Santo Domingo: A Country with a Future

by Otto Schoenrich

(2) An agreement with the Morion Trust Company of New York to act as fiscal agent of the Dominican Republic and as depository in the debt adjustment.

(3) An offer of settlement to the holders of recognized debts and claims, to adjust these in cash at rates varying from 10 to 90 per cent of the nominal values specified in the offer. The nominal aggregate, as recognized by the Republic, exclusive of accrued interest, was $31,833,510, for which it was proposed to pay $15,526,240, together with certain interest allowances.

The proposed scaling down of the debts provoked opposition and remonstrance, but the creditors wisely reflected on the difference between a bird in the hand and more in the bush, and by the beginning of 1907 holders of credits had signified their assent in sufficient amount to assure the success of the readjustment.

A new convention between the United States and the Dominican Republic was accordingly prepared, being signed in Santo Domingo on February 8, 1907. It was ratified by the United States Senate on February 25, and by the Dominican Congress on May 3, 1907. The Dominican Congress added what it called explanatory articles to the law by which it approved the convention but made no change therein.

This convention, a copy of which will be found in the appendix, recited that disturbed political conditions in the Dominican Republic had created debts and claims amounting to over $30,000,000; and that such debts and claims were a burden to the country and a barrier to progress; that the Dominican Republic had effected a conditional adjustment under which the total sum payable would amount to not more than $17,000,000; that part of the plan of settlement was the issue and sale of bonds to the amount of $20,000,000; that the plan was conditional upon the assistance of the United States in the collection of custom revenues of the Dominican Republic; and that "the Dominican Republic has requested the United States to give and the United States is willing to give such assistance."

The two governments therefore agreed that the President of the United States shall appoint a general receiver of Dominican customs, who shall collect all the customs duties in the custom-houses of Santo Domingo until the payment or redemption of the entire bond issue. From the sums collected, after paying the expenses of the receivership the general receiver is on the first of each month to pay $100,000 to the Fiscal Agent of the loan and the remainder to the Dominican government. Whenever the customs collections exceed $3,000,000 in any year, one-half the excess shall be applied to the sinking fund for the further redemption of bonds.

The Dominican government agrees to give the general receiver and his assistants all needful aid and full protection to the extent of its powers. The United States also undertakes to give the general receiver and his assistants such protection as it, may find to be required for the performance of their duties.

The convention further stipulates that until the payment of the full amount of the bonds the Dominican Republic is not to increase its public debt except by previous agreement with the United States, and that a like agreement shall be necessary to modify the import duties.

Even with the approval of the convention difficulties lay in the way of the debt adjustment. In Santo Domingo there was opposition to the plan by interested parties and by persons not sufficiently mindful of past errors and present dangers. The Dominican Congress mutilated the contracts with the bankers, who not only refused to accept the modifications, but declined to treat further with Minister Velazquez unless he were first invested with plenary powers. The Dominican Congress then extended the necessary authority, but it came late, for the fall of 1907 witnessed a money panic in the United States and the floating of a bond issue was impossible.

After months of negotiations and struggle with recalcitrant creditors Minister Velazquez and Prof. Hollander finally perfected an arrangement under which the creditors were paid the amounts specified in the plan of adjustment, twenty per cent in cash and eighty per cent in bonds guaranteed by the fiscal convention. For the purpose of the cash payments the creditors' fund accumulated under the modus vivendi was utilized. The bonds were delivered to the creditors at the rate of 98-1/2 per cent of their face value.