The Secretary of State to the Minister in the Dominican Republic ( Curtis )
9. Department desires you to call on President Trujillo and say to him that the Department has been giving very careful consideration to the Dominican financial situation in order to be able, if possible, to assist the Dominican Government in the present crisis. The Department has found the situation to be as follows:
- No reputable American bankers were willing to consider Dominican financing at this time;
- Two American construction companies were willing to make advances to the Dominican Government in conjunction with a construction program. One of those proposals was not approved by the Department and the other was rejected by President Trujillo because he did not desire to have a financial plan combined with a construction plan; the Department concurs in the view of President Trujillo that separate financial and construction proposals are desirable.
- The Dominican Financial Commission has been in this country for some months, but apart from the two construction companies above mentioned has been unable to interest any reputable American bankers in Dominican financing. It also appears to be a fact that their endeavors in the financial districts over this period of time and the lack of success thereof have made it more difficult for the Dominican Republic to raise a loan.
- In view of the present state of the bond market and of the financial condition of a number of Latin American countries any long time financing upon provident terms for the Dominican Republic is absolutely out of the question at this time.
As President Trujillo is aware, the Department has let it be known that it would welcome the entry of any reputable bankers into the field of the problem presented by the Dominican Republic and it has been well known throughout financial circles that the Dominican Republic was seeking some financial assistance. After continuance of this situation without any offer being made, Lee, Higginson and Company were the only bankers who showed the slightest interest in the matter as a purely financial proposition. Only recently and as soon as Lee, Higginson and Company showed their interest, the Department took it up with them in order to develop their interest.
At the request of the Department, and only on that consideration, Messrs. Lee, Higginson and Company have now stated that they are willing to discuss a moderate short time proposal of say $4,000,000 secured by $5,000,000 bonds to be issued under the Convention of 1924, provided the Dominican Government will consent to the four following conditions:
- An independent survey of the actual and immediate financial requirements of the Dominican Government; whether for funding [Page 96] floating debt, reconstruction of public works, meeting of deficit for 1931, or other purposes such as refunding of loans now outstanding (dependent of course, on market conditions). Such a survey should be made by Americans and we believe the cost could be confined to a small sum.
- Measures be adopted to insure continuance of the program of economy which we understand has been inaugurated.
- Definite steps be taken to insure competent control of finances in the future. This is of importance, not only to insure the balancing of the budget but also to make certain that sufficient funds are annually set aside for honest and efficient upkeep of public works, such as roads, water works, etc.
- Agreement that the expenditure of the proceeds of the proposed loan be supervised by a representative of the Department of State of the U. S. A. and that he countersign all checks against proceeds of loan.
The Department has discussed this matter with Lee, Higginson and Company who state that conditions 2 and 3 will be fulfilled by the appointment of an American under the audit and control laws enacted by the Dominican Congress as a result of the recommendations of the Dominican Financial Commission headed by General Dawes in 1929, provided contract between Dominican Government and bankers states that this American or another satisfactory to the bankers will serve in this position during the term of loan arranged at this time and providing that part of Section 8 of this law giving the right to the President to approve expenditures the comptroller has vetoed be suspended.
The Dominican Minister in Washington showed the Department a letter from President Trujillo asking that this Government lend him the services of Mr. Sydney de la Rue, Financial Adviser to Haiti, to help advise his representatives in the negotiation of a loan. The Department regretted that it could not meet his request as Mr. de la Rue is now in the service of the Haitian Government and is not available for the proposed service. The Department, however, would be willing to find another Financial Adviser for President Trujillo, should that be his desire, and would point out that this man could occupy the positions and discharge the functions specified in each of the four points outlined above by Messrs. Lee, Higginson and Company. That is, he could make the financial survey and examination of the floating debt, and the new construction work; could carry on the economy program initiated by President Trujillo; could make the audits of the Government’s accounts, and also countersign the checks paying out the proceeds of any loan as stipulated in point 4 of the Lee, Higginson report, which forms in substance point 4 of the conditions enumerated by the Department of State as necessary for its consent to any further loans. He could also act as Financial Adviser of the Dominican Government in the negotiation of the loan.[Page 97]
If these steps are taken by the Dominican Government, Lee, Higginson and Company state that they will then be willing to discuss with the Dominican Government its financial problems in an endeavor to work out a solution. While they state that they can not make any definite commitments until all the details are worked out and the condition of the bond market at that time is taken into account, the Department understands that Lee, Higginson and Company probably would, upon agreement on essential features of financing, make a small cash advance of say $500,000 pending sufficient improvement in the market to make larger financing possible. Lee, Higginson make no prediction as to when this improvement will take place but point out that market conditions often change quickly and unexpectedly and that it should be very much to the advantage of the Dominicans to arrange all details of their financing at once so that they will be prepared to take immediate advantage of an improvement in market conditions in the United States. As a prerequisite to entering into the business, Lee, Higginson and Company stated that they would require the Dominican Government to deal only with them until they arrived at an agreement or came to the conclusion that they were dissatisfied with the terms Lee, Higginson would give, and would break off negotiations. When this occurred it would then be definitely understood that the Dominican Government would be free to deal with any other bankers whatsoever but it should also be definitely understood that then Lee, Higginson would be definitely out of the picture and would not interest themselves further in the matter.
In the contract for the short term loan Lee, Higginson and Company would ask for a clause to the effect that in the further long term financing to follow, the Dominican Government would discuss the matter first and exclusively with Lee, Higginson and Company. Should the Government and Lee, Higginson and Company not agree on terms, the Dominican Government would then be free to deal with any other bankers.
You may say to President Trujillo that while it is not the policy of the Department to recommend any one particular American banking house, Lee, Higginson and Company is one of the outstanding banking houses in the United States and that it is the only one which has shown any interest, so far as the Department is aware, in a purely financial plan. You may please also say that the Department of course would be glad to render any possible assistance to the Dominican Government in negotiating a loan contract either with Lee, Higginson or with any other reputable American company in an endeavor to see that terms just and favorable to the Dominican people are arrived at.
You may leave a copy of the above with President Trujillo should he so desire. Please report by cable his views in the premises.[Page 98]
If asked you may say that the Department has in mind as Financial Adviser, should President Trujillo desire such an official, Mr. William E. Dunn who held the chair of Latin American History and Economics in the University of Texas from 1913 to 1917; was in the United States Naval Service from 1917 to 1919; was then Assistant Chief and Acting Chief of Latin American Division of the United States Department of Commerce; from 1921 to 1924 was Commercial Attaché at the American Embassy in Lima; from 1924 to 1927 was Director General of Internal Revenue, Republic of Haiti, and from 1927 to date has been in the banking business in this country, first as Manager of the Latin American Department of Redmond and Company, and since as Manager of the Foreign Department of the Foreman-State Corporation of Chicago. From July to December, 1930, he was General Secretary of the Kemmerer Financial Mission to Colombia. He speaks Spanish well.