817.51/1906½
Brief Description of the Financial Plan for Nicaragua Recommended by Dr. Cumberland
The financial plan provides for an agreement between the Republic of Nicaragua and New York bankers (to be determined later) and contains the following provisions:
1. All revenues and receipts of the Republic are to be collected by a Collector General of National Revenue nominated by the Secretary of State and appointed by the President of Nicaragua. (Art. 2, Sec. 1)
(Note: The financial plan now in force69 provides for a Collector General of Customs nominated by the bankers, approved by the Department of State, and appointed by the President of Nicaragua. Colonel Clifford Ham has held this position since 1911.)
2. The Collector General of National Revenues will collect all revenues and receipts of the Republic, whether general or special, including internal revenues, and will submit to the Secretary of State an annual report. (Art. 2, Sec. 2)
(Note: The financial plan now in force provides that the Collector General of Customs shall collect only customs revenues and certain [Page 530] special taxes, but can take over the collection of internal revenues under certain specified conditions. The internal revenues are collected at the present time by the Nicaraguan Government.)
The total cost of collection shall not exceed 7% of gross customs receipts, and 10% of internal revenue receipts. (Art. 2, Sec. 2)
(Note: Under the plan now in force the cost of collection is limited to 6%.)
3. The Collector General can be removed by the Secretary of State acting on his own initiative, or by the Secretary of State at the request of the Nicaraguan Government, if the Secretary approves of this request. (Art. 2, Sec. 4)
(Note: Under the plan now in force the Collector General can be removed at the request of the Bankers.)
4. Legislation governing existing revenues and receipts of the Republic shall not be amended in a manner to reduce such revenues and receipts without the consent of the High Commission. (Art. 2, Sec. 5)
(Note: The financial plan now in force provides that such legislation can only be enacted with the consent of the bankers parties to the financial plan.)
5. The Republic is authorized to contract a loan of not to exceed $30,000,000, secured by a first charge on all of its revenues and receipts, this loan to be issued in series, each series to bear such rate of interest and such maturity as may be determined at the time of issue; but after the first series no subsequent series must be issued unless and until average revenues and receipts of the Republic for the preceding period of five fiscal years shall have equaled four times the interest and amortization charges of the entire outstanding debt, plus such charges on the series which it is proposed to issue.
(Art. 3, Sec. 1).
The first series, which will amount to $12,000,000, is to be expended as follows:
| For refunding and liquidating outstanding Indebtedness | $6,000,000 |
| For payment of revolutionary claims | 2,000,000 |
| For highway construction | 3,000,000 |
| For election expences of 1928 | 150,000 |
| For paving and sanitation of Managua | 350,000 |
| For miscellaneous purposes | 100,000 |
| For cost of floating the loan | 400,000 |
| $12,000,000 |
(Art. 3, Sec. 2)
(Note: The banking firms of J. & W. Seligman and Company and the Guaranty Trust Company have an option on the financing.)
6. An Auditor General shall be nominated by the Secretary of State and appointed by the President of Nicaragua. The office of Auditor General (and of Collector General of Revenues) shall continue in force so long as there remain outstanding and unpaid any of the bonds authorized in the present financial plan. (Art. 4, Sec. 1).
(Note: The present financial plan provides for no Auditor General.)
7. The Auditor General is empowered and instructed to examine the accounts and records of each branch of the public administration and to prescribe the keeping of such records and books of accounts, and the rendering of financial reports. Orders of payment against funds of the Republic must bear the signature of the Auditor General. The Auditor General is empowered and instructed to examine and audit the national bank at least twice each fiscal year. The Auditor General shall submit reports to the Minister of Finance of Nicaragua and to the Secretary of State showing all expenditures of the Republic. The tribunal of accounts and the national treasury shall act through the Collector General and the Auditor General. (Art. 4, Sec. 2)
Nicaraguan officials shall have the right to examine the records of the Auditor General; but his accounts shall be considered approved unless specific objection is made thereto within thirty days. (Art. 4, Sec. 3)
The Secretary of State may remove the Auditor General on his own initiative or at the request of the Nicaraguan Government if he considers such request justified. (Art. 4, Sec. 4)
8. A High Commission shall be established consisting of the Minister of Finance, the Collector General of National Revenue, and the Auditor General. (Art. 4, Sec. 5)
(Note: The financial plan now in force provides that the High Commission shall consist of (1) the resident American High Commissioner, nominated by the Secretary of State and appointed by the President of Nicaragua; (2) the Minister of Finance; and (3) a non-resident American member to act as referee in case of dispute between the other two members.)
9. The High Commission shall agree upon detailed estimates of expected revenues and receipts and prepare a consolidated and summarized budget of expenditures for submission by the Minister of Finance to Congress. (Art. 4, Sec. 6–8)
(Note: The present High Commission has no authority over the preparation of the budget but approves of expenditures from a special fund of about $26,000 per month.)
10. In preparing the budget priority shall be given to the costs of the collection of customs and internal revenues; to the interest [Page 532] and amortization on all outstanding government obligations; and to the maintenance of the national constabulary. (Art. 4, Sec. 9)
11. The legislative body shall have the power to reduce or eliminate items in the budget but shall not increase any item above that recommended by the High Commission. If the legislative body fails to authorize a budget for any fiscal year, the budget already in effect shall continue in force. (Art. 4, Sec. 10)
12. A treasury reserve of at least $1,000,000 or 25% of the average revenues (whichever is greater) shall be established and maintained, and any surplus revenues above this amount can only be expended on the recommendation of the High Commission, and be devoted to productive public benefit. The treasury reserve may be utilized for anticipating service on the public debt, redeeming currency, and certain other specified purposes. (Art. 4, Sec. 13)
13. The Republic agrees to sell 51% of the stock of the National Bank of Nicaragua, the Board of Directors of the bank to consist of nine members, one of whom shall be appointed by the Secretary of State, (Art. 5, Sec. 1)
14. The bank is appointed fiscal agent of the Republic for receiving all revenues and effecting all payments. The bank is authorized to conduct an ordinary banking business, with certain stipulated reserves against deposits. The currency of the country continues to be governed by the existing law, but the High Commission may require the issue of additional quantities of currency, subject to the provisions of the law. The exchange fund (at present about $2,000,000) shall be deposited in banking institutions approved by the High Commission, with certain stipulations as to the manner in which it is to be invested. The bank shall present a detailed statement to the High Commission and to the Secretary of State. (Art. 5, Sec. 1–5)
15. There shall be attached to the Guardia Nacional a public works service which shall be administered by an Engineer in Chief who shall be nominated by the Secretary of State and appointed by the President of Nicaragua. (Art. 6, Sec. 1)
(Note: The reason for attaching this office to the Guardia is in order that an American Army Engineer may be detailed for this work.)
This office shall be in charge of construction, operation, maintenance and repair of all public works in the Republic, including the telephone and telegraph service. (Art. 6, Sec. 1)
16. The Pacific Railway may borrow the equivalent of $2,250,000 on terms approved of by the High Commission, secured by a first mortgage on all the property and assets of the railroad, the loan to be used for repairs and rehabilitation, and for the purchase of the [Page 533] wharf at Corinto from the private interests which now own it. (Art. 7, Sec. 1–3)
17. A Claims Commission shall be established consisting of two Nicaraguan members appointed by the President of Nicaragua and one (American member) nominated by the Secretary of State and appointed by the President of Nicaragua. Of the Nicaraguan members, one shall be a member of each of the principal political parties. All claims against the Republic, both on the part of Nicaraguans and foreigners, shall be adjudicated by the Claims Commission and awards shall be rendered by two assenting votes of the Commission, provided that one of the assenting votes shall be that of the member nominated by the Secretary of State. When all claims have been adjudicated the Commission shall be dissolved. (Art. 8, Sec. 1–2)
- For a description of the financial plan of 1920, see Department of State Latin American Series No. 6: The United States and Nicaragua: A Survey of the Relations From 1909 to 1932 (Washington, Government Printing Office, 1932), p. 37.↩