Under the plan of settlement the outstanding Franco-Belgian bonds and most of the other debt items were redeemed at fifty per cent of their face value, the Improvement Company's claim at ninety per cent, the deferred debts and comptroller's certificates at ten per cent, and the remaining claims at rates varying from ten to forty per cent. Accumulated interest was remitted entirely by the creditors, except in three cases, in which it was greatly reduced. These terms were much better than the Republic could have expected from any commission of investigation. The arbitral award of the San Domingo Improvement Company was scaled down by only ten per cent, because the bonds comprised in the award had been included therein at only one-half their face value and the other credits had also been largely reduced; even this small discount brought howls of protest from British interests that had remained discreetly silent while the State Department was pressing the claim thinking it completely American. Payment under the plan of settlement was soon practically completed. Only one important group of creditors, the Vicini heirs, still refuses to assent to the plan and accept the amount set aside for them.

Upon payment to the San Domingo Improvement Company, the Company turned over the Central Dominican Railway, from Puerto Plata to Santiago, to the Dominican government. The right of the Samana-Santiago Railroad to receive a percentage of the import duties collected at the port of Sanchez was redeemed by the delivery of $195,000 in bonds at par, an excellent bargain, made all the better by the circumstance that the railroad invested the proceeds of these bonds in the extension of its line in the interior. The restrictive concession and heavy damage claim of the Clyde Steamship Line were also cancelled, and the onerous wharf and harbor concessions at the various ports of the Republic were among the other important concessions acquired by the government by means of the bond issue.

Thus debts and claims aggregating nearly $40,000,000 have been and will be discharged for about $17,000,000. The surplus remaining from the bond issue and the modus vivendi collections must, under the agreements made, be devoted to public improvements approved by the United States government: a portion has been so expended, and a fund of over $3,000,000 still remains available. In addition the Republic's credit was established on a high plane; burdensome concessions were redeemed and adequate revenues for the maintenance of the government and the progress of the country were assured. As time goes on proper appreciation will be given to the men who were the principal agents in securing this financial and economic regeneration, especially to the Minister of Finance, Federico Velazquez, and to Prof. Jacob H. Hollander. While the fiscal convention largely increased the customs revenues, the Dominican government made no attempt to accumulate a reserve fund, but spent more even than authorized by its ever increasing budgets. During the period of civil strife following the assassination of President Caceres in 1911 the government, in order to carry on its military campaigns, neglected to pay the salaries of its civil employees, pledged its internal revenues, diverted and misapplied amounts of the trust fund set aside for public works, and incurred indebtedness for supplies and materials purchased and money borrowed. It thus violated the spirit and letter of the convention in which the Dominican Republic expressly agreed not to increase its public debt except by previous agreement with the United States.

The American government, in its unwillingness to interfere in the internal affairs of the Dominican Republic, had suffered the Victoria administration to seize the government in Santo Domingo after the death of Caceres, and it now also condoned the violation of the fiscal convention. The American commission which went to Santo Domingo in 1912 to reconcile the warring factions, found that an essential condition of the restoration of peace and the rehabilitation of the government was the payment of pending salaries and certain other debts. Accordingly the United States consented to an increase of the Dominican public debt by $1,500,000, and the Dominican government contracted a loan to that amount with the National City Bank of New York, which took the bonds at 97-1/2 Per cent. The bonds bore 6 per cent interest, and for the service of interest and sinking fund, it was agreed that the general receiver of customs pay over to the Bank, beginning in January, 1913, a monthly sum of $30,000. This bond issue was finally liquidated in 1917. The amount so borrowed was not sufficient to pay all the indebtedness of the Dominican government. The manner of circumventing the debt increase prohibition of the convention having been discovered, the interior debt was further augmented after that time by failure to pay salaries, by hypothecating stamps and stamped paper, and by contracting other obligations, either to combat insurrections or because of less worthy motives. In addition, claims for revolutionary damages were filed against the government.

The foreign debt thus consists merely of the $20,000,000 customs administration loan of 1907. The sums paid into the sinking fund of this loan have been used to purchase bonds of this issue at their market price, somewhat less than par, and the interest falling due on such purchased bonds has also gone to swell the sinking fund. The value of the assets in the sinking fund on December 31, 1917, estimating the purchased customs administration bonds at par, was $6,019,161.50, exclusive of interest accruals in 1917.

The interior debt, as a result of revolutionary confusion and defective accounting, became as problematic as in days of yore and was estimated at widely different figures. With a view to ascertaining the exact amount and making provision therefor, the military government, in July, 1917, constituted a commission consisting of three American and two Dominican citizens, who were charged with the duty of investigating and liquidating all claims against the government arising since the settlement of 1907. The American members appointed were J. H. Edwards, acting comptroller-general of Santo Domingo, chairman, Lt.-Col. J. T. Bootes, of the United States Marine Corps, and Martin Travieso, Jr., of the Porto Rican bar; the Dominicans were two attorneys, M. de J. Troncoso de la Concha and Emilio Joubert. Claimants were called upon to file their claims before January 1, 1918, or be deemed to have relinquished their rights. The nominal amount of the claims so filed—comprising all outstanding internal debts—is a little more than $14,000,000, some of the claims being for indefinite sums. This figure is probably greatly exaggerated and will doubtless be subjected to drastic revision by the claims commission.

The customs receivership has continued to render invaluable service. In peace and war its officials have distinguished themselves by a highly efficient, tactful and fearless discharge of their duties. Up to 1913 appointments to the service were determined by the fitness and experience of the appointee rather than by his political antecedents, and the officials appointed possessed unusual qualifications: the first general receiver, Col. George R. Colton, who held until 1907, his successor W. E. Pulliam, who continued until 1913, their deputy J. H. Edwards, and others, were experts trained in the Philippine customs service.

CHAPTER XXII

FINANCES

Financial system.—National revenues.—Customs tariff.—National budget.—Legal tender.—Municipal income.—Municipal budgets.