814.51/581

The Minister in Guatemala (Geissler) to the Secretary of State

No. 1479

Sir: I have the honor to submit the following report, concerning negotiations between the International Railways of Central America and the Government of Guatemala, for the settlement of the Government’s debt to that Company.

On April 23, Mr. Fred W. Wilson, special representative of the International Railways of Central America, called at the Legation and told me, that, as a result of extensive negotiations, Mr. Henry B. Price, Vice President of the company, and himself had seemingly almost arrived at an agreement with the Government of Guatemala for the settlement and payment of claims of the Company against the Government, but that, on April 22, definite action was postponed, with the rate of interest and the price of the bonds to be taken in payment of the debt remaining apparently as the only important points of difference.

Mr. Wilson expressed regret, that the settlement had not yet been completed, and said that he hoped, that a way might still be found to effect a settlement in time for its being ratified by the Assembly at its present session. He called again on April 26; and, on April 27, he presented a letter and a memorandum, copies of which are transmitted herewith.7

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It will be observed, that the memorandum contains the tentative basis of the settlement as developed in the negotiations between the parties.

In view of the request made by Mr. Wilson, in his letter, that, informally and unofficially, I do something calculated to facilitate early action, I mentioned the matter to Secretary for Foreign Affairs Matos on April 27.

In my conversation with Dr. Matos, I asked what news he had concerning pending political or legislative matters. He remarked, that the contract of the United Fruit Company seems now to have been gotten into such shape that it will probably be approved by the Assembly tomorrow. Then he said, that the Government is desirous of getting all pending matters with American companies adjusted as soon as possible, and that the negotiations with the International Railways have progressed to a point where there is almost agreement. I inquired for details. He said that, in effect, the only questions of importance to be decided, are, whether the bonds to be issued are to draw 6% or 8%, whether they are to be given to the company at eighty-five or ninety and whether they are to be secured by a lien on the 3% consular invoice tax now assigned for the support of the Foreign Office or on only ⅔ of that amount. He said, that Secretary of the Treasury Palma also had the desire that, instead of a lien being given on the tax just mentioned, the International Railways acquire the outstanding so-called A. E. G. or Los Altos Bonds, in the sum of $1,500,000.00 of an-original total issue of $3,000,000.00, and then let the 3% consular invoice tax covering those bonds also secure the new bonds in the sum of approximately three million dollars which are to be issued to the International Railways.

Then Dr. Matos made mention of having received a communication from the British Minister, which he considers amounts almost to a protest against a settlement with the International Railways before an agreement with the holders of the British Deferred Coupons is made. I said to the Secretary for Foreign Affairs, that I was not there to make any official representations concerning the railroad debt or concerning the British deferred coupons; that, however, it appeared to me, speaking personally, that it would be desirable for the Government to make, at the earliest practicable date, a mutually satisfactory arrangement with the holders of the British deferred coupons, but that I know of no reason why the holders of the coupons should have a right to object to a settlement being made previously with the railroad company, if such action happened to suit the convenience of the Government. Since then, I have secured a copy of the British Minister’s note, which I shall submit with another despatch.8

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Later, on the same day, Dr. Matos told me, that he had, since talking with me, mentioned the subject of the railway debt to President Chacón, who had told him, that he desires to have that matter settled as soon as Mr. Price returns from New York and reports the company’s decision as to the Government’s offer of 6% bonds at 90. From my conversation with Dr. Matos I received the distinct impression, that he does not anticipate that the company will be willing to accept bonds drawing less than 8%.

On April 29, Mr. Wilson called and told me, that he had, on the previous day, had a conversation with Secretary of the Treasury Palma, who had proposed to him, that the International Railways undertake to float a $10,000,000.00 loan, the proceeds of which, at a price of say 90, would be disposed of as follows:—

International Railways about $2,560,000.00
Los Altos Bonds outstanding 1,500,000.00
Refund to Treasury for Los Altos Advances 1,500,000.00
For Completion of Los Altos Railway 2,000,000.00

The balance to be available for other purposes.

Mr. Wilson said, that he thinks, that his company will prefer to arrange for a settlement of its debt first, although it may then be disposed to aid in the floating of any further loan which the Government of Guatemala might desire.

I have [etc.]

Arthur H. Geissler
  1. Not printed.
  2. Not printed.