839.51/3696

The Minister in the Dominican Republic ( Schoenfeld ) to the Secretary of State

No. 250

Sir: I have the honor to refer to recent reports regarding the difficulties encountered by Mr. W. E. Dunn, Financial Adviser to the Dominican Government, in carrying out his plans for consolidation of the budget, and to my despatches regarding the instructions received by Mr. Dunn from President Trujillo to proceed with the preparation of a comprehensive internal revenue plan. I beg leave especially to refer to my despatch No. 245 of February 18 last,2 reporting a conversation with the Minister of Foreign Affairs3 regarding the general position of the Dominican Government, in respect of its fiscal policy.

I now enclose a memorandum of a conversation I had with the President of the Republic and memoranda of conversations with Mr. Dunn and with the Minister of Foreign Affairs,4 all of which took place yesterday. I enclose also memoranda by Mr. Dunn2 of conversations which he had early yesterday afternoon with the Minister of Foreign Affairs and in the later afternoon with the President of the Republic.

It will be seen from my memoranda that in talking with the President I made a special effort to insure the resumption of direct personal contact between Mr. Dunn and the President, which had been interrupted since February 2nd. But the Department will observe that these conversations covered a wider range of subject matter than the mere resumption of personal contact between the Financial Adviser and the President, however indispensable that may be. My talks with [Page 590] the President and the Minister of Foreign Affairs, since the date of my despatch No. 245, have been designed to impress on them the unwise tendencies recently noticeable in the Dominican Government’s fiscal policy and the effect which might be produced upon this Government’s whole position unless those tendencies were checked.

Mr. Dunn informs me today that he had a four-hour talk with the President this forenoon, in the course of which a number of matters was settled that had not been fully discussed in his long talk with General Trujillo yesterday, including a definite understanding that far-reaching fiscal legislation of the kind which has lately caused much uneasiness will not be encouraged, the approval by the President of the internal budget of the Office of the Special Agent for the Emergency (see my despatch No. 220 of February 106) and in general an understanding as to the plans of the Financial Adviser and the cooperation of the President for the rehabilitation of this Government’s fiscal structure.

As a result of Mr. Dunn’s conversation with the President yesterday, the President drew up and authorized for publication a statement which appears in today’s press and is substantially to the following effect: “The Financial Expert in the service of the Government is finishing his preliminary technical study regarding the national and municipal revenue system adapted to this country. This study, which will be presented to the Government, has been going on for nine months and will soon be finished. It may be stated that certain taxes now paid by the people with some reluctance will be eliminated or reduced.”

The crisis in financial policy to which the enclosed memoranda refer and which culminated yesterday, is, without doubt, the most serious of its kind since last October when the so-called emergency legislation went into force. For the past few weeks there has been a distinct tendency on the part of the President and his advisers to grasp at ill-considered and hastily conceived plans calculated to raise increased direct revenue. Some of these plans actually came to public attention and caused correspondingly disastrous results; among them were a proposed capital export tax, a proposed inheritance tax, the immigration and residence tax on certain aliens actually enacted. Others were authoritatively rumored and included a proposed issue of $500,000 metallic secondary currency, a proposed sales tax, a proposed income tax and others. The Financial Adviser believed that none of these measures, however intrinsically good or bad, fitted into any pre-established fiscal plan which must be laid down, at least in a fairly definite form, in contemplation of the eventual end of the Emergency Plan. Under these circumstances the Financial Adviser was frankly [Page 591] alarmed and the fact that, for any reason, he had lost contact with the President was, in my opinion, a danger of great importance from the standpoint of this Legation and of the policy to be followed by the Department in respect of the Emergency Plan.

Consequently, I felt that the time had come for taking a definite position in support of the Financial Adviser’s claim not to be left isolated from immediate and regular contact with the President. I trust that the Department will approve the means I used to accomplish this result.…

Respectfully yours,

H. F. Arthur Schoenfeld
  1. Not printed.
  2. Max Henriquez Ureña.
  3. None printed.
  4. Not printed.
  5. Not printed.