89. Telegram From the Secretary of State to the Embassy in Honduras 1
84. Re your 1342 Department concurs your views regarding need to clarify to Villeda prospects of additional U.S. economic aid for Honduras and caution him against exaggerating such prospects in his plans and making over-optimistic statements. Rubottom pointed out to Mejia3 Wednesday that IBRD and ExIm Bank policies of financing only foreign exchange costs is well known. Development Loan Fund still unknown factor because criteria for use remain to be [Page 194] determined. We believe Honduras should exercise strict control over budgetary and fiscal planning; take appropriate steps to save exchange for capital goods imports; and foster private foreign investment. Rubottom expressed opinion Honduras should start on development projects which have already been studied and are ready for execution (such as highway construction). He made no commitment of any kind to Mejia group.
Villeda’s confidence that constituent assembly will name him president contrasts sharply with Armed Forces attitude as expressed by Galvez in 12 page letter to Agurcia4 who transmitted contents to Willauer by phone. Letter substantially agreed with Galvez views reported Embdes 125.5 According Galvez armed forces will retain control through Junta which acting as its agent until inauguration president chosen popular election and not by assembly, thus fulfilling commitment to Honduran people. Current Junta submitting resignation effective October 21. Armed Forces will name new Junta to operate until duly elected civilian government takes charge.