814.796 Latin American Airways/13

The Minister in Guatemala ( Geissler ) to the Secretary of State

No. 2403

Sir: I have the honor to report that in consequence of unofficial action by the Legation there is now a fair prospect that air transport contracts may be entered into by the Government of Guatemala with the approval of the National Legislative Assembly with two American Companies, namely with the Pan American Airways Incorporated, providing for a connection with its Miami-Panamá line, and with the Latin American Airways Syndicate, to be incorporated in the United States, providing for a connection with the projected Nogales-Maris-cal line of the Compañía de Transportes Aéreos Latino Americana; and I beg leave to add that there are indications that if that program does not go through there may develop rapidly a now latent movement in favor of the establishment of a Government-owned service, perhaps in cooperation with two or three of the other Central American countries and possibly with the aid of European material and men.

. . . . . . . . . . . . . .

On May 13, I invited Mr. Rihl to call and, as foreshadowed by the cablegram just cited,95 I said to him, after a discussion of the situation, that I intended to receive Mr. Balch later in the day and to say to him that, since the Latin American is an American concern and its financial backing is understood to be good and it was the first in the particular field, the Legation is inclined to give it appropriate support, but that, on the other hand, the Legation is also disposed to give appropriate assistance to the Pan American. …

An hour or so later, I had a talk with Mr. Balch, to whom I stated that, with a view to averting the possibility that no American Company will get a contract approved by the Assembly, I am inclined to give appropriate support to the Latin American and the Pan American; that I had already expressed myself similarly to Mr. Rihl, who, upon reflection, had stated that this might lead to such an adjustment of the matter as, on the whole, would be to the interests of both the concerns involved. Mr. Balch stated, that he liked the idea in principle. In fact he had told me, on May 9, that he would be willing for the Latin American contract to be amended so as to permit the Pan American to carry mail between the East coast of the United States and the city of Guatemala by way of Barrios, if the Pan American would stop fighting the Latin American’s effort to get a Guatemala-Mariscal contract; but during that [Page 641] conversation of May 13, he recalled that he had also said that he is very sure that the Pan American would not agree to that and he said that he did not mean for that remark of his to be construed as a binding proposal. He added that, however, he feels that the time has come for the Latin American and the Pan American to quit fighting, but that he prefers that there be an agreement covering not only Guatemala but also the rest of Central America and Mexico. I said, that my own concern is regarding the Guatemala situation, which, as seemed to be agreed, called for immediate action. He said then that he would seek a conference with Mr. Rihl.

On May 14, Mr. Rihl came and reported that he had arrived at an oral understanding with Mr. Balch. Shortly afterwards, the latter joined the conference. They told me that they were in accord, that it would be to the interests of both parties for them both to favor the granting of a contract to the Pan American, under which it would come from Belize, British Honduras, or Barrios, Guatemala, or Tela, Honduras, to the city of Guatemala, returning then to say Tela, and a contract under which the Latin American would be permitted to operate between Mariscal, Mexico, and the city of Guatemala, and then toward Salvador. They also said, that they had orally agreed to recommend to their principals that the Latin American should not operate between the city of Mexico and Mariscal and that the Pan American and its subsidiaries should not operate between Mariscal and Managua by way of Guatemala and Salvador. From what Mr. Rihl has told me since, it seems that, as he understands it, the oral agreement to be submitted to their principals relates only to United States Mail contracts. I am not certain that Mr. Balch so understands it.

At any rate, Mr. Rihl and Mr. Balch, at this time, appear to be cooperating in a very friendly way in an effort to get contracts from the Government of Guatemala, covering the respective routes Mariscal-Guatemala-Salvador and Belize-Barrios-Tela-Guatemala, and Mr. Rihl has abandoned efforts to get a contract for the Pan American’s subsidiary, the Compañía Mexicana.

On May 13, and again on May 14, I discussed the situation with Minister of Fomento Daniel Hernández, who told me that if the Compañía Mexicana abandons its application and the Pan American submits a contract substantially the same as that of the Latin American, except as to route, he would sign it and facilitate its despatch to the Assembly. He said that the cessation of the fight which the two interests have been carrying on against each other would probably result in the approval of both contracts. I have had and retain the distinct impression that he was conscious of the fact that the fight of the friends of the Pan American imperilled the Latin American’s project, and that he was not inclined to contract with [Page 642] the Pan American so long as it was fighting the contract he had signed with the Latin American.

It should also be mentioned, that the Latin American Syndicate will now presumably operate under an American instead of a Mexican charter in such of the other Central American countries as may grant it concessions.

As regards the prospective establishment of a Government-owned service in cooperation with other Central American countries, the Department will recall communications from the Legations at San José, San Salvador and here, showing that the subject has recently been discussed. One of the enthusiastic proponents of the idea is said to be Dr. Eduardo Aguirre Velasquez, Guatemalan Minister to Costa Rica, who as reported confidentially in despatch 2377 of April 29, 1929,96 may very soon be appointed Minister for Foreign Affairs. French aviation interests have indicated anxiety to sell planes to the Guatemalan Government, and it is very possible that Germans may renew efforts to become identified with the operation of aviation in the Republic. A Government supported operation would conceivably not prove profitable, but local pride would probably cause the country or countries concerned to pay any resulting deficit cheerfully, however imprudent that might seem.

The proposed Pan American and Latin American contracts may still encounter considerable opposition inspired by stockholders and friends of the Empresa Guatemalteca de Servicios Aéreos, Morales y Compañía, organized by Victor D. Gordon. According to an article published in El Excelsior of May 15, Mr. Gordon has purchased “four powerful airplanes and two hydroplanes”, special mention is made of a tri-motor, and he is quoted as having said at San Francisco with reference to a rumor that the quality of the airplanes he has acquired is defective, that the “report of the Department of Commerce was based on airplanes which were not purchased”, and that the planes he bought “are authorized by license of the American Government”. The same article states that the concern has presented a project of a contract to the Minister of Government in Salvador.

Making reference to the Department’s cablegram of May 14, 5 p.m., saying that pending the receipt of fuller information as to the status of both parties it desires me to adopt a noncommittal attitude and assumes that this can be done without jeopardizing the present rights of either, I respectfully beg leave to express the hope that the foregoing report regarding the situation shows that the action already taken by the Legation has the tendency of being productive of the greatest benefit possible to each one of the two American groups involved.

I have [etc.]

Arthur H. Geissler
  1. No. 59, May 12, 4 p.m., p. 639.
  2. Not printed.