817.77/252: Telegram

The Secretary of State to the Chargé in Nicaragua (Hanna)

160. Your 271, November 13, noon. At a meeting on November 13 the American members of the board of directors of the railroad resigned, giving as their reason the decree reported in your November 9, 1 p.m. The Nicaraguan directors had no instructions regarding a modification or postponement of the decree, but they had been instructed to proceed at once with the liquidation of the railroad company. They refused to consider suggestions by the Department and also by the bankers that the meeting might be postponed in order to allow time for further instructions to arrive. The Department understands that the railroad company is now being dissolved.

I am frankly somewhat embarrassed and much disturbed by these developments. The efforts which the Department has made to induce other bankers to assist Nicaragua in reorganizing her financial administration have been based on the assumption that President Moncada desired that the new bankers should manage both the railroad and the bank on behalf of the Government, in order to assure an efficient and non-political administration, and also upon the assumption [Page 659] that, pending the negotiations, the President would not take steps which would radically affect the situation and the financial soundness of these enterprises. The dissolution of the railroad company does materially affect the situation, and I fear that it may well discourage the bankers who are looking into the matter. It would be especially unfortunate if the railroad’s funds should be transferred to the Government and diverted to purposes not connected with the railroad.

[Paraphrase.] The Department has also been informed indirectly that Soley’s instructions contemplate the operation of the National Bank under a Nicaraguan board of directors and the possible issue of paper money by the Government of Nicaragua. In his conversations with the Department Soley has suggested a Nicaraguan board of directors.

Because of the foregoing I feel that the Department should have more definite information regarding the President’s plans for the bank and the railroad before asking the new bankers to spend further time and money in considering the situation. Take up this matter very frankly with the President and make it clear to him that you have been instructed to do so simply because it is my desire to be of service to him and to Nicaragua. [End paraphrase.]