800.51W89 Latvia/112

The Latvian Minister for Foreign Affairs (Zarins) to the American Minister in Latvia (Skinner)15

In connection with the payment of the next instalment of the Latvian debt to the United States falling due on December 15th, and with reference to the Note No. R. 763.00 of the 13th September last16 and the reply of the American Chargé d’Affaires of September 24th,16 the Minister for Foreign Affairs has the honor to inform His Excellency, the American Minister, that Mr. Lule, Latvian Consul General in New York and in charge of the Latvian Legation in the United States, has been instructed to address himself once more to the Government of the United States with the request to postpone the payment of interest as well as principal.

The reasons for asking for such a postponement are the following:

Owing to the catastrophal fall of the prices obtained for Latvian agricultural produce, of which the exports are mainly composed, the influx of foreign currency into Latvia has diminished to such an extent that about a year ago already extraordinary measures had to be adopted to protect the small reserves of gold and foreign currency at the disposal of the Latvijas Banka. So, for instance, Latvian exports to the United States show the following figures:

January to September 1930 Ls. 1,609,000
During the same period in 1931 they fell to 1,033,000
While for that period in the current year they amount to barely 562,000

The total exports, which reached Ls. 225,000,000 during the first nine months of 1930, fell to Ls. 143,400,000 in 1931 and to Ls. 59,100,000 during the same period of the current year.

The reserves of foreign currency at the disposal of the Latvijas Banka have reached such a low level that, unless this downward movement can be stopped, it is to be feared that there will be no possibility in the near future to provide the necessary foreign currency to pay for the goods which have to be imported.

The above is illustrated by the fact that, according to the statement of the Latvijas Banka, the assets of foreign currency at the disposal of that Bank on

November 28th, 1932, amounted to Ls. 11,355,232.88
While, on an average, in 1930 42,500,000   
In 1929 68,200,000   
And in 1928 72,500,000   

were still available.

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Although these reserves at the disposal of the Latvijas Banka are so inconsiderable, there are still outstanding sums to be paid for previously imported goods. As the American Legation is aware, there have been many cases where the Currency Commission has been unable to satisfy in full the demands presented to it for the transfer of dollars to the United States.

In spite of the extraordinary measures taken by the Latvian Government in order to prevent the outflow of foreign currency during the last months and weeks, a constant decrease can be observed every week, and the only possible course of action seems to be the introduction of additional and severer restrictions than those that are in force already.

Notwithstanding the fact that the budget of the State has been reduced to the utmost and that the Government has even been obliged to cut down the salaries of the State officials which, in many cases, hardly reached the indispensable minimum, it seems that the Government will have to cope with a heavy budgetary deficit. They are, so far, at a loss to devise the means by which this deficit could be covered.

Contrary to comments in the American press, according to which the American people consider that many European nations are spending too much on unproductive armaments, in Latvia all expenditure for the requirements of the army has been reduced to the utmost. Her expenditure for the purposes of national defence is exceedingly moderate and even insufficient for protecting the country against any kind of unprovoked aggression.

The Latvian army does not, in fact, amount to 20,000 men, manifestly possessing insufficient equipment and war material.

Among others, the American Representatives at the World Disarmament Conference have recognized the point of view of the Latvian authorities on the subject.

Finally, the Latvian Government hope that the Government and the Congress of the United States, in dealing with the question of the Latvian debt, will also consider the devastations wrought in the country by wars and revolution. The most fertile parts of the country had to be evacuated by the Latvian population, while afterwards the economic life of Latvia had to be reconstructed without any help from abroad. The Latvian nation has not only sustained heavy material losses during the Great war and its fights for liberation, but it has also lost a proportionally very important number of human lives (about 40,000 killed), the country being in the direct line of battle the whole time the world war lasted. Even now, 18 years after the beginning of the war, there are regions in Latvia where, [Page 788] owing to the lack of means, it has been impossible to remove all traces of the trenches and to turn the waste into arable land once more. Although the nation has been subjected to such severe sufferings, Latvia has received no reparations at all, unlike all the other nations of Western Europe that had been involved in a similar way during the world war.

It is the earnest desire of the Minister for Foreign Affairs that Mr. Skinner should kindly undertake to inform his Government of the above-mentioned facts. Mr. Zarins hopes that the particular circumstances existing in Latvia, which constitute a decided change for the worse since 1925, date when the debt agreement was made, will be taken into consideration, and that the Congress of the United States will find it possible to postpone the payment which falls due on December 15th on account of the Latvian debt to the United States for a period covering the business depression and until the question of the Latvian debt can be settled in all its aspects.

  1. Transmitted to the Department by the Minister in Latvia as an enclosure to his despatch No. 970, December 8; received December 21.
  2. Not printed.
  3. Not printed.