817.00/4335: Telegram

The Minister in Nicaragua (Eberhardt) to the Secretary of State

259. A conference was held this morning in the Legation at the request of the Diaz Government. It was attended by the Minister for Foreign Affairs, the Minister of Finance, High Commissioner, Deputy Collector General of Customs and Manager of the National Bank. The Government representatives stated the Government was now absolutely [without] available funds to carry on military operations but was determined to hold out against the revolution to the bitter end and would as necessity arose resort to all the measures and expedients employed by governments in desperate straits such as inflation of the currency, capital levies on Liberals first and then indiscriminately and ultimately suspension of payments on foreign debts. All the Americans present including myself pointed out the extreme gravity of such measures and the disasters they would produce. Government ministers replied they understood the United States was determined not to make armed intervention under any circumstances, hence Mexican aid to the revolution would continue unchecked. They therefore only saw the alternatives of surrender to Mexico or a fight to the finish. They realized the latter course might mean the complete ruin of the country and of foreign interests here, all of which they would deeply regret but it was for them a question of life or death and of national honor. They believed moreover that surrender to Mexico would be equally disastrous for them regardless of any agreement they might obtain, the observance of which would not be guaranteed. Any foreign intervention ultimately provoked by resort to drastic measures would be preferable to Mexican domination.

It was understood at the end of the conference that some $90,000, the remainder of the surplus which should go to meet the cost of the National Guard, sanitation and other items during the next half year, may be had at once by the Government and a loan of $100,000 secured [Page 286]by railway earnings might be arranged. In the meantime plans will be carried forward by the Government to take some of the drastic measures mentioned above as soon as necessary.

Diaz would prefer resignation or peace at any price to resort to the extreme measures indicated; but the Conservative Party which is united and determined will in my opinion not give in to the revolution and will either impel Diaz to go to extremes or put another in his place who will stop at nothing.

Diaz still expresses hopes that the United States may find some way of checking further Mexican and other outside aid to the revolution which is believed here to be all that is necessary to bring the Liberals to consider peace proposals by Diaz.