Under the accepted law of nations foreign Governments are within their right, if they choose to exercise it, when they actively intervene in support of the contractual claims of their subjects. They sometimes exercise this power, and on account of commercial rivalries there is a growing tendency on the part of other Governments more and more to aid diplomatically in the enforcement of the claims of their subjects. In view of the dilemma in which the Government of the United States is thus placed, it must either adhere to its usual attitude of non-intervention in such cases—an attitude proper under normal conditions, but one which in this particular kind of case results to the disadvantage of its citizens in comparison with those of other States—or else it must, in order to be consistent in its policy, actively intervene to protect the contracts and con cessions of its citizens engaged in agriculture, commerce, and transportation in competition with the subjects and citizens of other States. This course would render the United States the insurer of all the speculative risks of its citizens in the public securities and franchises of Santo Domingo.
Under the plan in the protocol herewith submitted to the Senate, ensuring a faithful collection and application of the revenues to the specified objects, we are well assured that this difficult task can be accomplished with the friendly co-operation and goodwill of all the parties concerned, and to the great relief of the Dominican Republic.
The conditions in the Dominican Republic not only constitute a menace to our relations with other foreign nations, but they also concern the prosperity of the people of the island, as well as the security of American interests, and they are intimately associated with the interests of the South Atlantic and Gulf States, the normal expansion of whose commerce lies in that direction. At one time, and that only a year ago, three revolutions were in progress in the island at the same time.
It is impossible to state with anything like approximate accuracy the present population of the Dominican Republic. In the report of the Commission appointed by President Grant in 1871, the population was estimated at not over 150,000 souls, but according to the Statesman’s Yearbook for 1904, the estimated population in 1888 is given as 610,000. The Bureau of the American Republics considers this the best estimate of the present population of the Republic. As shown by the unanimous report of the Grant Commission the public debt of the Dominican Republic, including claims, was $1,565,831.59¼. The total revenues were $772,684.75¼. The public indebtedness of the Dominican Republic, not including all claims, was on September 12 last, as the Department of State is advised, $32,280,000; the estimated revenues under Dominican management of custom-houses were $1,850,000; the proposed budget for current administration was $1,300,000, leaving only $550,000 to pay foreign and liquidated obligations, and payments on these latter will amount during the ensuing year to $1,700,000, besides $900,000 of arrearages of payments overdue, amounting in all to $2,600,000. It is therefore impossible under existing conditions, which are chronic, and with the estimated yearly revenues of the Republic, which during the last decade have averaged approximately $1,600,000, to defray the ordinary expenses of the Government and to meet its obligations.
The Dominican debt owed to European creditors is about $22,000,000, and of this sum over $18,000,000 is more or less formally recognized. The representatives of European Governments have several times approached the Secretary of State setting forth the wrongs and intolerable delays to which they have been subjected at the hands of the successive Governments of Santo Domingo in the collection of their just claims, and intimating that unless the Dominican Government should receive some assistance from the United States in the way of regulating its finances, the creditor Governments in Europe would be forced to resort to more effective measures of compulsion to secure the satisfaction of their claims.
If the United States Government declines to take action and other foreign Governments resort to action to secure payment of their claims, the latter would be entitled, according to the decision of The Hague tribunal in the Venezuelan cases, to the preferential payment of their claims; and this would absorb all the Dominican revenues and would be a virtual sacrifice of American claims and interests in the island. If moreover, any such action should be taken by them, the only method to enable them to secure the payment of their claims would be to take possession of the custom-houses, and considering the state of the Dominican finances this would mean a definite and very possibly permanent occupation of Dominican territory, for no period could be set to the time which would be necessarily required for the payment of their obligations and unliquidated claims. The United States Government could not interfere to prevent such seizure and occupation of Dominican territory without either itself proposing some feasible alternative in the way of action, or else virtually saying to European Governments that they would not be allowed to collect their claims. This would be an unfortunate attitude for the Government of the United States to be forced to maintain at present. It can not with propriety say that it will protect its own citizens and interests, on the one hand, and yet on the other hand refuse to allow other Governments to protect their citizens and interests.
The actual situation in the Dominican Republic can not, perhaps, be more forcibly stated than by giving a brief account of the case of the Santo Domingo Improvement Company.
From 1869 to 1897 the Dominican Government issued successive series of bonds, the majority of which were in the hands of European holders. Successive issues bore interest at rates ranging from 2¾ to 6 per cent, and what with commissions and other deductions and the heavy discount in the market the Government probably did not receive over 50 to 75 per cent of their nominal value. Other portions of the debt were created by loans, for which the Government received only one-half of the amount it was nominally to repay, and these obligations bore interest at the rate of 1 to 2 per cent a month on their face, some of them compounded monthly.
The improvidence of the Government in its financial management was due to its weakness, to its impaired credit, and to its pecuniary needs occasioned by frequent insurrections and revolutionary changes, and by its inability to collect its revenues.
In 1888 the Government, in order to secure the payment of an issue of bonds, placed the custom-houses and the collection of its customs duties, which are substantially the only revenues of the Republic, in the hands of the Westendorps, bankers of Amsterdam, Holland. But the national debt continued to grow and the Government finally intrusted the collection of its revenues to an American corporation, the Santo Domingo Improvement Company, which was to take over the bonds of the Westendorps. The Dominican Government finally became dissatisfied with this arrangement, and, in 1901, ousted the Improvement Company from its custom-houses and took into its own hands the collection of its revenues. The company thereupon appealed to the United States Government to maintain them in their position, but their request was refused. The Dominican Government then sent its minister of foreign affairs to Washington to negotiate a settlement. He admitted that the Improvement Company had equities which ought not to be disregarded, and the Department of State suggested that the Dominican Government and the Improvement Company should effect, by private negotiation, a satisfactory settlement between them. They accordingly entered into an arrangement for a settlement, which was mutually satisfactory to the parties. A similar arrangement was likewise made between the Dominican Government and the European bondholders. The latter arrangement was carried into execution by the Dominican Government and payments made toward the liquidation of the bonds held by the European holders. The Dominican Congress refused to ratify the similar arrangement made with the Improvement Company, and the Government refused to provide for the payment of the American claimants. In this state of the case it was evident that a continuance of this treatment of the American creditors, and its repetition in other cases, would, if allowed to run its course, result in handing over the island to European creditors, and in time would ripen into serious controversies between the United States and other Governments, unless the United States should deliberately and finally abandon its interests in the island.