The Minister in the Dominican Republic ( Curtis ) to the Secretary of State
[Received March 7.]
Sir: Referring to my telegram No. 18 of to-day, 12 noon,11 I have the honor to inform you that President Trujillo two days ago informed me that he intended to send Mr. Martin de Moya to me to discuss loan matters and that that gentleman called on me twice yesterday and again this morning, the President himself joining us for a few minutes this morning.
Mr. Mayo began by informing me that the President had told him that Messrs. Lee, Higginson and Company were again interested in floating a loan for the Dominican Government and that he (Moya) had persuaded him that the Government ought to try to obtain a loan through that company only, requesting it to make a proposal which should be accepted or rejected,—which should not be made a basis for negotiating with others. Mr. Moya stated that the Government was prepared to cable such a request to Messrs. Lee, Higginson and Company but thought it best first to reach an understanding with the Department for the modification of paragraph No. 4 of the “Memorandum—Dominican Financing. General Principles” which the Department had handed to the Dominican Minister in Washington and of which a copy was sent to the Legation with instruction No. 103 of February 20, 1931.12
The President objects especially to the requirement that “all advances or disbursements of the proceeds of any loan should be made under provisions similar to those stated in the note of the American Minister to the Minister for Foreign Affairs of the Dominican Government, answering the note dated March 1, 1913.” He feels that the procedure established by that note is unduly mortifying to the pride of the country and that the objects sought can be attained equally well by a procedure such as the following: the proceeds of the loan will be deposited only with Messrs. Lee, Higginson and Company in New York (or with the National City Bank there) and with the branch of the National City Bank in this city; the Government will send to such American official as the Department may designate copies in triplicate of all accounts which it considers to be properly payable from the proceeds of the loan, the original having attached to it a check to be signed only by the proper Dominican authority, the duplicate to be approved by the representative of the United States and [Page 93] returned with the original, and the triplicate to be similarly approved and sent to the Bank to constitute its authority to pay the original with its check when presented; in this manner, the public would not have its attention called to the control exercised by our Government.
An amount sufficient to pay the interest on this loan during the first year would be retained by the bankers. The memorandum handed to Mr. Brache suggests that there be set aside at least the amount of the present sinking fund for twelve months, or say $1,850,000. I consider the proposal of the Dominican Government preferable to that suggested by the Department because, although this would compel the Dominican Government to exercise the greatest possible economy for another year, it would allow us to say for what purposes every cent of the proceeds of the loan should be used, instead of permitting the Dominican Government to spend without any restriction on our part the $1,850,000 released to it from the customs revenues.
Three million dollars would be set aside for the purpose of paying off the floating debt; if it should be found that this sum is excessive, the remainder would be added to the balance which is to be used for public works.
The President especially requests that the expenses of the Dominican financial mission which has been in the United States and the salaries and expenses of those to be employed here to pass on the accounts of the floating debt (including Messrs. Moya and Roberto Despradel) be considered part of the cost of the loan and, as such, payable from the proceeds of the loan. The expenses of the mission are said to have been about twenty thousand dollars and the further expenses are expected to be less than five thousand dollars
If the foregoing proposal is put into effect, the figures will be approximately the following:
|$6,000,000 loan will yield||$5,000,000|
|One year’s interest at 5½%||$330,000|
|For the floating dept||3,000,000|
|Balance to be used for public works||$1,645,000|
The public works program would be decided upon in accord with the provisions of paragraph No. 5 of the Department’s memorandum. It is agreed by everybody here that the most important item of the program must be improvements of the highways, including some construction of bridges; the President desires that there be included also the paving of a few of the most important streets of this city and the purchase of a dredge, and possibly of barges, to replace the dredge (and barges) lost in the hurricane of September 3, 1930.[Page 94]
For my own information, and for that also of the Dominican Government if you permit it, I venture to enquire whether the control of expenditure of loan funds is to be applicable to those used for public works; the Dominican Government is willing that the procedure which it has proposed (see the third paragraph of this despatch) be applied to the public works but fears that any procedure adopted may cause delays to which the contractors may object with good reason; for my part, I feel that the Legation and Customs Receivership, if charged with the duty of approving the accounts, would have to verify on the spot the performance of all work to be paid for.
I venture to enquire also concerning the approval of the contracts to be made for the public works, inasmuch as neither the Legation nor the Customs Receivership possesses the technical knowledge requisite for estimating the degree of completion of any engineering work or the cost of the work completed.
The Government proposes to ask Messrs. Lee, Higginson and Company to make an offer for a loan to yield about five million dollars to the Government, to bear interest at the rate of five and a half per cent, to be amortized by payments of five hundred thousand dollars a year beginning with the year 1937 (or possibly at the rate of a million dollars a year beginning with the year 1941, when the amortization of the 1926–1940 loan at the same rate will have terminated); it will also be suggested that the loan be callable at 101 at as early a date as possible, so that all the outstanding loans may be refunded if it appears desirable to do so. The bankers will, however, probably be told that, while this is what the Dominican Government considers most desirable for it, any proposal which they think preferable in view of market conditions will be considered.
Important. President Trujillo requests that, in view of the altered status of the entire loan matter, the memorandum submitted to the President of the United States by the Dominican Financial Mission be withdrawn and returned.13
It is respectfully requested that the Department give heed to the desire of the Dominican Government to obtain a loan with as little delay as possible and that it inform the Legation, by cable if possible, of its attitude towards the suggestions and desires expressed in this despatch.
P. S. I respectfully recommend that the Department approve the procedure suggested by the Dominican Government as reported in the third paragraph of this despatch and that all the other proposals made in this despatch be approved in principle.