American claims……………………. £1,000,000
British claims…………………….. 50,000
Italian claims…………………….. 200,000
Spanish and German claims…………… 200,000
Other foreign claims……………….. 50,000
Dominican claims…………………… 2,500,000
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Total………………………. £4,000,000
The foreign claims were principally for damages during revolutions, violations of contract, failure of justice, false imprisonment, etc. The principal one was an American claim, that of Wm. P. Clyde & Co., of New York, of over $600,000 and was based on the failure of the Dominican government regularly to enforce certain high port dues against all vessels, save those of the Clyde line, as agreed in the Clyde concession. The Dominican claims were mostly old claims for unpaid salaries, revolutionary losses, merchandise furnished the government, etc.
The situation towards the latter part of 1904 appeared hopeless. Every item of the enormous debt had been in default for many months and interest was accruing at such rate that the whole income of the country would hardly have been sufficient for the payment of interest alone. Commerce was handicapped by high wharf and harbor charges collected by private individuals under their concessions from the government, and by prohibitive port dues imposed on foreign vessels in accordance with the concession of the Clyde line. More than three-fourths of the debt was held by foreigners who were clamoring for payment. The general revenues of the country and every important custom-house had been mortgaged to these foreign creditors. In general terms it may be said that the ports of the northern coast were pledged primarily to Americans and secondarily to Italians, those of Samana Bay primarily to Italians and secondarily to Americans, and those of the southern coast primarily to French and Belgians and secondarily to Italians.
Only one of the international protocols, however, specified when the custom-houses to which it referred were to be turned over and the manner in which the surrender was to be made. The others merely made the pledge in general terms, further negotiations being necessary to render it effective. The exception was the arbitral award of the San Domingo Improvement Company, which determined that in case of the nonpayment of any of the monthly instalments a financial agent, to be named by the United States government, was to enter into possession of the Puerto Plata custom-house. No payments of instalments were made by the Dominican government and in September, 1904, compliance with the terms of the award was demanded. On October 20, 1904, the vice-president of the San Domingo Improvement Company, designated as American financial agent, was placed in possession of the custom-house at Puerto Plata.
A cry of dismay ran through the land and the leading newspaper of Santo Domingo, the "Listin Diario," published an editorial under the expressive heading "Consummatum est," It was, indeed, the beginning of the end. The other foreign creditors now pressed their claims with more vigor than ever, and the preparations for turning over the Monte Cristi custom-house to the American financial agent, accomplished in February, 1905, stimulated them to greater exertions. In December, 1904, the French representative in Santo Domingo, acting in behalf of the French and Belgian interests, threatened to seize the custom-house of Santo Domingo City, the mainstay of the government. The Italian creditors also demanded compliance with their agreements. It was obvious that the foreclosure of these foreign mortgages would mean indefinite foreign occupation and the absolute destruction of the Dominican government, as there would be no revenue left to sustain it.
In this difficulty, the Dominican government proposed that all the ports of the Republic be taken over by the United States. The negotiations were carried on through the capable American minister in Santo Domingo, Thomas C. Dawson, and on February 7,1905, culminated in the signing of a treaty convention which provided that all Dominican customs duties be collected under the direction of the United States, that 45 per cent of the collections be turned over to the Dominican government for its expenses and the remaining 55 per cent be reserved as a creditors' fund, and that a commission be appointed to ascertain the true amount of Dominican indebtedness and the sums payable to each claimant.
The treaty was laid before the United States Senate and met with a cold reception. In the United States there was even less desire than in Santo Domingo for American intervention in Dominican matters. Further the treaty was strongly advocated by President Roosevelt and the tension then existing between the Senate and the President endangered many of his measures. The Senate accordingly adjourned in March, 1905, without action on the Dominican treaty.
It was the darkest hour for Santo Domingo. The creditors, tired of waiting, were in no mood to admit of further delay and the government, totally without resources, was in no position to appease them. Diplomacy was equal to the emergency and a modus vivendi was arranged, under which the President of the United States was to designate a person to receive the revenues of all the custom-houses of the Republic and distribute the sums collected in a manner similar to that determined by the pending treaty, namely, to turn over 45 per cent of the receipts to the Dominican government and to deposit 55 per cent as a creditors' fund in a New York bank. This temporary arrangement went into effect on April 1, 1905. The new controller and general receiver of Dominican customs arrived with several American assistants and soon had the receivership service admirably organized. The effect was immediate. The creditors ceased their pressure, confidence returned, interior trade revived, smuggling was eliminated, the exports and imports increased and the customs receipts took a leap upwards.
It was believed that the opposition in the United States Senate would be diminished, if, instead of the United States both adjusting the debt and collecting the money for its payment, the Dominican Republic should make a direct settlement with the creditors, and the United States merely undertake to administer the customs for the service of the debt as adjusted. Accordingly the Dominican government appointed the minister of finance, Federico Velazquez, as special commissioner to adjust the Republic's financial difficulties. After long and tedious negotiations, Minister Velazquez and his able adviser Dr. Hollander evolved three conditional agreements:
(1) An agreement with the banking firm of Kuhn, Loeb & Co. of New York, for the issue of fifty year 5 per cent bonds of the Dominican Republic to the amount of $20,000,000.