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from the payment of amortization on these loans, applying the amounts so diverted to the maintenance of vital governmental functions and the preservation of law and order upon which the ultimate payment of the external debts must depend.

The Dominican Government communicated to the Department of State in advance its intention and the facts upon which its action is based together with a statement of the drastic economy measures already taken in an endeavor to meet the situation. The Dominican Government frankly recognized that the step proposed by it is not only a violation of the obligations as to the holders of its securities but also a violation of the Convention between the United States and the Dominican Republic. After an independent investigation by the Department confirming the existence of the serious situation in the Dominican Republic, the Department informed the Dominican Government that it noted the steps which that Government felt required to take and the reasons therefor; and that the additional funds thus made available to the Dominican Government as a measure of last resort would be spent with the greatest care in maintaining vital governmental functions by an official specially designated to administer the same as a special emergency fund. The Department noted the firm intent of the Dominican Government to make as soon as possible the payments now to be deferred, and called attention to the fact that the measure proposed would necessarily extend the life of the Receivership of Customs for so long a period as the amortization payments are held in abeyance. The Department added that with an understanding of these special circumstances thus pointed out the policy of the United States Government would be guided.

With reference to your specific inquiry as to the policy and action of this Government, and having in mind the provisions of the Convention between the United States and the Dominican Republic, I may say that, in view of the circumstances set forth above, this Government is not disposed at this time to take any action other than to continue to follow with attention and care the developments in the Dominican Republic. It is the belief of the Department that this policy will be the best for all concerned, including the bondholders upon whose bonds the Dominican Government proposes to continue to pay interest regularly. Very truly yours,

For the Secretary of State:

HARVEY H. BUNDY
Assistant Secretary

839.51/3602: Telegram Lee, Higginson & Company to the Assistant Secretary of State

(Bundy)

BOSTON, November 12, 1931.

[Received 11:55 a. m.] As you

know our letter to our bond holders will consist of some introductory comments by us, our letter to the State Department and the State Department's reply. We plan to mail letter this afternoon and would appreciate any suggestions which you care to make with regard to our introductory comments which are as follows:

Despite the difficulties imposed by the severe economic depression during the past 2 years which were greatly aggravated by the destruction caused by the hurricane of September 1930, all interest and sinking fund payments on your bonds were punctually made in full by the Dominican Republic until September 20, 1931. In the case of payments due on the latter date and on October 20 while customs revenues of the Republic were sufficient to cover the interest and sinking fund payments on the loans of 1922 and the interest payments on the loan of 1926, such revenues were not sufficient to cover fully the sinking fund payments due on account of the latter issue which has a lien junior to the earlier issue. The Dominican Republic has notified Lee, Higginson and Company that an emergency law has been enacted temporarily suspending the payment of the sinking funds but has declared its intention to maintain regularly the payment of interest. The emergency law provides that after the interest requirements on the bonds of 1922 are met the balance of the customs revenues shall be paid into an emergency fund to be administered by the Financial Adviser of the Government. The purposes for which this fund may be used are specified and the interest on the bonds of 1926 is given priority over all other purposes. The law further provides that when the receipts of the general funds of the nation again become normal the law shall be annulled. The results to the bond holders are that the interest on their bonds is still secured by a lien on the customs revenues subject only to the cost of collection but that the sinking funds on both issues are suspended until conditions materially improve. As stated in the letter from the State Department to Lee, Higginson and Company which appears on the following page the postponement of the sinking fund payments will necessarily extend the life of the receivership of customs for so long a period as the amortization payments are held in abeyance. We have been in conference with representatives of the Dominican Republic and with the State Department of the United States and have given careful consideration to all plans suggested for meeting the situation. Believing that it is the firm intention of the Dominican Government that interest payments shall continue to be promptly paid and that sinking fund payments shall be reestablished as soon as conditions permit, we believe that the best course for the present is to trust to the good faith of that Government and the good offices of the Government of the United States.

LEE, HIGGINSON & COMPANY 839.51/3602 The Secretary of State to the Minister in the Dominican Republic

(Schoenfeld)

No. 188

WASHINGTON, November 17, 1931. The Secretary of State encloses for the information of the Minister at Santo Domingo a copy of a telegram, which was received from Lee, Higginson and Company,“ dealing with statements which that Company proposes to make to the holders of Dominican bonds. The Minister is informed that the Department has made no comments to Lee, Higginson and Company on the statements which that Company proposes to make.

[File copy not signed]

« Dated November 12, supra.

BOUNDARY DISPUTE WITH HAITI

(See volume I, pages 771 ff.)

ECUADOR

POLITICAL UNREST IN ECUADOR

822.00/791 : Telegram The Chargé in Ecuador (Dawson) to the Acting Secretary of State

QUITO, August 24, 1931–4 p. m.

[Received August 25–1:03 a. m.] 37. Congress has just accepted resignation of President of Ecuador. Following prior resignation of Cabinet, Colonel Luis Larrea Alba was appointed Minister of Gobernacion and automatically under the constitution becomes Acting President. However, this appointment has not been well received by the people. Situation still continues uncertain.

DAWSON

822.00/792: Telegram

The Chargé in Ecuador (Dawson) to the Acting Secretary of State

Quito, August 24, 1931–5 p. m.

[Received August 25—1:48 a. m.] 38. At personal request of Mrs. Ayora President and family are my guests in this Legation. Granting of temporary sanctuary is in my opinion fully justified until danger to personal safety of President has passed.

DAWSON

822.00/793 : Telegram The Chargé in Ecuador (Dawson) to the Acting Secretary of State

Quito, August 25, 1931—8 a. m.

[Received 11:36 a. m.] 39. Colonel Larrea Alba appears to have the situation well in hand and the support of the entire Army. Evidences of popular feeling against him decreased visibly toward evening and the night passed quietly. Quito is quiet this morning and the Legation has no reports of disorders elsewhere.

DAWSON

822.001 Larrea Alba, Luis/2: Telegram The Chargé in Ecuador (Dawson) to the Acting Secretary of State

QUITO, August 25, 1931–9 a. m.

[Received 3:32 p. m.] 40. Referring to my telegram No. 37, Colonel Larrea Alba does not have title of President but merely assumes charge of the Executive power. See articles 79 and 81 of Ecuadoran Constitution. Larrea was thoroughly loyal to the last government and took no subversive part in the movement against it. The transfer of the Executive power to him has been effected in accordance with the constitution. In the circumstances it appears to me that the question of recognition does not arise and that the Legation should deal with the present government as the lawfully constituted successor of that previously in power. I shall appreciate an early expression of the Department's views on this point.

DAWSON

322.2222/2: Telegram The Chargé in Ecuador (Dawson) to the Acting Secretary of State

QUITO, August 25, 1931–11 a. m.

[Received 3:30 p. m.] 41. Referring to my telegram No.38. As city is quiet Dr. Ayora and his family left the Legation this morning and returned to their home. They will return to the Legation immediately if there is any reason to believe that their safety is menaced.

DAWSON

322.2222/3: Telegram

The Acting Secretary of State to the Chargé in Ecuador (Dawson)

WASHINGTON, August 25, 1931–5 p. m. 16. Legation's 38, August 24, 5 p. m. Inasmuch as you were convinced that former President Ayora was exposed to grave personal danger, the Department acquiesces in your keeping him and his family in the Legation during the present emergency but trusts that you will be able to obtain satisfactory assurances with respect to his safety so that he may depart at an early date.

The Department desires to remind you, however, of the consistent policy of this Government with respect to the so-called Doctrine of Asylum.

CASTLE

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