The Secretary of State to the Dominican Minister (Despradel)
Sir: Your note of October 20, 1931, advising me of the critical difficulties with which the Dominican Republic is faced, has had my most careful and sympathetic consideration, and I have been much impressed by the gravity of the situation as set forth by you. The reports which I have received from other sources all show that the Dominican Government is passing through a most grave and difficult period.
I have noted that your Government is convinced that in the present critical emergency something must be done to relieve the situation and that accordingly your Government proposes to submit to the Dominican Congress a law, the adoption of which will result in making additional sums of approximately $100,000. per month available for the expenses of the Dominican Republic. This, you state, will necessarily result in the failure of the Dominican Government to pay the amortization on the external loans.
The step the Dominican Government proposes to take is a most serious one. It must necessarily adversely affect the credit of that Government. I am convinced that the gravity of this step is fully appreciated by your Government. The efforts made by the Dominican Government during the last year of grave depression which was made even more difficult by the disastrous hurricane that destroyed the city of Santo Domingo in September, 1930, are evidence of the desire of the Dominican Government to meet fully and promptly its financial engagements. The sacrifices and efforts made by the Dominican people during the last year are inspiring and, while it is to be regretted that the protracted depression has robbed these efforts of the success which they merited, they have nevertheless firmly set forth the determination of the Dominican people to live up to their obligations and have entitled them to all possible consideration.
I have noted specifically that it is the amortization payments of the external loans that your Government now proposes to defer for the time being, but that the interest on these loans will be met regularly. The continuance of interest payments is of the utmost importance to Dominican credit and to prevent even greater hardship to the bondholders. You point out that the amortization payments in question are extremely onerous. This Department felt that the amortization provision of the 1926 bonds was unwise at the time the loan was contracted and your Government will recall that the American bankers concerned also counseled against it. This provision was inserted on account of the very understandable desire of the Dominican Government to have the Customs Receivership limited to as short a period [Page 132] as possible, a desire with which this Government was then and remains in hearty sympathy. The measure now proposed by the Dominican Government will necessarily extend the life of the Receivership of Customs for so long a period as the amortization payments are held in abeyance, and I assume you have taken this into consideration in arriving at your decision.
I have also noted that your Government recognizes that the step it proposes to take is contrary to the provisions of the Treaty signed December 27, 1924, between the United States and the Dominican Republic, and also the Loan Contract contained in the bonds and in the agreement with the bankers acting as fiscal agents of the loan, but that your Government insists that the maintenance and continuance of government and orderly procedure in the Dominican Republic upon which the ultimate payment of your obligations depends, requires your Government to take this action. I understand that it is the firm intent of the Dominican Government to make as soon as possible the payments which are now to be deferred. This is essential in order that the effect on Dominican credit may be but temporary. I also note that the additional funds made available will be spent with the greatest care in maintaining vital Governmental functions and that your Government feels compelled to meet the difficulties that have arisen by the proposed measure as a last resort.
It is with an understanding of the special circumstances which you point out that the policy of this Government will be guided.