Memorandum by Mr. Joseph F. McGurk of the Division of Latin American Affairs

Conversation: Mr. Joseph E. Davies, Counsel in Financial Matters to the Dominican Government
Mr. Jefferson Caffery
Mr. H. F. Arthur Schoenfeld
Mr. E. C. Wilson
Mr. McGurk

Mr. Davies said that he had been in New York yesterday to consult with the fiscal agents and that he had had a very satisfactory interview with them. He said that they seemed willing to aid in any way they could in the present financial situation in the Dominican Republic. Mr. Davies said that he realized that there would be considerable physical difficulty in getting the bondholders together and that the Fiscal Agent had suggested that the banks paying the coupons might be able to obtain the names of those cashing the coupons as the bonds were all bearer bonds and not listed. He thought that this could be done but it would take considerable time. Mr. Davies then went on to say that in the meanwhile it would be necessary for the Dominican Government to obtain an extension of the present emergency law in order for the Government to carry on its construction program and to maintain law and order. Mr. Davies argued strongly that a complete moratorium on sinking fund payments for not less than four years [Page 637] should be included in the proposed extension of the emergency law. Mr. Caffery said that a four year moratorium on sinking fund payments would not be well received here. Mr. Davies supported his contention on the general ground that this was an era of consideration for debtors and that with a strong and honest government like that of President Trujillo the bondholders would be satisfied to receive their interest and were not concerned about the effects of delay in amortizing the external debt. Mr. Davies dwelt for some time on the excellent impression he had received of the personal qualities of President Trujillo, the Dominican Minister of Finance and of other Dominican officials, emphasizing their honesty, sincerity and patriotism, the President’s personal ability as a business man, the impressive program of public works that was being carried out, the President’s insistence upon rigid control of the public funds and in general that the Dominican Government was entitled to full confidence. Mr. Davies intimated that in any event if President Trujillo decided to extend the emergency law and to suspend completely all sinking fund payments, there was no likelihood of serious objection being made by the American Government, or at least that such objection would take the form of coercive action. Mr. Davies believed the President was conscious of this state of affairs and might therefore act accordingly if it became necessary. Mr. Davies even suggested that the Dominican Government might find it necessary to suspend interest payments although President Trujillo had strongly stated his intention at all costs to maintain interest payments and the high credit standing of the Dominican Government. Mr. Caffery then stated that he felt sure that it was the policy of this Administration to aid in every way possible the efforts of the Dominican Government to carry on through the present situation, but he felt that every effort should be made to put an end to the present extra-legal status and restore it to a legal basis under the Convention.…

Mr. Davies then mentioned the subject of a new convention or a supplementary convention to the present one. He was not at all certain as to how this could be worked out as he was not entirely familiar with the subject and said that he would make a study of it. Mr. Caffery then referred to the law creating the Corporation of Foreign Bondholders and asked Mr. Davies whether he thought the provisions of this law would cover the Dominican situation. Mr. Davies said that it was not clear to him whether the provisions would cover the situation, but if it did it would probably obviate the necessity of carrying forward the project of negotiations with the bondholders through the present fiscal agents.

[Joseph F.] McGurk