839.51/4848 Suppl.: Telegram
The Secretary of State to the Minister in the Dominican Republic (Scotten)
128. For Wilson. Department’s no. 124, August 29, 6 p.m. The preamble transmitted in your no. 146, August 28, 6 p.m.,18 is satisfactory.
The following provisions would seem to meet the criteria set forth in the Department’s no. 120 of August 24.
“Article I. The Government of the Dominican Republic shall collect, through its appropriate national officials, the customs revenues of the Dominican Republic and all revenues pertaining to the customs duties. The General Receivership of the Dominican Customs provided for in the Convention of December 27, 1924 shall cease to operate on the date on which the Dominican Government undertakes the collection of customs revenues.
[Page 815]All property and funds of the General Receivership, except the cash and securities in the pension fund of the General Receivership, which is the subject of an exchange of notes attached hereto, shall be turned over on the same date to the Government of the Dominican Republic.
No claim shall be advanced by one of the High Contracting Parties against the other on account of any act of the General Receivership.
Article II. The Government of the United States of America and the Government of the Dominican Republic, in common accord, shall designate a bank, with establishment in the Dominican Republic, as sole depository of all revenues and public funds of whatsoever nature of the Dominican Government. They likewise shall designate, also by common accord, an official who shall act in the said bank as representative of the holders of the bonds of the external debt of 1922 and 1926, in all matters that concern the service of the said external debt. If at any time the bank so designated ceases for any reason to function in this capacity or if either of the High Contracting Parties shall deem a change advisable, a successor shall be designated under the procedure stipulated above. If the representative of the holders of the bonds of the external debt of 1922 and 1926 shall, for any reason, be unable to continue in that capacity, or if either of the High Contracting Parties shall deem a change advisable, his successor shall be designated in accordance with the same procedure established for the original designation. In the event that it should become necessary to designate a successor to either the bank or the official representing the holders of the bonds of the external debt of 1922 and 1926, and in the further event that the two Governments should be unable to reach mutual accord on such designation within a period of 3 months, the Foreign Bondholders Protective Council, Incorporated, shall be requested to nominate said successor, and in the event of its failure to make such nomination, the president or a vice president of the American Bankers Association, or his duly authorized representative, shall be requested to make the nomination; provided, however, that neither a bank nor a person previously rejected by either of the High Contracting Parties may be so nominated. In the event that a bank or person is nominated in accordance with this procedure, the High Contracting Parties shall designate such nominee.
The official representing the holders of the bonds of the external debt of 1922 and 1926 shall, with the approval of the two Governments, designate a deputy to serve in his stead in the event of his temporary absence or incapacity.
Article III. During the first 10 days of each calendar month the representative of the holders of the bonds of the external debt of 1922 and 1926 or his deputy shall receive, by endorsement and orders of payment which shall be issued to the depository bank by the Dominican Government through the intermediary of the Secretary of State for the Treasury and Commerce, the sum necessary to cover monthly payments, as follows:
First, the payment of one-twelfth of the annual interest charges of all of the outstanding bonds of the external debt of 1922 and 1926;
Second, the payment of one-twelfth of the annual amounts designated for the amortization of the said bonds, including the interest of all the bonds which are or may be retained in the sinking [Page 816] fund. The said amortization shall be effected in accordance with the loan contracts as modified by the agreement concluded between the Dominican Republic and the Foreign Bondholders Protective Council, Incorporated, on August 16, 1934, and by the provisions of Article V of the present convention;
Third, the payment of one-twelfth of the annual cost of the services rendered by the representative of the holders of the bonds of the external debt of 1922 and 1926, who shall receive as salary $______ per annum and a reasonable amount for expenses incurred in the performance of his duties, including costs of bonding; and the payment of one-twelfth of the annual amount agreed upon between the Dominican Government and the representative of the holders of the bonds of the external debt of 1922 and 1926 as the compensation for the services of the depository bank; provided, however, that the annual total of monthly payments referred to in this paragraph shall not in any calendar year exceed three-fourths of one per cent (¾%) of the total revenues of whatsoever nature of the Dominican Republic. No disbursements of funds of the Dominican Government shall be made by the depository bank until the payments provided for in this Article shall have been made.
Article IV. The Government of the Dominican Republic declares that the interest and amortization service of the bonds of the external debt of 1922 and 1926 as well as the payments stipulated in the third numbered paragraph of Article III of the present convention, constitute an irrevocable first lien upon all of its revenues of whatsoever nature.
Article V. In case the total collections from all the revenues of whatsoever nature of the Dominican Government should in any calendar year exceed _____ pesos there shall be applied to the sinking fund for the redemption of bonds of the external debt of 1922 and 1926 which may be outstanding ten percent (10%) of the excess above _______ pesos but less than ______ pesos and in addition five percent (5%) of all sums exceeding ________ pesos. The depository bank shall ascertain and certify to the Dominican Government within thirty days after the close of each calendar year the amount to be applied to the Sinking Fund provided for in this Article V. When such amount shall have been ascertained and certified no disbursements of any funds of the Dominican Government, except as provided in Article III, shall be made by the depository bank until such deposit and application shall have been made.
Article VI. The representative of the holders of the bonds of the external debt of 1922 and 1926 shall have complete access to all of the records and books of the depository bank relating to the public revenues, and shall receive from the Dominican Treasury complete and detailed reports of all the operations of collection and disbursement of all revenues of whatsoever nature of the Dominican Government.
Article VII. The system of deposit of all revenues of the Dominican Republic will be carried out in accordance with the Dominican laws of accounting and of the Treasury now governing such matters, and these laws shall not be modified nor shall any law inconsistent with the terms of this convention be enacted by the Dominican Government [Page 817] during the life of this convention without the previous consent of both governments.
Article VIII. The exchanges of notes attached to this convention shall be given full force and effect as integral parts of the convention.
Article IX. Your Article VII in your no. 144.20
Article X. The convention signed by the United States of America and the Dominican Republic on December 27, 1924, shall cease to have effect, and the present convention shall enter into force upon the exchange of ratifications which shall take place in the City of Washington the first day of the month immediately following ratification by the Government which ratifies the later in point of time; provided, however, that Articles I, II, and V of the said convention of December 27, 1924 shall continue in full force and effect until the High Contracting Parties agree that there have been adopted and executed all the necessary measures provided for in the present convention.
The present convention shall continue in full force and effect during the existence of the outstanding external bonds of 1922 and 1926. After the redemption or cancellation of the said bonds, the provisions of this convention shall automatically cease to have effect.
In witness whereof the respective plenipotentiaries have signed the present convention in duplicate in the English and Spanish languages, both texts being equally authoritative, and have hereunto affixed their seals.
Done in the City of Washington the . . . . . day of . . . . . . ., 19 . .”
It will be noted that Articles I, VIII and IX in text transmitted in your no. 144 have been merged into Article X in order to make clear the time relationship of the various changes that will occur.
The Department reiterates its belief that an accelerated amortization clause is indispensable in order to make the proposed convention acceptable to the bondholders and the Senate. You may again point out to the Dominican Commissioners that it would not advance what both Governments are seeking, to sign a document which would have little hope of favorable consideration by the Senate. To the Dominican contention that the Department is now suggesting a greater scale of amortization than that agreed to in 1934 by the bondholders, you should reply that the bondholders did not anticipate at that time the modification of, much less the termination of, the General Receivership.
It should be made clear by aide-mémoire that the phrase “all revenues of whatsoever nature” envisages the deposit and pledge of any and all government income, from whatsoever source derived, whether styled revenues, customs, duties, excises, fees, fines, imposts, charges, levies, or any other kind of fund that comes into the control of the Dominican Government.
Please give your views on the adequacy of the figure of three-fourths of 1 percent which appears in Article III.
[Page 818]The Department has included in Article VI a statement that the representative of the bondholders shall have access to all expenditures and information of the government, as the Department is not aware of the provisions of Dominican legislation referred to in Article VII. If these laws offer the representative of the bondholders full opportunity to obtain the information needed, the Department will consider a modification of Article VI. For further consideration by the Department, please submit a brief statement on the foregoing.
There should be annexed to the Convention, and made integral parts thereof, notes regarding the floating debt and pensions. Previously drafted texts of notes on floating debt are in your possession. Notes regarding pensions should provide that the existing cash and securities mentioned in Article I should be devoted to that purpose. Specific provision should be made, by name, for Pulliam and Orme, as well as an arrangement for Norris. Please submit draft texts of notes.