The Acting Secretary of State to the Chargé in Nicaragua ( Beaulac )
9. Carazo38 informed the Department some days ago that Sacasa39 had terminated negotiations with Otis & Company because he considered their final proposal unsatisfactory. He objected particularly to a provision that the manager of the bank would have full authority with respect to the conduct of its business subject only to control as to matters of policy by a two-thirds vote of the members of the Board of Directors consisting of five nominees of the Government and four nominees of the bankers. He also objected to a provision giving the bankers an option on future financing so long as the agreement should remain in force. The Republic would have a right to terminate the agreement at any time on 30 days notice.
Sacasa and Carazo asked the Department’s advice as to the next step to be taken, but was informed that the Department could not advise the Nicaraguan representatives regarding the acceptance or [Page 694] rejection of a particular proposal, or regarding possible new negotiations with other bankers. It was unnecessary to consider the advisability of putting the Nicaraguan representatives in touch with other bankers, as they believed that they already knew of others who might be interested. It is understood that Carazo has had some discussion with the Bank of Manhattan and Trust Company. In response to his request for information he was informed |that the Department understood from the Department of Commerce that this was a strong and reputable institution.
If you find that there is any misapprehension on the part of the Nicaraguan Government regarding the Department’s relation to these negotiations you may make it clear that the Department’s activity has been confined to introducing the Nicaraguan financial representatives to a group of bankers known to be reputable, and to furnish the latter with general information which seemed likely to be useful to them. The Department could not undertake to advise the Nicaraguan representatives to accept or reject any given proposal, and it has not advised them regarding the beginning of negotiations now with a new banking group. They have acted in these matters entirely on their own responsibility, subject to any instructions which they may have received from their Government.
The text of the final proposal of Otis & Company will be forwarded to you for your information by air mail.