Foreign Relations of the United States Diplomatic Papers, 1937, The American Republics, Volume V

839.51/4505a

The Assistant Secretary of State (Welles) to the Dominican Minister (Pastoriza)

Washington, March 22, 1937.

My Dear Don Andrés: With reference to the suggested protocol which Dr. Henríquez Ureña and you presented to the Department of State on February 11 last and to our recent conversation when you and Dr. Henríquez Ureña called to see me, I am enclosing two copies of a counterproposal which I submit to you as a basis for further conversations. I should like to make it clear that the suggested draft which I am thus submitting as a possible substitution for the Convention of 1924 between our two countries is offered without any commitment, merely as a basis for discussion and that it is, of course, as you will see, predicated upon a prior understanding between the Dominican Government and representatives of the holders of Dominican Government bonds.

I shall hold myself in readiness to discuss further this suggested draft at any time with Dr. Henríquez Ureña and yourself.

With my kindest regards [etc.]

Sumner Welles

[Enclosure]

American Draft of a Counterproposal To Replace the Convention of 1924 Between the United States and the Dominican Republic

Whereas the Convention between the Dominican Republic and the United States of America containing provisions for the aid of the United States in the collection and application of the customs revenues of the Dominican Republic was concluded and signed by their respective plenipotentiaries in the City of Washington on the twenty-seventh of December, 1924;

Whereas this Convention was concluded for the purpose of facilitating payment of the public debt of the Dominican Republic and subsequently the said debt has been reduced;

Whereas the Dominican Republic has arrived at an agreement with the Foreign Bondholders Protective Council, Incorporated, which has consented to an extension of the amortization periods for the bonds of the public debt, and to subject the capacity of the Dominican Republic to make amortization payments to a sliding scale in proportion to the increase of the customs revenues until January 1, 1939;

Whereas the Dominican Republic has represented that certain provisions in the Convention of 1924 may hinder the action of the Dominican state in developing the natural resources of the country and in the progressive extension of its industry and commerce;

Whereas the Dominican Republic has requested the cooperation of the United States of America to enter into a new convention which shall take into account these circumstances and the new provisions agreed upon with regard to the manner of the payment of the public debt; and the United States is disposed to give such cooperation;

The United States of America, represented by
(Here follow the names and titles)
and the Government of the Dominican Republic, represented by
(Here follow the names and titles)
who, having communicated their respective full powers to each other, which have been found to be in good and due form, have agreed upon the following:

Article I

Punctual service of the external debt of the Dominican Republic shall constitute a charge upon the customs revenues of the Republic as set forth in Article III of this convention. Subject to the conditions and limitations accepted by bondholders in conformity with the agreement made on . . . . . . . . . . . . . . . . 1936, which are set forth in the bonds renewed under date of January 2 and February 2, 1937, and to the modifications introduced by the present convention, the Dominican Government shall maintain the guarantees and the general provisions stipulated in the original contracts for the existing external loans, and in the individual bonds of these loans, until payment has been made of each and every one of the bonds issued by the Dominican Republic.

Article II

Upon the termination of the Convention of 1924, as hereinafter provided in Article X of this Convention, the Dominican Republic shall entrust the collection and allocation of its customs revenues, with the sole authority and responsibility therefor, to a Customs Representative, who, with his principal assistants, not more than two in number, shall have been appointed for the purpose by the Executive Committee of Dominican Bondholders. Subsequent vacancies in the positions of Customs Representative and of his two principal assistants shall be filled by appointment by the President of the Dominican Republic from a panel submitted by the Executive Committee of Dominican Bondholders, of three names for each position vacated. The salaries of the Customs Representative and of his two principal assistants shall be established by virtue of an agreement between the Dominican Government and the Executive Committee of Dominican Bondholders.

The office of the Customs Representative shall deliver to the Fiscal Agent of the loan on the twentieth day of each calendar month a sum equal to the twelfth part of the annual interest on all the bonds issued and outstanding, and of the annual amounts indicated for the amortization of the said bonds in accordance with the provisions in force in any agreements now existing with the Foreign Bondholders Protective Council as modified by this convention.

Article III

The Office of the Customs Representative designated by the Executive Committee of Dominican Bondholders shall apply in the order indicated below the proceeds of the customs duties collected in the various customhouses of the Dominican Republic:

1. To the payment of the expenses of the office of the Customs Representative, but such amount shall in no case exceed five per cent of the customs collections. Upon the closure of the accounts of the Customs Representative’s office at the end of the fiscal year, any unexpended balance under this item shall be turned over as an additional payment under item 5 of this Article to the Dominican Government;

2. To the payment of the interest on pending bonds;

3. To the payment of the annual amounts stipulated for the amortization of the said bonds, in conformity with the agreements in force on the day of signature of this convention, including the interest on all bonds retained as a sinking fund;

4. To the purchase and cancellation, or retirement and cancellation, of any of the said bonds in accordance with the terms thereof as may be decided by the Dominican Government;

5. The remainder shall be paid over to the Dominican Government.

Article IV

The office of the Customs Representative designated by the Executive Committee of Dominican Bondholders shall, in its direction of the functioning of the customhouses of the Republic, give due consideration to, and undertake to remedy, in the event that in its judgment such remedial action is required, any error or deficiency in the administration of the customs which may be brought to its attention by the Secretary of the Treasury of the Dominican Republic; it shall, moreover, keep an account of the statistical data of customs activities and the trade of the Republic with other countries; and shall make an annual report in the Spanish and the English languages which shall be submitted to the Dominican Government and to the Executive Committee of Dominican Bondholders.

The employees of the Dominican Customs Service, other than the principal assistants mentioned in Article II, shall be citizens of the Dominican Republic and appointed by the Customs Representative with the approval of the President of the Republic.

Article V

The Dominican Government shall render to the office of the Customs Representative designated by the Executive Committee of Dominican Bondholders all the aid and support that may be necessary as well as the broadest protection in the discharge of its duties and the exercise of the powers granted to it in the foregoing articles, adopting for that purpose such laws and regulations as may be necessary.

Article VI

Until the Dominican Republic shall have paid off all its outstanding bonds, the contractual public debt may not be increased by the contracting of new loans or an emission of new bond issues except by prior agreement between the Dominican Republic and the Executive Committee of Dominican Bondholders. However, the Dominican Government may enter into contracts and financial arrangements for the extension of public works and other services of national interest provided that they are adjusted to the following conditions:

1. As a guarantee of those contracts or financial arrangements, there shall be set aside the receipts from any given impost of the internal revenue, which is not later to form part of the customs revenue as provided in Article VII, and these receipts shall be accepted as the sole guarantee for the performance of such obligations; and

2. The maximum period for the liquidation of any of these contracts or financial arrangements may not be greater than four years beginning from the date upon which the contract or arrangement is concluded.

The Dominican Government expressly renounces the right provided in the Convention of December 27, 1924, to issue new bonds up to the limit of $20,000,000. The Dominican Government may at any time freely dispose of the internal revenues and imposts not pledged as a guarantee for the payment of the public debt.

Article VII

With a view to establishing a more uniform and more scientific customs tariff, the Dominican Government will amalgamate into one schedule of customs duties the existing customs duties and the charges upon imports levied under the present laws governing internal revenue taxation.

The Dominican Government may thereafter modify its customs tariffs in accordance with the needs and advantage of its commerce, but pledges itself expressly not to reduce import duties at any time to such a point that, taking as a basis exports and imports of the same extent and kind for the two years preceding the year in which it is desired to make such modification, the net total customs receipts under the tariff so modified would not have amounted for each of the two said years, to at least one and a half times the sum needed to insure the service of the interest and amortization of the public debt; unless it shall have previously segregated from its internal revenue receipts, from special imposts or other charges, other than customs duties, an amount equivalent to the reduction in total customs revenues resulting from proposed modifications of its customs tariffs. In such event, the Dominican Government shall on the twentieth of each calendar month deliver against receipt to the office of the Customs Representative designated by the Executive Committee of Dominican Bondholders from its internal revenue so segregated a sum equivalent to one-twelfth of the amount by which the annual customs revenues of the Republic shall have been diminished as the result of such customs tariff modification.

Article VIII

The office of the Customs Representative designated by the Executive Committee of Dominican Bondholders shall render accounts monthly to the Secretary of the Treasury of the Dominican Republic, to the fiscal agent of the loan, and to the Executive Committee of Dominican Bondholders, and the said accounts shall be subject to examination and auditing by the competent officials of the Dominican Government, by the fiscal agent, and by the Executive Committee of Dominican Bondholders.

Article IX

Every controversy which may arise between the Dominican Government and the Executive Committee of Dominican Bondholders in the execution of the stipulations of this Convention and which cannot be solved by negotiations between them, shall be the subject of diplomatic negotiation between the Government of the United States and the Government of the Dominican Republic. In the event that an agreement cannot be reached through diplomatic channels between the two Governments, such controversies shall be settled by arbitration. For the execution of this provision in each special case, the contracting parties shall, when the necessity for arbitration has once been determined, conclude a special agreement defining clearly the extent of the disagreement, the extent of the powers of the arbitrators, and the periods that are to be fixed for the organization of the arbitral tribunal and the various stages in the proceedings. The special agreement providing for arbitration must be signed in all cases within a period of six months from the date on which either of the contracting parties notifies the other contracting party of its desire to have recourse to arbitration. It is understood that such special agreement shall be made on the part of the United States by the President of the United States by and with the consent of the Senate, and on the part of the Dominican Republic, it shall be subject to the procedure required by its constitution and laws.

Article X

This Convention shall be ratified in accordance with the constitutional methods of the High Contracting Parties. The Convention shall take effect on the first day of the first month next ensuing upon the exchange of ratifications, which shall take place at . . . . . . . ., and upon that date, the convention signed between the Dominican Republic and the United States of America on December 27, 1924, shall cease to have effect.

Upon the payment in full of each and every one of the bonds issued by the Dominican Government of the loans referred to in this convention, the provisions of this convention shall automatically become null and void.

In witness whereof, the Plenipotentiaries have signed this Convention in duplicate, in the English and Spanish languages, both texts being authentic, and have hereunto affixed their seals.

Done at the City of Washington this . . . . . day of . . . . . . . ., 1937.