817.51/1958: Telegram

The Secretary of State to the Minister in Nicaragua (Eberhardt)

[Paraphrase]

145. Your telegram No. 269, July 3, 4 p.m. The points you raised were taken up with the bankers. They agreed to the control of the apportionment of expense moneys.

As for the costs of the Guardia Nacional, to be met out of the third priority, the bankers stated that:77

“We of course are entirely agreeable to a revised figure but we feel that a definite figure must be included in the Plan as finally submitted to Nicaragua. You will readily understand that prospective investors will have a right to know exactly what the Republic is committed to in such an important feature of its program. We ourselves should like to be assured that the figure to be finally chosen for the minimum requirements of the National Guard will not be materially higher than the one contemplated in the agreement of December 22. We are hoping that the inaccuracy of which the Legation speaks lies in the direction of excess rather than underestimation. We have set up our proposed budget for Nicaragua on a very careful computation of its workability in actual practice, and we would feel very much disturbed if a priority were included the amount of which was to be determined after the enactment of our Plan. When the figure is being established, it should be borne in mind that appropriations for the National Guard, over and above [Page 550] the minimum requirements, are contemplated in the ordinary budget (page 23, lines 26 to 32, proof of July 1). Any material increase in the size of the third priority might affect very seriously the soundness of the budget set-up and thereby the protection for our bonds.”

If you are able to suggest a definite figure at the present time, the Department will be glad to have you do so. As you suggested, the bankers are covering the matter of the railroad and mortgage department in the National Bank.

Regarding the matter of countersigning checks, the bankers stated:78

“As for the countersigning power, we can only repeat what we said before, that the Fiscal Agents as a part of the present program, including the Plan, are unwilling to place this responsibility on a nominee of theirs. We have given this subject much thought, and would like to consider with you a plan which we hope might be a satisfactory compromise of the various viewpoints. Our tentative suggestion which might be incorporated in the Financial Plan would be that the Auditor General, whenever he discovers funds being spent improperly or illegally, should draw up a formal statement of such irregularities and present it to the High Commission and to the parties who nominate, approve and appoint him. The High Commission would then be empowered, in its discretion, if it found such statement has accurately represented the facts, to introduce such form of control over the Republic’s disbursements, including a countersigning authority, as in its judgment would effectively prevent the continuance of abuses. The High Commission would be able to alter or suspend such control in accordance with later circumstances.”

Will you please cable your view?

The bankers will provide for the matter mentioned in section 6 of your telegram No. 269, July 3, 4 p.m.

Kellogg
  1. Quotation not paraphrased.
  2. Quotation not paraphrased.