852.75 National Telephone Co./305: Telegram

The Ambassador in Spain (Weddell) to the Secretary of State

258. Referring to the Embassy’s No. 245, December 4, 6 p.m.17

1. Behn informs me that on December 18, during a conversation with Colonel Galarza, the Sub-Secretary of the Presidency, he informed the latter of his intention to place the matter of the Telephone Company’s situation with this Embassy. Colonel Galarza advised him before doing so to see the Minister of Finance which he did the same evening. The Minister of Finance at first expressed sympathy with the case of the Telephone Company and then expressed himself as being bitterly disappointed at the failure of the United States Government to expedite the question of coinage for the Spanish Government mentioned in the telegram under reference. The Minister of Finance added that he had hoped and expected to have the contract for this coinage signed by January 1st to permit him to make a public announcement to this effect. He explained that this would have had a very good effect politically and that furthermore the Spanish Government expected to make a large profit from this seignorage which could be shown in the next budget. He added that as regards the Telephone Company the various Ministers of the Cabinet had different opinions [Page 852] and that he looked to Colonel Behn to furnish him with “arguments” which he might use in sponsoring the case of the Telephone Company with the other Ministers. Behn inferred by this that the Minister was requesting him to use his influence with this Embassy to expedite action on the coinage of the money for Spain.

Behn considers the Minister’s remarks to be in the nature of blackmail, his inference being that unless the American Government makes this coinage available to the Spanish Government the Minister rests with the case of the Telephone Company.

Behn stated emphatically that he believes the Spanish Government is greatly in need of this coinage and that although the Minister of Finance stated the Government was “disposed” to pay for it when the conditions of payment are actually discussed Behn believes the Government will ask for credits. Behn has calculated roughly that this coinage will cost the Spanish Government somewhere in the neighborhood of 8 million dollars and he feels that putting the deal through would be another favor granted by our Government to the Spanish Government similar to the cotton credits. Behn considers the attitude of this Government as regards the Telephone Company and all other American interests here to be one of “horse trading” and he urged that the Department make it clear to the Spanish Government that no consideration will be given to the sale of the coins to Spain until the status of the Telephone Company is definitely settled. He believes that Spain cannot obtain these coins elsewhere and that if used as a trading proposition we have a powerful lever on the Spanish Government.

I informed Behn that up to the present the question of payment for the coinage had not been discussed and that if the Spanish Government was disposed to pay cash for the coins I doubted whether the Department would use this question for bargaining purposes. On the other hand I felt that should the Spanish Government request the extension of a credit to pay for the coinage the Department might be disposed to make the return of the management of the Telephone Company to its rightful owners a sine qua non. Behn reiterated however that even if the Spanish Government was disposed to pay for the coins their supply to the Spanish Government was still in the nature of a great favor extended by our Government and he urged that we should refrain even from doing this prior to the solution of the Telephone Company’s difficulties. I promised Behn that I would place this whole matter before the Department exactly as he had explained it to me for its consideration and comment.

  1. Not printed; it concerned an undertaking by the United States Mint to supply a large amount of coinage for the account of the Spanish Government (852.515/70).