Memorandum of Telephone Conversation, by the Assistant Chief of the Division of Caribbean and Central American Affairs (Newbegin)

Upon the receipt of Managua’s telegram 235, April 935 stating that President Somoza had instructed Mr. James of PRA36 to pay the Export-Import Bank the amount of arrears due on its loan to Nicaragua from funds payable to Nicaragua by PRA for road construction, I telephoned Ambassador Warren this morning to inform him (1) that President Somoza was not in a position to instruct James to pay the Exim Bank and that any payment due to Nicaragua by the Public Roads Administration should be made in the usual manner, (2) that we had maintained all along and continued to so maintain that there was no connection between the two sums due the respective governments [Page 1088] and that the Exim Bank loan was a direct obligation of the Nicaraguan Government and stands by itself.

Ambassador Warren replied that he had been unfortunate in his use of the word “instructed” since President Somoza had merely requested that this be done. He said further that the President had acknowledged fully on two occasions that there was no connection whatsoever between the two matters but that it would be of great assistance to the Nicaraguans were Mr. James to make the payment directly to the Bank. He said that in view of the fact that James had agreed to do so, it would be exceedingly embarrassing to go back at this time to the President and state that we would not comply with his request. He was, however, ready to do so provided the Department wished him to. I suggested that payment direct to the Exim Bank would set a precedent which we were very anxious to avoid and suggested that possibly Mr. James could make his payment to the Nicaraguan Embassy which in turn could pay the Exim Bank. The Ambassador said that he was having luncheon with Mr. James and that he would review the matter with him and call me later.

He telephoned again this afternoon emphasizing once more that there was no question in President Somoza’s mind as to the lack of connection between the two sums and that he and James were both of the opinion that since the President was particularly desirous of paying off the amounts due the Bank he could only interpret our refusal now to make this payment as an attempt to humiliate him. For this reason he felt it was undesirable to take it up with him again. I replied that under these circumstances it might be best to let the matter rest until Mr. James returned to Washington when it could be discussed further here. I suggested also that there would appear to be some question whether James could be authorized by PRA to make any payment to the Exim Bank. The Ambassador said that he was in accord and that no further action would be taken in Managua.37

R[obert] N[ewbegin]
  1. Not printed.
  2. Edwin W. James, Chief of the Inter-American Regional Office, Public Roads Administration (PRA).
  3. A memorandum of April 23 by the Special Assistant of the Division of Investment and Development (Stenger), reported to Mr. Newbegin that the Export-Import Bank had informed him (1) that a payment of approximately $77,000, the amount of the amortization and interest in arrears, had been received from Nicaragua, and (2) that the Bank had informed Mr. James that as Nicaragua had paid the overdue account it would not be necessary to use the PRA funds at that time (817.51/4–2346).