839.51/4841: Telegram

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

145. From Wilson. Please refer to the text transmitted in my telegram No. 144, August 27, 5 p.m.

Article III. The text grants the representative of the bondholders full access to all records and books of the depository bank. In addition we had suggested, in accordance with your 120, August 24, 5 p.m., that he receive complete and detailed reports from the Dominican Treasurer. Despradel argued that the insertion of such a clause would appear to accord to the representative supervisory rights over the administration of Dominican domestic matters. He explained that the laws in effect referred to in article VI would make available to the representative all the information which we had requested for the representative and that such laws under the text of article VI were irrevocable except with the consent of the two Governments. In view of this argument I acquiesced in the suppression of this additional prerogative for the representative, subject to your approval.

The alteration in the order of payments enumerated in “first, second, third” in article III was made at the request of the Dominicans in view of their explanation that the bank could not be in a position to charge for its services until such services had been rendered.

Also in article III we had incorporated provision for additional amounts to be allocated to the sinking fund as stated in the fourth paragraph of my 142, August 25, 5 [4] p.m. This was the only point to which the Dominicans strenuously objected. Despradel explained that the Dominican Government felt that if by their own efforts and economy they were able to increase the national revenue they should have the right to devote such increase to the benefit of the country. He argued further that the establishment of such a lien upon additional revenue would be detrimental to further credit for the Republic. He invited our attention to the fact that the 1934 agreement,15 which is expressly reaffirmed in the convention, has provisions limiting the amounts which after 1939 should be allocated to the sinking fund. He said that it would be more royalist than the King for us to insist upon a more favorable arrangement in respect to the sinking fund than the bondholders themselves had agreed to. I stated that I could make no decision in respect to the suppression of this article but that I would consult you on this matter.

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I am inclined to feel that barring unexpectedly prosperous years it is unlikely that the Government’s revenue under its own administration will attain 12,500,000, and that we are dealing therefore with an hypothesis somewhat unlikely of realization. Accordingly you may feel that it is unnecessary to insist upon the insertion of this article.

You will note that we have inserted a provision for pensions under the paragraph headed “third” in article III.

Article V. We had suggested a veto power for the representative of the bondholders in respect to disbursements when payments had been met. The phraseology submitted for this article is almost textually that of a Dominican counterproposal made to us this morning which seems to us even more advantageous than our earlier conception. [Wilson.]

  1. See Foreign Relations, 1934, vol. v, pp. 189 ff.; see also Foreign Bondholders Protective Council, Inc., Annual Report, 1934 (New York, 1935), pp. 57–67.