The Daily Missoulian., 1912-05-23

the proposed treaty with the uniteo
StateS. The Whitney agreement scales
! down the amount necessary annually
| for the service Of the loan from $780,
/ 600 a year to less than 100000. A
preliminary loan OF 100000 has been
negotiated to meet the pressing needs
Of the government.
! How Honduras came to be one of
the most debt ridden nations on earth.
with per capita Indebtedness OF over
5000, In one OF the most remarkable
stories of government financlering to
| he found anywhere. In 1927. upon the
/ breaking up of the Central American
federation, Honduras assumed one
sixth of the debt of that federation, its
share amounted to approximately
100000, with interest at per cent.
lFor 40 years the government failed TO
meet the interest on this debt. Then
II entered into what was known rs the
| 8 per cent conversion of $4,000 pounds
sterling, secured by customs house coll
lections at Amapala. The holders of
the original bonds of the federation
| We're paid off in new bonds, getting
$4,000 pounds sterling instead Of more
principal and interest would have
amounted. The same year that this re-
funding took place the government ne
gotiated loan of 100000 pounds mt
10 per cent interest, the syndicate taxi
ing the bonds at so. The interest on
this loan was secured by the railway
and It's revenues and the products or
the mahogany forests of Honduras
Still later another loan for nearly
two and a half million pounds, with
interest at 2-3 per cent. was nego-
tiated, the bonds being accepted at 75.
A few years later yet 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, concession was
granted to Mr. Binney 10 pay off
all of the foreign debts and TO COM
plete the railway. In 1892, the con-
cession. its terms unmet, expired.
Another somewhat similar To 1t was
granted tn an American company the
same year but 1t was cancelled In the
following year. In 1896. another con-
cession was granted to the succc5sors
To the holders of the 1892 concession.
In 1897. an American syndicate styled
the Honduras syndicate, agreed to
complete the railroad. settle the for
eign debt and establish bank charged
with the collection of the customs.
Each 500 Of the debt was 10 he paid
off with S25 Of new bonds. bearing In
terest at the rate of 10 per cent, the
bonds redeemable In % years. The
In I-la t.
the concession holders could offer sat
isfactory security. Meanwhile the dis
putes between the government and the
syndicate arose and the concession was
revoked.
After 40 years default of interest of
the external debt. more than $4,000. 900 |
of which bears interest at 10 per cent
year. and si0,000.O00 of which. the
bulk OF the remainder. bears interest
at 2-3 per cent. honduras still Al
lows the matter To go on. The inter-
est now amounts to practically many /
times the amount of the principal I
The bond holders were delighted when
the Morgan syndicate planned to Sc
cure the redemption of their bonds at
Il cents on the dollar Likewise they /
WIZ 'at pit@Nu wien
the Morgan deal failed to go through
An objection offered to the Hon I
duran loan proposed to be taken by the /
Morgan people, was that the bonds
were 10 be taken at ss: in other
words. that Honduras should be given /
ssS in cash for each 800 in bonds. II
has been pointed out, however. that
this Is good a rate as usaully can be
obtained In these countries. The 5 per !
cent bonds of Costa Rica today are
selling at 45 and 80. according TO the /
class The bonds OF Guatemala are
selling Mt SO 1-2. Salvador, the one
country without arrears of interest, /
lately made II s5,O00,O00 loan at 6 per /
cent. the bonds being taken at SO.
Costa Rica IL proposing loan at rs.
The proposed loan of Guatemala IL at /
even lower figure than this.
The foreign bond holders are some
what dissatisfied with the treatment
they have been accorded In number
of instances by Americans. In It's
for the year 1911 the coun-
sci of the corporation declares that II
Is significant fact that the four
Spanish American states which are In
defaut--Guatemala Honduras, Nicar-
aqua, and Ecuador--all have wholly or
aienated to citizens of the
United States securities which were
formerly preferentially pledged to for
eign bond-holders. They insist that
prior claims ought always to be recog-
nized, and have made frequent pro-
tests against the alternating of their
securities.
1t is more than probable that the
failure of the Honduran loan in the
assembly will mean another
era of revolution In that country.
President Bonilla Is almost In dying
condition. and as soon as he passes
away, 1t Is probable that a war OF sue
'ession will follow.
Tomorrow-caribbean Politics. XVII.