Foreign Relations of the United States, Diplomatic Papers, 1933, The American Republics, Volume V

839.51/3761

Memorandum by Mr. Winthrop R. Scott of the Division of Latin American Affairs

[Washington,] June 28, 1932.

We have gone over with Mr. Dunn at length during the last week various questions concerning Dominican finances. Briefly, as a matter of record, the following may be noted:

Funding the Floating Debt: Mr. Dunn explained the desirability of funding the floating debt, first, because it was urgently needed as a constructive financial measure and second, the extreme political importance of such a move from the point of view of maintaining the prestige of President Trujillo. Mr. Bundy explained the difficulties from the Department’s point of view of taking a formal step which would in effect be an acknowledgment of this increase in the Dominican public debt but added that he was inclined to feel that something would have to be done to take care of this debt, but that he was not certain in what form the matter could be handled or whether a formal bond issue would be necessary. Details of the possible funding operation were briefly discussed and the possibility that the interest rate on any bonds or certificates issued might be low and that payments of such certificates would inevitably be on a small scale and would, perhaps, have to be deferred for a year or so.

Mr. Dunn said that he was not anxious to begin allocations in the budget for the floating debt until he could see his way more clearly in this respect, and that it might be possible that the whole question of funding the debt could be held in abeyance for another year; in any event, the question was not immediately pressing, but he had desired to get the Department’s general view point on this subject.

Possible Revisions of the Tariff: Mr. Dunn advanced the idea that the Dominican Government was more or less prevented from modifying the tariff because of the convention; that in many ways the present tariff was unscientific and not adapted to the needs of the Dominicans and that he, Mr. Dunn, would like to make recommendations with a view to making constructive changes in the tariff but that he did not know how the Department would feel about his going into tariff matters because of the relation of this matter to the Receiver Generalship. Mr. Dunn was informed that the convention provision concerning the modifications of the tariff was merely to protect the bondholders against measures which would curtail customs revenues but the Convention did not preclude making modifications of the tariff. It was pointed out that somewhat similar provisions existed in regard to Haiti but that the Haitian tariff was continuously being modified. In regard to the second point the question of Dunn’s relation to Pulliam¹⁵ it was pointed out that Dunn as Financial Adviser to the Dominican Republic could properly make recommendations concerning any phase of Dominican finances. It was felt that details of this sort should be handled and agreements reached between Dunn, the American Minister and the General Receiver, who were in a position to work these things out on the job before bringing them up to the Department.

The Consolidation of the Internal Revenues Collected, Under Laws 190¹⁶ et cetera, with the Customs Revenues. Mr. Dunn argued that for the sake of efficiency a consolidation of this sort should take place. He was informed that the Department was not disposed to object to the consolidation of revenues outside of the customs revenues in any way which might be worked out by the financial adviser, this being purely an internal matter for the Dominican Government to decide upon, but that the Department would not approve any steps which would have the effect of modifying the convention or burdening the United States with further responsibilities and that it would not be practicable to consolidate additional revenues under the Receiver General, thus raising questions concerning the convention and also concerning the operation of the Emergency Plan.

Technical Features of the Emergency Plan: Mr. Dunn stated that in his opinion the emergency law was drafted in a faulty way in certain respects in that a literal compliance with it would cause the Dominican Government to immediately begin the full amortization payments, should the revenues in any semester be one dollar above $2,250,000. In addition he pointed out that there was nothing in the economic outlook to even remotely suggest that full sinking fund payments could be resumed at the end of two years. It was admitted that the emergency law could not be followed out literally but that these questions would have to be solved as they came up.

Coinage of Additional Small Currency: Mr. Dunn took up the question of coining about $200,000 worth of Dominican money of small denomination (less than five pesos), thus making a profit for the Government of perhaps $200,000, an operation similar to one recently successfully carried on in Cuba. Mr. Dunn pointed out that there were not sufficient Dominican coins in circulation, American money being largely used for this purpose; that he would consult carefully with the bank before undertaking any such operation and arrange for the establishment of a suitable reserve against this new currency.

Mr. Bundy stated that he did not clearly understand the working of such an operation. Both he and Mr. Livesey¹⁷ felt that was a matter for study and Dominican decision.

The Employment of Mr. Hershey, the Purchasing Agent for the Bureau of Insular Affairs, by the Dominican Government: It appears that a month or so ago Mr. Pulliam had endeavored to have Mr. Hershey make some provisions for the Dominican Government. General Parker,¹⁸ upon learning of this proposed arrangement, had discussed it with the Department and expressed his disapproval of the employment of Mr. Hershey in this capacity. The Department did not urge General Parker to change his views, since it was felt to be primarily a matter for the Bureau of Insular Affairs to determine.

At my suggestion Mr. Dunn discussed this matter with General Parker and after his interview informed me that General Parker was giving further consideration to the matter and might possibly be disposed to take a more favorable attitude. Apparently the question was not definitely decided.

The Renting to the Dominican Government of a War Department Dredge: This question is too long to be handled in a brief statement, having been discussed from various angles by Mr. Dunn with the Department of Commerce, with Mr. Jones of the Bucyrus Erie Company, and with members of the State Department. As the matter now stands Mr. Dunn appears to be uncertain as to whether he will ask us to urge the War Department to reconsider its position or not. He is going to talk to the Manager of the South Porto Rico Sugar Company and other individuals in New York and will bring up the question again with the Department. In this connection I informed Mr. Dunn that it was possible the Department might be willing to urge the War Department to reconsider its attitude, but only if we knew there was a real emergency requiring the dredge to be loaned and also after we learned definitely that the Dominican Government was really sure that it wished the loan of the dredge. In other words, Schoenfeld, Dunn, Rickards¹⁹ and the sugar people would have to get together before they could expect the State Department to do anything further. I made no promises to Dunn whatever as to what the Department might do.

Amortization Fund: After discussing when amortization payments should be resumed it was understood that the Dominican Government would not begin paying until assured of the full emergency fund ($125,000) up to the end of the fiscal year, December 31, 1932, but that when such revenues were assured that Government would in fact begin to apply money to the sinking fund.

In this connection Mr. Dunn was informed by Mr. Bundy that as the 1942 loan had a prior lien over the 1940 loan, all excess funds becoming available to amortization would have to be applied to the 1942 loan. Mr. Dunn stated that he understood this.

Military Mission: Mr. Dunn said that President Trujillo was extremely anxious to have a military mission composed of Marine Corps officers; that the principal reason for this was to build up his army to a point of efficiency … I said that my guess would be that a project for a Marine Corps Mission would not go through very well as far as the Department was concerned.

W[inthrop] R. S[cott]

15. William E. Pulliam, General Receiver of Customs in the Dominican Republic.
16. Gaceta Oficial No. 3652, June 3, 1925.
17. Frederick Livesey, Assistant Economic Adviser.
18. Chief of the Bureau of Insular Affairs, War Department.
19. Fred. Q. Rickards, Technical Adviser on Internal Revenue of the Dominican Republic.