Foreign Relations of the United States: Diplomatic Papers, 1944, The American Republics, Volume VII

839.51/11–344

Memorandum of Conversation, by Mr. Charles C. Hauch of the Division of Caribbean and Central American Affairs and Mr. Willard F. Barber of the Division of Financial and Monetary Affairs

[Washington,] November 16, 1944.

Participants:	Mr. Acheson41
	Dr. Troncoso, Secretary of State for Treasury42
	Dr. J. E. Rodríguez, Chargé d’Affaires of the Dominican Embassy
	Mr. Hauch—CCA
	Mr. Barber—FMA

Mr. Acheson informed Dr. Troncoso that the Department had had an opportunity to study the questions which Dr. Troncoso had presented in his earlier calls regarding the proposed $5,000,000 loan to the Dominican Government by the Chase and other New York banks. The Acting Secretary had also been consulted.

Mr. Acheson stated, as he had before, that the Department had no objection to the loan and retirement of the bonds in general but that there was just one point which gave concern and doubt, i.e., the legal obligation undertaken by the sugar companies to make payments to the New York banks. These payments would be on behalf of the Dominican Government which had received the proceeds of the loan, but the sugar companies could be sued in the United States in case the payments did not all turn out as hopefully as was expected. While there was probably no reason to think that the Dominican operation would not be successful this legal liability raised the general principle of U.S. companies acting as guarantors for the debts of foreign governments and, hence on broad grounds of policy the Department had decided to express its opinion unfavorably. Mr. Acheson reiterated that there was no legal right or authority underlying the Department’s statement of its policy, but the Department’s opinion had been asked by the New York bankers and hence it was given.

In reply to Dr. Troncoso’s inquiry Mr. Acheson added that there was no objection and that it was not a matter of concern to the Department what arrangements might be made between the Dominican Government and its tax payers as to whether taxes would be paid in U.S. dollars to New York banks or to any other arrangements which might be made between the Dominican Government and its tax payers. (In the draft letter which had been prepared by the banks it was not stated that the amounts for which the banks would be liable constituted a tax obligation of the sugar companies towards the Dominican Treasury.)

In explaining the reason for the Department’s doubts Mr. Acheson made clear that while it was not to be anticipated in the present Dominican loan, in other cases, the undertaking of a legal obligation by American companies might produce controversies between:

(a) the U. S. companies and the foreign government concerned;

(b) different U. S. corporations;

(c) the U. S. companies and the Department of State;

(d) the Department of State and the foreign governments.

Dr. Troncoso said that he clearly understood the Department’s position but that he was now doubtful that the New York banks would conclude the negotiations. Mr. Acheson stated that he did not take so pessimistic a view of the possibility of reaching a satisfactory arrangement with the banks. He added that the Department’s views had already been made known to representatives of the Chase Bank. Dr. Troncoso said that while his personal view was that the loan should not require the commitments of the sugar companies, that had earlier been inserted at the insistence of the banks. He was now going to return to New York to attempt to work out a revision of the plan for the loan, after which the plan would again be submitted to the Department.⁴³

41. Assistant Secretary of State Acheson was Chairman of the Executive Committee on Economic Foreign Policy.
42. Of the Dominican Republic.
43. Further negotiation with the New York banks and the study of other loan plans during December and the following year produced no definite agreements.