882.6176 F 51/43
The Liberian Secretary of State (Barclay) to the American Minister (Hood)37
Mr. Minister: In acknowledging receipt of your despatch of May 25, 1925, conveying the text of a cablegram from Mr. Secretary Kellogg38 with reference to the Firestone proposals, I have the honour to say that the Liberian Government appreciating the goodwill and sympathetic interest so continuously manifested in the affairs of the Republic by the Government of the United States accept with satisfaction the assurances given in said telegram, and will be disposed to enter into agreements with Mr. Firestone on the understanding, so far as these agreements suggest the flotation of a loan for development purposes in Liberia, that the detailed terms of the loan agreement will be worked out in subsequent negotiations [Page 434] and that the money will not be advanced by Mr. Firestone or the Corporation which he might form to promote rubber development in Liberia.
I have to point out that any hesitancy which the Liberian Government may have shown in relation to this matter grew out of an attitude of the public mind which was largely antagonistic to the question of a loan. This public feeling was aroused both by the terms of the Agreement of 1921, and by the manner in which those proposals were turned down by the United States Senate. This situation necessitated and still necessitates a considerable amount of suggestive propaganda by the Government before public opinion can be brought back to a favourable and receptive attitude towards this question.
I desire to emphasize the point that my Government have fully understood that the Bankers who might advance money to the Government of Liberia would insist upon some supervision of the Liberian finances by officials nominated for that purpose. The number of such officials, their pay, functions, powers and obligations must of course be worked out in the detailed terms, and they must be nominated by the United States Department of State.
With respect to the life of the Firestone contracts I desire to make clear, that my Government raise no objections to the two fifty-year periods which are proposed as the term of the Firestone interests. But they feel that they must oppose objections to the provision which, looking forward to a revision of the scale of payments which Firestone will make to the Government, would adjust this question by arbitration and thus open the way for controversies which my Government are most anxious by all possible means to avoid. It would seem to my Government preferable that the basis of those payments should remain the same during the period for which the contract must run, whether the life of the lease be a straight ninety-nine year term or two terms of fifty years each. These views together with those expressed in the addendum which has already been communicated to Mr. Firestone’s representative here, a copy of which was also filed in your Legation,39 being, it would appear, in substantial accord with the assurances given in the telegram the subject of this despatch, the Liberian Government upon the express acceptance of them by Mr. Firestone will have no hesitancy in executing the agreements and giving their fullest support to the agreement for a loan when that agreement comes to be submitted to the Liberian Legislature for approval.
[Page 435]In respect to the general basis for the loan the Government would respectfully call the Department of State’s attention to their memorandum on the subject transmitted in November 1924 through the Financial Adviser.40
In reply to the questionnaire section of your despatch, I am instructed by the President to point out that the public pronouncement of the Liberian Executive up until November 1924, in no way indicated the “earnest desire” of Liberia for a loan. The failure of the 1921 Agreement to materialize made the Liberian people clearly see that they need not seek or expect from America or elsewhere financial assistance of the kind then contemplated. They felt themselves thrown back upon their own unaided resources. In his letter to Mr. Dearing, to which reference is made in your despatch, the President observed in substance that notwithstanding the failure of the 1921 proposals, Liberia’s desire for the rehabilitation of her finances was just as keen as it had been before that failure, but he suggested that this rehabilitation, he had come to see, should be along the line of internal economic development rather than foreign financial assistance in the form of loans. The President, therefore, enquired whether or not Mr. Dearing thought it possible “to get some reliable and honest financial group with the ‘OK’ of your State Department interested in the economic development of Liberia?” This enquiry was indicative of the trend of policy which the President then felt himself compelled, by reason of the American refusal of assistance, thereafter to follow. That policy was financial rehabilitation through foreign investment for the development of economic resources.
The President emphasized this point of view in his inaugural address of January 1924, when he said:
“Foreign Loans. Past experience whispers to our ears a cautious tread along these lines. Foreign loans carry with them too many political entanglements.
We should bend all energies to the building up of such a healthy revenue that will assure to us financial stability and international credit on an equitable basis. In the meantime the economic development of the country should be left to private foreign enterprise under safe and reasonable terms of operation.”
The expression of these views in such circumstances and the programme of Legislation thereafter initiated and put in force, seem to the President an effective public notification to every interest concerned in Liberia of the Administration’s objectives and the means by which they were hoped to be attained. Any representations made [Page 436] to your Government contrary to these indications could not have correctly represented the desires of this Government.
When the Firestone proposals were first submitted with the tacit approval of your Department of State the President was impressed that his views were thoroughly appreciated.
These agreements constituted a complete scheme of economic development along a particular line, without the imposition of any extraordinary financial burdens upon the Republic, and yet having inherent in it the possibility of financial rehabilitation through the indirect results of the operations thereunder. Being thus in accord with Government policy already announced they were endorsed and supported in the fact [face?] of strong public opposition as the means by which your Government’s benevolent interest in this Republic had found practical expression, without involving Liberia in the political entanglements which would necessarily and inevitably have followed a loan.
Although the programme of development initiated by the Government produced gratifying results, these results were not commensurate with the Government’s hopes and desires. They were advised that completely satisfactory results could only be achieved by the expenditure of larger sums than would be available for any expansion in revenues which could reasonably be immediately expected. As a means of exploring the possibility of procuring such support, if necessary, the suggestion of November 1924, transmitted through the Financial Adviser, was thrown out. The Government of Liberia have never been advised whether the Department of State thought the scheme practicable, or that the money could be secured. The President was left to follow the course upon which he had embarked convinced that in this, as in the scheme of 1921, he had mistaken the kind of assistance which could be reasonably expected and secured in America.
All this must be envisaged as the back-ground of the discussions had upon the recent Firestone proposals, which, without notice to the Liberian Government, attached to the Agreement for economic exploitation by private means, a suggestion for the flotation of a public loan which was represented as an indispensable prerequisite to the plantation operations. Such an invitation to depart from a policy already settled upon by the Government and supported by public opinion could not be accepted without examination and without the assurance from your Government which were sought and which the telegram of Mr. Kellogg explicitly gives.
With sentiments [etc.]