Don Jose means only, "an embarrassment in the family of nations," but as usual the line has a greater meaning. "Byword" can mean not only "object of notoriety" but "one that stands as type," a subtle reference to how Conrad is using Costaguana as a metaphor for all governments, and why a Costaguana failure will be a "reproach." Indeed, "powers of the world" has a broader range, applying not just to governments but to any conquering dream-ideal.