The Secretary of State to the Minister in Honduras (Erwin)

No. 1154

The Secretary of State refers to the Legation’s despatch no. 2619 of February 11, 1943 concerning currency difficulties in Honduras in which the Legation requests that the Department forward the text of whatever modifications of present controls the Department considers should be suggested to the Honduran Government.

At the outset the Department wishes to point out that neither it nor the Treasury has ever believed that there was a probability that any appreciable amount of Axis-tainted currency existed in Honduras. The suggestions originally contained in the Department’s instruction no. 784, June 25, 1942,41 were, as the Legation knows, [Page 384] predicated upon the assumption that dollar currency was not a part of the circulating medium in Honduras. Because of this fact, it was felt that a requirement that all dollar currency be deposited and a prohibition against the further holding of dollar currency in Honduras would have constituted an effective means of uncovering such Axis-tainted currency as might in the future have found its way into Honduras in violation of the import restrictions.

The Legation’s clarification of the relationship between the difficulties which might be encountered in the future in connection with the sale of dollar drafts and the currency controls is appreciated.

Since the Department does not have available to it a complete compilation of the Honduran exchange control laws, it is difficult to suggest the text of any request for modifications that should be made to the Honduran Government. However, it is believed that the following points will enable the Legation to proceed, in such manner as it sees fit, with the necessary discussions with the Honduran authorities:

It should be suggested to the Honduran Government that it withdraw the following instructions: (a) such instructions against the sale or purchase of dollar currency by banks from persons within Honduras as may have been issued under Decree No. 141 of 1934 (see the Legation’s despatch no. 2500, December 17, 194245); (b) the prohibition of the exchange of lempiras for dollar currency by banks imposed on November 30, 1942 (see the Legation’s despatch no. 2474, November 30, 194246); and (c) such other restrictions on the internal circulation of dollar currency of which the Legation may be aware. In this connection, however, the Legation’s attention is invited to the remarks contained in the latter part of the Department’s A–164, January 14, 1943, concerning the possible desire of the Honduran Government to eliminate dollar currency as part of the circulating medium.
It is believed that the restrictions contained in Decree No. 48 of July 15, 1942 (see the Legation’s despatch no. 2206, July 16, 194246) and in Decree No. 141 of 1934 constitute, if effectively enforced, a sufficient prohibition against the importation and exportation of dollar currency.
As a result of the foregoing, it is believed that the objective of free circulation of dollar currency within Honduras and the prohibition of the importation and exportation of such currency (with the exception of a $50 travelers exemption) will be achieved.
To provide a check against the possible appearance of Axis-tainted currency in Honduras, it is suggested that the Legation make arrangements informally with the Banco Atlántida and the Banco de Honduras to handle deposits within Honduras of dollar currency of large denominations and of large sums of dollar currency in the manner outlined in the Department’s A–164, January 14, 1943.
The Legation’s attention is again invited to the fact that the Banco Atlántida and the Banco de Honduras need not necessarily forward [Page 385] to the United States for their own accounts dollar currency which they purchase (see Department’s telegram 27, January 26, 194347). They may, if they wish, retain such currency and if the Honduran restrictions are withdrawn, sell it to persons within Honduras. Furthermore, should the banks require additional dollar currency to satisfy the currency needs of Honduras, they can make withdrawals from their accounts in the United States in the form of dollar currency and, with the permission of the Honduran authorities, import such currency into Honduras.

The Legation is requested to inform the Department of any questions it may have concerning the matters discussed in this instruction and to keep the Department informed of all developments. The Legation is also requested to forward to the Department copies of existing restrictions in Honduras relating to dealings in foreign exchange, particularly Decree No. 141 of 1934.

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  2. Ante, p. 372.
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