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

No. 3141

Sir: Referring further to the Department’s airmail instruction No. 397 of February 4, 1936 (File No. 839.1541/32),32 and particularly to my despatch No. 3117 of February 12, 1936, reporting representations made by me on that day to the Acting Minister of Foreign Affairs, in respect of a contract entered into last October between the Dominican Government and the United States Steel Products Company and the relation of the said contract to the obligations of the Dominican Government under Article III of the Convention of December 27, 1924, I have the honor now to enclose a copy, with translation, of a note from the Acting Minister of Foreign Affairs, dated February 21, 1936, setting forth formally the views of the Dominican Government regarding the interpretation to be given Article III of the Convention in so far as it purports to make the assumption by the Dominican Government of obligations pledging future revenues subject to the consent of our Government.

Respectfully yours,

H. F. Arthur Schoenfeld

The Dominican Acting Minister for Foreign Affairs (García Mella) to the American Minister (Schoenfeld)

No. 131

Mr. Minister: I have the honor to refer to the memorandum which on the 12th instant Your Excellency delivered to me. It is stated [Page 437] therein: that the Gaceta Oficial No. 4861 [4865] of January 1, 1936, published a contract entered into between the Dominican Government and the United States Products Company for the purpose of providing for the construction in the Republic of three steel bridges over the rivers Chavón, Sanate and Camú, respectively. The Minister refers in his memorandum to the information transmitted to this Department of State in June 1934 that the American Government considered that the payment stipulated in another contract signed in 1934 established an obligation against future revenues of the Republic and was, consequently, in disagreement with the terms of article III of the Convention of December 27, 1924; and that, in compliance with instructions received from your Government, Your Excellency now calls the attention of the Dominican Government to the same point, considering that the contract made in October of last year and the method of payment stipulated therein for the construction of the three bridges constitute an increase in the public debt, and that accordingly the matter should have been treated with the Government of the United States to obtain its consent in accordance with the terms of article III of the said Convention of 1924.

In this respect, the Dominican Foreign Office hastens to state to Your Excellency that, in accordance with the text of article III of the Convention (“until the Dominican Republic has paid the whole amount of the bonds of the debt, its public debt shall not be increased, etc., etc.”), what is forbidden, or rather, what is limited, is the capacity of the Dominican Government to increase its public debt, wherefore the Dominican Foreign Office deems it convenient to fix from now and for always the extent of that expression “public debt,” in accordance with article III of the convention.

If by public debt is understood “the total of obligations which the State has contracted with its creditors,” it becomes evident that the contract which Your Excellency comments on gives no place for any criticism. If, broadening the criterion of that definition, we should establish that the “public debt is the total of obligations contracted by the State, comprising all that the nation recognizes it owes, whatever may be the form and the duration of the obligation signed or the conditions of reimbursement, whether in capital or in interest,” then and in spite of such general terms neither could there be comprised in them “the current debts of the State on account of the performance of public services, the maintenance of sea and land forces, payment of public employees, execution of public works, purchase of supplies, etc., etc.,” because all this is inherent in the life of the State, in its operation as such and in the condition of the existence of the Republic; wherefore it is necessary to agree that, in accordance with article III of the convention, the expression public debt includes “the obligations expressly stipulated with any creditor.”

[Page 438]

It is easy to understand that by article III of the convention the Dominican Government did not limit its powers to dispose of the portion of the revenues which might not be necessary for the payment of the bonds issued under the Convention of December 27, 1924, and that it is discretionary with it to apply that portion of its revenues within the terms, conditions and regulations established by the laws; thus, and in relation with the concrete case of the bridges, payment for which is stipulated in the contract on which Your Excellency comments, it is necessary to distinguish that the amount of their cost ($156,165.00) is stipulated in the budget for the year 1936, submitted to the methods of payment established by the building contract and that, therefore, in the light of the terms of the convention, it is sheltered from all criticism.

If the ideas established by Your Excellency in relation to this contract were correct, we should be obliged to conclude that the said comments, in respect to the bridge contract, could be made regarding all provisions contained in the General Law of Public Expenses; that all the execution of the national budget will, in that case, constitute a future debt since wages, salaries, the maintenance of the sea and land forces, the constructions and acquisitions of all kinds, are provided to be paid after the services have been rendered, the works completed, the monthly payments become due, etc.

In no way and in no circumstances could the American Government claim, as it has never claimed, nor could the Dominican Government consider itself, as it has never considered itself, under the obligation of asking consent to provide for the payment of works, of services, acquisition of implements, wages of employees, etc., in its Law of Public Expenses.

The very terms of article III of the Convention of 1924, on the contrary, explain that the public debt to which the convention refers is that which is contracted to produce obligations that compromise the financial capacity of the State and the interests protected by the convention itself; never the administrative movements dependent upon the execution of the Law of Public Expenses.

With the purpose of being always in a position to respond to the ends contemplated by the convention, that is, not to diminish the financial capacity of the State, nor to sign contracts which might involve future appropriations constituting debts, even though these debts may not have the character of public debt, the Dominican Government on May 1, 2 and 3 of the year 1929 voted Law No. 1114, called “Law of Accounting,” which provides in subhead (b) of section 9a that “no contract requiring the expenditure of public funds, though this contract may have all the approval required by the Constitution and the laws, shall have any validity if it be not endorsed with, or if there be not attached to it, a certificate of the Comptroller [Page 439] and Auditor General in such sense, and the latter shall not sign such certificate unless such contract has been properly authorized by the Government in accordance with the law and there exists an unappropriated balance from an appropriation filling the requirements of the Constitution, sufficient to cover such expenses.”

As Your Excellency can see, the Dominican Government has not been satisfied with the support of the principles, or with the interpretation of the convention, to protect itself against all criticism, but it has provided in the law that it will not make contracts with obligations for payment so long as there are no appropriations of funds which may not be necessary for the payment of the public debt.

In requesting Your Excellency to take note for appropriate purposes of the foregoing set forth in the name of my Government, I take the opportunity [etc.]

M. García Mella
  1. Not found in Department files.
  2. File translation revised.