839.51A/1: Telegram

The Commissioner in the Dominican Republic ( Welles ) to the Secretary of State

26. Department’s instruction no. 5 of March 21st. Department’s instruction of February 17th [27th], numbered 550, was not received by me.

The Military Governor’s report for the quarter ending December 31, 1923, to which Mr. Denby’s letter of March 8 to the Secretary of State refers, is evidently due to his failure to comprehend the financial statements issued quarterly by the Treasury Department of the Dominican Government owing to their complicated and somewhat misleading form.

The facts relating to the governmental receipts and governmental expenditures for the year 1923 are as follows: The total receipts for that period were $5,980,000; the total actual expenditures for that period were $6,136,000, leaving an apparent deficit of $156,000. This apparent deficit was, however, offset by a special reserve fund of $800,000, so that at the end of 1923 the Dominican Government had on deposit a supposed $664,000 instead of having incurred the deficit of $987,825 reported by the Military Governor. Against the cash surplus mentioned there may, however, be deducted bills outstanding but not presented totaling approximately $200,000, so that the Government at the beginning of the year 1924 had a clear balance to its credit of about $450,000.

The deficit estimated by the Military Governor consists of appropriations authorized but not expended under the budgets of 1921–22 and ‘23. Not only have these sums not been expended for reasons of economy, but under Dominican law appropriations authorized but not expended lapse in the second fiscal year after authorization. Such appropriations authorized in 1921 or 1922 can, therefore, in no sense be termed liabilities.

The figure for total expenditures in 1923 includes the cost of continuing the public works program amounting to $1,200,000. The President determined to meet this cost from ordinary government revenues rather than from the special reserve fund of $800,000 [Page 648] remaining from the loan of 1922 and destined for public works above mentioned, for the reason that the latter fund was drawing 6 percent interest while ordinary government deposits draw but 3 percent. It is likewise to be noted that this total of expenditures includes extraordinary electoral expenses of $200,000.

The statement of the Military Governor to the effect that from now on the Dominican Government will incur a monthly deficit of $100,000 [omission?] will be by the month of May when the remainder of the reserve fund of $800,000 for public works, which has been drawn upon since January 1st, will be exhausted. This estimated monthly deficit corresponds to the amount expended monthly on the continuation of the public works program. It is, however, the President’s hope that a speedy settlement of the controversy with the Santo Domingo Water, Light and Power Company will make possible the issuance in the month of April of the authorized $2,000,000 of bonds of the 1922 loan as the result of which the public works expenditures would no longer be a charge upon the general governmental revenues but would naturally be met from the proceeds of this loan.

The statement of the Military Governor regarding the inability of the Provisional Government to meet necessary educational expenses is incident [incorrect?]. The Government is expending over $35,000 monthly on the public instruction chapter of the budget. All schools provided for by law are functioning for the first time since the Military Government closed the majority of the schools for lack of funds in 1921. Every possible economy has been effected. The salaries of the Government employees outside of the Policia Nacional [Dominicana] have been reduced by 33 percent and all unnecessary employees have been discharged. The Government has likewise increased revenues by imposing special license taxes on motor vehicles and by increasing the wharfage taxes. It is, however, unable to accomplish more because of the restrictions occasioned by the contracts entered into by the Military Government for the issuance of the 1918 and 1922 loans which permit the Government to receive only 15 percent of all customs receipts in excess of 3,000,000 and because internal revenue taxes on national products are now as high as the industries can stand. The decision of the Department that the imposition of internal revenue taxes on imported articles constitutes a modification of the tariff infringing the terms of the convention of 1907,17 makes it impossible for the Government to increase its revenues by establishment of a luxury or excise tax. In view of the difficulties which it has encountered, I believe that the financial administration of the Provisional Government has been eminently successful and the actual [Page 649] financial situation of the Government demonstrates that there is no basis for the concern shown by the Military Government.

With reference to the opinion of Mr. Denby that an “American financial adviser in the Dominican Republic is imperatively needed,” I am strongly of the belief that the suggestion by the United States Government, even made informally, would tend to destroy the beneficial effects of the Department’s policy here. It was because of President Henríquez’s refusal to accede to our instructions on this point that his resignation and the resignations of the members of Iris Cabinet were forced in 1916, resignations which brought about the establishment of a Military Government.18 I feel certain that the President especially would refuse to assume the office to which he has been elected rather than accept it under such conditions. Furthermore, were it possible to induce the Dominican Government on its own apparent initiative to request the appointment of an American financial adviser, such an appointment would destroy public confidence in the good faith of the Government of the United States since it would undoubtedly be believed that it had not been sincere in stating to the Dominican people when the Plan of Evacuation was adopted that it desired no control over this Republic other than that provided in the convention of 1907. In conclusion it is my belief that such an appointment is neither necessary nor desirable.