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(Enclosure 2—Translation] *

Law Relative to Dominican Budget Payments Approved

October 1931

THE NATIONAL CONGRESS

IN THE NAME OF THE REPUBLIC AN EMERGENCY HAVING BEEN DECLARED Has ENACTED THE FOLLOWING LAW:

Number:

Article 1. The following order of payment of the appropriations, from the general fund, authorized in the Budget Law is hereby established and shall be observed by the National Treasurer:

1. Current salaries, to which there shall be applied the Seventy per cent (70) of the general funds of the Nation (beginning with the salaries of October, 1931) in the following order: a) Executive and Legislative powers; Public Order and National

Defense;
6) Treasury Offices;
c) Sanitation and Public Welfare;
d) Instruction;

e) All other salaries. 2. Current expenses, to which there shall be applied the 30 per cent of the general funds of the Nation in the following order:

a) Rations and hospitals;
b) Rentals and contracts;
c) Current supplies;

d) Expenses in arrears. Article 2. The National Treasurer shall set aside daily from the general fund revenues such sums as may be

necessary

to make the payments of the Government in the order and according to the percentages herein established.

Article 3. The Office of Supplies (Suministros) shall ship supplies only upon orders authorized in accordance with Accounting Law No. 1114. The limit of purchases in any month to replace stocks shall not exceed the amount of the orders filled during the month immediately preceding.

DONE, etc.

** Filed separately under 839.51/3584.

839.51/3582 The Secretary of State to the Dominican Minister (Despradel)

WASHINGTON, October 23, 1931. SIR: Your note of October 20, 1931, advising me of the critical difficulties with which the Dominican Republic is faced, has had my most careful and sympathetic consideration, and I have been much impressed by the gravity of the situation as set forth by you. The reports which I have received from other sources all show that the Dominican Government is passing through a most grave and difficult period.

I have noted that your Government is convinced that in the present critical emergency something must be done to relieve the situation and that accordingly your Government proposes to submit to the Dominican Congress a law, the adoption of which will result in making additional sums of approximately $100,000. per month available for the expenses of the Dominican Republic. This, you state, will necessarily result in the failure of the Dominican Government to pay the amortization on the external loans.

The step the Dominican Government proposes to take is a most serious one. It must necessarily adversely affect the credit of that Government. I am convinced that the gravity of this step is fully appreciated by your Government. The efforts made by the Dominican Government during the last year of grave depression which was made even more difficult by the disastrous hurricane that destroyed the city of Santo Domingo in September, 1930, are evidence of the desire of the Dominican Government to meet fully and promptly its financial engagements. The sacrifices and efforts made by the Dominican people during the last year are inspiring and, while it is to be regretted that the protracted depression has robbed these efforts of the success which they merited, they have nevertheless firmly set forth the determination of the Dominican people to live up to their obligations and have entitled them to all possible consideration.

I have noted specifically that it is the amortization payments of the external loans that your Government now proposes to defer for the time being, but that the interest on these loans will be met regularly. The continuance of interest payments is of the utmost importance to Dominican credit and to prevent even greater hardship to the bondholders. You point out that the amortization payments in question are extremely onerous. This Department felt that the amortization provision of the 1926 bonds was unwise at the time the loan was contracted and your Government will recall that the American bankers concerned also counseled against it. This provision was inserted on account of the very understandable desire of the Dominican Government to have the Customs Receivership limited to as short a period as possible, a desire with which this Government was then and remains in hearty sympathy. The measure now proposed by the Dominican Government will necessarily extend the life of the Receivership of Customs for so long a period as the amortization payments are held in abeyance, and I assume you have taken this into consideration in arriving at your decision.

I have also noted that your Government recognizes that the step it proposes to take is contrary to the provisions of the Treaty signed December 27, 1924, between the United States and the Dominican Republic, and also the Loan Contract contained in the bonds and in the agreement with the bankers acting as fiscal agents of the loan, but that your Government insists that the maintenance and continuance of government and orderly procedure in the Dominican Republic upon which the ultimate payment of your obligations depends, requires your Government to take this action. I understand that it is the firm intent of the Dominican Government to make as soon as possible the payments which are now to be deferred. This is essential in order that the effect on Dominican credit may be but temporary. I also note that the additional funds made available will be spent with the greatest care in maintaining vital Governmental functions and that your Government feels compelled to meet the difficulties that have arisen by the proposed measure as a last resort.

It is with an understanding of the special circumstances which you point out that the policy of this Government will be guided. Accept [etc.]

HENRY L. STIMSON

839.51/3554 : Telegram The Minister in the Dominican Republic (Schoenfeld) to the Secretary

of State

SANTO DOMINGO, October 24, 1931—10 a. m.

[Received 10:30 a. m.] My telegram No. 84, October 23, 7 p. m.39 Local press this morning published practically without comment emergency law and amendment to finance law in the precise terms previously reported. Both laws were passed by the Senate the night of October 22, and by the Chamber of Deputies yesterday and received the signature of the President yesterday.

SCHOENFELD

* Not printed.

839.51/3558

The Dominican Minister (Despradel) to the Secretary of State

[Translation)

WASHINGTON, October 26, 1931. MR. SECRETARY OF STATE: I have the honor to acknowledge the receipt of Your Excellency's kind note of the 23rd of the current month, by which I am informed that this Legation's note of the 20th instant has received your most careful and sympathetic consideration.

I have the honor to note also that Your Excellency recognizes the desires of the Dominican Government to comply promptly and in full with its financial obligations, which is shown, as Your Excellency very justly expresses it, by the efforts made by the Dominican Government during the past year of serious depression, aggravated by the disastrous hurricane which destroyed the city of Santo Domingo, on September 3, 1930.

In expressing my thanks for all the views contained in the said note, I avail myself [etc.]

ROBERTO DESPRADEL

839.51/3568
Memorandum by the Assistant Secretary of State (White)

[WASHINGTON,] October 27, 1931. The Dominican Minister, Señor Despradel, came in at my request and I pointed out to him that there was a paragraph in his note of October 22 which did not conform with the statement in the penultimate paragraph of his note of October 20. The latter recognizes that the action of the Dominican Government is contrary to the Convention of 1924 and contracts with the bankers, whereas the paragraph in the note of October 22 states that the changes made in the law are to bring it within the terms of the Convention.

I suggested to him that all that would be necessary would be to hand us a new copy of the enclosure to the note of October 20, giving the text of the proposed law as recently modified in substitution of the text enclosed in that note. We would then give him back the text originally included in the note and there would then be no necessity for the note of October 22, which I would also give back to him.

Señor Despradel said that he was surprised at the wording also, but he had put it in the note under instructions from his Government and he would have to consult them first. He later called up and asked to come in to see me and said that on returning to his Legation he had received the text of the proposed law as finally submitted to the Congress,40 and he had brought it along to substitute for the one originally enclosed in his note of October 20. He made the substitution, and I gave him back the original text. He also took back with him the note of October 22.

F[RANCIS] W[HITE]

839.51/3632
Lee, Higginson & Company to the Secretary of State

BOSTON, November 9, 1931.

[Received November 10.] DEAR MR. SECRETARY: We have received word by cable from the Dominican Republic that an emergency law has been promulgated providing for a temporary suspension of amortization of its external bonds, but declaring its intention to continue the paying of interest punctually:

Those who hold the bonds in question undoubtedly bought them relying largely on the terms of the Convention between the United States and the Dominican Republic, and they will certainly make inquiry as to the policy of the United States concerning the temporary modification of these terms declared by the Dominican Republic.

We know that the financial difficulties of the Dominican Republic have been the subject of consideration by your Department and we shall hope to receive some statement as to your policy and action which we can communicate to the bondholders. Faithfully yours,

LEE, HIGGINSON & Co.

839.51/3632
The Secretary of State to Lee, Higginson & Company

WASHINGTON, November 10, 1931. SIRS: In reply to your letter of November 9, 1931, you are advised that the economic conditions of the Dominican Republic have suffered in common with the rest of the world and were made much worse by the disastrous hurricane of September, 1930. The conditions have become so serious and the revenues, including both customs and internal revenues, have declined so abruptly that the Dominican Republic has informed the Department of State that it has found it necessary to adopt emergency legislation giving priority to the interest charges on the foreign loans but temporarily diverting certain customs revenues

40 For the official texts of Laws No. 205 and No. 206, see Gaceta Oficial, No. 4404, October 24, 1931.

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