William Jennings Bryan to Woodrow Wilson

I have the honor to enclose a copy of the letter which the Minister of Finance of Nicaragua, don Pedro Rafael Cuadra, and the Nicaraguan Minister, resident in Washington, don Emiliano Chamorro, have addressed to the Department under date of September 1st, with a copy of the contract referred to therein. You will notice that the provisions of the letter call for sufficient funds to pay off the present bankers (thus cancelling the option on the railroad) and to relieve Nicaragua's present financial stringency.
Mr. Moore revised the form of agreement and we have put in everything that we can think of that will protect Nicaragua. Please note that the Finance Commissioner has no right to be interested in concessions, except the bank. We thought this provision might remove temptation and enable him to act solely in the interest of Nicaragua. You will notice, too, that the compensation of 1% commission is small compared with what financiers have been in the habit of charging these countries in the form of discounts, and that the loans and expenses incurred in securing the same are subject to approval by the State Department.
The Nicaraguan representatives in Washington would have willingly made a contract less favorable to Nicaragua. In fact, they complained a little at the restrictions that I imposed, but I told them that I would not recommend anything to you that could, in my judgement, be criticized. When the new loan is made Nicaragua will insist upon a clause permitting payment at any time, so that she can pay off any part or all of her debt with money received from the Canal and Naval Base Convention.
I directed Mr. Long on Saturday afternoon last to request the Nicaraguans to write me a letter expressing definitely their preferences and I enclose a copy of their favor of August 30th. It contains many interesting statements, but as it did not define their desires with sufficient accuracy I asked for this supplemental letter
.Mr. Jarvis has not seen the papers in their present form, but as he is willing to act as Finance Commissioner and investigate the affairs of Nicaragua, as well as secure money for her, I do not anticipate that he will object to the consideration the Nicaraguans desire to show to the present bankers by paying them off before appointing Jarvis definitively. He is principal owner of the National Bank of Cuba and is willing to advance $200, 000 to Nicaragua for her immediate use at straight 6% and 1% banker’s commission if Nicaragua will agree to pay him back out of the money received for the Canal and Naval Base Convention.
I will serve on all parties the notice which you have already approved, reserving for the Department entire freedom as to any action that may be asked for, the Department’s decisions to be rendered when its advice or approval is asked. Copy enclosed.
I will await your advice in this matter and in order that you may note what the present bankers claim to have done for Nicaragua, I attach a copy of their telegram dated August 28, 1913. In my inquiry which brought out this message I referred to the option on the railroad as representing concealed profit, as there was no way to determine accurately the value of option on railway, but whatever it was, it represented an additional profit over and above the 6% interest for which the contract called. Please observe that they soberly refer to 18% as a current rate of interest in Nicaragua and that the Nicaraguan Minister points out that 24% is frequently charged, and states that even at these rates loans are not available. It is little wonder that unrest and revolution occur occasionally under such conditions, and it is the Department’s desire as soon as the loan of approximately $2,500,000 now desired is arranged to suggest such distribution of same as will relieve existing unfortunate conditions.
If the present bankers should desire to exercise their option on the railroad under the terms of the existing contract, they would be compelled to pay $1,000,000 for 51% of the capital stock (which is $3,200,000) and to lend to the railroad a half million dollars for improvements. Should a new temporary loan by them to Nicaragua for the sum of $2,000,000 be necessary, they now desire a new contract, 51% of the railway for $1,000,000, the remaining 49% for $1,250,000, and release from the obligation of advancing the half million to the railroad for improvements.
The Nicaraguans would prefer to retain the railroad but would not interpose objections should Brown Brothers and Seligman endeavor to exercise their existing option, believing that any effort on their part to break this contract, even though it be a bad one, would have an unfavorable effect upon the credit of their country.
As the transfer of this loan may be the subject of comment, I desire your opinion before taking final action.