815.51/566: Telegram

The Chargé in Honduras ( Dennis ) to the Secretary of State

36. Referring to the Department’s telegram of February 4, 2 p.m.33 British consul is pressing the President to sign the Lyall agreement and to submit it to Congress at once.34 A counterproject proposed by the Honduranean Government has been summarily rejected as unacceptable by the British representative. The President wishes to defer action until the question of the British debts can be considered at Washington in conjunction with the raising of a large loan. In response to urgent verbal solicitations of advice I have informed the President that in the absence of instructions I was unauthorized to recommend any course of action; however, that it was my personal and confidential opinion that were the Honduranean Government to decide to defer action upon the agreement pending the arrival at Washington of the representative of Honduras, Señor Lopez, who was being sent in a few days to negotiate a loan, this decision would not be ignored or displeasing to the Department.

The President would like to have an expression of opinion from the Department as he is somewhat impressed by the insistence of the British representative. I explained to the President that the Department might not feel disposed to make a statement which might be taken as a direction to the Honduranean Government in respect of an issue between the latter and the British bondholders but that I would undertake to obtain an intimation from the Department for the guidance of the President and of the Legation.

I have received today a note from the British representative asking me to inquire of the Department whether it would be prepared to convey to the Honduranean Government an intimation with regard [Page 339] to the agreement similar to that contained in earlier instructions to the Legation.35

I made it clear to the British consul as well as to the President that my Government would view with satisfaction the settlement of the British debt and that I believed settlement of the question would be a condition of the Department’s approval of any large American loan of [to] Honduras. However I told him I could not urge the acceptance of the agreement without further instructions from my Government which I felt possibly might not care to influence the Honduranean Government to any action with regard to the British debt, that in view of the projected loan negotiations might be against the best judgment of [my?] Government.

The Minister for Foreign Affairs informed me last night that Señor Lopez’s credentials would be submitted to the Legation in a few days for verification prior to his departure for the United States.

Dennis
  1. Not printed.
  2. The Lyall agreement was an ad referendum arrangement made in 1923 between the representatives of the Government of Honduras and the Corporation of Foreign Bondholders of London—George Lyall, the British Chargé, acting as the representative of the corporation. The arrangement, which was not ratified by Honduras, provided for the settlement of the external debt of Honduras by the payment of £1,200,000 in 30 semi-annual installments. See Fiftieth Annual Report of the Council of the Corporation of Foreign Bondholders, London, for the Year 1923 (London, Council House), pp. 211 ff.
  3. On Apr. 30, 1923, Secretary Hughes instructed the American Minister in Honduras as follows: “The Department believes a suitable settlement of the British debt would be to the advantage of Honduras and you may inform the Government of Honduras very informally to this effect, should an appropriate occasion arise.” (File No. 815.51/506.)