The Chargé in El Salvador ( Gade ) to the Secretary of State

No. 585

Sir: Pursuant to Embassy’s telegram 332 of December 6, 1945, 4 p.m.,39 I have the honor to report the receipt from the Salvadoran Minister of Economy of a note purporting to constitute the plan of the Salvadoran Government for the settlement of the Salvadoran foreign debt.

The note, a copy of which is enclosed herewith,39 bearing the date of December 6, 1945, is addressed to the American Embassy and recites that, in conformity with the recommendations of the Commission for the Study of the External Debt of 1922, the Executive Power, acting through the Ministry of Economy, will present to the National Legislative Assembly, for its consideration, a bill for the acknowledgement and adjustment of the external debt on the basis of the 1944 Agreement, modified as follows: 1) date of the Agreement to be January 1, 1946 instead of January 1, 1944, which implies the “capitalization of an additional two years of delinquent interest by means of the issuance of bonds”, and 2) the bonds to be issued in payment of the coupons which matured from January 1, 1938 to January 1, 1936 [1946], inclusive, shall bear interest at the rate of 2% instead of 3½% per annum. The note states further that in order to effect a conciliation between the points of view of the Council of the Corporation of Foreign Bondholders (the British Council) and the Salvadoran Government [Page 1079] with respect to a customs lien, the Ministry of Economy will include in the bill to be presented to the Assembly, in substance, the following provision: “If in the future the Republic guarantees the payment of any debt by a lien on customs collections, the new bonds which will be issued in conformity with the readjustment will ipso facto have a preferential lien over that of any creditor of the Republic.”

This note was actually prepared by the Minister of Economy in response to the suggestion of Mr. Lionel V. Laxton, the local representative of the British Council, that it would be helpful if the Salvadoran Government would submit, for transmisson to the British Council, something in the nature of a more complete offer of the Salvadoran Government for the settlement of the foreign debt.

Respectfully yours,

Gerhard Gade
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