Papers Relating to the Foreign Relations of the United States, 1920, Volume II
The Secretary of the Navy (Denby) to the Secretary of State
Sir: I have the honor to forward herewith for the information of the Department of State, a copy of the Quarterly Report of the Military Governor of Santo Domingo, for the period October 1 to December 31, 1920.
Quarterly Report of the Military Governor of Santo Domingo (Snowden)
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The sudden change of policy by the Home Government deciding to turn over the government to the Dominican people struck the Military Government at a most unfortunate period, when this administration was struggling with an economic crisis and depressed financial returns. It is, however, hoped that the $5,000,000.00 loan may yet be approved and render possible the amelioration of the extensive unemployment and the critical need of funds in circulation by the mass of the people. During the past quarter the government was forced to lay an embargo on imports of rice in order to forestall a commercial crisis and extensive bankruptcy of firms. It also became necessary to lay a partial embargo on cotton goods to protect the local importers against foreign or outside competition and avoid extensive failures. These measures reduced the income of the government and have produced a financial stringency which necessitates temporary measures to tide over lean months until the ordinary income is increased.
The government is, however, perfectly solvent; by issuing temporary certificates of indebtedness, the temporary stringency will be ameliorated. The government has also been compelled to greatly reduce personnel and expenses in all departments to meet its reduced income.
On December 23, 1920, by order of the Navy Department, there was issued a proclamation (copy enclosed)25 announcing the intention of the United States Government to inaugurate a simple and rapid withdrawal from the responsibilities assumed in connection [Page 156]with Dominican affairs and, as a preliminary step, the intention to appoint a commission of representative Dominicans to revise the existing laws of the republic and to frame new laws and amendments to the constitution. This proclamation was received in a widely varying manner by the different classes of people residing in the Dominican Republic. The American, foreign and Dominican business people and pro-American Dominicans who appreciate the benefits derived from the Occupation, believing the Dominicans not yet ready to assume control of their Government and incapable of carrying out the reforms and public improvements instituted by the Military Government and nearing completion, regarded the announcement of withdrawal as premature. The country people, laborers and poorer classes, appreciating their immunity from effects of revolutions and disorders under the Military Government and perfectly satisfied with present conditions which enable them to work and enjoy the fruits of their labor unmolested, received the proclamation with indifference. The professional politicians and agitators were entirely in discord with the proclamation and immediately set up a clamor and instituted a vicious campaign of propaganda in the newspapers against the terms thereof and against the United States Government and the Military Government, having gone so far as to brand with the name of traitors all those Dominicans who assisted the United States or the Military Government in any way in the accomplishment of the purpose of the United States as set forth in the proclamation. In this manner the task of obtaining representative Dominicans to serve on the Commission was rendered very difficult. Also at this time the Navy Department ordered the Military Governor to repeal Executive Orders Nos. 572 and 573, the Anti Sedition and Anti Defamation Laws promulgated by the Military Government,26 thus removing all restrictions and giving absolute license to agitators in their attacks on the United States and the Military Government and on those Dominicans who might in any way assist the Military Government. However, acting under instructions from the Navy and State Departments, the Military Governor called into informal conference the former Consultative Commission and the President of the Supreme Court and after explaining to them the terms of the proclamation invited them to become members of the new commission. These five gentlemen of the highest standing in the Dominican Republic expressed their desire to cooperate but later, influenced by the newspaper propaganda directed against the Dominicans who might assist the Military Government, communicated with the Military Governor by letter expressing their inability to serve on the commission unless [Page 157]certain impossible changes were made in the terms of the proclamation. The Military Governor replied, expressing his regret, that the terms of the proclamation could not be changed as desired by them and also regretting their inability to serve at that time but hoping for their co-operation in the near future, thus leaving the door open whenever they might care to enter, and it is with great pleasure that the Military Governor has at this time been able to announce to the Navy Department that these five gentlemen have changed their minds and formally accepted the invitation to become members of this most important commission.
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Owing to the immense amount of political anti-American propaganda being spread throughout the Republic by political agitators and the fact that the economic conditions are in a state of uncertainty there was and is a decided feeling of unrest throughout the entire Republic. In order to prevent trouble, rather than to promote it, the extensive patrolling of the previous quarter was increased. The largest number of patrols during the year were carried out during this, the last quarter. The number of active bandits were at the minimum during the first two months but increased during the latter part of December. There were five contacts with bandits, three of whom were killed and one wounded with no casualties among the Marines.
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5. On 29 November 1920, the Officer Administering the Affairs of the Department of Finance and Commerce was ordered to the United States with authority to represent the Military Government of Santo Domingo in requesting the approval of the State Department of the United States to obtain a loan for the Dominican Republic of $10,000,000.00, for the purpose of completing necessary and desirable public works in this country and upon approval by the State Department to negotiate this loan in the United States. Shortly after this time, due to the fact that the approval of the State Department for the loan was not obtained and due to the decrease of government revenues, caused by the economic and commercial crisis, it was found necessary to make a drastic cut in all financial expenditures until such time as the revenues might increase and the proposed loan be obtained. The decrease in the government’s income necessitated that the expenditures be decreased from $800,000.00 per month to $300,000.00 per month, a cut of $500,000.00 and it is easily seen what a drastic reduction resulted. The first result is the practical stopping of public works. Even should the revenues increase in the near future, public works could not be resumed at their former rate. Nothing but the proposed [Page 158]loan would allow that. The second result of the reduced expenditures is a general reduction in all government services. Since such services have been conducted efficiently heretofore, it is obvious that such reductions will be very harmful. The only course is to make the cuts in the places where they will produce the least harm. Should the revenues exceed present indications, expenditures on government services can be increased in proportion, but it must be pointed out that even though we increase expenditures for services to the full amount authorized in the 1921 Budget it would not cause sufficient release of money to benefit greatly the present depressed commercial situation. Due to world-wide conditions, commerce in Santo Domingo, as elsewhere, is depressed. Merchants are overstocked in many lines of goods and are faced with a falling market. Their customers cannot buy at prices for which the merchants can sell, as the purchasing power of the people has decreased very greatly due to the sudden drop in price of their principal products; sugar, tobacco, cacao and coffee. The result is a vicious circle. The merchants must liquidate outstanding loans or obtain further credit from the banks. They cannot liquidate unless they can sell at a good price—and their customers cannot pay such a price. The credit of the merchants is now used to the limit. The banks cannot make further loans and must call in some now outstanding on account of the great reduction in government deposits. Neither merchants nor banks can aid the producers who need aid through the present depressed condition of their market. The financial affairs of merchants, bankers, producers and consumers are inextricably interlocked. Each needs cash or further credit from the other. Cash or further credit none of them have. This must come from an outside source. The only possible outside source is the unused credit of the government. To use the government’s credit for the purposes of a productive loan would not be an attempt of the Republic “to hoist itself by its own boot-straps.” Practically every item on the proposed public works program, with the possible exception of the Leprosarium and the Penitentiary, is a revenue producer or a money saver. Good roads mean the opening of hitherto untouched sources of wealth. Good harbors mean increased commerce. Good schools mean increased productivity through better educated workers. The proposed public buildings will save their cost in increased efficiency and elimination of rents. These effects of course are general, but it is desired to emphasize them as they show that this loan will pay for itself and would be desirable at any time. It is doubly desirable now in view of the financial condition described above. The sudden and immediate effect of going on with these public works at a rapid rate now, [Page 159]instead of by minute degrees on current income, is that the money thus suddenly released would go into the pay envelopes of the workers—from the pay envelopes to the stores—from the stores to the banks—from the banks to necessary credit to merchants and producers—from producers to more workers. A conservative estimate is that every dollar released by the government will be worth four dollars to commerce. Moreover, since the proposed $10,000,000.00 could not be released in a day, much of this amount would be on deposit with various banks for a considerable period of time and would enable them to help in alleviating the financial crisis. The aid thus given to commerce through direct expenditures and bank deposit[s] will react directly on the income of the government. The reason is that Dominican revenue is almost totally dependent on commerce. That is, the customs and the internal revenue are almost entirely taxes on commercial affairs. Even the land tax depends largely upon commerce, as if the products or the rent of the land do not yield sufficient revenue the owner will default in payments, the land revert[s] to the government, and the government has no buyers. Actually 90% or more of the government’s income depends on commerce. The direct effect of commerce on our income is forcibly brought to attention by the obvious coincidence of the commercial crisis and our declining revenue. The loan would mean increased profitable commercial activity, which would mean increased revenue. This in turn would aid in paying the interest and amortization on the loan and in resuming government services on the scale proposed in the 1921 Budget. At the time of the present writing the State Department of the United States has refused to approve the proposed loan for the Dominican Government unless this loan be approved by the Commission of representative Dominicans. Dominican politicians and agitators will not approve the loan for many reasons, chief of which are:
- They believe refusal would embarrass the Military Government.
- They believe failure of the loan would hasten termination of the Military Government.
- They believe termination of the Military Government would end land tax and land surveys, enabling them (the politicians) to resume their old land-grabbing policies.
- They believe termination of the Military Government would let them get control of the Treasury.
- They believe a loan is necessary, but one or more of them wish to float such a loan themselves as they believe there is a certain amount of personal “graft” for the person who places the loan.
On the other hand, the vast majority—in fact nearly all—Dominican business men want the loan as they know failure of the loan [Page 160]means financial disaster for themselves. But, they are afraid to state their opinion openly. They fear the intention of the United States State Department is to turn over the country to their old politicians—and in that case the lives or the property, or both, of all who had gone counter to the politicians would be forfeit. This attitude in itself is a sure indication of the Dominican people’s unfitness for self-government. These business men far outnumber the politicians and could—if they had the courage—throw the politicians out of power. The information given in this and the preceding paragraph is not from my own imagination. It is a digest of reports received from agents all over the Republic. Failure of the loan will result in an economic disaster. The question as to whether or not the occupation is justified will always, perhaps, depend upon the point of view of the person arguing. But, if economic conditions are good and the people well off the world will say the occupation justified itself. If, however, while under control of the United States, the Dominican Republic should suffer financial disaster the occupation will be regarded as a failure.
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The new sanitary code was published in December. It now replaces the previous scattered sanitary regulations, embodying these requirements in a concise form. For the purposes of this code, the cities and towns are classified according to population and the requirements of the code are graded accordingly.
19. The representatives of the State Department and the Receiver General of Customs have continued in their cordial relations and hearty cooperation with the Military Government and this fact is greatly appreciated.