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

My Dear Mr. Welles: My despatch No. 3318 of yesterday reports a preliminary conversation with Bonetti Burgos regarding the note delivered under the Department’s instruction No. 426 of May 12 on the subject of Article III of the Convention. Since that conversation I have tried again to formulate in my own mind a precise statement of the Department’s position regarding the interpretation of Article III, in anticipation of a request upon me by President Trujillo or the Foreign Minister to explain its significance. In other words, I may be asked by the Dominicans to lay down for them a rule of practical conduct that would be considered satisfactory to the Department if they should see fit to follow it. The more we go into it, the more difficult it seems to be to give the Department’s thought on this subject precise meaning and the records of efforts made in previous years to formulate the Department’s position as, for instance, in the memoranda describing conversations in 1928, yield very little light on the subject.

Does Article III mean that the American Government expects to be consulted in order to see that the Dominican Government maintains a balanced budget and that no obligations shall be incurred by the latter beyond service of its external funded debt and current expenses of the Government without accumulation of any floating debt payable after the end of each fiscal year? To illustrate the difficulty, in the matter of the Camú River bridge contract, which called for final payment within a year, does such a contract call for consultation of our Government only because the payments run beyond the end of the fiscal year in which the contract was made? If this is not the meaning of the Department’s position, I find it impossible to formulate it in other terms. Besides, the Department may not really be prepared to back up such a formulation and yet we can not see in [Page 443] what other direction the Department’s instructions on the subject tend.

There is a possibility that, by following the line of the interpretation of Article ELI above indicated, we may find ourselves in an untenable position in which the Dominican Government would be able to argue, as it has before in the history of our relations with this country, that we were seeking to establish budget control. I seriously doubt that we are seeking to do any such thing. I think we should beware, also, of the argument that Article III was meant to preclude the increase without our consent of the Dominican public debt beyond what it was when the Convention was concluded; this argument would be difficult to counter. Would it not be better, by virtue of our obligations to the bondholders under Article III of the Convention, to concentrate our efforts on trying to clear up the floating debt situation here and thereby indirectly contribute to implant in the Dominican fiscal mind the germ of the idea that the indiscriminate accumulation of obligations for which no reasonable assurance of payment exists is undesirable and should be avoided?

Considering particularly the background of the negotiations that led to the agreement of 1934 with the Bondholders Council,35 it seems to me that we are in danger of putting ourselves in a false position by seeming to insist now upon an interpretation of Article III which we in the Legation at least find it impossible to formulate otherwise than as indicated and which does not yet seem to have been formulated with precision by the Department itself.

I should welcome any clarification of the Department’s views that you could send me for my guidance.

Sincerely yours,

H. F. Arthur Schoenfeld
  1. For the text of letters of August 10 and 11, 1934, exchanged between the Dominican President and the Foreign Bondholders Protective Council, Inc., see the Council’s Annual Report, 1934, pp. 59–62. See also Foreign Relations, 1934, vol. v, pp. 189 ff.