839.00/2461

The Secretary of the Navy (Denby) to the Secretary of State

Sir: Referring to our Conference of this date, I recommend that the Military Governor and the American Minister be instructed to return to Santo Domingo, and to call together, upon their return, for conference, Representatives of all political factions in the Republic and other representative Dominicans; that the American representatives be instructed to advise the Dominican leaders that this Government is unwilling to permit present conditions to continue any longer, and to inform them that, unless they now request the issue of a call for election, and agree to participate in the elections, the Proclamation of June 14, 1921,3 will be withdrawn and the Military Government will then continue until such time as the urgent public works have been completed and an adequate Dominican Constabulary is functioning.

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The Representatives of the United States should further be instructed to discuss with the political leaders, with the utmost frankness, the financial situation along the lines of the letter on Dominican finances submitted by the Military Governor of Santo Domingo, a copy of which I enclose herewith. It should be made clear to the political leaders that permanent financing is essential for the Dominican Government, and that if such financing is not undertaken immediately by the Military Government, advantage cannot be taken of the terms specified for the redemption of the 1918 and 1921 loans,4 with consequent loss to the Dominican Treasury; that if such permanent financing is delayed until elections take place and a National Government has been installed, the Dominican Government, immediately upon assumption of office, will be forced to negotiate the flotation of such permanent loan since it will thereupon encounter a deficit in the National Treasury; and that, therefore, in order that advantage may be taken of the terms provided for the redemption of the 1918 and 1921 loans, in order that Dominican finances may be stabilized, in order that the program of public improvements inaugurated by the Military Government may be continued, and in order that a Dominican Government may enter upon its duties with a balance in the Treasury, the Government of the United States has authorized the Military Government to negotiate, immediately, the flotation of a permanent loan of $10,000,000,5 the allocation of which will be in accord with the memorandum of the Military Governor, herewith attached.

The flotation by the Military Government of this permanent loan will necessarily entail the extension of the life of the Receivership General, the establishment of which was provided in the Convention of 1907.6 Such an extension of our control over Dominican finances will be necessary whether the permanent loan is floated by the Military Government or by a subsequent Dominican Government, since no loan, I am convinced, can be obtained without an extension of the duties of the Receiver General in this manner.

Should the conference result in a request by the leaders for a call to elections, a proclamation for elections should be issued by the Military Governor in the same form as his preceding proclamation for that purpose. Should the conference not result in a request for elections, the Military Governor should be instructed to issue a proclamation substantially in the form enclosed herewith.7

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Although the Military Governor, in his letter herewith, has recommended a loan of $10,000,000.00, which should give a fair working balance in the Treasury after the completion of the East and West roads and other expenditures contemplated from the loan, it is possible that authorization of a larger loan, from which additional funds could be obtained if required by the Dominican Government, might be good policy and is submitted for your consideration.

Respectfully,

Edwin Denby
[Enclosure]

The Military Governor of the Dominican Republic (Robison) to the Secretary of the Navy (Denby)

1. The Military Governor submits the following with reference to Dominican finances, and urgently requests the Department’s favorable consideration of the proposed method of stabilizing them, both in the interest of the Dominican people, and in the following of an enlightened and vigorous policy by the Government of the United States.

2. The best Dominican sentiment is not in favor of a very early withdrawal. It is in favor of permanent financing as the first essential. I am reliably informed that the Senate Committee, which recently visited the Island, is in favor of a financial program, substantially as set forth herein, and I am in receipt of a request from the Chamber of Commerce of Santo Domingo that a loan of sixteen millions be obtained.

3. The plan proposed for stabilizing Dominican finances must be in effect (money available) before May 1, 1922, in order that advantage can be taken of the terms specified for the redemption of the 1918 and 1921 loans. Unless these loans are redeemed, the Dominican Government has no security to offer for a new loan, work on new public roads will stop, the Policia National Dominicana cannot be recruited, and withdrawal of marines will be impracticable. The finances will be in such a state that, combined with the fact that marines cannot be entirely withdrawn, it is certain that no party will respond to an election call under the Proclamation of June 14, 1921. Whereas, with a good working balance in the Treasury, the strong sentiment against retention of marines or a military mission, might possibly be overcome.

4. Therefore permanent financing is necessary whether an early or delayed withdrawal is now contemplated.

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5. Loans.

Year Original Amount Now Outstanding Yearly charges,
Interest and
Amortization
Date complete
Amortization
1908 $20,000,000 $7,534,000 $1,200,000 1927–1929
1918 4,161,000 1,627,000 289,000
1921 2,500,000 2,242,000 814,000 July 1, 1925
$11,403,000 $2,303,000
6. Other obligations.
Internal Indebtedness { Budget deficit, 1921, $550,000 } $1,050,000
Unpaid taxes, 1921, 500,000
(Due Ayuntamientos)
Tobacco acceptances due May 1, 1922 950,000
7. Revenues, 1922.
Estimated internal $2,500,000
Estimated customs, gross $3,000,000 (Less service of loans and expenses coll) Net 500,000
Total $3,000,000
8. Budget, 1922—Including Public Schools $3,000,000
9. Required 1922 to continue work Public Roads $1,200,000
Recruit Policia Nacional Dominicana to strength necessary to enable Marines to be withdrawn 250,000
Foster Agriculture 50,000
Total $1,500,000

10. To stabilize Dominican finances, wipe out deficit, continue work on roads, and procure funds to recruit Policia Nacional Dominicana, Military Governor proposes to negotiate a $10,000,000 twenty year loan, noncallable for eight years and with no provision for amortization for the same length of time (or until expiration of 1908 loan) and to extend the duties of the General Receivership to the service of the loan.—$7,500,000 loan to be floated immediately and the remainder as required.

11. The $7,500,000 to be expended as follows:

1922 { Wipe out internal indebtedness $1,050,000
Redeem 1918 and 1921 bonds 4,000,000
Public Works } 1,500,000
Guardia Nacional
Agriculture
Meet Tobacco acceptances 950,000
Total $7,500,000

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12. Subsequent expenditures from receipts, tobacco sales $800,000
1923 { Requirements for Public Works } $1,500,000 from loan 700,000
Guardia Nacional
Agriculture
$1,500,000
To June 30, 1924 { Requirements for Public Works
Guardia Nacional
Agriculture From loan 750,000

13. Available from loan June 30, 1924—$1,050,000 less discount—(Rate at which loan is taken)—at which time the United States can complete[ly] withdraw from Santo Domingo except Receivership of Customs, leaving a well trained and equipped Policia Nacional Dominicana to maintain order.

14. Yearly charges for service of 1908 loan and new loan, assuming 7% interest on new loan (which appears to be now obtainable) will be:

1922 { 1908 Loan, Int. and amortization 1 yr $1,200,000
1918 Loan, Int. 6 mos 45,000
1921 Loan, Int. 6 mos 88,000
New Loan, Int. 10 mos 437,500
Total $1,770,500
1923 { 1908 Loan, Int. and amortization $1,200,000
New loan, Interest 574,000
Total $1,774,000
1924 { 1908 Loan, Interest and amortization 1,200,000
New Loan, interest 667,750
Total $1,867,750
1925 } Each { 1908 loan 1,200,000
1926
1927 700,000
1928
1929 $1,900,000
1930 New Loan { Amortization $833,333
Interest 700,000
Total $1,533,333

Subsequent years, constant amortization as above, with interest charges reduced $58,000 each year.

15. The amortization of the New Loan is based on redeeming bonds at par and starting in 1930. The New Loan would be paid [Page 10]off in 1942. Suitable provision should be made to amortize more rapidly if increase in revenues warrant such action. The 1908 loan carries such a provision with the result that the loan instead of expiring in 1958 as contemplated will expire not later than 1929.

16. The reduction of yearly charges on loans and any increases in revenues before 1924 should be applied principally to reopening public schools, now closed for lack of funds. (School budget which is included in General Budget reduced from approximately $1,000,000 in 1920 to approximately $600,000 for 1922).

17. Unless there is a very material increase in the prices of Dominican products, 1921 taxes (par. 3) collected in 1922 will probably be balanced by unpaid taxes in 1922.

S. S. Robison
  1. Foreign Relations, 1921, vol. i, p. 835.
  2. For correspondence concerning these loans, see Foreign Relations, 1918, pp. 371 ff. and 1921, vol. i, pp. 854 ff.
  3. For correspondence concerning the financing of this loan, see pp. 78 ff.
  4. Foreign Relations, 1907, pt. 1, pp. 307 ff.
  5. Not found in Department files. For text as proclaimed on Mar. 6, see p. 18.