1939: Nicaragua

The Constituent Assembly by a vote of 46 to 7 re-elected President Anastasio Somoza for an 8-year term on March 21, thus prolonging another of the Central American constitutional dictatorships. Two days later the Assembly approved a new constitution.

A very marked strengthening of the relations, both economic and political, between the United States and Nicaragua found ample demonstration in the spring of 1939. When President Somoza visited Washington in May he was given a very elaborate official reception. This was followed by a five-point agreement between the two countries according to which: (1) the United States will send to Nicaragua a board of army engineers and a medical corps officer to study the practicability of a trans-Nicaraguan waterway connecting the east coast with the interior and with the Pacific. No mention was made of a Nicaraguan canal such as is covered by the Bryan-Chamorro Treaty, which is one of President Somoza's objectives but which is against most informed opinion among United States' experts because of its costliness and because of the diplomatic issues it raises with other Central American states (see COSTA RICA). (2) Nicaragua agreed to encourage the investment of North American capital and to provide adequate dollar exchange to holders of its customs bonds of 1918. (3) Through the Export-Import Bank the United States agreed to set up credits of as much as $2,000,000 for the purchase in the United States of machinery and equipment for highway construction and other productive projects. A revolving fund, of perhaps $500,000 is to be made available for bridging seasonal deficits and preventing exchange fluctuations. (4) An officer is to be named by the United States War Department to act as director of the military academy of the Nicaraguan National Guard and to study the establishment of a military aviation school. (5) The United States is to consider lending American agricultural experts to develop manila hemp and rubber production. This scientific fostering of commodities which are non-competitive with North American products is a distinct feature of our most recent policy towards Latin America.

The credits extended by the Export-Import Bank are in line with the United States Government's moves to check European totalitarian influence and economic penetration in Latin America and are an important part of the Western Hemisphere solidarity plan. Although guaranteed by the Export-Import Bank, the entire sum was supplied by the Bank of Manhattan Company, a sign that North American private interests are becoming active again in the development of inter-American commercial and financial relations. The Nicaraguan Congress authorized the acceptance of the loan on Nov. 6.

Gold mining has experienced a boom, the year's output, valued at $3,500,000, being the largest in the history of the Republic. The exports of this metal exceeded by $1,000,000 the value of even the coffee-crop yield. In December the first textile mill which is to use Nicaraguan cotton was opened. President Somoza welcomes and will protect foreign capital. In 1938 the United States was the largest exporter to Nicaragua, with 60 per cent of Nicaragua's imports coming from this country, 10 per cent from Germany, and 8 per cent from Great Britain. Moreover, the United States was Nicaragua's best customer, taking 67 per cent of her exports.

Complete nationalization of the Bank of Nicaragua was ordered on Oct. 27. New York bankers, who owned 51 per cent of the stock when the Bank was incorporated in 1912, sold their shares to Nicaragua. The country still has a North American as collector of general customs, and Nicaragua maintains full service on its internal and external bonds.