Evening star. [volume] (Washington, D.C.) 1854-1972, 1911-02-26
HONDURAN FINANCES
Reasons for American Loan
Agreement Lately Reached.
ASSISTANCE WAS NEEDED
Foreign Creditors Were Pressing for
Settlements.
AMERICAN PRESTIGE AT STAKE
Welfare of the Canal Enterprise In
volved-Monroe Doctrine in It's
Bearing on the Case.
AMERICAN PRESTIGE AT STAKE
By an American Dinlomat


/ Through series of foreign loans the
| proceeds Of which were intended for per
manent public works. railways, etc, but
appear to have been dissipated in extray-
agance. graft and disproportionate ex-
penses of promotion, Honduras has found
itself for some years under great pressure
from foreign creditors. chiefly in Great
Britain, but also in such countries as
Belgium. Holland, France and Germany
During the last administration the Brit
ish bondholders proposed a plan to re-
fund the debt. 1t provided for raising
the tariff and took no due account of the
undoubted equities and even legal rights
of americans interested in various prop
critics which it was sought to hypothe-
cate along with the customs for the
| service of the loan. The arrangement
was also deemed unduly onerous to Hon.
duras and it was thought that through
this fact it would tend to cripple the
country and TO blockade its normal de-
velopment and its foreign commerce
The situation in Honduras was so ia
miliar and its relief was so desirable
that 1T had long been hoped that some
American banking house would be Wiling
to try once more the task which hitherto
had always failed, of making an econom-
ical and beneficial arrangement to put
Honduras financially on it's feet. At this
! time, during the last administration, the
government of Honduras made overtures
10 the government o. the United States
as to whether 1t would help bring about
| the desired arrangement through the
agency OF American bankers, and the
| government of the United States indicat-
cd that 1t would receive most sympa-
| thetically any definite suggestion to that
end. Later on the British government,
whose nationals were chiefly concerned
in the debt Of Honduras, expressed it's
| qualification at the American attempt.
and negotiations looking to the English
plan were abandoned to await the out
come Thereupon Honduras promptly
sent to New York two commissioners to
enter on the practical negotiations.
Financial Contract Negotiated.
Their work has now taken definite form
in a contract between the government of
| Honduras on the one hand and a group
| Of American bankers, composed Of j. r.
| Morgan & Co., Kuhn, Loeb & Co.
he National City Bank and the First
National Bank on the other, which
has recently been signed. This contract
| If finally approved by the Department Of
State and definitely accepted by the
government of Honduras including its
congress, will receive the shelter of the
convention now before the Senate. The
/
duras and the United States shall take
due note of the arrangement and shall
! give 1t such protection as may be requl-
| site to secure the advantages which have
moved the government of the United
States in Interesting itself in the trans
action The consent of the Senate Is
necessary to make operative the steps
| that have already been taken on the
| part Of the administration with the
American bankers and the government Of
| Honduras.
/ II is understood that the customs of
Honduras will be collected and admins
| tered in a somewhat similar fashion TO
those Of the Dominican republic. although
| not by an appointee Of the United States.
| This will mean that the customs when
| collected will be devoted, first. to the pay
| ment of the necessary expenses OF col
| lection: second. to the deposit In New
| York, where a fiscal agency will be es-
| tablished, of an amount sufhclent to
cover the interest and sinking fund on
| the bonds issued and. third. that the
| balance shall be paid to the government
| of Honduras
The American Interest.
Some superficial observer may ask,
why should the United States enter
into a convention with Honduras to Sc
cure a loan to the government of Hon
duras bv J. p. Morgan & Coz" 1t might
be replied with equal superficiallty, Be
cause the financial history, reputation and
condition OF Honduran finance are such
that neither j. p. Morgan & Co. nor
any other safe and sane American bank
ing house would make the loan. without
this element of security, nor without this
element of security could banker sell
i the bonds except at so speculative price
as would involve taking the. bonds from
Honduras at rate so low as to be
ruinous to that struggling republic. Pro-
ceeding to questions less superficial. why
should the United States wish American
bankers to help Honduras?
4 Secretary Knox gave one pretty good
general answer to this question when he
said, in his address to the University of
Pennsylvania, June 10, 1910:
IF this government can help to upbu1ld
and promote the thought that the cap
ital of the more advanced nations of the
world would be better employed In as
sisting the peaceful development of those
more backward than in financing wars.
1t is such a deviation from traditions as
the American people will approve 1t
is for the purpose, then, of pronotlnS
the peace, prosperity and welfare OF
Ine.ghboring republic that the Department
of State wishes to take such moderate
steps as are necessary to lead Amerl-
can capital to the rescue of Honduras.
Front Yard of the Canal.
The islands Of the Caribbean sea and
the republics between Mexico and the
iSthmuS nave Deen caileu the ITonl ydiu
| Of the canal" which is being built at
huge cost upon strip of American terri
tory connecting two great oceans and
standing as a segment in our coast line
interrupted at each end by the coasts of
Mexico and Central America. The United
States naturally would prefer not to have
a Kilkenny cat continuous performance
In the front yard of the Panama canal.
In Cuba and elsewhere the United
has promoted measures Of sanitation
| with the result Of giving our southern
| ports practical exemption from epidemics
| Proximity. close commercial intercourse
and travel between our ports and Cuba,
Just as between them and the five Cen
| trail American republics, made sanitary
| conditions very essential to our own
| people. Americans are in Central Amer
| lea in very considerable numbers. owning
| plantations and timber lands. operating
| mines and engaged In commerce They
/ are not only on the coast but in the
| interior We are the best customers
| for Central American products. and we
| have relatively large. expectation to them.
Our government owes something to the
| present and the future Of all the inter
| mingled commercial, maritime, political
| and social currents between the United
| States and the sphere OF Central Amer
lea and the Caribbean sea. Admiral