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

No. 658

Sir: Supplementing my despatch No. 652 of May 21, 1935, reporting on the visit of Messrs. James and Peck in connection with the Inter-American Highway project, and with particular reference to the Department’s telegram No. 14 of May 6,32 I have the honor to report that Mr. James and I are in complete accord regarding the general principles of a definite agreement for the mutual cooperation of the Government of the United States and the Government of Guatemala in the furtherance of the Highway. The essential points on which we have agreed are as follows:

Due consideration should be given to the following points in determining the allotment to Guatemala from the available fund:
The Government of Guatemala has formally agreed to cooperate with an annual expenditure of $75,000 as well as with additional labor under its “vialidad” laws which may be calculated at from $15,000 to $25,000 more.
The Government of Guatemala has never wavered in its support of the project, but has invariably taken a helpful attitude towards it.
The Government of Guatemala has been following a progressive and intensive program of road construction (within its limited means) which merits encouragement, as well as emulation by some of the other Central American countries.
This Government’s existing road-building organization and President Ubico’s well established reputation for exacting honest administration are guarantees that the cooperation of this Government will be prompt, efficient, and free from graft.
Our cooperation with Guatemala will immediately open all-year-round communication between two Central American capitals—Guatemala City and San Salvador.
Unless this Government should insist on the contrary and present sound reasons for such insistence, our cooperation should be restricted [Page 258] to the section of the Highway from this capital to the frontier of El Salvador. Work on the section from this capital to the Mexican frontier could not facilitate intercommunication between the capitals of the countries concerned in this project until Mexico has completed the Highway from its capital to the Suchiate river. This Government has specified a large and expensive bridge for the latter section, but I have no reason to believe that it will insist on this in preference to a number of minor bridges on the other section which are necessary but were not specified because of their smaller size.
Reasonable consideration should be given to this Government’s specifications for road-building machinery, with particular reference to the Government’s own road-building program as well as to the use of the machinery on the Highway itself, but, in general, our financial assistance should be given primarily for the construction of bridges, and secondarily for machinery to be used on improving the Highway from this capital to the border of El Salvador. I do not foresee any great difficulty in reaching a completely satisfactory understanding on this point.
In view of the facts set forth in paragraph 1 above, the allotment to Guatemala should be made the maximum consistent with proper consideration for less favorable conditions in the other countries concerned. It is my understanding from my conversations with Mr. James that the present needs of the four other Central American States and Panama can be met with approximately $500,000, and perhaps for considerably less if El Salvador should not desire our cooperation. In that event, I believe that the balance of the fund available for this form of cooperation can be utilized in Guatemala, as contemplated in the appropriation Act, with adequate cooperation by this Government, and that doing so would advance the main purpose of the project by opening the Highway between two capitals, and should stimulate greater interest in it in the other countries.
Any further conversations with this Government preliminary to a definite understanding, and initiation of actual work in Guatemala should not be delayed pending further negotiations with the other Central American Governments. In my opinion the assurances we now have from this Government are ample to justify our proceeding at once with the field work necessary for locating and making plans of bridges, preliminary to contracting for the bridge material and starting work here on the foundations and approaches for the bridges. It is not necessary, in my opinion, to make a specific allotment to Guatemala at this stage in our cooperation, or to specify how the allotment is to be apportioned between bridge material and machinery. On the contrary, it probably would be wiser in any case to delay making definite decisions on these points until after a preliminary study and report by a field force of American engineers. Finally, my conclusion is that we may now accept, in general, the terms on which this Government has formally agreed to cooperate and advise it that, with its concurrence, a field force of American engineers will make a preliminary survey which will form the basis for subsequent mutual agreement as to the amount to be allotted and the specific manner in which it is to be spent. The essential point now is to begin work in Guatemala with the least possible delay.

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I had several conversations with Mr. Peck concerning the economic and financial phases of the Highway project to which, as the Department is aware, he has devoted several years of careful and enthusiastic study. After all, the really difficult and fundamental problem in connection with the Highway project is finding a practical way in which it can be financed. If the Central American countries through which it passes must construct it from their own resources, a generation or so may pass before some of them could possibly construct a modern highway through their respective territories. We should recognize at the outset the very clear fact that the Government of the United States must find a way to finance the project practically one hundred percent and with slight probability of any speedy direct return of the money spent, if the Highway is to be built in the near future (or if at all) and if we, through its wide-spread and diverse influences, are to reap the material and intangible benefits which will surely follow. While I do not know whether Mr. Peck shares my very positive views on this point, he has made, in any event, an intensive study of possible ways for the United States to cooperate financially; and finding some practical way to do this constitutes our principal problem in connection with this great project if we propose to see it through to a successful completion.

As reported in a previous despatch, Mr. James and Mr. Peck were treated with great courtesy by President Ubico, the Minister for Foreign Affairs, and the Minister of Agriculture, all of whom manifested a sincere desire to cooperate in the enterprise.

I hope the Department may find it convenient to furnish Mr. James and Mr. Peck each with a copy of this despatch.

Respectfully yours,

Matthew E. Hanna
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