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

No. 203

Sir: Pursuant to my telegram No. 19 of June 21, 6 p.m., I have the honor to enclose the English and Spanish versions of a self-explanatory communication dated June 22, which I sent to President Martinez in the latter language this morning.

Respectfully yours,

Robert Frazer

The American Minister ( Frazer ) to the President of El Salvador ( Martinez )

Dear Mr. President: In view of your kind promise, in our conversation yesterday, to request Dr. Samayoa, the Minister of Finance, to send me a Memorandum regarding the difficulties which prevent the Government which you so ably direct from meeting the payment of Ȼ1,062,500 on its foreign debt, which is due at the end of the current month, it seems appropriate that I should also furnish the present memorandum of the verbal statements I made to Your Excellency and the reasons which impel me to feel that an unduly pessimistic view of El Salvador’s financial position is being taken by those members of Your Excellency’s Government who oppose the punctual payment of the above sum. Such a Memorandum might also be of assistance to Dr. Samayoa in pointing out any erroneous conclusions I may have drawn from the statistics available to me.

I beg, therefore, to submit the following:

(1). Government Revenues for First Ten Months of Fiscal Year

July 1, 1934 to May 1, 1935 Ȼ18,159,964
1935 1936 14,564,090
1936 1937 15,829,536
1937 1938 16,480,814

The foregoing figures indicate that total revenue during the first ten months of the current fiscal year has been the highest for three years and above the average of the past four years.

(2). Financial Resources of the Government

Government’s general deposit in the Central Reserve Bank:

May 15, 1935 Ȼ1,246,205
1936 3,274,459
1937 2,988,087
1938 4,196,000

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Deposits of Official Institutions in the Central Reserve Bank:

May 15, 1935 Ȼ301,888
1936 1,206,336
1937 1,331,199
1938 1,352,000

Gold Reserve Note Circulation
May 15, 1935 Ȼ11,921,319 Ȼ14,153,084
1936 12,916,962 14,234,888
1937 13,142,554 16,889,916
1938 13,172,000 14,246,000

The above figures indicate that the Government’s financial reserves are larger at this time than they have been for some years.

(3). Financial Position that Would Exist Were the Loan Service to be Met on June 30, 1938.

The amount due on the loan service on June 30, 1938, is Ȼ1,062,500. If this sum were deducted from the Government’s general deposit in the Central Reserve Bank, there would still remain in it more than Ȼ3,000,000. This sum would compare favorably with that on hand on the corresponding date last year and be much higher than on June 30, 1935, or June 30, 1936, as shown below:

General deposit June 30, 1935 Ȼ1,328,000
1936 1,372,000
1937 3,270,000
1938 3,000,000 (Approximate)

(4). El Salvador’s annual foreign debt service of $850,000, or Ȼ2,125,000, amounts to about ten per cent of the country’s revenue, which is a very moderate percentage, especially in view of the fact that the internal debt has been practically paid off.

When the annual foreign debt service was double what it is now from 1924 to 1931, or $1,700,000, payments were punctually made.

(5). Estimated Revenue from July 1 to December 31, 1938

It may be that the Government expects to collect smaller revenues in the second semester of 1938 than it has during the first semester. If this expectation should unhappily be realized, conditions which exist at the end of 1938 could more appropriately be discussed when the end of 1938 arrives than they can be now. In so far as the position on this coming June 30th is concerned, the financial position of the Government appears to be so strong as to make easily feasible the payment due on that date.

I have [etc.]

Robert Frazer