The memorandum is self-explanatory and sets forth in outline the
recommendations to be made by the Financial Adviser to the Dominican
Government as to the next step in the procedure for a re-adjustment of
the external debt of the Dominican Republic. It is possible that Mr.
Dunn’s recommendations, if found acceptable to the President of the
Republic, will be acted on in the near future.
[Enclosure]
Memorandum by the Minister in the Dominican
Republic (Schoenfeld)
[Santo
Domingo,] February 28, 1933.
Mr. William E. Dunn, Financial Adviser to the Dominican Government,
who returned from the United States this morning, called on me at 11
a.m. Mr. Dunn said that shortly after his arrival in New York a
meeting was held by him with representatives respectively of the
National City Bank, Lee, Higginson & Company, Brown
Brothers-Harriman, Dillon, Read & Company and the Continental
Illinois
[Page 625]
Trust Company,
for the purpose of discussing the Dominican external debt situation.
As a result of that and subsequent meetings with representatives of
these banks and of the Guaranty Trust Company, Fiscal Agents for
Dominican loans, and after consultation of counsel (Mr. Jesse Knight
of the firm of Curtis, Mallet-Prevost, Mosle and Colt) a plan had
been evolved for further procedure. The plan contemplated the
formation of an Advisory Committee, consisting of Messrs. W. W.
Cumberland (Chairman), Dana G. Munro and A. W. Kimber of White,
Weld, with the assistance of such representatives as the bankers
might designate for the purpose, to study the entire question of the
Dominican external debt with a view to the eventual formulation of a
plan of adjustment which would be considered by a committee to
represent the bondholders, to whom the plan would be submitted by
the Advisory Committee after consultation with the Fiscal Agents,
the Dominican Government and the American Government.
A necessary next step in the procedure, therefore, would be
legislative action by the Dominican Government authorizing the
Executive Power to deal with the Advisory Committee in order to link
up the Dominican Government with the Committee and the other parties
in interest, if and as a plan for the permanent re-adjustment of the
debt is developed. The legislation in question would simply extend
the Emergency Plan in its present form for another year beyond the
present date of expiration and would grant the Executive the
authority above referred to and authority to make the necessary
disbursements from the reserve in the Emergency Fund. Official
advice of the Dominican Government’s intention to legislate in this
sense would be transmitted to the American Government either
directly or through this Legation.
I told Mr. Dunn that I was not in a position to express any opinion
on the proposed procedure. Mr. Dunn said that he fully understood
that any action which might be taken by the Dominican Government in
pursuance of his recommendation along the lines above indicated must
necessarily be purely unilateral, in the same way as the Emergency
Law, etc., had been unilateral. He urged, however, that without the
proposed legislation neither the Advisory Committee, the Fiscal
Agents nor the other bankers could properly proceed with the study
of any plan for the regularization of the foreign debt question or
the correction of the default in sinking fund payments since the
Emergency Law went into effect. Under these circumstances it was
necessary in his opinion and, as he said, in the opinion of all
those whom he had consulted in New York, for the Dominican
Government to secure the legislative authority in question. Mr. Dunn
pointed out also that under the proposed plan of procedure the
Dominican Government would get no more from the Emergency Fund than
at present,
[Page 626]
pending the
permanent re-adjustment of the amortization rate, and that this plan
admitted of no further delay in execution since continued
uncertainty in the existing precarious state of the matter would be
harmful to the political and economic stability of the Dominican
Republic.
I gathered from what Mr. Dunn said that if the President accepts his
recommendation the official note from the Dominican Government
notifying of the proposed procedure may soon be forthcoming.
H. F. A[rthur] S[choenfeld]
