Minister Dawson to the Secretary of State.

No. 142.]

Sir: Continuing the subject of my No. 140, of the 9th instant, in regard to the proposed suppression by the Dominican Government of the agency of the French and Belgian bondholders, I have the honor to report that on the return of the minister of finance from Azua on the 11th instant the matter at once assumed an acute phase.

He took the first opportunity of repeating to the agents his firm determination not to pay any installments on the expenses of representation as long as the modus vivendi continues in force, and told the same thing to his colleagues in the cabinet. Meanwhile, definite instructions had come to the agents from the Antwerp and Paris committees to insist upon the immediate payment of all the arrears already accumulated. I inclose herewith a copy and translation of a personal note to me from one of the local agents referring to the latter fact.

[Page 372]

The only concession which the agents had been able to obtain from the minister was an agreement to consult me before taking final action.

As the Department already knows (see articles 4 and 11 of the Belgian contract of June 3, 1901, pp. 37 and 40 of Exhibit J, in the matter of the Santo Domingo Improvement Company arbitration), this government obligated itself to pay $10,000 annually in monthly installments toward the expenses of the representation of the bondholders. This is in addition to the $300,000 annually to be applied to the service of the debt. The latter payments have long since been stopped, but the Dominican Government has paid—although always some months in arrears—the $833.33 per month. It is now in arrears for a few months prior to April 1.

As indicated in my No. 140, Minister Velasquez now gives the agents clearly to understand that he is of the opinion that the modus vivendi suspends the operation of the contract of 1901 in all its parts, including that referring to the payment of the expenses of the committees; that he has no other authorization to pay the monthly installments, and that he regards the agency as useless, since the general receiver appointed under the modus vivendi protects the interests of all the creditors, including the Belgian and French bondholders.

During the negotiations preliminary to the modus vivendi the Belgian agents tried to bring the subject of the continuation of these monthly installments into the discussion, but it seemed best to ignore their efforts, especially since the minister of finance himself had spoken to me of this expense as one he would likely have to provide for, although I can not recollect that he explicitly compromised himself, and at that time it seemed urgently advisable to pass over all questions which might interfere with a prompt acceptance of the main proposition by all parties.

The agents have again told me that they have so far refrained from telegraphing to their principals until they can ascertain through me if the decision of the minister of finance is final and will surely be put into official form. However, they feel that they must not wait long before informing their principals, and they assure me that they anticipate the arousing of suspicion and alarm among the bondholders on receipt of a telegram announcing the suppression of the agency by the Dominican Government, and even that the Antwerp and Paris committees would formally protest against their respective governments accepting the modus vivendi.

I told them I knew my government would regret seeing any disagreement arise between the committees and the Dominican Government, and that my own good offices would be cheerfully granted toward preventing a misunderstanding.

Accordingly, I again saw the President, the minister of foreign affairs, and then brought up the matter with the minister of finance. I ascertained that no definite resolution had been reached and that the matter had not even been formally considered in the cabinet meeting, although it had been under informal discussion. The President and the minister of foreign affairs continued fully alive to the inadvisability of arousing the serious dissatisfaction of the largest creditors, although they also disliked to come to an issue with the minister of finance. As I expected, the latter laid special emphasis on the necessity he is under to exercise the most rigid economy, now that only 45 per cent of the revenues pass through his hands for governmental expenses. He suggested [Page 373] no solution of the difficulty, except that Colonel Colton should sequestrate the amount of the installments in question from the 55 per cent, charging it against the proportion to which the French and Belgian bondholders may ultimately be found entitled.

I told him that this in my judgment could not be done; that Colonel Colton’s power to dispose of the funds coming into his hands, being derived from the modus vivendi, was strictly limited by the terms of that document, and that he could do nothing with the 55 per cent, or any part thereof, except deposit it in the City National Bank of New York. On consulting later with Colonel Colton himself I found that this is also his opinion. I further said to the minister that I did not think either his government or my own desired to reopen the modus vivendi to modification or even discussion. To this he heartily assented.

The minister then told me that he considered his own powers to be likewise limited by the modus vivendi and also by the appropriation laws; that the former suspended the operation of the 1901 contract and that the latter did not provide for the payment of the committees’ expenses out of the regular administrative budget. The Belgian French agents contest this latter point, insisting that the appropriation laws have always provided for these monthly installments and that they have been uniformly treated as an administrative expenditure. On the other hand, the minister insisted that to pay the installments would be an implicit recognition of the right of the French and Belgians to demand the fulfillment of all the terms of their contract, even after the ratification of the February 7 convention, as well as the present payment of the $25,000 a month assigned by said contract to the service of their debt. If one part of the contract was recognized as privileged, logically the rest must be, and if the Belgian-French contract was so recognized, the Italians and others would demand equal treatment, and there would be an end of the modus vivendi.

I answered that I did not desire to enter upon any discussion of the force and effect of the Dominican laws governing his functions, and certainly did not think that it would be wise for him to expressly recognize the present enforcibility of the Belgian-French contract. It was for him and his colleagues to decide what their duties are under existing Dominican laws. The only considerations which I felt at liberty to offer concerned the advisability of seeking some practical method of avoiding a disagreeable clash which might endanger an arrangement vitally important to the security of his government. I declined to express any opinion as to the justice of his construction of the contract and the laws, but urged him to have his views presented to the French and Belgian Governments in a form calculated to secure a calm and impartial consideration by them, the parties adversely affected. It seemed unlikely that those governments would insist on imposing such an expenditure if he could satisfy them that the agencies are unnecessary and that the substantial interests of the bondholders would not be seriously jeopardized by their ad interim suppression.

I promised him that if his government desired to send instructions to Mr. Joubert in Washington to present the Dominican view of the matter to the French and Belgian Governments through M. Jusserand and Baron Moncheur, I would inform the State Department by the same mail of the position and desires of the Dominican Government. Possibly an occasion might arise for using good offices in the course of the [Page 374] representations which the Dominican may make to the French and Belgian representatives.

This dispatch is written in fulfillment of that promise.

I have, etc.,

T. C. Dawson.