The Bondholders Protective Committee for the Republic of El Salvador to the Secretary of State

Sir: As you have been previously advised, under date of February 10, 1933,44 this Committee was formed, pursuant to Deposit Agreements dated March 24, 1932 and March 28, 1932, for the Bonds of the Republic of El Salvador issued in 1922 under a loan contract made by said Republic in said year.

This Committee is informed by the Fiscal Agent for the El Salvador Loan that, on the announcement by President Roosevelt of the recognition of President Martínez of El Salvador, they formally notified the Department of State of the existing default in this loan.

This Committee has been in existence for over two years and represents over 85% of the outstanding dollar bonds of the said Republic, substantially all of which are held in the United States of America by over 4,000 individual bondholders resident in practically every State in the Union. The Committee has negotiated agreements with the Republic of El Salvador during said period,45 and has obtained substantial payments for the bondholders, of all of which the Department of State has been duly informed. There are, however, certain circumstances surrounding this loan of special interest and which clearly distinguish the present situation from most of those with which the State Department is concerned.

We refer especially to the exchange of Notes between the Government of the United States and that of El Salvador connected with the making of this loan in 1922, and especially to the Note of the American [Page 265] Minister to the Government of El Salvador, dated July 21, 1922, which is as follows:—

“July 21, 1922

Sir: My Government having now taken cognizance of the loan contract signed on June 24th, 1922, between the Government of Salvador and Mr. Minor C. Keith, and approved by the Assembly of Salvador on July 12th, instructs me to acknowledge your note of July 17th, and to state that the Government of the United States is gratified to receive the assurances therein contained and that the Secretary of State on his part is prepared to carry out the stipulations with reference to him in your note of October 20th, 1921,46 and in Articles 9, 19 and 21 of the loan contract in the event that it should be necessary to do so. This Government instructs me to repeat, however, that it must reserve entire liberty of action with regard to any diplomatic representations which it may feel it advisable to make with regard to the conduct of the office of the Collector General of Customs or with regard to the removal of that official in the event that he should prove incompetent or conduct his office in an improper manner.

I take this occasion to renew to Your Excellency the assurance of my highest consideration.

‘(Signed)’ Montgomery Schuyler

His Excellency
Doctor Arturo R. Avila
Acting Minister for Foreign Affairs
San Salvador.”

The same assurance was repeated in the letter from the Department of State, dated July 15, 1922, addressed to Messrs. Lansing and Woolsey, 8 Jackson Place, Washington, D. C.47

We feel that this situation is so different and so special that it requires recognition by the State Department of the peculiar circumstances thereof and of the responsibility of the State Department to the thousands of American citizens who have acquired the Bonds in question on the basis of the understanding that, due to the position taken by the State Department, their interests would be more adequately protected.

The Committee would appreciate receiving from you some statement of your position in this matter, and would like to have the assurance that it will have the support of the Department of State to the end that the interests of the Bondholders may be duly and adequately protected.

The Chairman of the Committee would like very much to discuss this matter with you, personally, at your earliest convenience, and [Page 266] respectfully requests that you grant him an interview, if possible, on March 21st or as soon thereafter as it meets with your convenience.48

Very respectfully,

Protective Committee for the External Bonds of the Republic of El Salvador Issued under Loan Contract of 1922. Constituted under the Deposits Agreements dated March 24 and March 28, 1932.
J. Lawrence Gilson

  1. Letter not printed.
  2. An agreement dated August 1, 1932, was rejected by the Legislature of El Salvador (816.51c39/212). On May 5, 1933, a temporary agreement for the partial service of the 1922 loan was signed; for text, see Diario Oficial, May 20, 1933, p. 1021.
  3. Foreign Relations, 1921, vol. ii, p. 852.
  4. Not printed.
  5. Mr. Gilson was informed by telegram March 19, 1934, that Assistant Secretary of State Welles would be glad to see him on March 21st (816.51c39/279).