Memorandum by Mr. Fred G. Heins of the Division of Central America and Panama Affairs 25


The following is a brief résumé of Nicaragua’s confused financial situation, made in view of A–190 of May 9, 1947 from Managua indicating that President Argüello may send his Foreign Minister to Washington to try to obtain a loan from the United States to tide him over his present financial difficulty. …

Although the public debt is said to have increased from 14,999,000 cordobas in 1938 to 29,217,000 cordobas in 1945, government revenues are reported to have increased from 7,493,825 cordobas for the fiscal year 1937 to 63,762,659 cordobas for the fiscal year 1945 with a surplus for each except two (1943 and 1945) of these nine years. The net surplus of revenues over expenditures for this period was reported to be 24,229,142 cordobas. The budgets for 1946 and 1947 amount to 70,391,338 cordobas and 77,359,608 cordobas respectively, but information is not available as to how they will balance.

The history of Nicaragua’s external debt is more favorable than that of many other countries. All outstanding loans previous to 1909 were converted into or paid from the proceeds of the Sterling 6% loan of 1909. Sinking fund payments due in 1911 and interest due January 1, 1912 were suspended. Under an agreement of 1912 interest was reduced to 5% and sinking fund fixed at 1% per annum. Service was interrupted in 1915–16 and again in 1917–20 when part cash-part scrip payments were agreed upon. Service was resumed in 1920 and maintained to November 1931, after which date sinking fund remittances through 1936 reduced. New arrangements were concluded in July 1937, reducing the rate of interest to 4% per annum and extending the maturity to 1957. Sinking fund payments on the outstanding 4% bonds of 1909 were temporarily suspended in September 1941, and resumed on January 1, 1945. On December 31, 1945 the outstanding balance of this Sterling debt was 9,437,116 cordobas.

The 1945 public debt, which was reported to be 29,217,000 cordobas, included external debts (Sterling bonds and Export-Import Bank credits) of approximately 24,242,000 cordobas. While exact figures [Page 851] are not readily available concerning the public debt at this time, it appears that the total external obligations now amount to approximately 77,373,465 cordobas as explained by the following:

Outstanding Principal on Export-Import Bank Loan $2,396,000
Outstanding Interest on Export-Import Bank Loan 656,994
Outstanding Lend-Lease Credits 508,000
Outstanding Stabilization Fund 5,263,699
Outstanding Bank of America Loan 2,000,000
Outstanding Sterling Bonds (approximately) 1,850,000
Quota for International Fund 2,000,000
Subscribed for Shares of International Bank 800,000
Total $15,474,693

The total Export-Import Bank loans of 1939 and 1941, outstanding on May 13, 1947, amount to $2,396,000 in principal and $656,994.78 in interest. Payments were current as of April 1, 1947, but are delinquent at the present time because $35,000 principal and $3,275.14 interest, due on April 30, 1947, have not been made as yet. In addition, $37,000 principal and $1,805.05 interest will become due on May 31, 1947, as well as similar amounts in succeeding months. Furthermore, payments due on principal will increase substantially before the end of 1947, because $2,000,000 of the above-mentioned loans are payable in 8-½ years, semiannually, beginning December 31, 1947.

As of May 1, 1947, Nicaragua owed a balance of $508,000 on its Lend-Lease account.

The Exchange Stabilization Fund on December 31, 1946 amounted to 26,318,499 cordobas, or 19.8% less than on December 31, 1945 and 29.4% less than on December 31, 1943.

Nicaragua is obligated, and may be called upon at any time, to make a considerable financial payment to the International Monetary Fund and the International Bank. According to a decree dated December 21, 1946, which became effective on February 17, 1947, the Issue Department of the National Bank of Nicaragua is fully authorized to pay in the name of and for the account of the Nicaraguan Government its quota for the Fund and also for its subscribed shares of the Bank. These two obligations total $2,800,000.

During the early months of 1947 the National Bank of Nicaragua negotiated a 3-½% loan of $4,500,000, in behalf of the Nicaraguan Government, from the Bank of America in San Francisco. The entire loan is to be made available by July 31, 1948. Quarterly repayments ranging from $100,000 to $175,000 are to begin in 1947 and are due until July 31, 1955. $2,500,000 is to be devoted to the indirect assumption of “frozen” agricultural loans held by the National Bank and $2,000,000 to the extension of new agricultural and industrial loans Two million dollars were advanced to Nicaragua in March.

[Page 852]

The general economy of the country in recent years has been fairly good, but the Embassy reports that business in the first quarter of 1947 was stagnant. The passed due loans by the National Bank as of December 31, 1946 amounted to 9,611,829 cordobas, or 19.05% of the bank’s total loans.

In 1946 Nicaragua’s receipts for exports exceeded payments for imports and showed a favorable balance of $129,929, as compared with an unfavorable balance of $247,329 for 1945. The first quarter of 1947 would have shown an unfavorable balance of over $134,000 had it not been for a two million dollar advance received in March by the National Bank against the above-mentioned $4,500,000 loan from a California bank.

At the close of 1946, the frozen deposits against import orders amounted to 23,243,254 cordobas and as of March 31, 1947 they amounted to 18,997,751 cordobas, showing a reduction of 18.3%. This reduction is due to the large imports of merchandise received during the quarter against back orders some of which had been placed nearly a year before.

. . . . . . .

F[red] G. H[eins]
  1. Copy transmitted to the Embassy in Nicaragua in instruction 506, June 16, 1947, not printed.