817.51/1924: Telegram
The Minister in Nicaragua (Eberhardt) to the Secretary of State
[Received 11:54 p.m.]
215. Department’s telegram No. 105, April 28, 6 p.m., and my No. 201, May 2, 4 p.m. Following are the points in the Cumberland program which should be considered in a preliminary arrangement such as was suggested in the Department’s No. 105, April 28, 6 p.m.:
- (1)
- Sale of the National Bank.
- (2)
- Assurance of adequate financial support for the Guardia Nacional.
- (3)
- Protection of the railroad from political exploitation and looting.
- (4)
- Appointment of an auditor, and
- (5)
- Unified collection of the revenues.
- (1)
- The matter of the sale of the National Bank has already been fully discussed. We still consider it extremely desirable. While the President might agree as an alternative to continue the present board of directors and management, this would not be sufficient. This is demonstrated by the transaction set forth in my telegram of April 23, 4 p.m.,73 and by a more recent loan of $7,000 made to … with the understanding that it would be repaid from the 5% contribution exacted from the employees of the Government. It will be impossible to keep the National Bank out of politics so long as it belongs to the Government. Since President Diaz desires very much to sell the control of the National Bank, further action in this direction rests entirely with the Department and with the bankers. Some arrangement regarding the use of the proceeds of the sale, however, would be advisable.
- (2)
- Inasmuch as it would presumably be inadvisable to apply the Cumberland recommendations regarding budget reorganization until a new loan made possible the complete revision of the existing financial plan, sufficient funds for the maintenance of the Guardia Nacional can only be obtained during the coming year by allocating the surplus revenues. We still believe, therefore, that President Diaz should be requested to promise not to anticipate the January 1929 surplus in any way until $500,000 for the Guardia Nacional has been accumulated, and that promises in writing should be obtained from candidates for President to turn the sum over to the Guardia Nacional in January. If the bank were under American control, the assurances thus obtained would be sufficient, and the practical result would be that practically no portion [Page 541] of the ordinary revenues would be available for political purposes except the limited amount which could be diverted from the monthly budgetary allowance and the school funds, and that part of the internal revenues which was not deposited in the bank. It is not likely that there will be any large available balance from the next July surplus, after the amounts already promised for the Guardia Nacional have been deducted.
- (3)
- Probably it would also be impracticable to apply the Cumberland recommendations respecting the Pacific railroad until a comprehensive financial program is worked out. Meanwhile, if the Liberals would agree, I have no doubt that President Diaz would be willing to make some arrangement for the nonpolitical control of the railroad. A contract for the continued operation of the railroad and the completion of repairs by the J. G. White Company would apparently be sufficient.
- (4) and (5)
- The appointment of an auditor, whose approval would be necessary before any funds could be withdrawn from the National Bank, and the establishment of a unified control over the collection of the revenues, is extremely desirable. … President Diaz has indicated that he would accept such an arrangement, provided it were clearly understood that it was preliminary to the flotation of a loan, and provided the Liberals also approved it. We have no information as to the extent to which it would be proper to hold out the hope that a loan can be secured. We ought to have full information on this point before we take up the matter again with President Diaz in order that there may be no possible subsequent question of misrepresentation or unfulfilled promises, as in 1911, and in 1920.
If the above program could be carried out, it is our belief that there would be no serious difficulty with regard to the misuse of Government funds during the election. We do not feel that anything worth while could be accomplished through the appointment of persons designated by General McCoy in key positions in the National Bank and the Treasury Department, as the Department suggested in telegram 105, April 28, 6 p.m., because the financial system of Nicaragua would not lend itself to effective control by this method.
The agreement of both parties on points (4) and (5) may be very difficult to secure. If the appointment of an auditor and the unification of the collection of revenue prove to be impracticable, the action which was suggested under headings (1), (2) and (3) should still, we believe, be taken, because it would fully protect the largest resources that might otherwise be used for electoral purposes. If the National Bank were under nonpolitical management, serious abuses of the internal revenues could probably be discouraged by appropriate representations when the deposits fell off, and by supervisory [Page 542] control over the alcohol warehouses; and the misappropriation of current budgetary and school funds could not be carried very far without seriously inconveniencing the Government itself.
I am advised that General Moncada sent word to Rosenthal through Aguado that he would approve the sale of a controlling interest in the National Bank if the Legation requested such approval.
- Not printed.↩