the force of the Administration would be broken if this were done, and in consequence thereof the public peace would be endangered. With my highest consideration [etc.] PEDRO RAF. Cuadra. File No. 817.51/587a. The Acting Secretary of State to the American Minister. [Telegram-Paraphrase.] DEPARTMENT OF STATE, Washington, October 11, 1913. See Department's October 10. The Department is advised that the contract with the bankers was signed October 8, so that the Nicaraguan Government had no opportunity to cause insertion of the clause recommended by the Department. It is, however, gratifying to the Department to learn from the bankers that by agreement with Señor Cuadra $400,000 has been set apart and will not be drawn against by Nicaragua pending arrangement with the Department of the Claims Commission matter. Communicate the substance of this telegram to the Government of Nicaragua. MOORE. File No. 817.51/588. The American Minister to the Secretary of State. [Telegram-Paraphrase.] AMERICAN LEGATION, Managua, October 13, 1913. Department's October 10 and October 11. President Díaz emphatically declares it impossible to accede to Department's suggestion relating to the $400,000, asserting that such legitimate expenses as unpaid salaries of Government employees and rental of Government buildings practically equal the disposable funds of the loan, and that neither Chamorro nor Cuadra was authorized to agree to set aside the $400,000. However, President Díaz will agree to the following: If back salaries and current expenses shall not have exhausted all disposable funds, he will be [omission] to consider with the Department an appropriate expenditure of the balance; but he refuses to bind himself in the sense indicated in the Department's telegrams referred He promises that, in any event, he will inform the Department before drawing against the $400,000. to. JEFFERSON. File No. 817.51/594. Curtis, Mallet-Prevost & Colt to the Secretary of State. NEW YORK, October 18, 1913. SIR: Referring to the letter of the 2d instant addressed to you by Messrs. Brown Brothers & Company and J. & W. Seligman & Com NICARAGUA. pany and enclosing drafts of certain proposed agreements; and referring to your letters of the 6th instant in reply to the above, we now, by direction and on behalf of the Republic of Nicaragua and in accordance with the provisions of the agreements hereinafter mentioned, beg to hand you herewith for filing with the Department of State an original counterpart of each of the following agreements,' all dated October 8, 1913: 1. Collateral Trust Agreement between the Republic of Nicaragua and the United States Mortgage & Trust Company; 2. Agreement for the purchase of Treasury Bills, between the Republic of Nicaragua, party of the first part, and Messrs. Brown Brothers & Company and J. & W. Seligman & Company, parties of the second part; 3. Agreement for purchase of Railroad and Bank stock, between the Republic of Nicaragua, party of the first part, and Messrs. Brown Brothers & Company and J. & W. Seligman & Company, parties of the second part; 4. Agreement between the Republic of Nicaragua and National Bank of Nicaragua, Incorporated; and 5. Agreement between the Republic of Nicaragua and Ferrocarril del Pacífico de Nicaragua. The above agreements, having been deposited with us in escrow at the time of their execution, have today been delivered. Respectfully yours, CURTIS, MALLET-PREVOST & COLT. File No. 817.51/605. Statement of the features of the loan contracts of October 8, 1913, prepared by the bankers and given to the press October 20 with the assent of the Secretary of State. Brown Brothers & Co. and J. & W. Seligman & Co. have purchased from the Republic of Nicaragua 51% of the stock of the Pacific Railways of Nicaragua (incorporated under the laws of Maine) and of the stock of the National Bank of Nicaragua (incorporated under the laws of Connecticut). This purchase was made under a contract executed in 1911 and at that time approved by the U. S. Government. The remaining 49% continues to be owned by the Government of Nicaragua. The bankers have also discounted at par $1,060,000 oneyear Treasury bills of the Republic of Nicaragua dated October 1, 1913, and maturing October 1, 1914, drawing six per cent. The Treasury bills are secured by lien on the customs, subject only, first, to the existing lien amounting to about $375,000 per annum in favor of the English bonds of 1909, and second, to the lien on the fourth of the customs in favor of the currency fund referred to below. Customs revenues for the year ending August 31, 1913, amounted to approximately $1,683,000 (U. S. gold). The Customs administration is conducted by an American Collector General recommended by us. The Pacific Railways of Nicaragua is the only railroad in the Republic and extends for 163 miles from the port of Corinto on the Pacific Coast to Managua, the capital, and Granada on Lake Nica Not printed. rauga, with branches. The capital stock outstanding is $3,300,000. For more than a year the railroad has been operated by the J. G. White Management Corporation, who will continue in charge. Two members of the Board of Directors are to be nominated by the Minister of Finance of Nicaragua, and the Secretary of State of the United States has the privilege of appointing one. The latter will also act as Railroad Examiner, making confidential reports to the Governments of the United States and of Nicaragua. The Bank has been in operation for over a year. Its capital has just been increased from $100,000 to $300,000. Its head office is at Managua, with branches at Bluefields and Granada and an agency at León. The Bank is the depository of the Government and its issue department issues bank-notes on behalf of the Government. Two of the members of the Board are to be nominated by the Minister of Finance of the Republic and the Secretary of State of the United States has the privilege of appointing one. There is an exchange fund to maintain the gold standard and in order to insure the permanent maintenance of this fund it is provided that whenever it is depleted below a certain point, one-fourth of the customs revenues is to be applied to it month by month until it is again replenished. Each time this process becomes effective it will by so much permanently strengthen the fund. During the years of political unsettlement recently past, the commerce of Nicaragua suffered from successive inflations of paper currency. A plan of monetary reform which was recommended by F. C. Harrison of London and Charles A. Conant of New York has been placed in operation, the necessary funds being derived through various loans made since 1911 by Brown Brothers & Co., and J. & W. Seligman & Co. The plan provided first of all for the gradual retirement and incineration of all the previous issues of paper money, and during the last two years a total of 37,300,000 pesos of paper money, out of an estimated aggregate of 48,000,000 pesos originally outstanding, has been bought up by the Government (or exchanged for córdobas) and incinerated. The present currency is on a gold basis. Bank notes are in córdobas (the new standard of value, equivalent to the United States gold dollar) and such of the paper pesos (the former standard) as are still in circulation are received as the equivalent of 8¢ in gold, or at the rate of 12 pesos to the córdoba, and fractional currency in silver, nickel and copper is also in circulation. The exchange rate has been maintained at the present level since January, 1913. The financial position of Nicaragua has been fundamentally improved. Efficient collection of customs during the past two years by Colonel Clifford D. Hamm, formerly of the Philippine Revenue Service, has, without change in rates of duty, more than doubled the receipts. The physical condition of the railroad has been entirely changed. In addition, deficits have given place to dividends. With the credit facilities afforded by the National Bank, and with the currency, which underlies credit, established on a firm basis, the most serious evils in the finances, both of the Government and of the country, have been remedied. Nicaragua is now in a position to realize the progress in national welfare which has been the aim of the administration of President Díaz. In the meantime the Government has practically the entire use of all revenues, both internal and customs, for its current needs, excepting only the $375,000, annual re-. quirements to meet the charges on the English bonds of 1909. Proceeds arising from the sale of the Railroad and Bank stock and the Treasury bills have been applied to strengthening of the currency fund and to the payment of existing advances by the National Bank of Nicaragua, Incorporated, and by the bankers. The balance will, it is understood, go to make payments on account to sundry creditors. Should the United States Senate at its regular session this winter ratify the pending treaty with Nicaragua, providing for the establishment of a naval station on the Gulf of Fonseca and granting a perpetual right to build the Nicaragua Canal, the proposed payment to Nicaragua of $3,000,000, provided in the treaty as compensation, would put that Government in a position where it could liquidate the greater part of the local debt and claims accumulated during former periods of political disturbance. The only foreign debt of the Government of Nicaragua, except the $1,060,000 Treasury bills now issued, is the English bonds of 1909 amounting to £1,200,240, and paying interest at 5% and amortized by a cumulative sinking fund of 1% per annum, calculated to retire the issue on or before maturity. File No. 817.51/599f. The Secretary of State to the Minister of Nicaragua. DEPARTMENT OF STATE, Washington, October 27, 1913. SIR: I have the honor to enclose herewith for your information a copy of a letter sent by the Department of State to Messrs. Brown Brothers and Company and J. and W. Seligman and Company, 59 Wall Street, New York, in reference to the loan contracts between the Republic of Nicaragua and the above-mentioned banking firm. In transmitting to you the enclosed copy, the Department desires to state that its position in this matter is very clearly defined therein and refers especially to the many conversations which you have had at the Department in the premises. Accept [etc.] File No. 817.51/598a. W. J. BRYAN. The Secretary of State to Brown Brothers & Co. and J. & W. Seligman & Co. [Telegram.] DEPARTMENT OF STATE, Washington, October 27, 1913. Department will be glad to have you place two hundred of the four hundred thousand of Nicaragua's money at their disposal. Immediately a telegraphic reply comes from Nicaragua, you will be advised regarding the arrangement respecting the balance. W. J. BRYAN 1 The fourth of the four letters of October 6 directed to the bankers by the Department. File No. 817.51/598. Brown Brothers & Co. and J. & W. Seligman & Co. to the Secretary of State. NEW YORK, October 29, 1913. SIR: We received yesterday morning your telegram of the 27th instant, and have accordingly notified the Nicaraguan Government at Managua that the $200,000 referred to in your telegram, out of the $400,000, was subject to its disposal. We understand, unofficially, that Mr. Cuadra has drawn a check to the order of yourself and Mr. Charles A. Douglas for $100,000 on Brown Brothers & Company which has not yet been presented for payment. When this check is deposited for collection, we beg to advise that it will be necessary to send us instructions to pay it out of the $200,000 now held in reserve, as per your telegram of the 27th instant; also that it will be necessary for Mr. Cuadra to give instructions to the same effect. We have [etc.] BROWN BROTHERS & Co. File No. 817.51/599. The Minister of Nicaragua to the Secretary of State. [Translation.] LEGATION OF NICARAGUA, Washington, October 31, 1913. EXCELLENCY: I have the honor to answer your excellency's note of October 27 in which you kindly enclosed a copy of the letter sent on October 6 by your excellency to Messrs. Brown Brothers & Co. and J. & W. Seligman & Co., bankers of New York City, in which letter your excellency states that in Nicaraguan matters you have acted and intend in future to act solely in the capacity of adviser; of all of which I take due note. I take the liberty of expressing to your excellency on behalf of my Government and for myself our thanks for the inestimable services which your excellency has lent to Nicaragua during the short time you have occupied the high position of Secretary of State of the United States of America. With assurances [etc.] EMILIANO CHAMORRO. File No. 817.51/598. The Secretary of State to Brown Brothers & Co. and J. & W. Seligman & Co. DEPARTMENT OF STATE, Washington, November 5, 1913. GENTLEMEN: The Department is in receipt of your letter of October 29, in connection with the Nicaraguan loan, and referring to the payment of the $100,000 which was to be paid out of the |