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

No. 47

Sir: The Department has recently received a visit from Mr. Frederick E. Lober, Vice President of the Manufacturers Trust Company, 55 Broad Street, New York, New York, in connection with the failure of the Government of El Salvador to comply with the terms of the Readjustment Agreement of April 27, 1936,2 and its default under the Loan Contract of June 24, 1923.3

Mr. Lober informed the Department that since the recent announcement of suspension of payment on its foreign bonds by the Government of El Salvador, the receipts of that Government have continued at an unusually high level. He also stated that the Government of El Salvador has continued to set aside sums required for the service of the 1922 loan under the Readjustment Agreement and he has requested the assistance of this Department in prevailing upon the Government to utilize these funds for the purpose of resuming the service of the loan.

Before reaching a decision with regard to the desirability of discussing this matter with the Government of El Salvador, it is desired to have full information on the present financial situation of the Government.

You are therefore requested to submit a prompt report by air mail which should include in particular information on the following points:

A comparison of the customs and other revenues since January 1, 1938, with a similar period for several previous years.
The disposition made of that portion of the export tax on coffee which is normally devoted to the service of the loan and any information which may be available with respect to the present intention of the Government of El Salvador to remit it to coffee exporters.
Any other information which in your opinion would be of assistance to the Department in reaching a decision with regard to requesting the Government of El Salvador to resume service of its loan.

Very truly yours,

For the Secretary of State:
Sumner Welles
  1. El Salvador, Readjustment Agreement between Republic of El Salvador and Bondholders’ Protective Committee for the Bonds of the Republic of El Salvador and Council of Foreign Bondholders of London, Regarding the Loan Contract of 1922 as Amended by Agreements dated January 5 and September 28, 1923, April 21, 1936 (n. p., n. d.); also printed in Foreign Bondholders Protective Council, Inc., Annual Report, 1936 (New York, 1937), pp. 373–382.
  2. El Salvador, Loan Contract between the Republic of El Salvador and Minor C. Keith, June 24, 1922 (n. p., n. d.).