The Chairman of the Bondholders Protective Committee for the Republic of El Salvador ( Lisman ) to the Secretary of State

Dear Sir: The Committee has instructed me, in replying to your letter of February 25th, to thank you for the assistance which has been given by the American Legation in San Salvador to facilitate conversations between the Government of El Salvador and this Committee and to inform you as follows on the points mentioned in your letter.

1 and 2.
There will be no deductions on account of the expenses and compensation of the Committee, or for any other purpose, to the knowledge of the Committee, from any cash payments to be made on coupons under any temporary or permanent agreement which the Committee is now negotiating or at present intends to negotiate with the Government of El Salvador, but the full amount agreed to be paid by the Government of El Salvador to the Bondholders on such coupons will go directly to the Bondholders without deduction.
The Committee plans, upon the completion of the permanent revised agreement, and an assurance that the Government of El Salvador is performing the same, to return the Bonds which are now held on deposit and to terminate its existence. However, pending such assurance, the Committee expects to remain in existence for a limited period in order to ascertain whether or not the Government of El Salvador will perform its obligations under the permanent revised agreement. During this period the bonds now on deposit will remain on deposit, except as the same may be withdrawn by the various Bondholders from time to time pursuant to the provisions of the Deposit Agreements under which the Committee is acting. During this time, if the Government performs its obligations, there will be no charge of any kind to the Bondholders, but the Committee will perform its duties as it sees them during this period. In the event that the Government does not perform its obligations under the new Agreement, the Committee will then be in a position to act promptly on behalf of the Bond-holders [Page 572] and to save them the large expense which would be necessary to organize a new Committee and to obtain deposits of Bonds. The Committee considers that it owes this duty to the Bondholders and that if it were to return the Bonds and terminate its existence promptly upon the completion of the permanent revised agreement, there would be a great temptation for certain interests to attempt to earn a commission from the Government of El Salvador by inducing it to default on its contract and offer the Bondholders a still lower rate of interest. This the Committee will prevent if it possibly can.
The Committee has no intention of attempting to deprive non-depositing Bondholders of any of their rights. It does, however, think that the Government of El Salvador should agree with it that no better terms will be offered to non-depositing Bondholders than are-offered to depositing Bondholders. The reason for this is that substantial amounts of all series of Bonds are held in El Salvador, and for political reasons the Government might conceivably, without such an agreement, be willing to make better terms for its own citizens than for American citizens. This the Committee does not wish to see occur.

If the Committee can furnish you any other further information it will be pleased to do so.

Yours very truly,

F. J. Lisman