839.51/3521: Telegram

The Chargé in the Dominican Republic (Stafford) to the Secretary of State

66. For Bundy from Schoenfeld. In conversation with Dunn last evening and this morning he pointed out that indispensable prerequisite to any negotiations for conversion of outstanding bonds will be formal notice by Dominican Government to fiscal agents of this Government’s inability to make up deficit in revenues pledged to debt service; that lack of such formal advice to fiscal agents here is probably the reason for aloofness of the latter in committing themselves; that he is seriously considering recommending to the President of the Republic a formal communication to fiscal agents setting forth inability to meet debt service deficit, requesting cooperation of the fiscal agents in organizing appropriate representation of bondholders to discuss default and possible readjustment by conversion in order to protect the interests of the bondholders, the whole being subject to treaty relations between the United States and Dominican Governments.

Foregoing seems to me sound reasoning on Dunn’s part. I can well believe that the attitude of fiscal agents thus far has been due to non-existence of necessary legal position to enable them to act.

It is my impression that unless the President overrules Dunn the emergency procedure previously contemplated will be suspended at least pending outcome of proposed conversation [conversion] negotiations. Acting General Receiver of Customs estimates customs revenue will fall short of debt service requirements by roughly as much as $50,000 in current month. [Schoenfeld.]