817.1051/517: Telegram

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

54. I called upon President Moncada this morning and left with him a memorandum of the representations contained in your telegram No. 103, April 28, 1 p.m. The Ministers for Foreign Affairs, Gobernacion, and Finance were present and took part in the discussion of the matter. The discussion was friendly but very frank. The President said his Ministers dwelt upon the difficulty of supporting the Guardia in the present state of the country’s finances. I recognized the difficulty but maintained with all firmness that the Guardia must be supported, in spite of the difficulty, strictly in accordance with the plan of February last.

President Moncada took exception to the determination of the International Acceptance Bank to use the loan solely for the purposes for which it was granted. He and his Ministers had been discussing this matter when I arrived and while I was present they decided upon the following allocation of the monthly advance of $80,000. from this loan: $10,000. for each of the two railway projects, $10,000. for the Atlantic highway, $5,000. for road construction in the Segovias, $17,000. for the Guardia and military academy and the balance of $28,000. for a reserve to be expended by this Government for other purposes to meet the emergency growing out of the earthquake.

I understand this Government will endeavor to get the bankers’ approval to the foregoing allocation. I told those present that I agreed [Page 854] with the idea in principle and would support this Government’s efforts to obtain an allocation to meet the emergency which would be acceptable to the bank directorate.

I assume that the bankers cannot disregard the demands of the crisis existing here and, if properly and fully informed, will agree to a new allocation. The loan, other than the portion for maintenance of the Guardia, should be expended where it will give the greatest measure of relief, and I deem this the general principle to follow in a new allocation. I think smaller amounts than those mentioned above should be spent on the two railways and that the amount for the Atlantic highway should not be more than the $10,000. mentioned, preferably less. In view of the grave labor conditions in Managua and other portions of the Republic resulting from the earthquake, I believe the $15,000. monthly originally allocated for road construction in the Segovias should be temporarily reduced to the $5,000. set forth above. I am also strongly in accord with creating a reserve of the balance of the loan to be expended as this Government may desire, possibly under restrictions which would give the banks a watchful supervision over the purposes for which the expenditures are made.

The labor and general economic conditions in this capital are so critical as to give rise to the gravest fears for the near future if the Government is unable to give the city financial assistance. The Government of the national district is not functioning actively, is entirely without funds and has absolutely no revenues coming in at the present time. The capital of the country is completely bankrupt and apparently without any way of raising more than the most trifling sums.

I endeavored to leave the President and his Ministers in no doubt concerning the positive attitude of my Government regarding the future maintenance of the Guardia but I did not press for a categorical reply. I believe funds to meet the present requirements of the Guardia will now be made available without further delay but I anticipate continued difficulties in this connection.