839.51/3632
The Secretary of State to Lee, Higginson & Company
Sirs: In reply to your letter of November 9, 1931, you are advised that the economic conditions of the Dominican Republic have suffered in common with the rest of the world and were made much worse by the disastrous hurricane of September, 1930. The conditions have become so serious and the revenues, including both customs and internal revenues, have declined so abruptly that the Dominican Republic has informed the Department of State that it has found it necessary to adopt emergency legislation giving priority to the interest charges on the foreign loans but temporarily diverting certain customs revenues [Page 135] from the payment of amortization on these loans, applying the amounts so diverted to the maintenance of vital governmental functions and the preservation of law and order upon which the ultimate payment of the external debts must depend.
The Dominican Government communicated to the Department of State in advance its intention and the facts upon which its action is based together with a statement of the drastic economy measures already taken in an endeavor to meet the situation. The Dominican Government frankly recognized that the step proposed by it is not only a violation of the obligations as to the holders of its securities but also a violation of the Convention between the United States and the Dominican Republic. After an independent investigation by the Department confirming the existence of the serious situation in the Dominican Republic, the Department informed the Dominican Government that it noted the steps which that Government felt required to take and the reasons therefor; and that the additional funds thus made available to the Dominican Government as a measure of last resort would be spent with the greatest care in maintaining vital governmental functions by an official specially designated to administer the same as a special emergency fund. The Department noted the firm intent of the Dominican Government to make as soon as possible the payments now to be deferred, and called attention to the fact that the measure proposed would necessarily extend the life of the Receivership of Customs for so long a period as the amortization payments are held in abeyance. The Department added that with an understanding of these special circumstances thus pointed out the policy of the United States Government would be guided.
With reference to your specific inquiry as to the policy and action of this Government, and having in mind the provisions of the Convention between the United States and the Dominican Republic, I may say that, in view of the circumstances set forth above, this Government is not disposed at this time to take any action other than to continue to follow with attention and care the developments in the Dominican Republic. It is the belief of the Department that this policy will be the best for all concerned, including the bondholders upon whose bonds the Dominican Government proposes to continue to pay interest regularly.
Very truly yours,
Assistant Secretary