817.51/1890: Telegram

The Chargé in Nicaragua ( Munro ) to the Secretary of State

[Paraphrase]

40. The following is from Dr. Cumberland in reply to Department’s 16, January 14, 6 p.m.:

  • “(1) In reply to a question from President Diaz regarding the probable cost of new loan for Nicaragua I said that such cost would depend in large measure on the attitude of the United States toward the proposed financing, but what that attitude might be was not discussed with President Diaz or with other officials of Nicaragua, although it is obvious that the attitude of the United States determines the rate of interest and the proper amount of the proposed loan, and until I am advised on this point no sound recommendations can be made.
  • (2) In his letter of November 29, 1927, the Secretary of State instructed me to make a comprehensive economic and financial study of Nicaragua, and to present recommendations.62 This study has already convinced me that the financial plan proposed by the bankers is merely a revision of the financial plan which has shown its inadequacy, that such revision does not serve the best interests of Nicaragua, would form no basis for permanent financial expansion and development, and would not be accepted by the Government of Nicaragua. The proposals in the bankers’ plan for the settlement of claims are particularly unacceptable and unjust. Therefore, in order to present concrete recommendations to the Department, I am preparing an alternative financial plan in addition to my report. Such a plan can only be intelligently prepared in Nicaragua where the views of the responsible officers of the Government of Nicaragua may be secured on different points as they arise. Otherwise, a program unacceptable to Nicaragua would almost be certain to result, as is the case with the bankers’ plan. A well-considered project is necessary, with special emphasis on administrative efficiency, budgetary responsibility, allocation of treasury resources to constructive purposes, payment of any foreign obligations, and provision for future financial requirements in orderly fashion over a considerable number of years.
  • (3) My estimate of 2 or 3 months as the time necessary for a study of the finances of Nicaragua, as I stated when I received my appointment, still seems to be accurate. A shorter study would be dangerous and a waste of time and money.”

Dr. Cumberland and I both had understood, from our conversations with the officials of the Department and from the Department’s instructions to Dr. Cumberland, that the Department desired Dr. Cumberland to recommend changes in the existing system which would rid it of its defects and make possible the most effective utilization of the resources of the country. Such changes could only be brought about by a new financial plan—one more comprehensive than the plan proposed by the bankers. I believe that the bankers’ plan would be wholly unacceptable to the Government of Nicaragua because it affords little real hope for opening communications with the east coast, and because it makes no real provision for the payment of claims. Dr. Cumberland and I feel that the bankers’ plan does not meet the present situation in Nicaragua. I have made no attempt to report in detail on the situation recently because it was my understanding that the Department would take no action until it was in possession of the Cumberland report, which would be much more useful than any report I could make.

Munro