File No. 439.00/34
The Acting Secretary of State to the Secretary of the Navy ( Daniels)
Sir: I have the honor to refer to your undated letter enclosing a communication of May 2, 1918, addressed to you by the Military Governor of the Dominican Republic, requesting that this Department specifically authorize the increase of the public debt of the Dominican Republic by such an amount as shall be found to be due claimants by the Dominican Claims Commission of 1917, which, it appears, is now in session; and also to your letter of July 5, 1918, transmitting a further letter of June 8, 1918,1 from the Governor in which he suggests a method for liquidating such claims against the Republic as may be allowed by the Claims Commission.
The consent of this Government to the increase of the public debt of the Dominican Republic is requested pursuant to the provisions of the “convention providing for the assistance of the United States in the collection and application of the customs revenues of the Dominican Republic,” concluded February 8, 1907, Article 3 of which reads as follows:
III. Until the Dominican Republic has paid the whole amount of the bonds of the debt, its public debt shall not be increased except by previous agreement between the Dominican Government and the United States. A like agreement shall be necessary to modify the import duties, it being an indispensable condition for the modification of such duties that the Dominican Executive demonstrate and that the President of the United States recognize that, on the basis of exportations and importations to the like amount and the like character during the two years preceding that in which it is desired to make such modification, the total net customs receipts would at such altered rates of duties have been for each of such [two] years in excess of the sum of $2,000,000 United States gold.
It appears that the awards which it is stated the Claims Commission is prepared to make, as soon as means are available for the extinguishment of the claims allowed, will aggregate five or six million dollars. The Governor states that it is to the great interest of the United States, the Military Government, and of the claimants, many of whom are suffering embarrassment as a result of the deferred settlement, that payment should be made as soon as possible; that inasmuch as there is insufficient money in the Dominican Treasury to begin payment of the claims, and since a foreign loan can not be floated to advantage, if at all, by the Dominican Government at this time, and the Dominican Government having been unable to obtain assistance from the United States Treasury, he and his advisers have devised a plan whereby the Dominican Government shall issue to the claimants themselves, in payment of the awards, 20-year 5 per cent bonds in denominations of $50, $100, $500 and $1,000 each, and pay in cash all amounts of less than $50.
The Governor states that bonds issued by the Dominican Government on its own responsibility alone would, on account of the low credit of the Dominican Government, be subject to considerable discount, and that it is therefore necessary that the United States should in some way be behind the issue. For this reason he proposes that [Page 377] the Executive order to be issued by him and the bonds themselves, drafts of both of which have been submitted, should contain a stipulation that the bonds are issued and the customs revenues (from which the interest and principal are to be paid) are pledged “with the consent of the Government of the United States,” it being the view of the Governor that this indication that the bonds are issued in conformity with the terms of the above-mentioned convention of February 8, 1907, will lend to them an element of security.
In view of the Governor’s statement regarding the customs receipts and disbursements, and of his assurance that in addition to providing for the present charges against such revenues, namely, those indicated in Article 1 of the convention of February 8, 1907, there are and will be in normal times ample income for the payment of interest and the providing of an amortization fund as indicated in Article 8 of the proposed Executive order, this Government approves the issuance by the present Government of the Dominican Republic of such bonds in payment of the awards of the Dominican Claims Commission.
This request of the Military Governor of Santo Domingo on behalf of the Dominican Republic and the concurrence of this Government therein may, it is believed, be taken to constitute, in the circumstances, the “agreement between the Dominican Government and the United States” required by Article 3 of the treaty of February 8, 1907, prior to the increase of the public debt of Santo Domingo in the manner proposed.
I have [etc.]
- Not printed.↩