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  4. Document 1001

839.51/11–1144

Memorandum by the Chief of the Division of Financial and Monetary Affairs (Collado) to the Assistant Secretary of State (Acheson)

[Washington,] November 11, 1944.

Mr. Acheson: The visit to you Saturday at 12:30 of Mr. Troncoso, special financial representative of the President of the Dominican Republic, relates to the same matter which the Chase National Bank took up with me earlier this week and which I have been asking to see you about.

The problem relates to the desire of the Chase National Bank to obtain the approval or at least “no objection” of the Department to a specific loan transaction. The matter is important, not so much as regards the specific Dominican transaction, but because of two matters of policy which might set precedents:

(1)
Proposed loan involves the obtaining of guarantees of American sugar companies to an obligation of the Dominican Government. Messrs. Haley, Hiss and Fowler,37 as well as Phelps, Luthringer and other members of FMA38 agree with me that this is an unsatisfactory form of foreign loan and believe that the precedent set, while perhaps unimportant in the Dominican Republic, might have serious repercussions if utilized by Chile, for example, in connection with the copper companies.
(2)
The request of the Chase National Bank involves the old question as to what extent the Department will indicate its views regarding a specific loan.

It is recommended that the Department inform the Chase National Bank orally that while the Department ordinarily would not specifically approve or disapprove particular loan transactions, and while it would have no objection from the point of foreign policy to an ordinary loan to the Dominican Republic, it views with concern the proposal to involve the American sugar companies as direct obligors. We might add that this concern does not apply to the direct transfer by the sugar companies to the banks of sugar production taxes as authorized by the Dominican Government; our concern relates to the general responsibility of the sugar companies which the Bank is attempting to secure.

[Page 1033]

It would be preferable to take this up with the Chase National Bank before discussing the matter in detail with Mr. Troncoso—although I personally do not feel it would do any harm to let Mr. Troncoso have a general idea of our views.

Details of the proposed transaction are set forth in the attached draft letter—dated November 3, 194439—which the Chase syndicate proposes to send to Mr. Troncoso. Certain points of the proposed transaction may be summarized briefly.

(1)
The Dominican Government has some $13,000,000 of dollar bonds outstanding. About half are believed to be held in the Dominican Republic—and as a result of full interest payments, generous amortization, and Dominican purchases in the open market the bonds are quoted at about par.
(2)
So long as these bonds are outstanding there remains in effect a convention between the United States and Dominican Governments which give us certain responsibilities and powers. This convention we would like to get rid of.
(3)
The Dominicans propose to retire the issue—obtaining $5,000,000 from the Chase syndicate and $8,000,000 by local bond issue within the Dominican Republic.
(4)
We would very much like to see the dollar bonds retired and the convention eliminated.
(5)
The Chase syndicate stipulates:
(a)
Heavy amortization and reasonable interest by transfers monthly to the bank of sugar production tax payments by the sugar companies.
(b)
Obligation on the part of the sugar companies—which are mainly American and subject to suit in the United States—as well as of the Dominican Government.
(c)
A particularly unfortunate clause (#5) about acceleration of maturity.
(6)
We must say something as the Department cannot let investors know that it wishes to be informed of investment plans and then fail to react in any way at all. We have in the past not “approved” but orally and informally indicated “no objection” when this was the case. For example, the Secretary so indicated to Mr. Aldrich40 with respect to the Dutch loan, and he authorized the Chase Bank and the Dutch so to indicate in a press release.
(7)
We feel as indicated above that bringing the sugar companies in as obligors would create a very undesirable precedent, although we would have no objection to the mere transfer by the companies of sugar taxes as they accrue.
(8)
There is no real likelihood of difficulty in the Dominican case; our objection is on broad grounds. The Dominican sugar companies are very profitable; the sugar revenues are most ample for the purpose; the heaviest amortization is in 1945–46 during which period the British have contracted for the whole Dominican production.
  1. Bernard F. Haley, Chief, Commodities Division, Donald Hiss, Deputy Director, Office of Economic Affairs, and William A. Fowler, Chief, Division of Commercial Policy.↩
  2. Robert E. Phelps and George F. Luthringer, Assistant Chief and Associate Chief, respectively, Division of Financial and Monetary Affairs.↩
  3. Not found in Department files.↩
  4. Presumably W. W. Aldrich, chairman of the Board, Chase National Bank.↩