The Minister in the Dominican Republic ( Schoenfeld ) to the Secretary of State
[Received April 25.]
Sir: I have the honor to acknowledge receipt of the Department’s strictly confidential instruction No. 43 of April 9, 1932, (without file number) and of its enclosure, being a memorandum dated February 26, 1932, setting forth the views of the Department concerning the status of the Financial Adviser to the Dominican Government and the so-called Emergency Plan in the Dominican Republic.
The Department will have observed from my despatches since the date of the memorandum enclosed with the Department’s instruction under acknowledgment that many of the matters which gave the Department concern at the date of the memorandum in question have shown substantial improvement.
Of the points mentioned in the memorandum, that pertaining to the use by the Dominican Government of the 10% reduction in Government salaries under law No. 22911 as amended by law No. 29612 may soon require special attention. I understand from the Financial Adviser to the Dominican Government that the proceeds from the 10% salary reduction have been used for the payment of legitimate bills against the Dominican Government. The amount, of course, has been insufficient to take care of the obligations in question but, according to Mr. Dunn, such funds as have been available from this source have been applied to the payment of debt. This does not necessarily mean that all political favoritism in meeting such accounts has been eliminated, but the floating debt has at least been reduced by the relatively small amounts which it has been possible to pay from the proceeds of the 10% salary reduction. As of interest in this connection, I enclose copy of a memorandum by Mr. Dunn13 regarding the progress of the work of determining the claims making up the floating debt.[Page 597]
It would be helpful to me to receive an expression of the Department’s views regarding the bearing of Article 3 of the Convention of December 27, 1924 upon an eventual funding of the floating debt of the Dominican Government, also taking into account, of course, the Emergency Plan. It would be desirable, if possible, to have an expression on this question in the light of the fact that a further step towards the issuance of Certificates to holders of recognized claims making up the floating debt should, if possible, be planned in the relatively near future. It will be remembered that the Financial Adviser expects to proceed to the United States at the end of May or the beginning of June next, to complete his report on the Dominican tax system. If provision is to be made in the 1933 budget for service of a funded internal debt, I should be enabled before Mr. Dunn’s departure for that purpose to express myself authoritatively on the point. My own belief is that Article 3 of the Convention should not be interpreted in such a way as to preclude funding of the floating debt, which would not thereby be increased, but rather the opposite. It may also be possible when urging the inclusion in the next budget of an appropriation for service of such funded internal debt, to secure the inclusion of the proceeds from the 10% salary reduction in the consolidated budget, where it properly belongs.
If, as indicated in the last paragraph of the Department’s instruction under acknowledgment, the Department should decide to discuss with the Dominican Minister at Washington any general aspect of the financial position of the Dominican Government, it is respectfully suggested that one of the questions which it might be useful so to discuss would be that of the floating debt, including some reference to the unwisdom of having segregated the 10% salary reduction under law No. 229 outside the consolidated budget. I should doubt the value of making an isolated point of this matter in any discussion with the Dominican Minister at Washington, but should the Department mention it to Señor Despradel, such mention would probably have some repercussion here if, in the same discussion, the Department should deem it appropriate to comment favorably on the progress that has been made by the Dominican Government in such matters as the consolidation of the budget, the effort of the President and the Minister of Finance14 to insure compliance with the budget in the matter of expenditures and to prevent the increase of the floating debt, the recently announced policy of the Dominican Government to promulgate no further tax laws and its plans thoroughly to overhaul the Internal Revenue system, all in contemplation of the inevitable end of the Emergency Plan. In my opinion, an expression on the part of the Department along these lines would serve to encourage [Page 598] President Trujillo to forge ahead without deviation in his program of financial re-habilitation. It would tend, incidentally, to strengthen the position of the Minister of Finance.…