Before 1905 the seizure of a custom-house was invariably the next step, which would at the same time provide the insurgents with the sinews of war and make it impossible for the government to pay its employees in that province. The custom-houses were eliminated as pawns in the revolutionary game by the fiscal treaty with the United States, according to which the customs receipts were paid over to an American receiver-general. Revolutions for a short time became more difficult, but where there's a will there's a way, and under a new routine the necessary funds were derived from the government's internal revenues and from levies on private citizens.
The first two or three weeks of a revolt constituted its critical period, for the government at once poured troops into the district in order to suppress the insurrection, while the rebels sought to obtain as many strategical points as possible. Both sides lived on the country while roaming about in pursuit of each other. If the government was victorious the leaders of the revolt would usually scramble across the border into Haitian territory, or leave the country by boat, or otherwise make themselves inconspicuous until the time was ripe for another rebellion. When the government was unready or unsuccessful, the insurrection spread with great rapidity from town to town until it arrived before the walls of Santo Domingo City. There was more or less of a siege and when the president capitulated he was permitted to board a vessel and go into exile. The head of the new revolution then assumed charge of the government and had himself elected president and the game began all over again.
The personal property of the fallen adversaries was respected and there was no confiscation, such as has occasionally been witnessed in certain other Latin republics. When Baez was overthrown in 1858 there was an exception to the rule, his properties being seized by the Santana government on the ground that he was a traitor ready to deliver the country over to the Haitians and was guilty of other high crimes and misdemeanors. But when the wheel of fortune again brought Baez to the top he promptly reentered upon his lands.
During the uprisings there has rarely been wanton destruction of property, the property of foreigners being especially respected. The owner of a plantation near Macoris told me that on one occasion the general of an insurgent force even halted at his gates and sent him a polite request for permission to cross the property. Such consideration was not universal, however, and large sums have been paid to foreigners for damages inflicted during revolutions. A serious inconvenience was caused farmers by revolutions as many laborers were enrolled in one army or the other, either voluntarily or by impressment.
In the course of the insurrection there were numerous encounters between the rebels and the government troops, most of them being mere skirmishes. There is hardly a town where there are not houses which show the marks of bullets. The walls and gates of Santo Domingo City and the houses in the vicinity are full of such marks, though generally painted over now. In 1904 and 1905 one of the sights of the city was a beautiful villa opposite the Puerta del Conde, which had served as target for the government forces while occupied by the insurgents and was so peppered by shot and shell as to look like a sieve. The sieges of Santo Domingo City sometimes lasted for many months. At such times almost every citizen took part in the excitement, barricades were erected at every street opening and the rattle of musketry was heard at all hours.
The proportion of shots fired to casualties inflicted is known to be enormous in all wars and in Santo Domingo it is almost incredible. Battles have been fought lasting for hours with thousands of shots fired, yet with not one man lost. There have been revolutionary uprisings lasting for months with not a man wounded. In Puerto Plata it is said that when the government troops attacked the city in 1904 a fierce battle ensued which continued from morning till the town was taken by storm in the evening; yet only one man was killed and his death was due to his own carelessness, for he appeared not far from where soldiers of the other side were training a cannon and refused to obey their warning to get out of the way, whereupon the cannon was discharged and his arm shot off, causing a mortal wound.
At other times, however, the results have been far more serious, as many a maimed soldier and bereaved family can testify. The graves of victims of the revolutions are scattered all over the Republic. How many have fallen in the disturbances of the past fifteen years it is impossible to determine; I have heard estimates ranging from 1000 up to 15,000. Nor is revolutionizing a pleasant business when continued for any length of time. When the men entered a town contributions could be levied on the merchants, but when they were harassed and forced to retreat to the mountains they roamed for weeks half nude, bare-headed, barefooted, exposed to the weather, living on what bananas and wild fruits they could find or occasional wild hogs they were able to kill, undermining their constitutions and brutalizing their natures. The landlady whose son sought political distinction with a gun told me amid sobs that her boys were dutiful, industrious lads before being caught in the revolutionary torrent, but that in the woods they lost all inclination for work and returned home completely demoralized. From grieving relatives of victims I have heard many another story of ruined lives and early deaths. It is saddening to reflect on the tears which have been shed and the misery which has been caused by this long continued civil strife.
While women have been heavy sufferers from the revolutions they have not hesitated to take sides and contribute their mite. Many are the stories current in Santo Domingo of women who smilingly passed through the enemy's ranks and carried ammunition and supplies concealed beneath their garments to their friends in the woods.
Excluding the revolution by which the Haitian yoke was thrown off in 1844 and that of 1863-65, which expelled the Spaniards, there have occurred in the seventy years of Dominican independence no less than twenty-three successful revolutions. One occurred in each of the years 1848, 1844, 1849, 1857 and 1864, three in 1865, one each in 1866, 1867 and 1873, three in 1876, one each in 1877, 1878, 1879, 1899 and 1902, two in 1903 and one each in 1912 and 1914. At times hardly had a revolution proved successful when a counter-revolution broke out and secured the victory. The longest intermissions were from 1879 to 1899 when the party of the dictator Heureaux was in power, and from 1903 to 1912, when the indirect protection of the United States was sufficient to sustain the government.
These were the successful revolutions; the unsuccessful insurrections are innumerable. It has been unfortunate for the credit of Santo Domingo that almost every little shooting affray is classed as an insurrection or revolution. Most of these unsuccessful uprisings have been unimportant excursions into the country by some disaffected local chief and a handful of followers, the band being promptly rounded up or scattered by government forces or induced to come in by promise of a job or some other consideration.
The circumstance that the provincial governors found it to their advantage to have disturbances in their district explains many of the smaller commotions. Upon the outbreak of an insurrection or before the threat of an outbreak the authorities in the capital would authorize the provincial governor to recruit troops and draw funds for their payment. The governor would do so, but if two or three thousand men had been authorized he would raise only two or three hundred and forget to account for the balance of the money. The suppression of the "revolution" would thus benefit both his military reputation and his pocketbook. Governors were therefore prone to exaggerate rumors of insurrection and sometimes themselves sent out men to fire a few shots in the woods and create alarm.
Other insurrections have been fierce and formidable and some administrations were obliged to engage in constant warfare in order to maintain themselves. A serious unsuccessful insurrection was that led by Gen. Casimiro de Moya against Heureaux in 1886, which lasted six months. The most widespread was that of Jimenez against the Morales government, lasting from December, 1903, to May, 1904, and during which the insurgents gained possession of practically the entire Republic. Other serious outbreaks occurred in 1904, 1905, 1906, 1909, 1911, 1913 and 1916. The fires smouldered constantly, especially in the Cibao, which raises the largest crops of everything, including revolutions.
The effect of such continuous commotion has been most disastrous to the country and the people at large. This is all the more saddening when it is considered that, less than ten per cent of the people took part in the disturbances. Revolutions, successful and unsuccessful, have been fought to a finish with less than a thousand men on either side. Ninety per cent of the population are law-abiding citizens who would like nothing better than to be let alone and permitted to pursue their vocations in peace. The other ten per cent were not entirely to blame: they have been the victims of their environment.
Not only have the revolutionary disturbances caused enormous indirect loss to the country through paralyzation of agriculture, arrest of development and loss of credit, but they have also been a large direct expense. A considerable portion of every budget was devoted to appropriations for the purchase of war material and the maintenance of the military and naval establishment. When uprisings occurred the additional amounts necessary for their suppression have been taken from other appropriations, those for public works usually being the first to be cancelled. If the uprisings became serious the other appropriations of the budget were reduced by fifty or even seventy-five per cent until all the available cash was devoted to war purposes. In 1903 military and naval expenditures absorbed 71.7 per cent of the Republic's disbursements, and in 1904 72.6 per cent. At such times the government was reduced to a desperate struggle for existence; the loss of the custom-houses in power of the insurgents made its position still more precarious; it contracted loans on ruinous terms; it neglected its foreign obligations and paid its employees in promissory notes and even in postage stamps, which they would then peddle about the streets. Under such conditions it is natural that nothing was left for public improvements. Even under the peaceful administration of Heureaux a disproportionate part of the national funds was expended for military purposes and three gunboats were acquired and maintained, but not a single mile of improved road was laid out.
With the American military occupation political conditions in the Dominican Republic have radically changed. The system of waging political campaigns by force of arms has stopped abruptly and absolutely. Revolutions have become a matter of history. Ballots will hereafter take the place of bullets, and politics will be conducted in the same manner as in other orderly countries. Evolution, not revolution, will be the characteristic of the future.
Audiencia of Santo Domingo.—Legal system.—Judicial organization.—Observance of laws.—Prisons.—Character of offenses.
In the year 1510 the Spanish government established in Santo Domingo the first of the famous colonial audiencias, or royal high courts, the list of which appears like a roll call of Spain's former glories. Others were added later in Mexico, Guatemala, Guadalajara, Panama, Lima, Santa Fé de Bogotá, Quito, Manila, Santiago de Chile, Charcas (now Sucré), and Buenos Aires. The audiencia of Santo Domingo at first had jurisdiction over all the territory under Spanish dominion in the new world, but upon the establishment, of the audiencia of Mexico and others its jurisdiction was confined to the West India Islands, and the north coast of South America. Its functions were both judicial and administrative, including the power to hear appeals from the judges of the district and from certain administrative authorities, and to intervene in certain matters of government, in the finances of the territory and in behalf of the public peace. The governor and captain-general of Santo Domingo was president of the royal audiencia, though not acting when it sat as a law court, and at times the audiencia alone temporarily carried on the government of one or more of the territories under its jurisdiction. It applied the law as expressed in the codification of the "Laws of the Indies," and the Spanish "Partidas." It sat in the building still called the old palace of government. During the dark days which fell upon the island in the seventeenth century, the presence of the audiencia helped to save the colony from being completely forgotten. It continued in its functions until the country was ceded to France, whereupon in 1799, it was removed to the city of Puerto Principe, in Cuba. Could its records but have been preserved a great many gaps in the history of Santo Domingo, Cuba, Porto Rico and Venezuela would be filled. It seems that the first records were destroyed by Drake in 1583, and almost all the later ones succumbed to the negligence of man and the voracity of the tropical insects. When the government of Cuba in 1906 honored the request of the government of the Dominican Republic for the return of such of the records of the audiencia of Santo Domingo as were still extant, it could find in its national archives and turn over but a score of bundles of documents, mostly records of suits regarding land boundaries in the eighteenth century, of little historic value. These and several small mahogany bookcases still preserved in the present audiencia of Havana, are the only tangible remains of this noted court.
When Santo Domingo again came under Spanish rule in 1809, the colony was included in the territorial jurisdiction of the audiencia of Caracas. Upon the beginning of Haitian rule in 1822, when most of the distinguished citizens, including judges and lawyers, left the country, they took with them the ancient legal system. The Haitians imposed their laws, namely, the Code Napoleon and other French codes. These took such deep root that on the expulsion of the Haitians no attempt was made to return to the Spanish laws, which also at that time were still under the disadvantage of not having been revised and codified in accordance with modern needs. In 1845 the laws of France were expressly adopted by the Dominican Republic. During the troublous times following little attention was given to the legal system, and there was not even a Spanish translation of the codes. After annexation to Spain in 1861 the Spanish authorities attempted to clarify the situation by introducing the Spanish penal code and law of criminal procedure and by appointing a commission to translate the civil code, in which they made several changes, but upon the reestablishment of the Republic in 1865 everything done in this respect by the Spaniards was annulled. Several efforts were later made to secure a translation of the codes, though laws were not often invoked amid so much civil unrest. As late as 1871 the American commission which visited the island reported that the administration of justice had practically fallen into disuse. The local military chiefs and the parish priests decided the questions that arose.
As the country progressed in spite of itself, and there were periods of peace, the need of an official Spanish text of the laws became more pressing, and at length in 1882 a commission was appointed to translate and adapt the French codes. On the report of the commission a civil code, a code of civil procedure, a code of commerce, a penal code, a code of criminal procedure and a military code were approved in the year 1884. They are literal translations of the French codes with a few modifications to adapt them to local conditions. The penal codes are such close translations that several paragraphs relating to juries were retained, although the institution does not exist in Santo Domingo. It was tried in 1857, but discontinued in the following year. The Dominican Congress made but few changes in these important laws, which have therefore been more permanent than the constitution. The need for a further revision of the Dominican codes became urgent, however, and such revision has very recently been concluded by a commission which sat for that purpose; it is now being considered with a view to an early promulgation of the codes in amended form.
Santo Domingo, the first Spanish colony, thus has no Spanish laws. It is the only Spanish country which has adopted French legislation so completely, and which looks so largely to France for its jurisprudence.
The laws of Congress, and the decrees of the Executive relating to concessions, naturalization, pardons, and other matters, and, at present, the "executive orders" and decrees of the military government, are published in the Official Gazette, a government newspaper appearing almost daily. In addition to the calendar date, official papers are dated from the declaration of independence in 1844 and the restoration of the Republic in 1863, somewhat as follows: "Given in the National Palace of Santo Domingo, Capital of the Republic, on the 3rd day of March, 1916, the 73rd year of Independence and the 53rd of the Restoration." In Haiti it was formerly the custom, after a successful revolution, to count dates not only from the declaration of independence but also from the proclamation of the latest revolution, the latter period being denominated the "regeneration," thus: In the 40th year of independence and the 3rd of the regeneration. In the Dominican Republic Baez introduced this rule in his presidency of 1868-1873, during which period decrees were dated in the following manner: "On the 3rd day of March, 1871, the 28th year of Independence, the 8th of the Restoration, and the 3rd of the Regeneration." The revolution of December, 1873, ended this regeneration, and the official references thereto.
At the present time the judicial power is vested in a supreme court, sitting in the capital of the Republic, three courts of appeals, one in Santo Domingo, one in Santiago and one in La Vega; twelve courts of first instance, one in each province; and 70 alcaldias or justice of the peace courts, in the several communes and cantons. The supreme court is constituted by a presiding justice and six associate justices, who are elected by the Senate for terms of four years. It exercises original jurisdiction in cases against diplomatic functionaries and judges of courts of appeals, sits as a court of cassation in appeals from, the courts of appeals, finally decides admiralty cases and has certain other functions assigned to it by law.
The three courts of appeals each have a presiding justice and four associate justices, all elected by the Senate for four year terms. They exercise appellate jurisdiction over cases adjudged by courts of first instance and courts-martial, and original jurisdiction in admiralty cases and in the prosecution of certain judicial and administrative officials. Prior to 1908 there was one supreme court, with five members, and no court of appeals. When the income of the country grew, the new constitution provided that the supreme court have at least seven members, and that at least two courts of appeals be established, with their necessary judges and clerks. The system is now costly and topheavy.
The twelve district courts each have a judge of first instance and a judge of instruction, elected by the Senate for terms of four years. The judge of instruction is not, strictly speaking, a part of the court, his duty being to investigate the more serious criminal offenses, commit the offenders for the action of the court and report the result of his investigation to the prosecuting attorney. The courts of first instance have original jurisdiction in all criminal matters except the minor police offenses and in all civil matters except those expressly assigned to the justices of the peace. They hear appeals from the justices of the peace in civil and criminal cases.
The local justices of the peace are called "alcaldes." The alcalde, in Spanish times, was an officer exercising both administrative and judicial functions, the name being derived from the Arabic "al cadi," the judge, and whereas in Spain and most of the former Spanish colonies the alcalde has now only administrative duties and his office is equivalent to that of mayor, in Santo Domingo he now exercises solely judicial authority. (The office of "alcalde pedaneo," which may be roughly translated as deputy mayor, exists in Santo Domingo, however, this title being given to the municipal executive's agent in each section.) The alcalde's jurisdiction comprises the smaller police offenses and, in civil cases, matters involving less than $100, as well as certain cases, such as suits between innkeepers and guests, where the limit of his authority is raised to $300, and other cases, such as ejectment suits, where his jurisdiction attaches on account of the subject-matter. The alcaldes are appointed by the president of the Republic.
In general the system works smoothly. The alcaldes are often ignorant men, but even in the United States the country magistrates are not always founts of wisdom. The judges of first instance and district attorneys are almost without exception respected in the community, and the present judges of the supreme court and of the courts of appeals enjoy a good reputation. Not infrequently political considerations have given rise to poor appointments, such as occurred in Barahona some years ago when the judge-elect telegraphed an indignant protest to the capital to the effect that he was unacquainted even with the rudiments of the law. The administration had not taken the trouble to ascertain whether he was a lawyer, but knowing he sought a position, had given him the first one at hand. This was rather an oversight, as the law requires such appointees to be members of the bar. On another occasion the legal requisite was filled by first declaring the aspirant a lawyer and then designating him for the post. These cases are exceptions, however. The integrity of the judges is not often questioned, but the alcaldes do not enjoy so good a reputation.
At the present time there are also American provost courts which take cognizance of "offenses against the military government." This designation is broad enough to include anything the military authorities choose to include. Apart from a few cases of regrettable harshness these courts have done fairly well.
While the various constitutions have expressly declared the independence of the judicial power, the authority of the courts has heretofore been rather relative, and they have studiously avoided conflicts with the other branches of the government. There is no case on record where they have declared a law unconstitutional. The supreme court when driven into a corner in 1904 even declared that it had not the authority to make such a declaration. The constitution of 1908 modified the decision by expressly providing that the supreme court may decide as to the constitutionality of laws.
This decision of the supreme court made little impression in the country, due probably in part to the ease with which the various administrations have disregarded the constitution when it suited their convenience. The little value of the constitution between friends has constantly been demonstrated. Certain provisions have been systematically violated, even by the best of administrations. Principal among them is the provision that no one be arrested without a warrant setting forth the offense, unless caughtin flagranti, and the provision that every person imprisoned be informed of the cause of his imprisonment and submitted to examination within forty-eight hours after arrest, and not be detained for a longer time than permitted by law. These provisions have been dead letters as far as political prisoners are concerned. When a person was suspected of being involved in a conspiracy against the government he was liable at any moment to be seized and conducted to prison, where he might be detained indefinitely, until the danger was over, or he was considered innocuous. The ancient fortress at the river mouth in Santo Domingo, known as La Torre del Homenaje, bears over its entrance the sign, "Political Prison," and rarely has it been without tenants, even when the country was at peace and the constitutional guarantees were supposed to be in force. On one occasion when I heard a Dominican lawyer lament that a friend of his had thus been incarcerated for several months without a hearing, I inquired why he did not apply to a court and invoke the constitutional provision. The reply was, "The judge who signed an order to set the prisoner free would probably join him in jail before many hours had passed."
Such ignoring of the written law was a relic of the days when the will of the military was the only law respected. Reminders of the old state of affairs continued to crop out, though the people and government were rapidly adopting other customs. An instance occurred in Sanchez during the presidency of Morales. A younger brother of the president was customs collector at that port and was accused by public rumor of irregularities in office. A customs employee having been discharged for spreading the rumor, called on the collector and invited him to a meeting outside; and the two adjourned to the bush, where shots were exchanged and young Morales was wounded in the leg. The aggressor was immediately seized by the general commanding the military forces in Sanchez and carried to the town cemetery, a grave was dug, and the general prepared to have him summarily shot. The town authorities interceded, but in vain, and the execution was about to take place when the ladies of the town succeeded in moving the commandant by their pleadings. The prisoner was remanded to the jail in Samana and was later tried by the court of first instance and acquitted. Much more recently the leader of the band that assassinated President Caceres was killed without trial.
Some of the surviving military leaders of the old school find difficulty in adjusting themselves to the new conditions. Among them was General Cirilo de los Santos, better known by his nickname "Guayubin" (the name of the town where he was born) who took an active part in the political disturbances of the Republic for many years. When I traveled through the country with Prof. Hollander on his financial investigation we were guests of this hero of a hundred revolutions, who was then Governor of La Vega. In the course of conversation Prof. Hollander expressed gratification at the cessation of the custom of shooting political prisoners. The governor was at that time engaged in the persecution of one Perico Lasala, a perpetual revolutionist who was infesting the nearby hills and who has since done his country a favor by being killed in an incursion on the coast. The idea of not shooting this notorious character as soon as he was apprehended seemed grotesque to Guayubin—and perhaps not without reason. He cried, "If you were in my place and caught Perico Lasala, wouldn't you shoot even him?" "Why, no," was the answer. Guayubin's face fell and he became thoughtful. For the rest of the day he was strangely silent and he continued so on the morrow, when he accompanied us for several miles out of town. When bidding goodbye, he broke out: "I wish to ask your advice. If I should catch Perico Lasala, what would you advise me to do with him?" Dr. Hollander asked: "What do you do with persons who steal or commit similar violations of the law?" "We put them in jail." "Why, then, put Perico Lasala in jail." A look of inexpressible relief came over the face of the old warrior. "Of course!" he said, "I never thought of that."
Not long after this incident General Guayubin met a political opponent against whom he harbored resentment. He immediately drew his revolver and began to shoot, and the object of his wrath escaped only by dexterous sprinting. At a session of Congress there was some criticism of his action and Guayubin resigned his office in disgust. The death of this fighter was as stern as his life. He attended a christening party at a house where there was a forgotten powder-cask; a spark fell into the powder and in the ensuing explosion Guayubin's eyesight was destroyed. Grimly refusing to take food or drink, he pined away.
Prior to the American occupation, the Dominican penal establishments were as a rule in very bad condition. There is no penitentiary and portions of the forts or government houses are used as jails. The prisoners were herded together with little thought of cleanliness. The stench in some of the jail yards was at times almost unbearable. In justice it should be stated that the Dominican authorities frequently called the attention of their Congress to this condition of affairs. The prisons at Santo Domingo City and Santiago were exceptions to the rule; they were improved even to the extent of being endowed with a prison school.
The political prisoners were generally given better accommodations, if there were any at hand, and had the privilege of securing their meals from the outside instead of being limited to the scant and repugnant prison food. During revolutions, however, when the prisons were overcrowded, the political prisoners were kept in irons and supervision was rigid. According to law the functionaries of each court of first instance were supposed to visit and examine the jails once a month, but as the date of their visit was known beforehand the inspection was little more than perfunctory. Not very long ago it was whispered in the Cibao that a judge in inspecting a jail accidentally passed through a door to a room he was evidently not expected to enter, and there to his own embarrassment and that of the warden found a score of prisoners whose names were not on the prison rolls.
The more serious offenders were kept in irons. The Dominican authorities, realizing that they had no reason to be proud of their prisons, were loath to permit foreigners to visit the jails. When I called at the government building at Sanchez on one occasion, however, the commandant was absent and an indiscreet sergeant offered to show me the two rooms used for prison purposes. The building was a wooden one and one of the rooms, though heavily barred, did not seem unfitted except in case of overcrowding, which I was told sometimes occurred. The other room was extremely repulsive. It was dark and a foul odor rising from a hole in the wooden floor demonstrated the truth of the guide's remark that there was no outhouse for the use of the prisoners. Along one side of this room lay two long square-cut beams, one on the other, scalloped out so as to form a number of round holes along their juncture. It was evident they were used as stocks and my guide stated that he had seen a whole row of men sitting along the log with their feet thus confined. One or two of the holes were a little larger and it was explained that they were for the purpose of confining not the feet but the neck of the delinquent, and that this punishment was much worse, producing especial pain in the case of short-necked persons. The severest pain was produced, so the guide stated, when the delinquent was seated on the beam and his feet placed crosswise through the holes: he could bear the agony of this position for only a short time.
The American authorities have made great improvements in the prisons and prison discipline. The jails are now so clean that they are almost show places.
The revolutionary disturbances have seriously interfered with the proper execution of the sentences of the courts. It was a usual procedure for revolutionary forces, upon entering a town, to free the prisoners—either as a slap at the government or in order thereby to augment their own strength. In Puerto Plata, a few years ago, a merchant was convicted of fraudulent bankruptcy and sentenced to three years in jail; soon afterwards a revolutionary force took possession of the town and freed the prisoners; and a few hours later the townspeople were amused to see the lawyer who had been instrumental in securing the conviction himself led to prison at the instigation of the culprit.
In March, 1903, when the political prisoners in the Santo Domingo prison broke out, they released the convicts, some of whom retained their gyves during the fighting which followed, until the revolution was successful several days later.
The undeveloped state of the country has offered difficulties to the apprehension of criminals, and the proper enforcement of the law. Could a criminal but reach the mountains of the interior, which are almost entirely uninhabited, he would be safe from pursuit and might either wait to join the next uprising or proceed to a different part of the country, where he was unknown and where, owing to the difficulty of intercourse, detection would be unlikely. Instances have occurred more than once where an escaped malefactor has become a "general" of other outlaws and by threatening to raise an insurrection has induced the government to pardon him and his associates.
In several regions there were up to the time of the American occupation local caciques who were almost absolute monarchs in their district. They and their followers considered themselves above the law and their power and influence were such that the government in the capital preferred to let them alone so long as they kept within bounds. Such gentlemen can hardly be expected to favor the American administration for they have been made to understand that their rights and remedies are no more than those of other citizens.
In view of such conditions so favorable to wrongdoers, the low criminal record of Santo Domingo is all the more remarkable and speaks highly for the character of the population. Crimes evincing malice and a depraved disposition are exceedingly rare. The Dominican boasts that it is possible to travel without fear from one end of the Republic to the other, though unarmed and carrying large sums of money. The few attacks on travelers which are on record have generally been due to revenge or some other personal motive. There is petty thievery, but no more than anywhere else. A friend of mine used to remark that he had never seen so many chickens in a community where there were so many negroes. No criminal is so greatly despised as a thief, and to accuse a person of being "mean enough to steal a pig" is a mortal insult. A distinction is made, however, between public honesty and private honesty, and the impression has been only too general that stealing from the state is not stealing.
The most common serious offenses are homicide and assaults committed in sudden quarrel or due to jealousy. Not a little mischief was caused by the unfortunate habit of going armed.
The attractions of the fair sex give rise not only to crimes of jealous passion, but also to other missteps, such as seduction and similar offenses. The average of these is not greater, however, than in other southern countries.
Financial situation in 1905.—Causes of debt.—Amount of debt.—Bonded debt.—Liquidated debt.—Floating debt.—Declared claims.—Undeclared claims.—Surrender of Puerto Plata custom-house.—Fiscal convention of 1905.—Modus vivendi.—Negotiations for adjustment of debt.—New bond issue.—Fiscal treaty of 1907.—Adjustment with creditors.—1912 loan.—Present financial situation.
Rarely have the fiscal affairs of a country experienced so rapid and radical a change for the better as those of Santo Domingo since 1904, and rarely has a financial measure so quickly proved its efficacy as the fiscal convention between the United States and Santo Domingo. In the beginning of the year 1905 Santo Domingo had fallen to the lowest depths of bankruptcy and financial discredit. After decades of civil disturbance, misrule and reckless debt contraction, the deluge had come. The substance of the country had been wasted in military expenditures; agriculture and commerce were stagnant; a debt of over $30,000,000 had been contracted with nothing to show for it but forty-two miles of narrow-gauge railroad and two small gunboats; the government obligations were chronically in default and interest charges were piling up at ruinous rates; every port of the Republic was pledged to foreign creditors who were clamoring for payment; one port had already been seized and the occupation of the others by foreign powers was imminent. At this juncture the Dominican government applied to the United States for assistance and the custom-houses of the Republic were placed in charge of an American general receiver, with the obligation of reserving a specified portion of the customs income for the creditors and turning the remainder over to the Dominican government. The situation immediately changed as if by magic. The imports and exports, and with them the income of the government, quickly reached higher figures than the country had ever seen, the national debt was scaled down by almost one-half and the new Dominican bonds issued in 1907 to convert the old debt went nearly to par in the markets of the world.
(a) Periodic accumulation of floating debt, owing to:1. Political instability, requiring large outlays for soldiery,for bribery of potential revolutionists, and for suppressionof actual revolutions.2. Corruption of officials.3. "Asignaciones" or pensions to mollify enemies and to rewardfriends of the existing régime.(b) Usurious interest computations, on account of:1. "Bonus" in principal,2. Extravagant interest rates.(c) Interest default and compounding accumulations.(d) Recognition and liquidation of excessive or illegal claims as acondition of further advances.
In order to obtain more positive information with reference to outstanding Dominican indebtedness, for use in connection with the pending fiscal treaty, the American government in the early part of 1905 commissioned a financial expert, Prof. Jacob H. Hollander, of Johns Hopkins University, to proceed to Santo Domingo and make an investigation of financial conditions. Prof. Hollander, in an elaborate report, found the amount of the claims pending against the Dominican Republic on June I, 1905, to be $40,269,404.38, distributed as follows:
Bonded debt…………………… $17,670,312.75Liquidated debt…………………. 9,595,530.40Floating debt…………………… 1,553,507.79Declared claims…………………. 7,450,053.89Undeclared claims……………….. 4,000,000.00———————Total indebtedness…………….. $40,269,404.38
The bonded debt, as above designated, comprised the public indebtedness represented by outstanding bonds; the liquidated debt consisted of items secured by international protocols or by formal contracts; the floating debt consisted of admitted indebtedness, neither funded nor secured, but evidenced by public obligations; the declared claims were claims presented for reimbursement or indemnity but not expressly recognized by the government; and the undeclared claims were claims of the same nature not yet formally presented. A brief description of each of these items will afford an idea of the general character, of Dominican financiering and a better understanding of Dominican history.
Bonded Debt. The bonded debt held by Belgians and French and amounting to $17,670,312.75, was the final outcome of eight consecutive bond issues floated by the Republic, as follows:
Interestper TermDate Amount cent years Name_
1869 £ 757,700 6 25 Hartmont loan 1888 £ 770,000 6 30 Westendorp loan 1890 £ 900,000 6 56 Railway loan 1893 £2,035,000 4 66 4 per cent consolidated gold bonds 1893 $1,250,000 4 66 4 per cent gold debentures 1894 $1,250,000 4 66 French-American reclamation consols 1895 $1,750,000 4 66 1897 £1,736,750 2-3/4 102 Obligations or de Saint Domingue £1,500,000 4 83 Dominican unified debt 4 per cent bonds
In making its very first loan, in 1869, the Dominican government fell into the hands of sharpers and was mercilessly fleeced. The bargain, even if it had been honestly carried out, was improvident enough. Reduced to American money the nominal amount of the loan was $3,788,500; of this amount the Republic was to receive but $1,600,000; yet it contracted to pay as interest and sinking fund in twenty-five years a sum amounting to $7,362,500. The contractors for the loan, Hartmont & Co., of London, were authorized to retain $500,000 as their commission. In fact, however, no more than $190,455 was ever paid to the Dominican government. The brokers claimed that they tendered a further sum of $1,055,500, though after the expiration of the time limited in their contract, and that the tender was refused because of negotiations then under way for the annexation of the Republic to the United States, but such tender is denied on the Dominican side. At all events, the loan contract was cancelled by the Dominican senate in 1870 on the ground of non-compliance of the brokers with its conditions and the government made no payments for interest or sinking fund. The brokers nevertheless continued to sell bonds in London and pay the current interest with the proceeds. Incidentally in addition to collecting their commission, they turned a penny for themselves by taking the bonds with their friends at 50 and selling them to the public at 70. When the Dominican repudiation of the bond issue was published in England in 1872 a cash balance of $466,500 still remained to the credit of the Dominican government, but it was coolly pocketed by the principal agent, who claimed it as a set-off against alleged damages in connection with a concession he had near Samana. In the ten years of anarchy that followed in Santo Domingo no attempt was made to straighten out the matter. The bonds having gone into default in 1872 dropped lower and lower until they reached 3 per cent in 1878.
The setback received by the credit of the Republic by reason of the defaulted Hartmont bonds made further bond issues impossible for a number of years. Finally an Amsterdam banking house, Westendorp & Co., was interested and in 1888 and 1890 floated the second and third bond issues for £770,000 and £900,000 respectively. The object of the second issue was to retire the Hartmont bonds at 20 per cent, to pay a number of floating interior debts the owners of which were harassing the government, and to provide cash for the treasury, principally for military and naval expenditures, while the third issue was designed to secure funds for the construction of a railroad between Puerto Plata and Santiago. For the purpose of providing for the service of the loan a collection office known as the "caisse de la regie," or simply "regie," under the management of Westendorp, took charge of the customhouses with the obligation of paying a certain amount to the government monthly and devoting the remainder to payment of interest and sinking fund of the loans. The arrangement was thus similar to the later receivership plan, but its vulnerable point was that it was operated by a private concern.
The first instalments of interest and sinking fund on these two bond issues were paid from the proceeds of the bonds, then for several months the "regie" supplied funds, and then came the first crash. The government was ever in need of money and to secure the same violated its agreements by seizing certain revenues to pledge them to local merchants for advances, and by conniving at customs irregularities. As a result, after paying the sums for the budget, the "regie" had nothing left for the service of the bonds and they went into default in 1892.
Westendorp was almost ruined by this occurrence and became anxious to draw out of his Dominican entanglements. He applied to Smith M. Weed and Brown and Wells, New York attorneys, to negotiate a sale of his bonds to the United States government, transferring also his right to collect the Dominican customs. The United States government declined, whereupon Weed, Wells and Brown organized the famous San Domingo Improvement Company under the laws of New Jersey, the claim of which was later the prime factor in bringing about American intervention in Santo Domingo. Subsequently two other companies, the San Domingo Finance Company and the Company of the Central Dominican Railway, were incorporated, also under the laws of New Jersey, as auxiliaries of the Improvement Company, but they were all managed by the same persons. The San Domingo Improvement Company took over Westendorp's holdings and was placed in control of the "regie." A fourth bond issue, of £2,035,000 was floated through the agency of the Improvement Company in 1893 for the conversion of the outstanding government bonds. The Improvement Company also completed the railroad from Puerto Plata to Santiago, which was the only improvement it ever effected in the Republic and this it did with Dominican money. It further took from the Republic at rates very favorable to the Company a fifth, sixth and seventh bond issue, in 1893, 1894 and 1895 respectively, aggregating $4,250,000, for the payment of government indebtedness. The obligations paid by the first two of these issues were in considerable part inflated claims against the government, capitalized at excessive interest rates, those satisfied by the 1895 issue arose principally out of indemnity claims made by France for mistreatment of French citizens and for debts due them.
The Dominican government took no warning from previous disasters but continued in its course of reckless debt contraction. In order to equip warships and arsenals it borrowed money right and left at rates of interest which ranged anywhere from 18 to 30 per cent per annum. The loans were guaranteed by customs revenues which the creditors were authorized to collect direct from the importer. Thus the amount collected by the "regie" was not sufficient to provide for the service of the ever increasing bonded debt and in 1897 there was another default.
The old remedy of a new bond issue was to be tried again. The San Domingo Improvement Company undertook to float the eighth bond issue of £2,736,750 in bonds at 2-3/4 per cent and £1,500,000 in bonds at four per cent. With these bonds it contracted to convert all previous bonds then outstanding, to pay overdue interest and to secure for the government over $1,000,000 in cash. President Heureaux issued drafts on this presumption, but it soon became evident that it would be impossible for the Improvement Company to carry out the contract. The company blamed the government and the government the company. The situation quickly became chaotic. Eventually the conversion of the older bond issues was completed, though at enormous cost. Bonds to the value of £600,000 were absorbed during the transaction with at most a cash payment of $250,000 to the Dominican fiscal agent in Europe. In the meantime the government tried the experiment of a large emission of paper money in which the customs dues were partly payable. The paper depreciated as fast as it was issued, the revenues were again insufficient and the new bond issue suffered default in April, 1899.
While plans for further action were under consideration, President Heureaux was shot in July, 1899, and the revolution which followed his death made Jimenez president. The new administration in 1900 entered into a contract with the San Domingo Improvement Company for a different distribution of the customs revenues, but a condition was introduced that the consent of the majority of bondholders be obtained for the funding of interest up to 1903. A large number of Belgian and French bondholders had become dissatisfied with the Improvement Company, however, and repudiated the contract and all connection with the Company. In Santo Domingo, too, there was general hostility towards the Improvement Company which was regarded as an associate of President Heureaux and an incubus on the development of the country. The Company claimed it had secured the consent of a majority of bondholders but the government decided it had not and in January, 1901, President Jimenez issued a decree excluding the Improvement Company from the custom-houses.
The government now made a new contract with the Franco-Belgian bondholders, and for the payment of its obligations pledged its customs revenues, and specifically the income of the ports of Santo Domingo City and San Pedro de Macoris. But if there had been default before, in time of peace, with the "regie" in charge of the custom-houses, there was still less money available for the creditors now, with no control by creditors over collections and the government harassed by constant revolutionary uprisings. Small partial payments were made for two years and then ceased. As the Improvement Company's bond holdings became the subject of a special arrangement, the bonded debt of the Republic was considered to be that held by the French and Belgian creditors. However unsavory the debts which gave origin to the bond issues, and however imprudent most of the bond issues themselves, the great majority of bonds had passed into the hands of small holders, innocent third parties who sustained great loss by the continued suspension of payments.
Liquidated Debt. The liquidated debt, secured by international protocol or formal contract, Prof. Hollander found to be as follows on June 1, 1905:
San Domingo Improvement Company(American and British)…………….. $4,403,532.71Consolidated internal debt(chiefly Spanish, German and American).. 1,737.151.35Internal debt held by Vicini heirs(Italian)…………………………. 1,598,876.04Old foreign debt(chiefly Italian and Dutch)…………… 365,183.20Sala claim (American)………………….. 356,314.20Vicini heirs (Italian)…………………. 242,716.32Italian protocol………………………. 186,750.36Spanish-German protocol………………… 100,034.00B. Bancalari (Italian)…………………. 175,000.00J. B. Vicini Burgos (Italian)……………. 55,500.00Ros claim (American)……………………. 39,967.78Two cacao contracts(chiefly Dominican and German)…………… 68,296.16Bancalari, Lample & Co. (Italian)………… 16,733.19Twenty-eight minor contracts(chiefly Spanish, American)…………… 249,475.19——————Total……………………………… $9,595,530.40
The claim of the San Domingo Improvement Company was secured by a protocol between the American and Dominican governments. When the San Domingo Improvement Company was ousted from the custom-houses in 1901, it immediately appealed to the State Department in Washington. The State Department counselled a private settlement and negotiations with the Dominican government dragged on for almost two years. The Improvement Company claimed no less than $11,000,000 for the bonds it held or controlled, for its interest in the railroad from Puerto Plata to Santiago, for its shares of the extinct National Bank of Santo Domingo which it had purchased at the government's request, and for the settlement of a long list of minor claims. Arbitration was suggested by the Company, but the Dominican government finally offered a round sum of $4,500,000 and the offer was accepted. It is probable that the Republic fared better under this compromise than if the case had been submitted to arbitration, for though the Improvement Company's demands were greatly exaggerated, its position toward the government was that of a careful creditor who has kept minute account of all transactions as against a spendthrift debtor who has squandered his property with little or no record of his expenditures.
By a protocol signed January 31, 1903, the Dominican government formally agreed to pay the sum of $4,500,000, leaving details to be settled by a board of arbitrators to be designated by the American and Dominican governments. The board met in Washington and rendered its award under date of July 14, 1904. It fixed the interest on the debt at four per cent per annum and designated the custom-houses of Puerto Plata, Sanchez, Samana and Monte Cristi as security for the debt. In the event of failure by the Dominican government to pay any of the monthly instalments specified, a financial agent, appointed by the United States, was authorized to enter into possession of the Puerto Plata custom-house, and if its revenues proved insufficient to take possession also of the other custom-houses designated. The Dominican government never made any payments and the financial agent took possession of the Puerto Plata custom-house in October, 1904. Most of the other claims comprised in the liquidated debt had their origin in advances made to the government—often bearing interest at two or three per cent a month, or even more—and in indemnity claims for revolutionary damages. In making the liquidations, musty credits and a generous amount of compound interest were generally included and it was usually provided that the sums so agreed upon were themselves to bear interest. The greater portion of these claims was held by foreigners, Italian, German, Spanish and American holdings predominating. Payments, more or less feeble, were made in many cases on account of principal or interest up to 1903, but in that year, when the government was reduced to desperate straits in combatting insurrections, practically every item of the debt went into permanent default.
The principal Italian claimants were the heirs of an Italian merchant, J.B. Vicini, and an Italian in business at Samana, Bartolo Bancalari by name, who with other Italian subjects became loud in their complaints at the non-payment of their claims. The Italian government began to do a little sword-clanking, the Italian minister came from Havana in a warship, and the upshot was the signing in 1904 of three protocols admitting most of these claims and solemnly promising to pay them. Payment of the internal debt held by the Vicini heirs and of the Italian revolutionary claims was guaranteed by five per cent of all the customs receipts of the Republic, the revenues of Santo Domingo City, Macoris, Sanchez and Puerto Plata being specifically pledged. The Bancalari debt was guaranteed by part of the customs revenues of Samana. Notwithstanding the protocols, no payments were made by the Dominican government.
Floating Debt. The floating debt, consisting of admitted indebtedness, neither funded nor liquidated, but evidenced by some kind of public obligation, was found to be as follows:
Registered deferred debt………………. $587,710.24Registered floating debt……………….. 140,850.27Privileged revolutionary debt……………. 79,812.12Certificates of comptroller's office…….. 633,124.60Certificates of treasury offices…………. 31,771.07Open unsecured accounts…………………. 80,239.49—————Total……………………………… $1,553.507.79
By the year 1902, a large number of small claims—many of them for supplies furnished and services rendered—had accumulated, the justice of which the government admitted but of which owing to the deficiencies in its books it had no record. Notices were accordingly published calling on holders of such lawful credits to present the same for registration. This was the origin of the so-called registered debts. The largest item was constituted by what was very aptly denominated the "deferred" debt, created in 1888. Prior to that time the government had covered its military deficits with money obtained from loan associations known as "credit companies," which flourished in the larger towns and which did business at an interest rate that fluctuated between five and ten per cent a month. When a settlement was finally made, part of the amount due these companies was paid in certificates of indebtedness, the law directing with subtle humor that they be paid from the annual surplus in the budget. There never was a surplus, nothing was ever paid, and the market value of these certificates fell to three per cent of their nominal value.
The revolutionary debt above referred to, consisting of claims arising in the revolutions which brought Jimenez into power, was called "privileged" because it was assigned interest. To some extent it was, indeed, privileged, for partial payments were made until the middle of 1903. The government certificates forming part of the floating debt, were acknowledgments of indebtedness issued by the government when it was pressed for ready money. Many bore no interest, others bore interest as high as two per cent a month. In view of the great uncertainty of payment the amount of indebtedness was generally either frankly or disguisedly inflated before being expressed in the certificate. Such certificates were sometimes admitted in part payment of customs dues.
Declared ClaimsBesides the admitted indebtedness, there were many claims for indemnity and reimbursement which had not been acknowledged by the government in contract form. Some had been formally filed with the government for the payment of specific amounts, while others were still general demands. The declared claims were as follows:
Internal revolutionary claims………………. $ 885,258.10American revolutionary claims………………. 71,000.00Spanish revolutionary claims……………….. 40,000.00French revolutionary claims………………… 190,000.00Italian revolutionary claims……………….. 40,000.00German revolutionary claims………………… 10,000.00British revolutionary claims……………….. 5,000.00Cuban revolutionary claims…………………. 35,000.00Font claim (Spanish)………………………. 186,643.00Heureaux estate claim (Dominican)…………… 3,100,000.00National bank notes……………………….. 1,574,647.00Lluberes contract (Dominican)………………. 250,000.00West India Public Works Company claim (British). 250,000.00Vicini heirs claim (Italian)……………….. 812,505.00______________Total…………………………………….$7,450,053.89
Most of the older claims of indemnity for damages suffered during revolutions crystallized into bonded indebtedness, were recognized in government contracts or protocols, drifted into the old foreign debt, or were represented by certificates of indebtedness. Some remained, however, and their number was greatly increased by the disturbances between 1899 and 1905. How exaggerated many such claims were, is illustrated by a story told by the Danish consul in Santo Domingo. A Danish subject came to him and complained that government soldiers had invaded his store and carried off merchandise. He begged the consul to present a damage claim of $10,000 gold, which was equivalent to $50,000 silver. The consul listened to his story and said: "You are asking for a large sum, I cannot get you that. I doubt whether I can get you more than $40, silver." "Make it gold, consul," was the immediate reply. Many other claims would not have suffered by a similar scaling down. Most claims were for houses burned, cattle killed, horses commandeered and fences and other property destroyed by government forces or revolutionists.
The other declared claims arose principally out of alleged violations of concessions or other contractual obligations. The Heureaux estate claim, advanced by creditors of the Heureaux estate and based on the practical identity of the accounts of Heureaux and those of the government was later rejected by the Dominican courts. The outstanding national bank notes were those issued by the defunct Banque Nationale de Saint Domingue.
Undeclared Claims. The undeclared claims, such as had not been formally presented, were estimated as follows:—
American claims……………………. £1,000,000British claims…………………….. 50,000Italian claims…………………….. 200,000Spanish and German claims…………… 200,000Other foreign claims……………….. 50,000Dominican claims…………………… 2,500,000—————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.
(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.
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.