882.51/1877

The Chargé in Liberia ( Wharton ) to the Secretary of State

No. 336
Diplomatic

Sir: This Legation has the honor to refer to its despatch No. 334 dated February 12, 1926, and report further on the planting and loan agreements.

Loan Agreement:

. . . . . . . . . . . . . .

While the Legation knows that some politics was involved in handling the ratification and further appreciates that some of the modifications were radical, nevertheless it is known that the repeated reflection on the good faith of the Liberian Government was not justified and greatly hampered further negotiations. (See Department’s cable No. 5, February 3, 6 P.M., and Legation’s cable No. 8, February 6, 9 P.M. [February 7, 5 p.m.]) This incident and others have been exceedingly unfortunate and untimely owing to their tendency to disrupt all negotiations, not only cause misunderstandings between the parties to the agreements, but also between the governments, and result in an unwarranted situation.

For the Department’s information it should be known that the President had made no secret of his position with reference to the loan agreement which was that he could not be in favor of a loan for $2,500,000 or even $5,000,000 which pledged all the revenues of the country. He at all times has considered the customs revenues alone sufficient security but would be willing to make provision should the customs be insufficient. (It may interest the Department that as early as January 1st, this was his position but further information was desired by me before my cable of January 23, 9 A.M. Legation’s No. 330 “President insists that customs receipts sufficient security for present loan”.) This was the major objection of President King to the loan agreement and he has been consistent throughout all the negotiations. He has been, and without reserve, is in favor of American interests in Liberia, particularly the Firestone project and (inasmuch as the Department advised it) likewise the loan but with reasonable terms.

The modifications provide that the loan charges will be met from customs and headmonies but if these are insufficient then by the other revenues as necessary. The accounting control of the loan officers over the entire revenues is, however, not disturbed and is desired as a means of increasing their efficiency and bettering their system. This has not been changed.

[Page 532]

In further substantiation of the President’s position and in confirmation of this Legation’s cables Nos. 11 and 12, there is enclosed herewith the “Joint Resolution Supplementary to the Joint Resolution passed by the Legislature of the Republic of Liberia on the 28th of January 1926, directing, instructing and authorizing the Executive to consummate the Loan Agreement between the Government of the Republic of Liberia and the Finance Corporation of America.”31

In light of this Legation’s cable No. 15 of February 19, 1926,32 and despatch No. 334, referred to before, the difficult task confronted by President King and the reasons not only for the prior but later modifications of the loan, can be better realized. I attribute the difficulty mainly to the situation created by premature publication of the projects, especially the loan, in American and foreign papers prior to the securing by the President of sufficient legislative support here, and the fear and apprehension on the part of the Liberians even legislators (see despatch No. 344 [334]). The Department understands that in order to avoid foreign interference with the negotiations, they had been conducted confidentially and the public and even the Legislature knew nothing of the loan proposal prior to January and at all times the Executive was acting without legislative authority.

So that the Department could better understand the facts, my cable No. 15 cited the voting in both houses during the enactment of the last modifications which give substantially the original loan terms. The House of Representatives was deadlocked and the Speaker cast the deciding vote in favor of the modifications. In order to secure passage, President called a joint meeting of both Houses at the Executive Mansion the night before passage at which meeting he and other members of the Executive branch urged the absolute necessity of these further modifications bringing the loan back to its original form in substantial effect. At this meeting he asked the Financial Adviser to be present and address the two Houses so as to assure and explain to them the necessity of not breaking down the financial scheme incorporated in the original agreement and to explain to them the advantages of modern methods of control, collection and expenditure of government finance. The President in conference with the Senate in order to assure passage without destroying, any substantial provisions as far as possible, had the resolution presented as a party measure and stated that the Firestone and Loan Agreements were absolutely necessary to preserve Liberia.

[Page 533]

It is now felt that the provisions of the loan agreement have been ratified substantially in the original form and save for minor details, further negotiations are unnecessary.

Rubber Agreements:

The Department’s No. 633 was orally communicated to the Secretary of State, Honorable Edwin Barclay, on February 8th, who became indignant at the position taken by Mr. Firestone and the Department’s agreement “that the Liberian Government should fulfill the planting agreements in strict accord with its pledged word”. Further, he stated that the Liberian Government has always kept its word and no matter how strong other nations were or wealth any corporations had, still Liberia could not be intimidated into breaking her Constitution, into playing fast and loose for any concession, nor have her honor flouted by others. Mr. Barclay resented this attitude on the part of Mr. Firestone and the Department and threatened to use this to defeat the proposal of further modifying the loan agreement to substantially the original form.

Taking into consideration the nature of the planting modifications, the exchange of letters on these modifications, the question raised by Mr. Firestone with regard to Mr. Barclay’s power to bind the Liberian Government under the Liberian Act of Ratification of 1925, the desire of the Liberians for the Firestone project and therefore possibility of adjusting these matters later, the resentful attitude of the Liberian Secretary of State, and the manifest inclination at that time to further modify the loan agreement in a far more acceptable form, substantially the original agreement; this Legation deemed it advisable, while neither lessening the effect of the Department’s No. 6, nor agreeing with the Secretary of State of Liberia, to leave the planting modifications in abeyance until the reconsideration of the loan by the legislature.

This Legation in reviewing the history of the planting negotiations and the present status of the agreements, realized that the situation here is badly misunderstood in America.

The ratification of 1925 upon which Mr. Firestone bases his claim to the agreements as signed by Mr. Barclay in New York, was a ratification, not of the present planting agreements but the original agreements negotiated by Mr. Hines, refused by Mr. Firestone, and withdrawn. Since entirely new agreements were submitted by Mr. Firestone shortly after my arrival in Monrovia May 1925, negotiations carried on by cable, and finally a substantial basis reached, the signing of the later agreements by Mr. Barclay, was merely the act of the Executive without the authority of the legislative branch of [Page 534] the government. The Liberian Government contends that under the constitution all concessions must be ratified by the Legislature and inasmuch as Mr. Barclay negotiated a entirely new concession it was absolutely necessary and likewise impossible to have ratification before the last session. Further, it was understood prior to Mr. Barclay’s departure that his authority was that of the Executive only.

It is suggested to the Department that regardless of the question of ratification as explained above, the Liberian Government considers the subjects incorporated in the act of ratification merely interpretations agreed to by Mr. Ross, the manager of the Firestone Plantations Company here. A copy of this letter, which the Liberian Government is relying on, is enclosed herewith.34 Please note that the copy furnished the Legation does not indicate the manner in which the letter was signed by Mr. Ross.

In previous despatches to the Department this Legation has indicated the harmful effect of propaganda circulated against the Firestone negotiations, particularly by the British who used Mr. Firestone’s statements to defeat the scheme of American rubber production. These interpretations were incorporated in the act of ratification in order to allay the fear of the members of the legislature and the Liberian public.

With reference to the authority of Mr. Ross to bind Mr. Firestone, the Department should know that all present operations are conducted under lease with Mr. Ross and the business is conducted in his name. Further information has been received that under orders from Mr. Firestone, Mr. Ross withdrew this letter from the Department of State here. Secretary Barclay returned the letter and expressed regret that Mr. Firestone repudiated this act and thanking Mr. Ross for his assistance in aiding ratification of the planting agreements.

Unfortunately no copy of this letter was received by this Legation though it had been requested.

There is enclosed also a report from the General Receiver of Customs34 which clearly shows the disposition of the Liberian Government relative to these modifications, particularly the Emergency Relief Fund.

This Legation feels that all the modifications are of comparatively minor importance and should not interfere with the greater principle of American development of rubber sources, especially in Liberia which offers without doubt an exceptional opportunity wholly free from foreign control except that of the Liberian Government.

This Legation cannot understand at this time why Mr. Firestone should consider withdrawing from Liberia on the ground that he [Page 535] has lost confidence in the Government. This Legation feels that Mr. Firestone had some confidence in Liberia and while he may possibly feel that there was some weakness in handling the final settlement of the agreements, nevertheless this Legation cannot see any reason why this attitude should be changed to such an extent to justify him in abandoning all operations except Mount Barclay. First, the modifications to his agreements are minor; secondly, the loan now has been ratified in substantially its original form and its integrity intact. Further, regardless of the confidence of the Banking Company and Mr. Firestone, it was considered necessary to tie the loan and planting agreements in order to stabilize the government and make operations safe, and this object has been attained. It would be exceedingly difficult in face of the present Liberian attitude for Mr. Firestone to only retain Mount Barclay.

It is hoped under the circumstances that Mr. Firestone will continue, for the Liberian Government is anxious for the country to be the seat of his major operations. This Legation feels that in view of the larger principle of aiding the United States to have sources for not only rubber, but other products which are now controlled by foreign monopolies, no better opportunity is available than Liberia. Likewise, American influence should be felt in Africa.

The Liberian Government considers Mount Barclay as part of one entire scheme and that if Firestone does not accept the entire proposition, he cannot retain Mount Barclay.

It has been hinted by certain Liberians that the failure of either Firestone or the Finance Corporation of America to communicate with the Liberian Government has been caused by better offers being tendered to Firestone and he now wishes to take advantage of these offers and take undue advantage of the Liberian Government by only holding Mount Barclay. When the profits which can be derived from Mount Barclay Plantation are taken into consideration, the Department can see the reason why the Liberian Government would not consider Firestone retaining only this plantation. The annual profits from Mount Barclay have been roughly estimated to be slightly over $300,000. This plantation of about 1400 acres produces at the present time 30 long tons of rubber per month at a cost of about thirteen and one-quarter to thirteen and one-half cents per pound. The present rental is $6,000 per year.

It is known that should Firestone withdraw the Liberian Government intends to undertake the operation of Mount Barclay. It is also appreciated that antagonistic interests should be and are anxious to produce rubber here. There has been a rumor that … will accept this plantation and other areas should Firestone withdraw.

[Page 536]

Under all the foregoing circumstances this Legation feels that there is not sufficient disagreement to warrant accusations of bad faith by any party to the agreements. Likewise, to abandon all negotiations now that there is a substantial agreement is not only unwise but aiding the rubber monopolists and thwarting attempts to build up American commercial independence.

This Legation wishes to report to the Department with reference to the interference in business negotiations, (Department’s cable No. 936), that the only communications to the Liberian Government during the crisis of the negotiations were made through and by the Legation as neither Firestone nor the Finance Corporation of America communicated. Mr. Firestone cabled Mr. Ross not to interfere in the negotiations and the Finance Corporation had no representative here. The tension was great and misunderstandings widening the gap between the Liberian Government and the American concerns. Had the Legation not acted the Legislature would have adjourned leaving an impossible situation. However, the strict limitations upon interference in business negotiations have been observed as consistently as possible and this Legation has continually had as its objective safeguarding the interests of the American concerns and obtaining a place for America to grow rubber.

I have [etc.]

Clifton R. Wharton
  1. Not printed.
  2. Ante, p. 524.
  3. Not printed.
  4. Dated Feb. 5, 1926; ante, p. 518.
  5. Not printed.
  6. Not printed.
  7. Dated Feb. 17, 1926; ante, p. 529.