817.51/1912a: Telegram
The Secretary of State to the Minister in Nicaragua ( Eberhardt )
97. For Minister Eberhardt and General McCoy. We are carefully studying the Cumberland report and financial plan, copies of which were forwarded in last Tuesday’s pouch. The plan contemplates a far-reaching and definitely articulated program of economic development and financial stability, and takes into account all basic factors like the unification of the revenue services, the supervision of expenditures, the revision of the budgetary structure, the National Bank and currency stabilization, the establishment and maintenance of a permanent national constabulary, the railway and other public works, public health, public instruction, and a claims commission, the entire program to be worked out through the medium of a loan which will involve the refunding of the public debt, and will provide for the control of the collection and expenditure of revenues, the national budget and the currency system through a Collector of Revenue (an American), an Auditor General (an American), and a High Commission composed of these two officials and the Minister of Finance.
Dr. Cumberland finds that the present financial condition of the Government of Nicaragua is comparatively satisfactory, and the argument for the proposed financial plan rests, therefore, not on immediate necessity, but on the desirability of undertaking at the proper time to bring about in this way permanent economic and financial stability. Although it may be assumed in the light of the communication of May 15, 1927 from Minister of Finance Guzman to Colonel Stimson70 [Page 534] that the Government of Nicaragua would view a plan of this nature with satisfaction, nevertheless, the details would have to be considered by the Government and by the banks. Moreover, action by the Congress of Nicaragua would be necessary. With every effort and disposition to expedite matters, we are apprehensive that in all the circumstances delay is inevitable. We must take note of the serious political difficulties that would attend the proposal and adoption of such a measure at this time. A powerful weapon would be placed in the hands of those who criticize us in the United States and elsewhere, who would undoubtedly charge that the Government of the United States was taking advantage of a so-called military occupation of Nicaragua to impose upon it a permanent economic and financial domination. In the face of Dr. Cumberland’s finding that the existing financial conditions are satisfactory and that a loan was not needed for immediate purposes, the charge that would be made, although fundamentally specious and misleading, would not be easy to meet. As an independent problem, detached from all connection with pending operations, permanent economic and financial reconstruction should in principle be postponed until the country has passed through this electoral transition phase. The considerations that militate against such a policy are: (1) The risks indicated in Legation’s despatch No. 608, February 7, 1928; (2) the possible difficulty of obtaining agreement in Nicaragua on any kind of financial plan after the election is over and one of the political parties assumes control. We ought to be prepared to take the risk on the second possibility, but we are frankly in doubt on the first, and feel that additional information in that respect is needed for a final decision. We must definitely insist upon an honest, as well as a free election. Without the control over the revenues and expenditures contemplated in Cumberland’s financial plan, reliance must be placed upon President Diaz, and any guarantees and assurances which he can give that the public funds, under any circumstances, will not be directly or indirectly used for corrupt purposes. It is especially important that President Diaz should guarantee the allocation of the surplus revenues to the upbuilding and maintenance of the constabulary. We have found no reason to question the courage and sincerity of President Diaz, and we are hopeful that he could and would resist any pressure that might be put upon him to weaken in any way when it comes to the administration of the public funds and revenues during this critical time. In short, we see so many difficulties and delays in establishing an effective control through a financial plan that we are strongly inclined to contend that every expedient should be exhausted in other directions to guarantee the honesty of the election. There may well be no other way to proceed. We should be pleased to have your considered views on the entire situation, and because of the obvious difficulty in adequately [Page 535] dealing with the subject by correspondence, we suggest that it would be extremely helpful if General McCoy could conveniently come to Washington for a conference at this time. Whether he can come to Washington in the near future will depend upon whether he can safely leave Nicaragua while plans are being formulated for the election. General McCoy will have to decide that. I believe that it would also be well for you and General McCoy to consult with President Diaz and ascertain his views with respect to the project of making a loan and putting the financial plan into force now …