839.51/4013
The Dominican Minister (Despradel) to the Acting Secretary of State
Excellency: I have the honor to transmit to Your Excellency, at the direction of my Government, the following:
When the administration, presided over by President Trujillo, came into power on August 16, 1930, not only did it have to face the disastrous consequences of the previous extravagant and inefficient administration—i. e., existing political instability, a bankrupt treasury with salaries and expenses in arrears amounting to more than $1,750,000.00, and consequent lack of confidence in business circles—but was also confronted with the fact that the properties acquired and the works executed in previous years, carried out in greater part by monies from foreign loans, were almost in complete decadence, and, without funds to face this urgent situation, the total loss of the large [Page 661] sums already invested was imminent. Furthermore, the time had arrived to begin amortization of the loans contracted.
In order to meet the situation described above, the Dominican Government needed then and needs now, indispensably, a reconstruction period during which the works and properties mentioned can obtain their original value and be converted into sources of production, thus contributing to save the country from ruin and constituting a solid guarantee for the loans contracted.
In a diplomatic note addressed to the Government of the United States, under date of October 20, 1931,46 the Government of the Dominican Republic set forth the difficult circumstances which compelled it to propose the enactment of emergency legislation authorizing the diversion of a certain portion of the customs revenues in order to apply such funds to the maintenance of essential governmental activities without which it would be impossible to insure internal tranquillity and the orderly processes of public administration. The Dominican Government recognized that such action would be contrary to the terms of the Convention of 1924, as well as a partial violation of the provisions of the existing external loan contracts. The proposed Emergency Law was not passed by the Dominican Congress, however, until after the Government of the United States had fully investigated the situation and evidenced no objections.
The Emergency Law in question, which was promulgated by His Excellency, the President of the Dominican Republic on October 24, 1931, provided for the payment to the Dominican Government of a maximum sum of $125,000.00 per month, or $1,500,000.00 annually, from customs revenues, after full payment of interest on all outstanding external bonds and of the necessary expenses of the General Receiver of Customs and of the Special Emergency Office created by this law.
The provisions of the Emergency Law were put into execution at the earliest possible moment. Simultaneously my Government undertook the various and successive reforms in its general fiscal administration that it believed necessary to demonstrate its earnest desire to conform to the letter and spirit of the emergency legislation, viz: the correct and efficient administration of all government revenues in such a way as to justify the partial diversion of customs revenues. A recapitulation of these reforms seems pertinent at this point, as follows:
- 1.
- Maintenance of a balanced budget, and prompt payment of all current salaries and expenses.
- 2.
- Establishment of a scientific system of control over government expenditures.
- 3.
- Centralization of Government purchases in a reorganized Bureau of Supplies with resulting economies and benefit to the Dominican people as a whole.
- 4.
- Inauguration of internal revenue reforms under a competent foreign specialist.
- 5.
- Rigid economies in all branches of the public administration.
- 6.
- Gradual reduction of the floating debt under special laws enacted for this purpose.
- 7.
- Inauguration of an economical and efficient public works program.
The foregoing measures cover almost the entire field of Dominican fiscal administration, and will demonstrate my Government’s good faith and earnest desire to conform to the principles of the Emergency Plan.
As a purely temporary expedient, designed to prevent the threatened collapse of orderly Government in the Dominican Republic, the Emergency Law as originally passed has served its purpose well. However, it could never be considered as a permanent solution of the nation’s fiscal difficulties.
The Emergency Law, vital though it has been to the welfare of the Dominican people, has merely sufficed to hold together a precarious situation, and has not been far-reaching enough to affect general basic conditions which have a direct influence on such a situation. In other words, the efforts of my Government under the present law have necessarily been limited to carrying on essential processes of government on a greatly reduced scale, and sufficient funds have not been made available to stimulate economic activities on which final recovery must depend. It is the conviction of my Government that law and order having been safe-guarded by the present emergency resources made available to it, it would be sound economy to carry out a modest program of vital physical rehabilitation and stimulation of the productive resources of the country without which a further dwindling of the national revenues can hardly be avoided. Such a policy would also seem to be vital to the interests of our foreign creditors, since a continuation of the declining tendency in revenues would obviously make it more and more difficult to pay even the interest on our external bonds.
The bare essentials in such a program include the maintenance of means of communication whereby the products of the country can be exported to foreign markets; and the imports of merchandise, from which a large part of our revenues are derived, can be distributed in the local markets. Such activities would include the repair and upkeep of existing roads, the opening up of inexpensive new feeder roads to tap productive areas now isolated from outside markets, the erection of sorely needed bridges, the dredging of some of our ports, [Page 663] which have had no attention during the past five years, and the construction of other reproductive public works which will produce additional revenues. The funds that are available for such purposes, even with the aid of present emergency funds, are not sufficient to carry out a minimum economical program of maintenance and rehabilitation, covering essential activities; and further delay will endanger the Republic’s physical assets without which it could not maintain its present standards and stage of economic development. Additional funds are also needed for practical agricultural relief in order to bring about an increase in the volume of our products, thus off-setting as much as possible the low commodity prices now prevailing, and, as a result conserving the country’s purchasing power.
My Government feels that it can be justly proud of its present public works organization and of the methods that have been adopted after a preliminary effort to carry on such activities through private foreign contractors. The work done by the Dominican Republic has resulted in direct and substantial savings to the public Treasury. The fact that both the technical and financial aspects of the work will continue to be efficiently so handled and that full value will be obtained from the expenditure of every dollar would seem to justify the application of all possible funds for such reproductive purposes for a limited period of time rather than to use such sorely needed funds for the purchase of our external bonds in the open market to the detriment of our international balance of payments and perhaps of the payment of interest itself.
It is obvious to competent persons familiar with our local situation that an investment made now to restore such assets will go vastly further than if such investment is further postponed. My Government feels that the real test of its success lies in its ability to restore the physical properties of the country on at least a minimum scale and to maintain fiscal equilibrium, both of which are vitally necessary if government is to continue to preserve property, life and the liberties of the Dominican people.
The total revenues of the Dominican Republic decreased from $15,000,000.00 in 1927 to approximately $7,000,000.00 in 1932. Of these customs revenues decreased from $5,900,000.00 to $2,700,000.00 in the same period.
As total income continues at about the same low level as in 1931–1932, the necessity to continue to divert a part of customs revenues to complete requirements for salaries and routine government expenses, is as vital now as two years ago with the added necessity of providing funds for repair and replacement of plant, etc., as set forth above.
We have therefore reached the conclusion to take up the matter of adjustment of the situation with the bondholders through the Central [Page 664] Bondholders Committee, recently appointed by the President of the United States.
We are advised that that Committee has not yet organized, and the administrative machinery has not yet been established, but that it will be ready to function in the immediate future.
In view of that fact, my government has decided that it will be advisable to retain the present status quo until consideration of our problems has been had by this Committee. To that end, my government believes it necessary to extend the existing Emergency Law, for a period of six months, from December 31, 1933.
My government is exceedingly anxious to conclude the proposed readjustment of our foreign debt service, and believes that the proposed six months’ extension of the status quo should afford sufficient time in which to enable the Committee to give full consideration to the situation.
Because the Dominican Constitution requires that the government budget shall be made on an annual basis, an extension of the Emergency Law for a period of six months only is impractical and would, in effect, be violating the constitution. Because of that fact my government has extended the Emergency Law without nominal limitation as follows:
“Sole Article: While the economic arrangements, which the Dominican Government is diligently endeavoring to realize, with relation to the external debt of the Republic, are being concluded, there is hereby extended the life of Emergency Law Number 206, dated October 23, 1931, from and after December 31, 1933.”
My government contemplates that the matter of the external debt may be considered and adjusted within six months from January 1, 1934, in which event the Emergency Law will be repealed. Every effort will be made in behalf of my government to expedite consideration of the case before the Central Bondholders Committee when it is ready to function, to the end that the operation of the law can be terminated in less than six months if possible.
If despite cooperation and every effort, the matter were not adjusted within the six month period, the Emergency Law would have to be re-enacted. If re-enacted at this time without nominal limitations, there would be no necessity for re-enactment at the end of the six months period, pending completion of the negotiations.
Your government has the assurance of my government that it is making, and will make, every effort to have this matter adjusted within the period of six months and will retain the status quo pending that determination.
My government desires, however, to stress the fact that the existing emergency law is insufficient to properly protect the Republic from [Page 665] distress and injury. It will, however, withhold any new or additional emergency provisions awaiting the conclusion of the negotiations thru the Central Bondholders Committee.
In view of the foregoing statements and explanations, I trust that Your Excellency, as well as the Government of the United States, will appreciate the foregoing basic reasons for this course which my Government has been obliged to take.
I take [etc.]