Dear Sir:
The attention of this Association has been called to the issuance by the Military Government of Santo Domingo "acting under the authority of the United States Government, on behalf of the Dominican Republic of $6,700,000 twenty year Customs Administration 51% sinking fund gold bonds, repayable at maturity at 101 and interest dated March 1, 1922 due March 1, 1942."
I. We note in the letter of D. W. Rose Lieutenant Commander, S.C.U.S. Navy Officer Administering the Affairs of the Department of Finance and Commerce for the Military Government, March 31, 1922 addressed to Messrs. Lee, Higginson & Company fiscal agents for the service of this loan the following paragraph:
"This issue of these bonds has received the approval of the United States Government required by the terms of the American-Dominican Convention of 1907 and the Secretary of State consents to the inclusion in the bonds of the following statement:
"The acceptance and validation of this bond issue by any government of the Dominican Republic as a legal, binding and irrevocable obligation of the Dominican Republic is hereby guaranteed by the Military Government of Santo Domingo and, with the consent of the United States Government the General Receiver of Dominican Customs appointed under the Convention of 1907 will during the life of that Convention make such payments as are necessary for the service of the new loan from the revenues accruing to the Dominican Government. The Military Government further agrees that after customs revenues shall be collected and applied by an official appointed by the President of the United States in the same manner as the present General Receiver of Customs and that the loan now authorized shall have a first lien upon such customs revenues until all the bonds thereof are paid in full.
The authorized loan herein referred to is a loan of $10,000,000 of which this $6,700,000 is a part."
We respectfully inquire whether in fact the Secretary of State of the United States has consented to the "inclusion [page 2] in the bonds" of the above statement?
II. Article III of the American-Dominican Convention of 1907 provides that the public debt of the Dominican Republic shall not be increased except by previous agreement between the Dominican Government and the United States" Has the Dominican Government either requested or approved this new loan? If not, what legal validity is given to these bonds by "the approval of the United States Government?"
III. The American-Dominican Convention of 1907 provided that the "President of the United States shall appoint a General Receiver of Dominican Customs who shall collect all the customs duties accruing at the several customs houses of the Dominican Republic until the payment or retirement of any and all bonds issued by the Dominican Government in accordance with the plan and under the limitations as to terms and amounts hereinbefore recited."
Since 1907 three external loans (prior to the present issue) have been assured by or for the Dominican Government: (1) the 5 [percent] loan of 1908 for $20,000,000 under the terms of the Convention of 1907 (2) the 8 [percent] loan of 1918 for $4,161,300 and (3) the 8 [percent] loan of 1921 for $2,500,000. The loans of 1918 and 1921 were issued for the Dominican Government by the United States Military Government of Occupation. The balance of the 1921 loan now outstanding will according to a press release of the State Department dated April 5 1922, be retired by a portion of the proceeds of this new (1922) issue. The two issues prior to 1921 "the 1908 loan due in 1938 and the 1918 loan due in 1938 will by the operation of sinking funds" writes Commander D. W. Rose in his letter referred to above "be retired out of customs revenues not later than 1929." Since the life of the American Dominican Convention of 1907 by its terms is predicated upon the life of the bonds accrued by it may not therefore the expiration of that Convention be expected about 1929?
In any event, Commander Rose in his letter referred to above does not claim that this new (1922) issue of bonds is the result of a "previous agreement between the Dominican Government and the United States" as required by the terms of the [Convention] of 1907. Nor does Commander Rose in this same letter assert that the validity of this issue of bonds is dependent upon the Convention of 1907.
In view of these facts we would appreciate learning from you how Commander Rose on behalf of the United States Military Government of Santo Domingo can legally assure prospective purchasers of this now (1922) Dominican loan as he does in his letter referred to above that either the Government of the United States or that of Santo Domingo or both of these Governments will enter into an agreement to be effective after the expiration of the 1907 Convention on or about 1929 which [page 3] will provide (1) "that after the expiration of the Convention of 1907 such (Dominican) customs revenues shall be collected and applied by an official appointed by the President of the United States in the same manner as the present General Receiver of Customs" and (2) "that the loan now authorized shall have a first lien upon such customs revenues until all the bonds thereof are paid in full."
Further, in view of (1) the explanation contained in the press release of the Department of State April 5 1922, referred to above that "the proceeds of this (1922) loan will be used to retire the balance of the 1921 bond issue" (2) Commander Rose's calculation of the retirement of the outstanding Dominican obligations of 1908 and 1918 not later than 1929, and (3) the consequent expiration of the American Dominican Convention of 1907 we respectfully inquire by what authority the United States Military Government of Santo Domingo engages that during the term of this (now) loan no future bonds of the Republic will be issued secured by customs revenues, other than the total authorized amount of bond of this issue unless the annual average customs revenues, other than the total [authorized] amount of bonds of this issue unless the annual average customs revenues for the five years immediately preceding amount to at least 1 1/2 times total charges on all obligations secured by customs revenues, including charges of any new loan, and that the present customs tariff will not be changed during the life of his loan without previous agreement between the Dominican Government and the Government of the United States."
If you answers to our questions prompt us to further inquiry, may we have your indulgence in communicating with you further?
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