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Dollar Diplomacy in the Light of the Guatemalan Loan Project, 1909-1913

  • D. H. Dinwoodie (a1)
Extract

While historians have shown unusual agreement in their critical assessment of the results of Philander Knox's Central American policy, they have frequently disagreed on the reasons for this failure, as well as on the goals of the Secretary of State. An examination of one of Knox's loan projects — the Guatemalan refunding scheme — throws light on these two issues. The record of this futile four-year attempt to reorganize the country's financial structure reveals a State Department approach relying eventually on the use of coercive diplomatic methods. These techniques were resourceful, but ineffectual, and contributed to an unproductive and acrimonious diversion with the British Foreign Office. The negotiations suggest that the Secretary and other Department officers sought goals broader in nature than national economic or strategic interest. The extent of their objectives may have contributed to the unsatisfactory outcome of the case.

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1 For examples of interpretations of goals, see the following: Williams William Appleman, The Tragedy of American Diplomacy (Cleveland, 1959), stresses economic motivation; Munro’s Dana G. thorough study, Intervention and Dollar Diplomacy in the Caribbean, 1900–1921 (Princeton, 1964), emphasizes political objectives; and Scholes Walter V., “Philander C. Knox,” An Uncertain Tradition: American Secretaries of State in the Twentieth Cntury, ed. Graebner Norman A. (New York, 1961), broadens Knox’s frame of reference to include missionary concerns. The latter two works include knowledgeable views on the reasons for Knox’s failures. Other interesting comments on this are in Einstein Lewis, A Diplomat Looks Back, ed. Gelfand Lawrence E. (New Haven, 1968) 8485.

2 Fisher H.A.L., James Bryce (New York, 1927), 2, 38 ; and Jessup Philip C., Elihu Root (New York, 1938), 1, 563.

3 Notes Relative to Central American Countries, Philander C. Knox Papers, Library of Congress.

4 Munro Dana G., “Dollar Diplomacy in Nicaragua, 1909–1913,” Hispanic American Historical Review, XXXVIII (May, 1958), 210 ; and Adec to Wilson, March 11, 1909, Numerical File 18432/12 in the State Department records, National Archives. Earlier Adee had contemplated United States-Mexican supervision of a reorganized and consolidated Central American political structure. See Adec memorandum, filed July 26, 1907, Numerical File 7805.

5 Wilson F.M. Huntington, Memoirs of an Ex-Diplomat (Boston, 1945), 208. de la Barra Francisco León, “Las Memorias de De La Barra,” Hoy, 6 (September 10, 1938), 30.

6 William Buchanan to Root, March 4, 1909; Root to Buchanan, March 20, 1909, Elihu Root Papers, Library of Congress.

7 Munro , Hispanic American Historical Review, 38, 210 ; Adee to Wilson, March 1 1, 1909, Numerical File 1 8432/12.

8 Numerical File 1 8432/1 86; Scholes Walter V., “Los Estados Unidos, México, y América Central en 1909,” Historia Mexicana, 10 (April-June, 1961), 613–27.

9 Young John Parke, Central American Currency and Finance (Princeton, 1925), 3543 ; Fernández Valentin Solórzano, Historia Je la evolución económica de Guatemala (México, 1947), 331–40.

10 Palmer Frederick, Central America and Its Problems (New York, 1910), 98. A summary of the development of Guatemalan coffee culture is in Jones Chester Lloyd, Guatemala, Past and Present (Minneapolis, 1940), 203212.

11 A copy of one of the Stahl contracts is in Combs to Department, December 3 1, 1904, Diplomatic Despatches, Central America in the State Department records, National Archives. Numerical File 2418 contains additional information on these arrangements.

12 Young , Central American Currency …, 5960 ; Chargé Mitchell Innes (British Embassy) to Department, January 3, 1912, State Department Decimal File 814.51/l50.

13 Rippy J. Fred, “The British Bondholders and the Roosevelt Corollary of the Monroe Doctrine,” Political Science Quarterly, 69 (June, 1934), 200205.

14 Combs to Department, January 1 1, 1905, Despatches, Central America.

15 Rippy J. Fred, Latin America and the Industrial Age (New York, 1944), 139 ; Long W. Rodney, Railways of Central America and the West Indies (Washington, D.C., 1925), 3.

16 Numerical File 18857/7, 8; and 14992/5–10.

17 It thus appears that Keith and Palmer at this point initiated the State Department connection with the project, although probably they were aware of Knox’s interest in shoring up Honduras financially.

18 Numerical File 18857/1.

19 Speyer to Wickersham, April 2, 1909, Numerical File 18857/2–3; Huntington Wil son memorandum of conversation, June 14, 1909, Numerical File 20523. Also, Keith to Sands, August 25, 1909, Numerical File 10859/20–22.

20 Numerical File 10859/25–26.

21 ibid., 18857/2–3.

22 Heimke to Department, July 27, 1909, Numerical File 10859/17–19; Sands to Department, October 16, 1909, Numerical File 10859/28–29. Correspondence between Sulzer and Windsor agent Frías José Antonio on the concession negotiation is in New York Times, August 24, 1913, 2, 1 and 2.

23 Numerical File 10859/10 and 11–12.

24 Neither did Bradley Palmer’s efforts to interview Knox in July: Numerical File 18857/10 and 11.

25 Seligman memorandum of November 8, 1909, Numerical File 10859/34–35.

26 Numerical File 108 59/13–14, 1 516, and 17–19; Wilson memorandum of conversation, November 11, 1909, Numerical File 10859/32–33.

27 Numerical File 10859/31 and 18857/19.

28 Sands to Department, November 15, 1909, Numerical File 10859/36 and 41; Sands to Department, December 18, 1909, Numerical File 10859/44.

29 Knox to Sands, February 25, 1910, Numerical File 10859/48. This message was inspired partly by knowledge that Stahl had in the past filed copies of his unsavory contracts in the American legation. See Sands to Department, January 22, 1910, Numerical File 10859/48, and Palmer to Department, January 22, 1910, Numerical File 10859/54.

30 Decimal File 814.51/55A.

31 Knox to Sands, May 9, 1910, Decimal File 814.51/72.

32 Sands to Department, May 7, 1910, Numerical File 24853.

33 Sands to Department, May 22 and July 1, 1910. Decimal File 814.51/77 and 87. Before adjourning, the assembly was able to confirm the re-election of the President for another six-year term.

34 Knox memorandum of conversation, October 22, 1910, Decimal File 814.51/115; Knox to Hitt, October 29, 1910, Decimal File 814.51/113.

35 Hitt to Department, November 1, 1910, Decimal File 814.51/116. Also 814.51/117 and 817.00/1458. Even before the revolt succeeded, the Honduran Congress refused to approve Knox’s customs convention.

36 Sands to Department, September 15, 1910, Decimal File 814.51/106.

37 El Nacional, August 9, 1910, pp. 1–9; August 12, p. 1. La República, August 9, 1910, pp. 1, 4, 9, 12; August 10, pp. 1, 4, 9; August 11, pp. 1, 4, 9, 12.

38 Sands to Department, September 28, 1910, Decimal File 814.51/109.

39 Henry James memorandum, October 21, 1910, Decimal File 814.51/112.

40 Decimal File 714.62/6.

41 Ibid., 714.62/8.

42 Dodge to Wilson, December 30, 1910, Decimal File 714.62/5; Knox to Hitt, December 31, 1910, Decimal File 714.62/6.

43 Decimal File 814.51/ 125, 126, 130, and 137.

44 Mitchell Innes to Doyle, January 3, 1912, Decimal File 814.51/l50. Summaries of the three-way loan controversy are in Rippy J. Fred, Caribbean Danger Zone (New York, 1940), 216–23, and Munro , Intervention and Dollar Diplomacy …, 238–45.

45 Decimal File 814.51/150.

46 Ibid., 814.51/145. Martínez Rafael Arévalo, in Ecce Pericles! (Guatemala, 1945), 244–45, asserts that Méndez’ mission was to dissuade President Taft from deposing Estrada because of his intransigence on the loan question.

47 Memoranda of converation, October 18, 1911, Decimal File 611.1431/2 and 3.

48 Decimal File 611.1431/8.

49 Mitchell Innes to Department, January 3, 1912, Decimal File 814.51/150.

50 Ibid.

51 South American Journal, December 23, 1911, in Decimal File 814.51/unnumbered.

52 Decimal File 814.51/156.

53 Hitt to Department, January 23, 1912, Decimal File 814.51/156.

54 Wilson to Knox, March 2, 1912, Decimal File 033.1 100K77/119A.

55 New York Times, February 11, 1912, II, 6; Wright Herbert F., “Philander Chase Knox,” The American Secretaries of State and their Diplomacy, ed. Bemis Samuel Flagg (New York, 1929), 9, 339.

56 “Preparations for Secretary Knox’s Centrai American Trip, 1912,” Knox Papers.

57 Wilson to Knox, March 2, 1912, Decimal File 033.1100K77/119A.

58 Minister Hitt’s report of the visit, dated April 8, 1912, is in Decimal File 033.1 100K77/165. Also Diario de Centro America, March 18, 1912, 3–6.

59 Decimal File 033.1 100K77/165 ; and New York Times, March 17, 1912, ITI, 6. Knox was convinced he had foiled a plot by the wily Estrada to embarrass him at the dinner. Bearing a rather stout physique, Knox nevertheless prided himself on lightness of foot. His chair abruptly collapsing at the banquet, he sprang nimbly to his feet, dignity untarnished. See Wilson , Memoirs …, 236.

60 Carden to Knox, March 30, 1912, Decimal File 713.41 and 815.51/331.

61 Knox to Carden, June 15, 1912, Decimal File 713.41/2A.

62 Relying on the promise of a commercial treaty and the British threat: Decimal File 611.1431/9; Wilson to Méndez, May 23, 1912, Decimal File 814.51/l65A.

63 Decimal File 814.51/151 and 152.

64 Decimal File 814.51/177.

65 Ibid., and Decimal File 814.51/181.

66 Bryce to Department, November 13, 1912, Decimal File 814.51/192.

67 Decimal File 814.51/196.

68 Decimal File 814.51/199.

69 Seligman draft contract, dated December 27, 1912, Decimal File 814.51/unnumbered. The question of the right of United States intervention on behalf of the customs agency had been an increasingly contentious issue between the bankers and Guatemalan officials. The former and the State Department had urged that the contract at least contain a statement permitting the agency to incorporate in one of the American states and to appeal for assistance from the United States government. Decimal File 814.51/184.

70 Decimal File 814.51/199.

71 Laughlin to Department, January 15, 1913, Decimal File 814.51/212; also Laughlin to Department, January 27, 1913, Decimal File 814.51/221.

72 Hitt to Department, January 28, 1913, Decimal File 814.00/200.

73 Knox to Hitt, February 7, 1913, Decimal File 814.51/222.

74 Annual service charges approximated $1,500,000 on a new issue, compared to $300,000 on the British bonds. El Nacional, August 20, 1910, 1, and Clausen John, “Guatemala: Its Commercial and Financial Possibilities,” The Bankers Magazine, 94 (January, 1917), 75.

75 Huntington Wilson memorandum of conversation, November 11, 1909, Numerical File 10859/32–33.

76 Scholes , “Philander C. Knox,” An Uncertain Tradition …, 6162.

77 Diario de Centro America, March 14, 1912, 2.

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The Americas
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