839.51/3930
The Minister in the Dominican Republic (Schoenfeld), Temporarily in the United States, to the Acting Secretary of State
Dear Mr. Secretary: I have not heard what progress has been made recently in the Dominican debt re-adjustment program. But I recall that the Dominican Emergency Law expires by limitation at the end of this year. It appears that the Dominican Government does not plan to wait very long before extending the Emergency Law, perhaps for several years, and so amending it as to increase the amount of customs revenue to be diverted from debt service to current expenses, the Convention and the loan contracts to the contrary notwithstanding. Meanwhile, the surplus accumulated in the Emergency Fund is approaching half a million dollars; but there seems to be no intention to apply the surplus to amortization of the funded debt, the indications being that when the Emergency Law is amended the surplus will also be used for expenses.
The fact that there have been few, if any, recent expressions of our policy on the international aspects of the Dominican debt problem has disappointed, though I think it has not discouraged, the Dominican [Page 641] Government. They seem to have realized that our Government has been preoccupied with questions of greater importance to us. But even before I left Santo Domingo it was pretty clear that they expect us to give them a lead without much more delay. It is also a fair inference from our knowledge of President Trujillo’s energetic character that, if our attention is not soon directed to his problems in so far as they involve ourselves, he is quite capable of creating a situation that would demand attention and that we, perhaps, would have preferred not to see created.
Assuming that the Department is not ready at this time to undertake the fundamental revision of the Convention as desired by the Dominican Government, my feeling about a practicable settlement is that it could probably be found along the lines of reducing the interest rate, restoring payments into the sinking fund at a considerably lower rate than that on which there has been default, stipulating for the application of a prosperity index to the amortization rate and putting the service of the debt back in the hands of the General Receiver of Dominican Customs as provided in the Convention. The forthcoming setting up of the Corporation of Foreign Security Holders will doubtless have a bearing on the problem; but the official character of that Corporation created under the Securities Act of 193338 will make it all the more necessary to keep in mind, in the Dominican re-adjustment, the Treaty obligations of our Government.
In any case, we seem to be getting to the point where our course will probably have to be charted again in the light of conditions that have changed a good deal since the Department last took its bearings, nearly two years ago.
. . . . . . . . . . . . . .
When I return to Santo Domingo, I should like if possible to do so with a clear perception of our considered policy there and particularly with precautions taken against any crossing of wires in representing that policy to the Dominican Government. I have not had the honor of meeting either the President or the Secretary of State, whose directions I should be more than glad to have before starting on a new tour of duty in Santo Domingo. If you think that my coming to the Department on temporary detail before going back to my post would serve a useful purpose, I shall hold myself ready to act on instructions to that effect, instead of sailing for my post when my leave expires on August 15th.39
Believe me [etc.]