817.24/8–1946: Airgram

The Ambassador in Nicaragua ( Warren ) to the Secretary of State

confidential

A–337. In connection with the conversation of Messrs. Briggs and Cochran with Nicaraguan Ambassador Sevilla Sacasa covered by memorandum of conversation dated July 31, 1946, this Embassy offers most respectfully the following comment.

It is not understood how Ambassador Sevilla can attribute Nicaragua’s failure to make any payment on Lend Lease to the recent drought. With the exception of coffee, Nicaragua had the greatest exportable surplus from its 1945 crop in the history of the Republic. Important exports of corn, rice, and beans began to move late in 1945, and continued until just recently when due to drought the Government suspended issuance of export licenses for grain food. As the Ambassador points out, the recently increasing coffee prices should have improved somewhat Nicaragua’s ability to pay.

This Embassy had not heard heretofore of any scheme to sell some of Nicaragua’s gold production to China. If gold can be disposed of in China to better advantage than in the United States, it is to be hoped that the scheme can be effected. It is the firm conviction of the Embassy that Nicaragua’s failure to meet its obligations under Lend Lease are due almost entirely to extravagant expenditure by the Somoza administration.

With regard to the amount of $166,000 owed by Nicaragua to the United States Army Engineers, it is the Embassy’s belief that the failure to liquidate this obligation is due primarily to the readiness of the Somoza administration to spend its revenues for other purposes which it considers more compelling. The Nicaraguan Government is in arrears to the United States Army Engineers just as it is in the payment of its contribution to the sanitary program41 in this country, on Lend Lease, and on the payment of certain bills due in the United States. It is possible that General Somoza does desire to see all these obligations paid before he leaves the Presidency on May 1, 1947. If so, he has chosen a most difficult time in which to meet the obligations. It seems certain that during the coming months Nicaragua will face declining revenues. It will be even harder to pay these obligations during the next 8 months than it has been any time during the past 16.

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During his recent visit here, Ambassador Sevilla told me he has spoken to President Somoza and that the Lend Lease obligation would be paid in installments as funds become available. He said there was no question of bad faith and that there exists a real desire on the part of General Somoza to liquidate the amount as quickly as possible. I do not recall that he mentioned the sum owed to the United States Army Engineers.

The Embassy is of the opinion that it would be a mistake to lend Nicaragua $3,000,000 to buy agricultural machinery and equipment and to make loans to small farmers. Mechanization of agriculture is not the solution to Nicaragua’s problem. Such a change would entail the unemployment of many Indians now used in agricultural work. Furthermore, it would call for many trained mechanics for the operation and upkeep of such machinery. Such mechanics are not available and would have to be trained over a period of years. Consequently, the new machinery would probably be discarded at the end of the first harvest—a new loss to be borne by Nicaraguan economy. If Nicaragua desires to make loans to small farmers it should learn to raise internally the funds which she needs for that purpose. It is not seen that an importation of dollars for this purpose would be justified. There is plenty of money in Nicaragua for such a purpose, but the Nicaraguans do not have sufficient confidence in their Government to use it for that purpose. Furthermore, a rate of from 10 to 15 per cent a month on funds is not unusual.

The Embassy will continue to watch this matter closely.

Warren
  1. Under agreement between the United States and Nicaragua respecting a health and sanitation program, effected by exchange of notes signed at Managua March 30 and 31, 1944, it was understood that Nicaragua would contribute $150,000.00 to be combined with funds contributed by the United States for the cooperative program in Nicaragua. For texts of notes, see Department of State Executive Agreement Series No. 484, or 59 Stat. (pt. 2) 1673.