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

No. 1010

Sir: I have the honor to refer to my despatch No. 982 of May 2235 reporting a conversation with President Trujillo on the night of May 21 with regard to the status of Mr. William E. Dunn, Financial Adviser to the Dominican Government. The Department will recall that in that conversation the President informed me of his intention not to renew Mr. Dunn’s contract upon its expiration next month.

In a brief audience I had with President Trujillo on yesterday for the purpose of paying my respects before leaving Santo Domingo on leave of absence, I referred to our conversation regarding the Financial Adviser and suggested to the President that to avoid possible injustice to Mr. Dunn, who would doubtless have to make personal arrangements accordingly, Mr. Dunn seemed to be entitled to receive direct advice from the Dominican Government if it were really decided not [Page 633] to renew his contract. The President made no comment on this point but stated that before my forthcoming departure he intended to send me further information on the subject.

I venture to set out in the present despatch, as of possible interest to the Department, a few general considerations which seem pertinent to this matter, in view of the background, development and present apparent status of the Financial Adviser’s relation to the Dominican Government.

Mr. Dunn, though possessing no official representation on behalf of the United States Government, was recommended for the post of Financial Adviser in the Dominican Republic by the Department of State. Any impulsive or ill-considered action with regard to Mr. Dunn on the part of the Dominican Government would, therefore, seem to involve our Government to the extent that any American employed by a foreign Government on the recommendation of our Government may possess in any degree even a quasi-representative character. It may be suggested that in view of the circumstances of the Financial Adviser’s original employment here and the imperative need of the Dominican Government for such professional advice as he was equipped to give, both at the time of his employment and continuously since then, there was a special responsibility upon the incumbent of that post through his personal efforts to create for himself a position of such prestige that the Dominican Government would rely upon him exclusively and confidently for guidance in financial and fiscal matters. It may be suggested also that the present frame of mind of President Trujillo as set forth in my despatch abovementioned indicates that Mr. Dunn failed to establish his prestige on sufficiently solid foundations to warrant such exclusive and confident reliance. Perhaps no foreigner in the Financial Adviser’s position could have established such unquestioned prestige, given … the strong nationalistic feeling of members of the Dominican Government. Nevertheless, there is no doubt, in my opinion, and I consider the opinion amply supported by the record, that the Financial Adviser has been largely responsible for the very substantial improvement in the financial condition of the Dominican Government, with all this implies, between the date of his arrival and the present time. I believe the record shows that his services have made possible in great measure General Trujillo’s present reputation as a Dominican President who has had special success in financial and fiscal administration. It may be said, therefore, that Mr. Dunn is entitled to special consideration from the Dominican Government not only in respect of his quasi-representation of the American Government but in respect of the inherent merits of his work here.

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Judging from the files of this Legation, it is recalled that until my own incumbency of the Mission accurate information regarding the financial and fiscal operations of the Dominican Government seems not to have reached the American Legation or the Department of State promptly or completely. The fact that the Legation has been able to follow financial and fiscal developments fairly closely and with a considerable degree of accuracy since October, 1931, with the necessary result that our work in relation to Dominican affairs has been greatly facilitated, is largely due to the assistance rendered by the Financial Adviser in this respect. Doubtless, this circumstance might not redound to the merit of the Financial Adviser in the eyes of the Dominican Government, although the data supplied to the Legation from time to time by the Financial Adviser were supplied with the original consent and by the direct authority of President Trujillo in pursuance of an understanding reached between the President and myself to that effect immediately after my arrival here in October, 1931. These circumstances however, would seem to give Mr. Dunn a claim upon the special consideration of our Government.

Since the employment by the Dominican Government of Mr. Joseph E. Davies as counsel in financial and related matters last month, President Trujillo has seemingly come to believe that he can afford to dispense with the services of a Financial Adviser performing the duties which Mr. Dunn has performed. This inference is drawn from the time and circumstances of the conversation reported in my despatch above-cited. The employment of high priced counsel in the person of Mr. Davies seems entirely justifiable from the standpoint of the Dominican Government, which may hope that counsel so retained … will make unnecessary the continued employment of a technical adviser of Mr. Dunn’s qualifications, likewise involving a substantial disbursement. Nevertheless, there is, in my view, some question that counsel operating mostly in the United States, as Mr. Davies doubtless expects to do, can efficiently perform the complementary and equally necessary duties that seem to be required at this end to insure consistent and intelligent progress. In fact, it would seem to be in the interest of such counsel in the United States to be represented in the Dominican Republic by a man of substantially the same qualifications as those possessed by Mr. Dunn, if the present Financial Adviser should cease to be employed.

It is also true that the President has long felt and so stated to me as early as December of 1931, that the presence here of a foreign official performing Mr. Dunn’s duties was politically embarrassing to him. I have no reason to doubt that it was considered embarrassing in the same sense as, and only in less degree than, the existence of the General Receivership of Dominican Customs and the treaty relations between [Page 635] the Dominican Republic and the American Government have been and are still considered politically embarrassing to this Government.

Regardless of this particular circumstance, however, consideration must be given to the interests of the holders of Dominican external bonds and to the treaty relations between our Government and that of this Republic.

So far as the interests of the bondholders are concerned, it seems obvious that the longer the present emergency status continues, the more difficult it will be to make adequate arrangements for the resumption of substantial payments for sinking fund on the foreign debt on an agreed basis that will be fair both to the Dominican Government and to the holders of the bonds.

So far as our treaty relations with this Government are concerned, the earliest possible return to a prescribed and legal procedure sanctioned by treaty is patently in the best interest of the American Government, which assumed certain definite obligations under the Convention of 1924 and the loan contracts concluded under the authority thereof, as well as in the interest of the Dominican Republic for whose stability the Convention has constituted a foundation the importance of which is recognized by many patriotic Dominicans. Our acquiescence in the Dominican Government’s radical departure from the practice of the Convention through the Emergency Law was clearly based upon a showing of the most pressing necessity and arose out of the compelling conditions of that time. That acquiescence did not imply abandonment of the Convention by the American Government. But continued acquiescence in admitted treaty violation by this Government for any substantial period of time after the emergency shall have passed would necessarily imply such abandonment and would involve us, as well as this Government, in the violation of an international treaty. Hence, a return to the full practice of the Convention and compliance with the loan contracts or the negotiation of new loan contracts revised to meet changed conditions, possibly involving the elaboration of a new Convention, can probably not be long deferred.

I believe that the Financial Adviser to the Dominican Government rarely, if ever, lost sight of these two fundamental factors and it is probable that his present difficulties are largely due to differences between his employers and himself as to how these fundamentals should be treated in formulating the policy of the Dominican Government.…

At first glance, perhaps, the fact that President Trujillo, may now intend to have no American in the Dominican Republic, after the expiration of Mr. Dunn’s contract, who will be in a position to perform the duties the Financial Adviser has been performing, does not appear [Page 636] to be a matter involving much more than the relations between Mr. Dunn and his employers. But this is evidently a superficial view to take. Rather, it seems clear that President Trujillo is really unaware of the implications of his proposed course of procedure or that, if he is aware of these implications, he hopes the American Government may overlook them. It may be deemed desirable, therefore, if the Department concurs in the foregoing analysis of the situation, to make an informal statement to the Dominican Government on the subject. In view of my forthcoming departure on leave of absence there is no time for me to receive before I leave an expression of the Department’s considered views and the corresponding instructions, but if the line of thought above set forth commends itself to the Department, it may be found expedient to communicate it orally or otherwise to the Dominican Minister at Washington in the near future.

Respectfully yours,

H. F. Arthur Schoenfeld
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