Foreign Relations of the United States Diplomatic Papers, 1937, The American Republics, Volume V

839.51/4510½

Draft Convention Submitted by the Dominican Plenipotentiaries on March 29, 1937

March 29, 1937

[Translation]

Whereas the Convention between the Dominican Republic and the United States of America, containing provisions for the aid of the United States in the collection and application of the customs revenues of the Dominican Republic, was concluded and signed by their respective plenipotentiaries in the City of Washington on the twenty-seventh of December, 1924;

Whereas the Dominican Republic has declared that certain provisions of the Convention of 1924 may hinder the action of the Dominican State in developing the natural resources of the country and in the progressive extension of its industry and commerce;

Whereas one of these provisions stipulates that the Dominican public debt may not be increased until the bonds actually in circulation have been amortized; which provision, if no exception thereto be admitted, may create obstacles to the conclusion of financial arrangements aimed at the execution of public works which tend to the progress and well-being of the debtor nation and through this to the reinforcement of its capacity for payment;

Whereas another of these provisions forbids the Dominican Government to modify freely its customs tariff; and this provision designed to strengthen the customs revenues, which are applied to the service of the debt, may be substituted by another guarantee equally strong, such as that covering from the proceeds of other taxes the decrease which might result in the customs revenues in case that by reason of the modification of the customs tariff the amount of the said revenues should be reduced; and in exchange for offering this additional guarantee the Dominican State will always be in a position to develop without restrictions the economic policies which best suit its existing conditions;

Whereas the Dominican Republic has requested the cooperation of the United States of America to enter into a protocol complementing the said Convention, with a view to giving greater scope to the third and fourth clauses of the said instrument, which are those which contain the restrictions referred to; and the United States is disposed to give such cooperation;

The Dominican Republic represented by . . . . . . . . . . . . . . . . . . . . and the United States of America represented by . . . . . . . . . . . . . . . . . . . . who, having communicated their respective full powers to each other; which have been found to be in good and due form, have agreed upon the following:

Article I.

The third clause of the Convention concluded between the Dominican Republic and the United States of America under date of December 27, 1924, to regulate the form of payment of the Dominican public debt, shall read as follows:

Until the Dominican Republic shall have paid the total amount of the bonds of the loan, its contractual public debt may not be increased by the contracting of new loans and new emissions of bonds, except by prior agreement between the Dominican Government and the Government of the United States. Notwithstanding, the Dominican Government may enter into contracts and financial arrangements for the execution of public works or other services of national interest, providing they are adjusted to the following conditions:

1. As a guarantee of those contracts or financial arrangements, there shall be set aside the product of a given impost of the internal revenue service or of any other impost which is not reserved to the payment of the public debt, and it shall be stipulated that this product is the sole guarantee for the performance of this obligation; and

2. The maximum period for the liquidation of any of these contracts may not be greater than four years beginning from the date upon which the contract or arrangement is concluded.

Moreover, the Dominican Government may contract a new loan whose exclusive object is to convert, refund, consolidate or amortize the bonds existing by virtue of the former loans and to liquidate entirely its existing debt, agreeing with the new lenders to the stipulations which it may consider advisable and considering definitely terminated the validity of this Convention since once each and every one of the bonds which the Dominican Government emitted by virtue of the former loans, have been paid off entirely, the provisions of this Convention will become automatically null and void.

The Dominican Government expressly renounces the right which it possesses of emitting new bonds up to the limit of $25,000,000 provided in this Convention. The Dominican Government may, at any time, freely dispose of the internal revenues and imposts not pledged as a guarantee for the payment of the public debt.

Article II.

The fourth clause of the same Convention of 1924 shall read as follows:

The Dominican Government may modify its customs tariffs in accordance with the needs and advantage of its commerce, but pledges itself expressly not to reduce import duties at any time to such a point that, taking as a basis exports and imports of the same extent and kind during the two years preceding the year in which it is desired to make such modification, the net total customs receipts, according to the tariff so modified, would not have amounted for each of the said two years, to at least one and one-half times the sum necessary to insure the service of the interest and amortization of its public debt, unless the said Dominican Government shall have previously segregated from the proceeds of its internal revenues, and special imposts which are not pledged, as are the customs duties, to the payment of the debt, an amount equivalent to the reduction in total customs revenues resulting from the proposed modifications of its customs tariff. In such event, the Dominican Government will not need to be guided by the formula stipulated; and on the twentieth of each calendar month shall place at the disposal of the General Receiver of Customs, a sum, segregated from its internal revenues and special imposts, equivalent to one-twelfth of the amount by which the annual customs revenues of the Republic shall have been diminished as a result of such customs tariff modification.

The present protocol complementary to the Convention of December 27, 1924, shall be ratified by the high contracting parties in accordance with their respective constitutional methods, and will enter into force as soon as the exchange of ratifications shall have been effected and will have the same duration as the said Convention may have.

In witness whereof the plenipotentiaries have signed this protocol in duplicate in the English and Spanish languages, both texts being authentic and have hereunto affixed their seals.