611.1731/134
The Minister in Nicaragua (Lane) to the Secretary of State
[Received October 10.]
Sir: I have the honor to refer to the Department’s instruction No. 292 of July 16, 1935, transmitting a copy of the revised general provisions which the United States desires to have incorporated into the trade agreement with Nicaragua, and to report that as a result of a talk with Minister for Foreign Affairs, Dr. Argüello, I was finally able to have an informal conference with the Minister of Hacienda, Dr. Castro, regarding the general provisions of the proposed trade agreement.
The discussion with Dr. Castro was informal and was stipulated not to be binding. During the conversation, it became apparent that he had studied only about half of the general provisions, and those only casually.
Dr. Castro’s comments were in substance as follows:
- 1.
- He felt that due to the position of bondholders who hold bonds guaranteed by Nicaraguan customs receipts, it would be impossible to reduce duties without the consent of the bondholders, and suggested that all articles be bound. This question was discussed with the Collector General of Customs who stated that it was true that Nicaraguan tariff rates could not be reduced without the consent of the bondholders who hold bonds guaranteed by Nicaraguan customs receipts. He said he could not, of course, give any assurance on the point, but he felt that the bondholders would probably accept whatever recommendations the Collector General of Customs made with regard to the question of import duties, as had been the case in the past. Dr. Castro’s objection, therefore, would appear to be of an academic nature.
- 2.
- With regard to wheat flour, Dr. Castro referred to the flour mill at Masaya, Nicaragua, and said he understood that the concession granted the owners of that mill by the Government of Nicaragua provided that the duty on wheat flour should not be reduced. He added that the terms of the concession had the effect of law. Dr. Castro also informed me that there is a movement on foot to request the Nicaraguan Government to increase the duty on wheat flour. The subject of wheat flour was also discussed by Mr. Ray, of this Legation, on October 3 with the Collector General of Customs, who confirmed the information given me by Dr. Castro. Mr. Lindberg stated that he had an appointment for the same day with a representative of the flour mill at Masaya, and that the latter had intimated his intention of advocating that the Nicaraguan Government make a substantial increase in the duty on wheat flour, and admit wheat free of duty. (It seems probable, from what Mr. Lindberg said, that the United States would thereby lose a considerable amount of export trade to Nicaragua in flour, and that, as he understood wheat could be purchased more cheaply in Argentina, the United States might not be able even to sell any appreciable amount of wheat to Nicaragua.) He [Page 837] promised to keep the Legation advised as to the situation, but expressed confidence that no action would be taken, either towards increasing the duty on flour or admitting wheat free of duty. He said the mill at Masaya had not operated for some time, but that the concession had recently been transferred to a person very close to the Government, and that a determined effort was apparently being made to begin operation of the mill on a substantial scale.
- 3.
- With regard to the last sentence of Article IV, Dr. Castro remarked that the reason why the provisions of the Article should not be applicable to cocoanut oil or combinations or mixtures was not clear to him. It would be appreciated if the Department would advise me what reply it desires me to make to the above informal inquiry.
- 4.
- Dr. Castro also inquired, with respect to Article V, as to what basis the United States Customs use for computing the value of articles on which duty is levied. The consulate has furnished me the information contained in Section 402 of the Tariff Act of 1930, regarding the value of merchandise imported into the United States. If the Department feels that additional information should be furnished Dr. Castro, may I be appropriately instructed in the matter?
- 5.
- With regard to Article VI, Dr. Castro remarked that Nicaragua has no objection to the provisions of that Article provided there shall be no lack of foreign exchange. As concerns sub-heading 3 of Article VI, he said some provision should be made for Nicaraguan laws, such as the reference made to Section 337 of the United States Tariff Act of 1930. He remarked, however, that he knew of no Nicaraguan law in existence at present which might be applicable. Dr. Castro said he made this suggestion so that the provision, as drafted at present, would not appear one-sided, favoring only the United States.
- 6.
- He also requested me to explain to him the reasons for paragraph 2 of Article VII, and what effect the provisions thereof would have on the importation of Nicaraguan sugar into the United States. In this connection, please see my despatches Nos. 1011 and 1030 of August 24 and September 6, 1935, respectively,32
- 7.
- He objected to the second paragraph of Article IX on the ground that during a previous representative period prior to the establishment of any exchange control there had been no difficulty in securing exchange, and stated that under present conditions the amount of foreign exchange allotted must be based on importations.
- Dr. Castro apparently had not studied the general provisions further than through Article IX.
Any instructions which the Department may be good enough to give me with regard to Dr. Castro’s observations will be appreciated.
Because of the political situation, outlined in my recent telegrams to the Department, it is in my opinion futile to endeavor to press urgently at this moment the matter of the negotiation of a trade agreement; I shall, however, on receipt of the Department’s instructions, discuss the matter further with the appropriate officials. For the reasons mentioned above, and for that of economy, I shall not, [Page 838] unless instructed to the contrary, and until the present political stress is relieved, report by telegraph my conversations on the reciprocal trade agreement.
Respectfully yours,
- Neither printed.↩