817.516/227½: Telegram

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

175. Referring to your No. 288, December 20, 10 p.m., and No. 289 December 21, 10 a.m.

The new bankers and the Department have been informed that Soley has been discussing possible arrangements for the management of the National Bank and also of the Pacific Railroad with several bankers, apparently in an endeavor to obtain terms more satisfactory than those which Otis & Company and their associates have proposed. In view of the fact that the Nicaraguan Government is still negotiating with the bankers whom the Department suggested to them this has placed the Department in a somewhat embarrassing situation and has made Otis & Company and their associates doubtful about the advisability of proceeding further. When the Department asked Dr. Sacasa and Soley about this the latter said that he had discussed the Nicaraguan problem informally with several bankers in an effort to ascertain what were the best terms which he could obtain, and that he had done so because he was under the impression that President Moncada had rejected the proposal made by Otis & Company and communicated to you in the Department’s 173, December 18, 6 p.m. He was informed that the Department had no interest in any one group of bankers and wished only to assist the Nicaraguan Government in any proper way in making an arrangement which would be satisfactory to it, but that it was embarrassing to the Department to find that the matter was being discussed with other bankers when the proposition made by the bankers whom the Department had interested in the matter was still pending.

After the receipt of your No. 288, December 20, 10 p.m. the Department again conferred with Sacasa and Soley, but found that they had no instructions about making any counter proposal.

It was perhaps President Moncada’s intention that the Department should convey his counter proposal to Otis & Company and ascertain their reply. The President will realize, however, that the Department cannot very well conduct the negotiations as his representative, and that it would be preferable for the Nicaraguan Government itself to deal with Otis & Company. The President may wish either to instruct Soley to present a counter proposal, instructing him along the lines of the statement contained in last paragraph of your 289, December 21, 10 a.m., or to invite the bankers to send a representative to Nicaragua who could deal with the President and the Minister of Finance directly. The Department believes that the bankers would accept such an invitation if the Nicaraguan Government paid the expenses of the representatives.

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In discussing the above with the President please make it clear that the Department is simply trying to be helpful and not in any sense seeking to direct the President’s action. In particular the Department desires that there should be no suggestion of any complaint regarding the conduct of Sacasa and Soley. The Department is laying the situation very frankly before the Nicaraguan Government, because it fears that it will be difficult to reach an arrangement with Otis & Company or any other bankers unless a satisfactory method of conducting subsequent negotiations is adopted. In the Department’s opinion direct negotiations in Managua would produce the most satisfactory results.

The Department has informally stated to Seligman and Company that it would be helpful if the former bankers would continue their connection with the bank for a time.