The Minister in El Salvador (Corrigan) to the Secretary of State

No. 444

Sir: I have the honor to inform the Department that extraneous matters of considerable local political importance have been delaying the special trade agreement negotiations. Some of these are quite reasonable causes for delay and beyond the control of anyone. There has been also apparently a dilatory course pursued by the Ministry of Hacienda which indicates a desire on the part of the Government to hold off for a time at least the signing of a new treaty.

On September 29th also the Sub-secretary of the Treasury, who has had charge of most of the negotiations up to now, had been called to California on account of the illness of his wife.

In an effort to obtain some definite commitments from the Minister of Hacienda, a conference was arranged for today and the Minister accompanied by Secretaries Fisher and Cochran engaged in a round table discussion with Doctor Samayoa. This resulted in bringing to light the actual fears that exist in the minds of Minister Samayoa and [Page 550] his advisers that the government revenues would be sharply reduced if the suggested reductions in duties should be adopted.

Calling attention to the fact that under the most-favored-nation treaties the concessions would be extended to other nations as well, he stated that while the statistical studies of the Salvadoran government were not yet entirely completed, they indicated so far that the granting of the requests made by the United States would involve a loss of customs revenue of $872,000 in ordinary years, running up to over $1,000,000 in good years. We pointed out that the method by which the figures were obtained, did not take into account any possibility of increased revenue from increased imports as had occurred following the removal of trade barriers in other countries as for example Cuba, quoting also the opinions of the experts who had prepared the treaty. His mental attitude with regard to increased importations was, to say the least, skeptical. He stated that he was quite willing to sign a treaty if we could prove to him that there would not be a net loss of revenue and finally agreed to permit the Legation staff to go over in detail the study now nearing completion with Mr. Llach, the expert of the Government Finance Commission, who seems to be largely responsible for the adverse report.

From the nature of conclusions apparently arrived at by this body it is quite evident that considerable educational work must still be done before a basis for satisfactory agreement can be reached. It would not in any opinion be prudent to exercise more pressure at the moment with possible sacrifice of the goodwill that Doctor Samayoa has manifested. He has a number of pressing problems, is a very slow and careful mover, not entirely sure of his ground and therefore not taking any chances.

The Legation had hoped for a speedier termination of these negotiations and trusts that the foregoing will make plain to the Department why speedier progress has not been possible. The Legation will continue to use every possible means to bring about the desired result.

Respectfully yours,

Frank P. Corrigan