El Paso herald. (El Paso, Tex.) 1901-1931, 1912-05-16

/ Nicara qua has been called the cock
I pit of Central America viii fail OF
ratification at Tegucigalpa as well as
I Washington. Meanwhile the faction in
Honduras headed by POlicarpO Bo-
I to die of the incurable malady from
( nilla, is waiting for the presl-
which he is suffering. The Honduras
people are very much prejudiced
against the United States and Amer
lean financiers, and the treaty com
mands but little support Even the
representative of the Honduran gov
eminent who acted as its agent IN
drawing up the treaty with secretary
Knox, afterwards resigned his position
and opposed its ratification.
The immediate situation leading up
to the negotiation of the treaty with
] Honduras was an effort to forestaI
the plans Of the European bond holders
to settle the HOnduran debt question.
] The bond holders counsel says that in
I March, 1903, an arrangement for set
! Ting the external debt was entered
| into between president Davila, Of Hon
duras, and the British minister Of Cen
/ trail America, acting on behalf OF the
/ bond-hOlders, but that before this
| agreement could be ratified by the
| bond holders and by the government
I Of Honduras, the United States gov
eminent interviewed and insisted upon
the substitution OF its own scheme OF
| settlement
The state department at Washing
ton. on the other hand. says that the
proposed agreement provided for in
creased import duties, and took no &C
7 count Of the undOubted equities ana
even the legal rights Of Americans in
/ terested in various properties in that
country sought TO be hypothecated
along with the customs in the settle
ment Of the debt The British plan also
contemplated placing the principal rail-
roads on the Atlantic side of Honduras
under foreign control 1t was deemed
TO impose an Unduly onerous burden
upon Honduras, and ii was also feared
that Il would tend to cripple the cOun-
try and retard internal development
and commerce.
Morgan Offers Financial Aid.
Then Honduras asked the United
States for assistance. The banking
house Of J. P Morgan & Co proposed
that If a treaty were made giving the
United States control Of the customs
houses Of Honduras. IL would furnish
the Honduran government with the
funds necessary TO meet its foreign
debt. to pay the internal debt and TO
adjust the external and internal claims
against the country, that il would fur
Their provide funds for certain internal
improvements and railroad cOnstruc-
ton when the country got into a con-
ditiOn that would warrant It, This
proposed loan was mainly to take care
Of the SIPS 600, 900 debt owed by Hon
duras. and the foreign bond holders
had agreed 10 accept payment on a
basis Of Is cents on the dollar. The
government has defaulted on the pay
ment OF the interest on its external
debt for 40 years. The chief objection
that was raised TO the Morgan loan
contract was against the provision for
the promotion Of a railway and other
projects, and for the settlement Of in
ternal debts and claims The bonds
were proposed TO be sold at IS. In
January Of this year the HOnduran
government definitely rejected the
Morgan proposals
New Orleans Bankers Favored.
A little later a New Orleans banking
house, the Whitney Central Trust and
savings bank, associated with the firm
OF Selden & Co, OF New York. entered
into negotiations with Honduras for
the assumption Of the loan that had
been refused the Morgan company. The
proposition Of the Whitney syndicate
was for the Issuance Of a $4,000 600
loan, the first issue being for $4,000. 900.
payable In 40 years interest at ; per-
cent, with a sinking fund Of / per-
cent after five years The bonds OF I
tnls loan, II is proposed. shall be Sc /
cured by the customs receipts of the Z
government under the proposed treaty I
with the United States. The Whitney I
agreement scales down the amount I
necessary annually for the service OF I
the loan from S450.000 a year to less I
than SS50000. A preliminary loan OF /
100000 has been negotiated to meet /
the pressing needs Of the government 4
Getting Into Debt.
HoW Honduras came to be one of the
most debt-ridden nations on earth,
with percapita Indebtedness Of over
$500, is one Of the most remarkable
stories OF government financiering TO
De found anywhere in 1927, upon the {
breaking up of che Central American
+ federation, Honduras assumed one I
sixth Of the debt Of that Federation.
us share amounting TO approximately
100000, with interest at percent.
For 40 years the gOvrnment failed to
meet the interest on this debt Then
u entered into what was known as the
. percent conversion loan Of 10000
pounds sterling, secured by customs
mouse collections at Amapala-- The
holders Of the original bonds of the
ederatiOn were paid off in new bonds,
getting $1,000 pounds sterling instead
OF the more than 10000 pounds cash
70 which principal and interest would
nave amounted. The same year that
this refunding took place the govern
lhent negotiated loan or 1,OOO,OOO I
pounds at 10 percent interest. the syn
dictate taking the bonds at so. The
interest on this loan was secured by
the railway and its revenues and the
products of the mahogany forests Of
Stin later another loan for nearly
two and a half million pounds, with
interest at % percent was negO-
lated, the bonds being accepted at 10 I
A few years later vet another 10 per- |
----
cent loan OF two and a half million |
dollars was negotiated In 1872, all {
four Of the outstanding loans were in
default In 1887. a concession was
granted TO a Mr. Binney to pay off all !
Of the foreign debts and to complete !
the railway In 1892. the concession, I
its terms unmet, expired
Another somewhat similar to II was !
granted to an American company the
same year, but IT was cancelled in the
following year. In 1895, another con-
cession was granted to the successors
10 the holders of the 1892 concession. J
In 1897. an American syndicate styled I :
The Honduras syndicate. agreed to com
plete the railroad. settle the foreign |
debt and establish a bank charged I
with the collection Of the customs. Each I I
800 OF the debt was to be paid OFF / ,
with SIS of new bonds. bearing interest
1t the rate Of IL percent. the bonds Z
in 25 years The bond {
holders agreed to this, providing the ]
concession holders could offer satisfac-
.orv security. Meanwhile the disputes
the government and the svn- ,
iicate arose and the concession was ]
evoked.
Debt Grows to St5,OOO,OOO.