839.51/3827: Telegram

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

60. Department’s telegram No. 35, November 18, 2 p.m. Financial Adviser to the Dominican Government left here by air this morning and should be in Washington November 21. He took with him instructions from this Government to the Dominican Minister at Washington embodying proposed note and enclosures of which copies were transmitted to the Department with my despatch No. 677 of November 15 now en route by air mail. Before his departure I [Page 615] recommended to him that proposed note should not be delivered to the Department pending thorough consultation with the Department and I understand this recommendation will be followed.

In my opinion absolute necessity for diverting further monies from amortization payments cannot now be said to exist in the same sense as necessity for such diversion existed prior to the enactment of Emergency Law last year. Orderly Government and vital administrative functions are not now as they were then in imminent danger of collapse. Trend of Government revenue, however, has shown no improvement beyond that represented by the funds released for use within the country through operation of the Emergency Law. Trend of revenue rather shows deterioration in economic stability of this country. The Dominican Government believes that unless this trend can be reversed there is real, though not immediate, danger that this Government will be unable to make interest payments on the foreign debt. I cannot express an opinion as to whether the particular program of so-called reproductive public works to which it is proposed to apply further monies to be derived from amortization payments is the program best calculated to reverse present trend of revenue. I know no one here whose opinion on that subject I would accept as conclusive. But opinions of bankers, business men and General Receiver of Customs coincide that the purchasing power of the Dominican people shows no sign of revival.

If this continues, payments of interest may become impossible. In the light of the opinions available I should say we would be justified in accepting the Dominican Government’s view that further diversion of monies from amortization to apply them to a program of physical rehabilitation is necessary. At the same time I would recommend careful scrutiny, if possible by disinterested but competent technical expert, of the specific works proposed to be undertaken in order to determine which of them if any may be considered likely to preserve economic stability of the Dominican Government by keeping up or increasing the national revenue.