839.51/2840a: Telegram

The Secretary of State to the Minister in the Dominican Republic ( Young )


32. After having given careful consideration to the matter of the Dominican loan, Department felt that its approval under article III of convention of 1924 could not be given to the loan project as set forth in Dominican Legation’s note. Department has two reasons for position taken: (1) The issue of $10,000,000 at this time seems unnecessarily large amount for new Government’s first loan; (2) were a smaller loan to be made and the proceeds applied satisfactorily, the credit of the Dominican Government would be materially strengthened and probable attacks and criticisms of misuse of proceeds of a large loan would be minimized.

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On October 23 the Dominican Minister was called to the Department and informally advised that Dominican Government’s request for approval of loan should be reconsidered; and that for it there should be substituted a request for a loan of $4,000,000, as it was thought that $2,500,000 for the aqueduct, $1,200,000 for road building (understanding being that $100,000 per month is now used for that purpose), and $300,000 for irrigation and agricultural projects now being executed, would be sufficient for year 1927. Unless such a plan were instituted, the Department intimated to Mr. Morales that it could not see its way clear to give the authorization. Mr. Morales is away from Washington at present, and on his return will probably be able to inform the Department officially of the Dominican Government’s attitude.

Referring to your telegram No. 87, October 25, 7 p.m., while the Department understands President Vasquez’s position and desires to assist the Dominican Republic in every way, it feels that to issue loan for $10,000,000 and then to embark upon a very comprehensive plan of public works is too ambitious and is likely to entail unwise expenditure. The Department thinks that it would be wiser to approve a loan for $4,000,000 for this year and another loan for $4,000,000 next year and the remainder the year after that. If, however, the Dominican Government feels that loan for total amount of $10,000,000 must be issued, the difficulty might be obviated if Mr. Morales, when making request indicated, addresses a note to the Department stating that $3,000,000 is to be used during forthcoming year for certain definite purposes which are set forth and that remainder will be deposited in a New York bank subject to withdrawal by order of a Public Works Board, the latter to consist of one member appointed by the President of the Dominican Republic, one member appointed by the American Minister, and the third member to be the Receiver General of Customs. It also seems that it would be very advisable if the Board above mentioned should exercise some form of control over the expenditures on each project.

Department’s principal objection to loan of $10,000,000 is that expenditure of such a large amount of money would offer great temptation for mishandling by political self-seekers with resultant political and economic injury to the country. Please cable your views and give your opinion on how Santo Domingo would regard the proposed Board of Public Works. The Department will make no further suggestions until it has heard from you and from the Dominican Minister.