816.51/84: Telegram

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

33. Department has suggested to Keilhauer that option contract for loan be modified to provide for single Customs Collector appointed by President of Salvador from list submitted by bankers and approved by Secretary of State, and that Department be given right to request replacement of Collector for inefficiency or conduct contrary to American or other interests.

Department advised that on these conditions matter was laid before several banking houses which were not interested in making loan at all or desired to make it only in connection with some understanding between United States and Salvador Governments, which would make the bonds attractive to American public. As solution an exchange of notes has been proposed by interested parties and National City Company is reported inclined to make loan if Salvador will agree to note to this Government assuring it that provisions regarding Customs Collector will be observed so long as bonds outstanding; that the Government of Salvador will in carrying out the terms of this contract cooperate in every respect with the Bankers and the Government of the United States, that Collector of Customs will be appointed in manner stated above and removed at request of United States; and that Chief Justice of the United States shall have final decision in case of any disagreement regarding the interpretation or fulfillment of the contract.

It is proposed that this Government acknowledge these assurances in appropriate reply stating readiness to carry out the stipulations with reference to the Secretary of State as set forth above. The Department is inclined to accept exchange of notes proposed as only means of interesting American bankers in proposed loan. The foregoing is for your confidential information only and you will take no initiative in discussing with the Salvadorean Government an exchange of notes as Keilhauer says that he himself can induce Salvador to agree to it. However, should you be approached by the Salvadorean Government with an inquiry regarding our attitude towards an exchange of notes you may indicate orally this Government’s friendly interest in any transaction which will make possible an improvement in financial conditions in Salvador and an increase in the trade between the two countries. You may also lend your good offices in obtaining a revision of the option contract to include the amendments suggested by this Government and described above.