817.51/1913: Telegram
The Minister in Nicaragua (Eberhardt) to the Secretary of State
[Received 1:45 p.m.]
187. Department’s telegram No. 97, April 19, 4 p.m., arrived badly garbled. We still regard the dangers set forth in despatch No. 608 of February 7 as extremely serious. We also feel that we should emphasize the grave risk that the stability of the whole financial structure of Nicaragua will be impaired if the National Bank and the railroad are left subject to purely political control. It is very possible that so much injury would be done to those institutions and to the currency system before January 1, 1929 that the set-up for a future loan would have to be used for rehabilitating them rather than for constructive purposes. Furthermore, if the January surplus is dissipated in advance, and it is almost certain that it will be, the lack of funds for the maintenance of the Guardia Nacional will place it in a most precarious condition.
With respect to the criticism attending a financial operation at the present time, it is our feeling that there will be much more criticism from Nicaraguan sources if a new financial plan is adopted by the new administration. A loan at the present time would be part of the general plan for the rehabilitation of the country, and would be made, if at all, with the approval of both parties, whereas, if a President should accept a new financial plan later on, he would be accused of having accepted it in advance as the price of his election.
In view of the above it is our feeling that it would be far better, as contemplated, to proceed immediately with the Cumberland financial program. We have, however, appreciated the difficulties attending its realization, not the least of which is the doubt whether the Liberal Party would accept a comprehensive financial reform at this time. We have, therefore, been giving the entire matter most [Page 536] careful consideration. It is our belief that the above-mentioned dangers could at least be diminished by adopting the following:
- (1)
- To approve the purchase by the bankers of a controlling interest in the National Bank which President Diaz is anxious to sell. We understand from Bosenthal71 that the Department’s opposition has prevented the sale thus far. We are fully aware of the objections to this transaction under present conditions, but we have a feeling that the criticism to which we would be subjected would be less justified than the criticism which would follow a collapse of all the benefits obtained from American financial aid during the past 17 years. Foreign control would ensure respect for the financial plan and prevent a dissipation of the currency reserve, thereby keeping from the Government the chief resources which it might use to buy the election. However, unless such a control is definitely and permanently established, it will be difficult to expect President Diaz to refrain from profiting by the Government’s control of the National Bank when such abstinence may simply mean leaving the resources of the bank to be dissipated after January by his political enemies. We regard the sale of the bank as of the greatest importance.
- (2)
- To arrange with President Diaz and the management of the bank that no commitments of any kind be made against the January surplus until $500,000 for the maintenance of the Guardia Nacional to July has been accumulated. We have arranged to apply almost the entire July surplus to the expense of the Guardia Nacional.
- (3)
- To remind President Diaz that United States control of the internal revenues has been insisted upon by the Liberals, and that Colonel Stimson considered it essential to the holding of a fair election, and to say that the Government of the United States is withholding its opinion on this point as long as the deposits of the revenues in the bank are satisfactory, and as long as there is no evidence that improper use is being made of alcohol from the warehouses of the Government. By arranging for some supervision of the warehouses by the Guardia National, the use of alcohol for political purposes could be further checked.
- (4)
- To persuade President Diaz to contract for the completion of the projected repairs on the Pacific railroad. The railroad is in bad condition and the cash surplus of over $500,000 is urgently needed for repairs. Unless the surplus is tied up by contract it will be diverted to other purposes. The management of the railroad is being drawn more and more into politics, even now. President Diaz told me that he would like to turn over the entire management of the railroad to the White Management Corporation.
It is our feeling that the course of procedure above outlined would be only partly effective, and that it would require constant vigilance and interference by this Legation. President Diaz cannot be relied upon to cooperate in a wholehearted manner. The President would be bitterly disappointed by the decision of the Department not to sanction a loan, as the adoption of a comprehensive financial reform [Page 537] during his administration has been his most cherished ambition. President Diaz would not be very enthusiastic over plans for rendering such a loan unnecessary. We do not feel, therefore, that he could be relied upon to cooperate in carrying out such plans except under unremitting pressure from us. The President would be so strongly influenced by pressure from other members of the Conservative Party, by his own desire for a Conservative victory, and by a national [natural?] reluctance to turn over any funds or assets to the new administration, that no guaranties which he gave us could be entirely relied upon. In view of this we do not believe that it would be advisable to discuss the entire situation frankly with the President until the Department has given the matter further consideration.
Before Dr. Cumberland left he discussed his conclusions tentatively with President Diaz and with General Moncada, and he has doubtless informed the Department of the result. Until there is something more concrete to present to them, it seems inadvisable to us to try to obtain a more definite statement from either of them.
Funds for the final payment of the million dollar loan were remitted to New York on April 21. In view of this, both the railroad and the bank from now on will be subject to the exclusive control of the Government.
General McCoy concurs in the foregoing. He can return to the United States to discuss the matter, but on account of recent developments he would prefer to remain in Nicaragua for at least a week more.
- Manager of the National Bank of Nicaragua.↩