The Assistant Secretary of State (Welles) to the Minister in the Dominican Republic (Schoenfeld)
My Dear Mr. Schoenfeld: I have received your letter of May 21, 1936, relating to the Department’s position regarding the interpretation to be placed on Article 3 of the Dominican-American Convention, in anticipation of a request upon you by President Trujillo or the Minister for Foreign Relations to explain its significance.
In amplification of the Department’s position as set forth in the draft of the note transmitted with the Department’s instruction No. 426 of May 12, 1936,1 believe that the most satisfactory and friendly way to handle this matter at the present time should you be approached [Page 446] either by the President or the Foreign Minister, would be to state that our position is that, if the Dominican Government enters into contracts which involve amounts provided for in the annual budget and which are to be paid within the current fiscal year, this Government has no reason to protest under the terms of Article 3; that if, on the other hand, the Dominican Government enters into contracts which call for the making of a series of payments over a term of years, there can obviously be no assurance that in the years to come the revenues of the Government would be sufficient to meet such payments, and that, consequently, such contracts imply an increase in the public debt of the Dominican Government without the prior consent of the Government of the United States, and are consequently to be construed as to be in violation of Article 3 of the Convention.
As stated in the note transmitted with the Department’s instruction No. 426 of May 12, 1936, we desire to give as liberal an interpretation as possible to the provisions of the Convention and we do not think that we would be justified in endeavoring to exercise budgetary control, but should the budget contain provisions for payments to be made beyond the end of the fiscal year and pledging revenues for a period of years in advance, we must, of course, consider such procedure as increasing the public debt and in violation of Article 3 of the Convention.