in holding open the possibility of obtaining a substantial loan which would enable the Salvadorean Government to radically improve economic and financial conditions. It is also obviously to Salvador’s advantage in case of a temporary loan to guard against repayment at a figure making cost to Salvador excessive.