817.1051/516: Telegram

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

47. General Matthews recently asked this Government for $36,000 for pay for the Guardia for April and maintenance for the first half of May, to be made available by April 25th at the latest. The Minister of Finance told him today that $10,000 can be furnished now and that he would make inquiry to determine what additional sum or sums can be furnished in the near future.

General Matthews has also asked for $22,000 on May 10 for maintenance during the last half of May and has been given no reply to this request. He tells me all the above amounts are in strict accord with the recent agreement in this matter. I have just discussed the foregoing with President Moncada. He told me he can see no way to furnish the amounts requested immediately because the money is not available but that he would supply the funds as fast as possible. [Page 851] I pointed out the possible dangers and consequences of failure to pay the Guardia promptly and the necessity greater than ever at this time for promptly meeting every Guardia obligation. I did not touch upon what the Department’s attitude would be towards a failure of this Government to adhere strictly to the most recent agreement on the subject. I advised him that the money must be found from some source and suggested the million dollar loan. He said Carrazo Morales had told him that the loan was terminated by the earthquake. I replied that if the loan was necessary before the catastrophe it is far more necessary now and I reminded him that the plan for our continued military cooperation is founded on the loan. He said he would immediately ask for a categorical answer concerning the loan.

General Matthews says he has no funds for the April payroll. If the funds he has requested are not supplied immediately he anticipates a total demoralization of the Guardia followed by mutinies and assassinations of American officers in chargé of outlying posts. He recommends that in the event funds in the amount he has requested are not furnished, the United States give notice of immediate withdrawal of its military assistance and the Nicaraguan Government be requested to inform him of the persons to whom command of Guardia troops should be turned over.

General Matthews has stated that he is confident of the ability of the Guardia to maintain law and order in the Republic provided they are paid and subsisted but believes that any failure or delay in payment will be seized upon by agitators who will be able to undermine the discipline of the Guardia to such an extent as to render control by American officers in outlying posts impossible.

Lindberg40 is of the opinion that the total revenues exclusive of the guarantee for bonded debt and not counting the revenues pledged as guarantee for the million dollar loan were prior to the earthquake approximately $200,000 per month about equally divided between customs and internal revenues, and that the total for the next 6 months will be approximately $100,000 per month of which $30,000 will be customs and $70,000 internal revenues. He says the foregoing is a very conservative estimate and that the total might increase to $125,000 monthly. If the Government can obtain $80,000 monthly from the loan, it would have a total of not less than $180,000 monthly for all purposes. Under the terms of the most recent agreement the cost of the Guardia is approximately $88,000 monthly and the cost of road construction in the Segovias is $15,000 monthly, making a total of $103,000 and leaving $77,000 monthly for all other expenditures.

I realize that this Government is confronted by a crisis in its finances and that the economic situation resulting from the earthquake may [Page 852] make it impossible for the Government to obtain a further loan or to increase its current revenues. The Government might balance its budget by reducing its expenditures but even if it had the energy to do this it would not be possible without complete cessation of all public works and the consequent danger of labor unrest. In any event the million dollar loan or some substitute equally acceptable is imperative and, in view of the critical situation confronting General Matthews, there should be no delay in establishing the source from which he is to obtain funds for the Guardia. The catastrophe has vastly increased the responsibilities of the Guardia and the country will be exposed to still graver disasters if the Guardia is not maintained. I sympathize with this stricken country and I do not doubt that the Department will exert every effort to assist it financially but it is clear to me that the latest agreement on the subject of the Guardia must be strictly observed by this Government if we are to continue our officers in the Guardia under conditions which do not expose them to grave danger. I urgently request the Department’s instructions.

  1. Irving A. Lindberg, Collector General of Customs and member of the High Commission.