operate further with the Department at any time you may wish to have us do so.

Very truly yours,

LEE, HIGGINSON & Co.

SUSPENSION OF AMORTIZATION PAYMENTS ON THE EXTERNAL DEBT OF THE DOMINICAN REPUBLIC

839.51/3477

The President of the Dominican Republic (Trujillo) to President Hoover 23

No. 25788

[Translation]

SANTO DOMINGO, August 25, 1931. GREAT AND GOOD FRIEND: The peculiarly intimate friendly relations that have existed for many years between the United States of America and the Dominican Republic impel me to bring directly to Your Excellency's personal attention the critical situation through which my country is passing with respect to its public debt and its finances. The Dominican Republic has maintained an uninterrupted record for many years and up to the present time of the exact fulfillment of its obligations in connection with its foreign debt. This record is due in large part to the arrangement under which our customs revenues have been pledged as security and are collected in accordance with the Dominican-American Convention; 24 but the Dominican people, on its part, has loyally cooperated in carrying out the said Convention and it considers with pride that to this is due in part the high credit enjoyed by the country in the financial circles of the world.

For some time, however, it has become daily more evident that, due to the existing world-wide economic depression, the Dominican Republic is making efforts to pay its foreign public debt to an extent exceeding its capacity to pay. Even though the total amount of our public debt is not excessive, the provisions for the payment of the sinking fund agreed upon by previous administrations are so onerous and unscientific that they constitute a burden which our diminished national receipts can no longer support.

It is not without great regret that my Government finds itself obliged to admit this fact. During my own administration I have put into practice all means within our reach, carrying out administrative and economic reforms in order to be able to continue as hitherto to fulfill our foreign obligations. Not even such a fatal and unforeseen event

23 Handed to the Chief of the Division of Latin American Affairs on September 2 by the Dominican Minister with an accompanying note of the same date by the Dominican Minister requesting that President Trujillo's letter be forwarded "to its high destination." (839.51/3475)

24

Signed December 27, 1924, Foreign Relations, 1924, vol. 1, p. 662.

as the cyclone of September 3, 1930,25 was sufficient ground for us to interrupt the payments or seek means of suspending them. Our national revenues have diminished from a total of approximately $14,000,000 in 1929 to a level of $7,000,000 per annum at present, with a prospect of continuing to diminish unless a prompt reaction takes place in the world situation.

Our customs revenues, pledged under the Dominican-American Convention as security for the payment of the bonds of the debt, have also been affected by the economic crisis, having gone down to such an extent that, while the Dominican Government formerly received a considerable residue after taking care of the service of its foreign debt, it is now necessary to supplement the proceeds from the customs revenues allotted to our Fiscal Agents in New York with funds taken from our scanty domestic receipts.

This entirely wipes out the revenues received by the Government as customs receipts for administrative purposes. It is really impossible for the Government to continue to function under such conditions, and to attempt to continue in this way would incur the risk of a complete disorganization of the Public Administration.

I have the satisfaction of having done everything humanly possible during my term at the head of the Public Administration to maintain an orderly economic situation and be able to continue making the burdensome payments on our public debt. In proportion as the receipts have diminished I have made corresponding reductions in our expenditures, to such an extent that our estimates are now balanced on the basis of approximately $7,000,000, in which are included $3,000,000 for the payment of the debt, while in 1929 the sum of $13,841,019.58 was collected and the service of the debt amounted to only $1,221,639.13, and in 1930 the sum of $9,975,673.95 was collected and the service of the debt amounted to only $2,345,119.86. So drastic a reduction was rendered possible only by decreasing expenditures in all Departments of the Government, beginning with the offices of the Executive Branch and not omitting the forces of the National Army; but in order to secure the aforementioned balance it was also necessary to abolish public services which should be restored if the Dominican Republic is to continue satisfying its legitimate aspirations for progress.

Some months ago I engaged the services of an American expert to advise the Government in solving its fiscal problems, an expert who was recommended, at my instance, by the State Department at Washington.26 Since his appointment, and in fact for several months previously, negotiations have been carried out with various American

25 See ibid., 1930, vol. п, pp. 727 ff.

"William E. Dunn; see telegram No. 9, March 6, 5 p. m., to the Minister in the Dominican Republic, p. 95.

banking groups for the purpose of securing some relief even though it be but temporary; 27 but the conditions existing in the world's financial markets have frustrated all efforts and we have been unable to assure ourselves of obtaining money on any terms.

The Dominican Government has, then, exhausted all possibilities of finding help by utilizing the ordinary banking resources or through domestic expedients. It is physically impossible for the country to continue to spend about 40% of its receipts solely to maintain the service of its foreign debt. The balance remaining at our disposal is such that it is a physical impossibility to obtain the necessary funds or credits for the current expenses. The country is being constantly impoverished by the continual exportation of capital, the result being that it is no longer a question of what the Dominican people and government would like to do, but of what it is physically possible for them to perform.

Please permit me to state here, Mr. President, that the Dominican Republic neither intends nor desires to evade in the least its obligations toward the bond holders of its foreign debt or toward its creditors, and that, after adjusting and thoroughly cleaning up its domestic debt, it is firmly determined to pay every cent of the interest and principal owed. Far from wishing to scale down or repudiate its debts, the Government is anxious to protect itself against the remotest possibility of such a contingency. It wishes on the contrary to increase the fundamental solidity of its foreign obligations by placing them on such a basis that they shall always be within the limits of our capacity to pay.

For the reasons set forth above, the Government has decided to adopt a plan of procedure which appears to be the only rapid solution of the present difficulties without affecting the high credit which this country has won.

The adoption of this plan entails, however, the making of great sacrifices on our part, but it will without doubt afford some prospects of hope to our people and enable the Government to restore certain services which are indispensable and which cannot be neglected any longer without causing considerable injury to the whole nation.

One of the most obvious realities in our present situation is that the aid must be given without any delay. For over a year we have been avoiding the adoption of emergency measures in the hope that an improvement in the world's economic situation would be reflected in our own country. We have now come to the limit of our strength. The main feature of the plan I am now proposing is that it must be put into execution no later than October 1, 1931, that is, just as soon

27 See pp. 84 ff.

as the current semi-annual payments of interest and for amortization have been made.

What the Government proposes to accomplish, in short, is an immediate readjustment of our foreign obligations by means of an exchange of our bonds of the foreign debt for new conversion bonds to be issued in accordance with the terms of the Dominican American Convention now in force.

There are at the present time approximately $17,000,000 of our 52% bonds maturing in 1940 and 1942 that are unredeemed. The Government proposes to exchange these bonds for new ones similarly secured but bearing a higher interest rate, namely, 6% annually and having a 1% sinking fund instead of the mistaken and burdensome rate of amortization of the present bonds. The $17,000,000 in bonds necessary to effect this exchange will be part of a total issue of $25,000,000 which will give to the Republic additional bonds to the nominal amount of $8,000,000, which may be used in paying the floating debt, claims, urgent repairs to our roads and the construction of other public works which are of vital importance to the economic and commercial development of the country. The fundamental aspects of the Government's plans are comprised within the appended copy of a bill which will be voted on soon by the National Congress. This bill was prepared with the advice of reputable lawyers and bankers of the United States. It seems to me that it embodies the least detrimental expedient that can be resorted to in order to secure the necessary relief so as to enable us, instead of injuring, to increase the credit which we have won in financial circles. Certainly any other mode of solution, whether adopted actively or passively, would be more radical and injurious.

The Government realizes that the proposed law covers aspects of the Convention of 1924 which had not as yet been considered as a concrete problem, but it is my earnest hope that the Government of the United States will appreciate our plight and that it will endeavor not to interpret the Convention in such a way as to prevent our obtaining the immediate help which we imperatively need for our welfare, unless, indeed, Your Excellency can suggest some modification or some other plan which our own efforts have been unable to devise.

Inasmuch as the study of various points embodied in the appended draft and affecting the Convention will require considerable time, I trust that Your Excellency will agree with me that it is impossible to hope that such studies will be finished before the plan is put into execution.

In order that we may not fail to fulfill the obligations contracted toward our creditors, it will be necessary to pass the proposed law

quickly enough to enable our lawyers in the United States to prepare the necessary financial contracts by October 1 of this year.

I take the liberty, therefore, to request Your Excellency's approval of the plan of the Dominican Government as an emergency measure, making the proposed readjustment of our domestic debt subordinate to the completion of all the legal details. The approval should become effective by October 1, 1931, so that the Government may have available as of that date, from the customs receipts, the balance arising from the payment of our bonds under the plan now in execution and the payments required under the new plan.

It is understood, of course, that the details necessary to legalize the new arrangement will be completed through the usual diplomatic channels, as is proper, if Your Excellency so desires.

I beg Your Excellency kindly to accept the assurance of my highest esteem together with my deep gratitude for such attention as you may devote to the present statement.

(Your) loyal and good friend,

[Enclosure-Translation]

RAFAEL L. TRUJILLO

Plan for the Conversion of the Foreign Debt of the Dominican

Republic

THE NATIONAL CONGRESS IN THE NAME OF THE REPUBLIC

WHEREAS the National Congress, by law No. 158 of July 17, 1931, authorized the Executive Power to issue bonds of the Republic to the amount of $5,000,000;

WHEREAS the law in question does not provide for the conversion of our foreign debt, an operation whose expediency has become revealed as necessary at present;

WHEREAS the economic and industrial conditions of the country, aggravated by the hurricane of September 3, 1930, and by the world crisis, make it urgently necessary that the Government should obtain and devote to public services a larger sum than that now available from the revenues of the country;

WHEREAS the foreign loans contracted by the country during previous years stipulate, for the payments on their sinking fund, disbursements which under present circumstances are beyond the economic capacity of the country;

WHEREAS measures must be adopted to relieve the situation and these measures must be such as not to injure the high credit which the Republic has won for itself in the money markets;

AND WHEREAS it is absolutely essential to the proper functioning of the public administration that the floating debt contracted by preceding administrations should be refunded;