Foreign Relations of the United States: Diplomatic Papers, 1943, The American Republics, Volume VI

816.51/1148: Telegram

The Secretary of State to the Ambassador⁵⁸ in El Salvador (Thurston)

No. 158

Washington, May 12, 1943.

Sir: I refer to the Department’s instruction no. 124 of April 19, 1943 and to your despatches nos. 323 and 324 of April 28, 1943,⁵⁹ regarding the desirability of resumption of service by El Salvador on its outstanding bonds.

The Department notes that the Salvadoran Government contemplates submitting to the American and British Governments a plan which is now being prepared for adjustment of the debt. You are requested to make it clear at an early opportunity to the appropriate Salvadoran authority that it would be contrary to the Department’s policy for it to negotiate a specific plan on behalf of the bondholders. The Department believes that this [is] a matter which primarily concerns the Salvadoran Government and the bondholders, and that it should therefore be discussed directly between the competent Salvadoran officials and the bondholders or their representatives, for example, the Foreign Bondholders Protective Council, Incorporated, 90 Broad Street, New York, with the standing of which the Government of El Salvador is familiar. The purpose of the Department’s instruction was merely to make it clear why the Department believed that the Salvadoran Government should seek an early opportunity to initiate discussions with the bondholders or their representatives looking to a resumption of service on the outstanding debt.

You may, in your discretion, should a suitable opportunity offer itself, discreetly point out to the Minister of Finance,⁶⁰ that the Department has never taken any position with regard to the desirability of the establishment or dissolution of the Bondholders Protective Committee. In giving consideration to the Salvadoran default in all its aspects, the Department has naturally taken into account the scope of the legal powers which an overwhelming majority of the bondholders had entrusted to the Committee, and the primary responsibilities which consequently rested upon it.

For your background information, the Department would not be at all disposed to accept a debt plan such as that described in your despatch no. 283 of April 15, 1943⁶¹—in the event that the Minister of Finance was referring to a plan of this nature in informing you that a plan would be submitted to this Government. The Department has consistently declined to become involved in refunding plans for private indebtedness contemplating the use of this Government’s funds. On the other hand, there is no reason why the Salvadoran Government should not propose to the bondholders or their representatives some link between coffee prices and the level of service which that Government covenants to maintain on its debt.

Very truly yours,

For the Secretary of State:

A. A. Berle, Jr.

58. The Legation in El Salvador was raised to the rank of Embassy on April 16, 1943, when Walter G. Thurston presented his credentials as Ambassador.
59. Despatches Nos. 323 and 324 not printed.
60. Rodrigo Samayoa.
61. Not printed; in it the Ambassador described this plan proposed by Hector Herrera, President of the Mortgage Bank of El Salvador, as a proposal (1) that the Governments of the United States and Great Britain become the creditors of El Salvador in lieu of the individual American and British holders of Salvadoran external bonds; (2) that a further modification of the interest and amortization rates on these bonds be made; (3) that the price of coffee be stabilized; and (4) that the processes by which the internal taxes of El Salvador are collected be improved, utilizing therefor the services of Mr. W. W. Renwick (816.51/1143).