Minister Dawson to the Secretary of State.

No. 122.]

Sir: Continuing the subject of my No. 118, of March 7, the negotiations for an arrangement in regard to the Dominican debt and customhouses, I have the honor to report that no event of importance happened until the arrival of the Italian cruiser Calabria at this port on the 14th. It was immediately reported that her visit was for the purpose of urging the collection of the Italian claims. Alarm spread among the friends of the Morales government and the Dominican-American convention, while the enemies of the administration rejoiced.

The captain of the Calabria, Count Moriundo; accompanied by the Italian chargé d’affaires, called on me almost immediately and said that he had been instructed by his government to make a stop at Santo Domingo and ascertain what the prospects were for the prompt payment of the installments due to Italians under the various protocols negotiated in their behalf; that he especially wished to know what position these installments would take under the convention negotiated on February 7. I asked him whether his government approved the making of the convention, and he answered that it naturally did, since the manifest purpose was to secure the application of a part of the Dominican revenue to the payment of debts, which up to the present had been neglected; that he only wanted to be advised as to the manner in which the United States would probably proceed in determining the amounts of the various claims and apportioning the total available sum among them after the convention goes into effect.

[Page 356]

I answered that my government had not yet determined on the exact mode of procedure which would be adopted, and that I could not, of course, tell him how much would be paid annually on any particular claim until the total debt and total revenue available should be ascertained. I added that my government undoubtedly desired to adopt a procedure satisfactory to his, and that I would be glad to transmit any practical suggestions he might be authorized to make on the subject.

He answered that what I said was entirely satisfactory, that he had no suggestions to make, and that he hoped for the sake of Italian creditors that the convention would be speedily put into effect.

I invited Captain Moriundo and his officers, including Ferdinand of Savoy, Prince of Udine, to a luncheon at the legation. When this courtesy was reciprocated by him, I found that he had invited to meet me a Mr. Bancalari, a merchant, who is the principal Italian creditor. In introducing him Captain Moriundo said that he hoped Mr. Bancalari would keep in touch with me.

Speaking of his itinerary Captain Moriundo said that he expected to go to Habana and thence to Venezuelan ports, but that he would be obliged to wait here until he got definite orders from Rome. On the morning of the 20th he left, and in the course of the day I learned that he had received orders changing his itinerary and had gone to Kingston, Jamaica, instead of Habana.

On the same day a news telegram was published in the papers here announcing that the Senate had adjourned its extra session on the 18th. This immediately caused apprehension on the part of the government and a condition of public excitement, which was increased the next day by the publication of a telegram from Mr. W. L. Bass, at New York, asserting that the convention had been rejected. That evening, the 21st, there was a meeting of the principal Jimenistas now in this city and messages were sent to Monte Christi urging Arias and Rodriguez to declare a revolt and expel Lieutenant-Commander Leiper from the custom-house. Jimenista sympathizers openly boasted that they had supplies of money, arms, and ammunition, not only at Monte Christi, but also at Santiago, La Vega, Samana, Seybo, Azua, and even in the neighborhood of this city, and that the moment the American war ships left these waters they would overthrow Morales without serious difficulty.

The government quietly took every reasonable precaution, doubling the police guard and watching various suspected places and persons, but did not force the issue by ordering any important arrests.

The President telephoned me hourly to know if I had any telegram from the Department, and I could only assure him that the news of rejection could not be true, because otherwise I would have been informed.

Mr. Peltz, a special correspondent of the New York Herald, telegraphed an inquiry to his paper and, on receiving a reply that the Senate had adjourned but that the convention had not been rejected, communicated the fact to the President, who procured its immediate publication.

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On the 23d I telegraphed you as follows:

Santo Domingo, March 23, 1905.

Secretary of State, Washington;

Adjournment without ratification has been made public. Revolutionists are encouraged. Conspiracies and preparations rumored. Tension is great. Quiet still prevails. Dominican President firm.

Dawson.

I confirm your reply, as follows:

Washington, March 25, 1905.

Dawson, Minister, Santo Domingo:

Your telegram 23d. Treaty is still before the Senate upon favorable committee report. Adjournment does not prejudice its status. We are confident that with fuller knowledge of facts it will be consummated at the next session.

Adee.

which I showed to the President and minister of foreign affairs. They were greatly relieved and begged me to allow them to publish it. Though I felt obliged to refuse this, I prepared and sent a note (copy inclosed) which I told them they might make any use of they saw fit. A Spanish translation of it will be published to-day, and President Morales believes it will have a material effect in correcting the popular misapprehension and in convincing the revolutionists that the occasion is not yet ripe for them to begin operations.

But apprehensive as the government is of internal disturbance, it is even more anxious lest the adjournment of the ratification of the convention bring on the intervention of the European powers. The seizure of a single port or even the sending of an ultimatum, backed by a show of force, would be taken throughout the country as a proof that Morales can no longer count on the forbearance and moral support of foreign powers.

On the 23d the Belgian chargé d’affaires made a formal demand for an immediate resumption of payments under the contract of 1901. * * * More important was the attitude of Mr. Bancalari, the principal Italian creditor. I have already referred to the alarm caused by the Calabria’s visit, an alarm which was hardly quieted by her withdrawal to Kingston, whence, it is believed by this government, she may be recalled on short notice. Mr. Bancalari had been vigorously pressing this government to permit him to collect certain revenues which were specially assigned to him as security some months ago, and when the news of the Senate’s adjournment came he further urged the necessity of at once making some substantial provision against the dissipation of all the revenues during the coming months. I was kept informed of his operations by mutual acquaintances, but carefully avoided speaking with him or the government on the subject, believing that creditors and government would soon reach a point where they would be obliged to come to me with a proposition for a modus vivendi.

The difficulties of the government were further increased by the dissatisfaction of Mr. Michelena, the American banker, who is advancing weekly the sums necessary for administrative purposes. Most of the merchants now importing goods have contracts and government duebills which they insist shall be received for duties instead of the usual promissory notes. Even before the news of the Senate’s adjournment came the minister of finance had neither the moral nor actual force required to repudiate these contracts, and now his position [Page 358]is much, weaker. Michelena has thus far managed to get into his hands enough promissory notes to secure his advances, but is apprehensive of the future and threatens to withdraw unless the preferential contracts are all repudiated and all importers compelled to pay.

Accordingly, on the morning of the 24th the minister of finance asked me to come to his office, and said that he could stand the strain no longer and that he contemplated resigning. I told him truthfully that his resignation would only plunge his country deeper into difficulties; that the experience acquired by him in the last year was too valuable to be thrown away, and that his proven honesty and patriotism carried weight with foreign creditors and the Dominican people. He then asked me to indicate some practical modus vivendi pending ratification. This I declined to do, well knowing that he had some plan of his own. He then said that he would be disposed to make an arrangement by which the government would content itself with 45 per cent of the total customs revenues and deposit the remaining 55 per cent in my hands, to be held in trust until the ratification or definite rejection of the convention. I told him my government would probably not permit me to act in such a capacity, but that it would not be difficult to choose a suitable depositary. He then offered to name a joint commission, of which I should be a member. I told him that this would also be objectionable, and that I could not hold out to him hopes that any representative of the United States would be permitted to appear in the position of taking charge of Dominican revenues until the convention should have been ratified. I further said that I could not agree to anything which would affect the rights acquired under the Improvement Company award, which seemed to me to be likely to be an obstacle to such an arrangement as he suggested, since the other foreign creditors might not be willing to let the money intended for their partial payment be in deposit while the Improvement Company was receiving its full installments in cash.

Nevertheless, I undertook to ascertain the views of the representatives of the different creditor powers, and, after a conference with President Morales and Minister Sanchez, in which they formally made the same proposition as Minister Velasquez, I interviewed either directly or intermediately the Italian, Belgian, French, and Spanish representatives and the American claimants here.

I found that the Italian representative was expecting my visit. He urged me to consent to act as trustee, and offered to give a pledge that the Italian creditors would take no measures to enforce their claims as long as the proposed arrangement should continue. To the Belgian chargé d’affaires the proposition was a surprise, but after a long conference with the Italian he gave his adherence to the idea of a moratorium conditional on the consent of his bondholders. He insisted, however, that the Improvement Company be also required to consent to have its payments suspended until ratification. I declined to give any encouragement that this would be consented to by the Improvement Company, and called his attention to the value of the award in preventing revolutions.

The French chargé d’affaires took much the same position, while the Spaniard said he was prepared to sign a definite agreement at once covering the Viñamata-Hutlinger protocol. Mr. Michelena, Mr. Puente, [Page 359]and indirectly Mr. Ariza, who are the principal American creditors outside of the Improvement and Mrs. Sala, are willing to accept.

I gave no assurances whatever, except that I would submit the proposition of the government and the views of the foreign creditors to the State Department.

It is evident, therefore, that all the creditors except the Improvement Company will agree not to press their claims for the present, on condition that 55 per cent of the revenues of all the ports be deposited in New York and held as a trust fund until the convention is ratified or rejected. They prefer that a single American act as receiver for the ports not now being administered under the award. The Dominican Government will appoint anyone we may designate for the southern ports, and will request us to take Samana and Sanchez under the award if an amicable arrangement can be reached with the Improvement by which the financial agent would hold in his hands, pending ratification of the convention, the proportions which go to the apartados, Improvement Company, and internal debt, plus the excess up to 55 per cent of the receipts of the four ports. Such an additional arrangement would not affect the status of the award nor the substantive rights acquired thereunder; it would only postpone the latter. Neither would the Belgians and the French, by consenting to the naming of an American receiver for the southern ports, give up their right to receive $25,000 a month out of the proceeds. They would only agree not to enforce that right pending ratification.

* * * * * * *

I telegraphed you on the 25th as follows:

Santo Domingo, March 25, 1905.

Secretary of State, Washington:

Under pressure foreign creditors and domestic peril, Dominican Government offers nominate a citizen of the United States receiver southern ports pending ratification protocol. Four northern ports to be administered under the award. Forty-five per cent total to go to Dominican Government, fifty-five to be deposited New York for distribution after ratification. Creditors to agree to take no further steps in the meantime, and receiver to have full authority to suspend importers’ preferential contracts. Italian, Spanish, German, and American creditors, except the Improvement, accept unconditionally. Belgian and French representatives will recommend acceptance. Some modus vivendi absolutely necessary. I am ready, if desired, start Washington, D. C., 28th to explain details and modifications to plan obtainable. Whole matter can be held open during my absence.

Dawson.

I am assured that the local representatives of the foreign creditors will not ask their governments to take any aggressive steps during my absence, and I can induce Michelena to continue his advances to the government, which, with the presence of our ships, will minimize the danger of an internal outbreak.

As to the delicate question of whether we would give moral support to an American receiver for the southern ports I have, of course, not committed myself at all. As to this matter I would desire the definite instructions of the Department.

I have, etc.,

T. C. Dawson.
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[Inclosure.]

Minister Dawson to General Sanchez.

Mr. Minister: I have the honor to inform you that I have received a telegraphic communication from the government at Washington, by which it appears that the status of the Dominican-American convention of February 27 is satisfactory to its friends.

This communication states that after the submission of the convention to the Senate by the President on February 15 it was committed to the Committee on Foreign Affairs and was in the hands of that committee during the regular session which ended March 4.

Owing, however, to the press of legislative business incident to the closing days of that session no action could be taken until the beginning of the special session, which was called by President Roosevelt for March 6. It was then taken up and, after the full and careful consideration demanded by the transcendental importance of the matter, the committee made a favorable report. Upon this report the convention is now before the Senate.

An adjournment was taken on March 18 and before the Senate had been able to reach a vote, but this adjournment in no way prejudices the status of the convention nor affects the probability of its ratification.

It is probable that the Senate will meet again in October and immediately take up and act upon the report of the committee as unfinished business.

I desire further to felicitate the government of which your excellency is a distinguished member upon the statesmanlike foresight and upon the spirit of honor and justice toward foreign creditors demonstrated by the terms of the modus vivendi suggested by you. To me such an arrangement appears to furnish the creditors the best guaranties which at present are possible, while at the same time it secures for the government revenues sufficient for successful and good administration during the period which will elapse until the American Senate can meet and ratify the convention.

The situation demands temporary sacrifices on the part of creditors and of this government, and as a sincere friend of the Dominican Republic, its autonomy, and continued peace, I am gratified to see that both sides are disposed to make them.

It is with pleasure, etc.,

T. C. Dawson.