817.51/10–1646: Airgram

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


A–231. Loan applications have been submitted by the Nicaraguan Government to the Bank of America and to the Eximbank for apparently similar purposes, as follows:

The Department is informed that the Bank of America was approached by Rafael Huezo, General Manager of the Banco Nacional de Nicaragua for an eight-year loan of $4.5 million which reportedly will be employed to increase the working capital of the Banco Nacional so as to enable the latter to advance funds to the Banco Hipotecario de Nicaragua for opening up new lands and for the mechanization of agriculture. The Banco Nacional desires $2.5 million upon approval of the loan, and the balance within two years. The period of repayment is 1948 to 1955 at the annual rate of $600,000, payments to be made quarterly. The security reportedly offered is the assignment of $2 million in gold and $1.5 million in dollar balances which would be held by the Bank of America, appropriate assurances being given that no legal or financial encumbrances, written or otherwise, exist to prevent the offer of such security. Reportedly, the Nicaraguan Government and the Banco Nacional would guarantee the loan. The Department is not aware that this loan application to the Bank of America has received [Page 1093] or will receive favorable consideration. (Reference Embassy’s confidential telegram no. 542, September 30, 1946.44)

In a letter of July 23, 1946, the Nicaraguan Ambassador presented to the Eximbank an application for a loan of $3 million. The Exim-bank reports that the application is for two different types of credits; namely, (a) to provide capital for the Banco Hipotecario de Nicaragua so that the latter apparently could take over from the Banco Nacional long-term loans to municipalities, public utilities, et cetera, and thus permit the latter to make short-term loans to agricultural producers, and (b) for the purchase of U.S. agricultural machinery and equipment.

The Nicaraguan Ambassador and Rafael Huezo have been informed by the Eximbank that the first type of credit could not be extended since it was contrary to the policy of the Eximbank to extend credit for such purposes, namely, for the establishment of a reserve against which local currency loans could be made. They were informed, however, that the second type of credit could be considered, but that it would be necessary to indicate more precisely the machinery and equipment desired and the specific projects for which they would be employed. They were informed, moreover, that since the current application for the second type of credit did not specify in sufficient detail the projects contemplated, it was uncertain whether the Eximbank would consider giving approval to the credit. The Nicaraguan Ambassador did not definitely indicate that a revised application would be submitted.

For the Embassy’s information only, the Department and the Eximbank believe that the following economic considerations preclude favorable consideration of credits to Nicaragua, namely: doubt as to possibility of effective use of any credits which might be granted at this time; the questionable position of the Banco Nacional; and, the failure of the Nicaraguan Government to meet its existing obligations to United States entities such as rubber companies, U.S. Corp of Engineers, Lend-Lease and others.

For political reasons, the Department does not favor the extension of an Eximbank loan to Nicaragua prior to the elections to be held early in 1947.

  1. Not printed; it indicated that on December 30, 1946, the Nicaraguan Ambassador informed Assistant Secretary Braden that preliminary steps had been taken, and an agreement signed, whereby Nicaragua would obtain a 4½ million dollar loan from the Bank of America, and that part of this loan would be applied to lend-lease payments (711.17/12–3046).