The Minister in Honduras (Lay) to the Secretary of State

No. 1339

Sir: I have the honor to report that after presenting to the Foreign Minister on February 11 the Memorandum enclosed with Department’s Instruction No. 663 [664] of February 5, 1935, requesting tariff concessions (Schedule I) in connection with the projected Trade Agreement with Honduras, I had this morning a preliminary discussion with Señor Julio Lozano, the Finance Minister, to whom the Memorandum and Schedule I were sent by the Foreign Office for consideration.

Señor Lozano said that it would take him a few days more to fully consider the concessions and to determine to what extent they may be granted. When I expressed the conviction that he would find upon further examination of our suggested rates of duties that they would amply protect existing and potential domestic industries, he agreed but explained that it was most delicate to attempt to convince Deputies who are interested in local manufactures that the present duties on many articles are unnecessary for protection, create artificial monopolies, are a burden on the people and means a heavy loss of revenue to the country. He explained that it would be useless to negotiate an agreement which would not be approved by Congress. For these reasons I anticipate considerable difficulty in securing the reductions we have proposed on flour, butter, lard, soap and eggs, but some compromises on these products may be secured. The Honduran Government may be unwilling, Señor Lozano informed me, to bind on the free list empty sacks of jute, burlap or cotton, since the erection of a bag factory in Honduras is projected.

Señor Lozano said he feared that the Municipal taxes intended originally to exclude Nicaraguan products (reported in Legation’s despatch No. 1189 of August 27, 19345), which amount to an extra duty on a number of American products, would not be withdrawn by Congress since a number of Deputies find these taxes a valuable source of revenue for the cities in their constituencies.

During the conversation with Señor Lozano he expressed the belief that if he could give some of the Deputies an idea of what other Latin American especially Central American countries were granting us in the way of tariff reductions in trade negotiations with us, it would be of great assistance to him in his efforts with Deputies to make them see reason.

[Page 733]

He said nothing about concessions Honduras would be likely to ask of the United States, but I understand from other officials that we may expect a request for reduction of United States duties on tobacco. It is believed here that in a short time, with the improved system of curing recently installed, that Honduran tobacco can compete with the Cuban product in the United States market provided United States rates of duties are reduced.

I expect to have further discussions with Señor Lozano on the Trade Agreement next Monday.

Respectfully yours,

Julius G. Lay
  1. Not printed.