816.51C39/546: Telegram

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

19. Department’s telegram No. 17, June 17, 6 p.m. In interview with President Martinez this morning he stated that El Salvador’s budget of expenditures for fiscal year beginning June 1 will be for 17 million colones or 3 million less than expenditures for the past several years. This was the only definite statement that could be extracted from him in support of his repeated asseverations that the country’s financial situation is so bad that it will be impossible for it to meet the debt charges due at the end this month.

Two millions of the budget decrease equal the amount of the loan service for 1 year and the remaining million is more than compensated for by new taxes and more efficient collection of old ones. The President asserted that such taxes are earmarked for specific purposes and are not available for the service of the debt.

The President agreed to direct the Minister of Finance to supply me with a written exposition of the alleged obstacles to payment and I am taking advantage of the opportunity to supply earlier to the President a reciprocal written exposition of the reasons which support the view we hold. The Department will be informed immediately of climaxes.