839.51/4832: Telegram

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

120. For Wilson. Your 139, 140 and 141,11 August 21. The Department is disposed to consider a departure from “draft X” along the general lines suggested by Despradel containing as minimum requirements all of the following conditions:

Dominican Republic to make a specific pledge with first lien against all of its revenues, including customs and internal revenues and all ordinary or extraordinary receipts.
All revenues to be deposited in a depositary.
The depositary to be a bank chosen by the two Governments. Adequate provision to be made for the selection of successor banks if the original bank ceases operations, or if for any other reason this Government deems it desirable to do so.
A Fiscal Representative to represent bondholders to be selected by the two Governments, by common accord. Suitable provision to be made for successors, for removal, and so forth.
The Fiscal Representative to have complete access to all of the records and books of the depositary bank and in addition to receive complete and detailed reports from the Dominican Treasury of all of its operations, including the collection and disbursement of all revenues.
No funds to be disbursed by the depositary bank until the depositary bank and the Fiscal Representative have been compensated, and interest and amortization of the external debt has been met in accordance with loan contracts as modified by the 1934 Agreement between the Dominican Republic and Foreign Bondholders Protective Council, Incorporated. Irrevocable orders to be issued to the bank granting the Fiscal Representative the veto power with respect to all withdrawal of funds until the monthly service of the debt has been met.
A provision to be incorporated similar to that contained in the last paragraph of Article I of “Draft X”. Some such provision is essential to make the arrangement at all palatable to the bondholders.
A provision for arbitral procedure to be incorporated.

It is the Department’s opinion that a suitable depositary bank would probably in the first instance be the Dominican branch of the only American Institution there, that is the National City Bank. The appointment of such a depositary might be appealing to the bondholders. At some subsequent time a local institution, if one is created, might be considered.

The Department would welcome your comments on all of the above and in addition would appreciate your studying carefully the following two points:

What would be proper figures to be inserted in the provision called for in (7) above?
Is the seasonal variation in the revenues of the Dominican Republic sufficiently great to require that interest and amortization payments be made on a basis other than one-twelfth of the annual totals each month?

In your discretion you are authorized to discuss all of these matters with the Dominican Commissioners.

  1. Telegram No. 141 not printed.