817.51/1838: Telegram
The Chargé in Nicaragua (Munro) to the Secretary of State
[Received October 7, 1927—6:05 p.m.]
267. Legation’s 262, October 4, 8 p.m. Minister of Finance called this morning to urge the desirability of establishing at the present time a definite system of control which would assure the future financial stability of the Republic. He said that both parties would accept such control now to get money for the payment of the war claims, especially as neither knew who would control the next administration. He still advocates the adoption of the system outlined in his letter of May 15th to Mr. Stimson but he thinks that such a system could only be approved by Congress if it were part of a loan contract.
After careful investigation I have reached the conclusion that there is nothing in the local political situation which makes it inadvisable to proceed at once with a loan for the payment of claims and for such other purposes as the Government and the chosen representatives of the Liberal Party may approve. I have thus far discussed financial questions only in a very general way with the Liberals, however, and I cannot ascertain their position definitely until I know the general outlines of the plan which will be presented. It will be helpful when the time comes if the Department can telegraph an outline of any plan under consideration in order that I may discuss it confidentially with leaders on both sides to ascertain whether any of its features are unacceptable.
In my opinion it would be advisable to present definite and comprehensive financial proposals in time for consideration by Congress next December.
While I understand that the bankers have contemplated paying only a small amount of the claims in cash I believe that it would be far better from the Nicaraguan point of view to pay them entirely in cash rather than partly in internal bonds which would cost the Government as much as a foreign loan but which would be far less valuable to the recipients. I do not believe that a loan providing only a small amount of cash for claims would be well received by either party or that it would materially help the economic situation.
The loan might also well include funds to start the Atlantic Railway and a small amount for roads, especially for a road from Leon to the Segovias which would have both military and political advantages. General McCoy25 was much interested in this latter project and I suggest that he be consulted regarding it. I think however that [Page 414] it would be well to discuss the matter with the Liberal Party before finally adopting any plan for a loan for other purposes than the payment of claims.
While the loan should be dependent on the adoption of a plan for financial control I think that the latter would be better received if it came from the Department rather than from the bankers. The Department could properly suggest a revision of the financial plan which would be attached to the loan contract like former financial plans but which would include not only those provisions considered necessary by the bankers to safeguard the loan but also such provisions as the Department and the Nicaraguan Government might consider desirable for the future financial stability of the Republic. The plan should in my opinion include the reforms outlined in Guzman’s letter of May 15 above mentioned as well as a definite provision for the support of the guardia national, an increase if possible in the amount of $115,000 now allotted monthly for the budget, and perhaps in the amount allotted to the High Commission and definite regulations covering the appropriation and expenditure of the surplus. I do not believe that any foreign control more stringent than that proposed in Guzman’s letter would be necessary or justifiable in Nicaragua.
Guzman’s plan apparently contemplates three principal American officials: a collector of revenues, a comptroller, and a high commissioner. There seems to be no reason why the two latter should not be combined. The collector of revenues and the comptroller, with the Minister of Finance, could then form the budget commission.