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On the legal and semilegal questions involved I have said that it seemed to me

1. That this Government can on its motion and when it likes to suspend entirely or modify as it pleases the decree of March 31, 1905. That Valesquez, Tejera, and Caceres think, however, that a suspension would bring about the overthrow of their Government, and further see the advisability of not opening up the question of a formal modification of the “modus vivendi.” On the other hand, if they do not find some way to carry out the railroad law the opponents of the convention will receive an immense increase of strength, especially in Congress itself.

2. That the view taken by this Government that it is under obligations to act as if the provisions of the convention in effect are applicable to the “modus vivendi,” is taken voluntarily by it, and that the American Government can not sustain such a proposition, or protest against its violation. However, the position of the Dominican Government on this point shows good faith toward the creditors, is good policy, and altogether beneficial and commendable.

3. In case of a modification of the “ modus vivendi” in a form injurious to the creditors their Governments, including the American, would of course be free to take such action as might appear wise to secure the payment of those debts.

4. That personally I did not think my own Government would consider an abolition of export duties a modification injurious to creditors, since in making the conyention of February 1, 1905, it had consented that this might be done whenever the Dominican Government deemed advisable.

5. That personally I could see no reason why the expenditure of export duties for an object directly tending to favor internal production should be considered more injurious to the creditors than the total abolition of such duties. On this point, however, I had not consulted the Department of State and must not be understood as committing it to my opinion.

6. That if it was decided to pay out this money no formal modification of the decree of March 31, 1905, would be necessary, since the law of June 27, 1905, in effect constituted the modification desired.

The three cardinal objects of this Government are the maintenance of peace, economical and honest administration, and the setting aside for the creditors an amount satisfactory to them. This railroad project will directly tend to favor the first, will not affect the last, and with proper precautions and supervision on the part of Colonel Colton will not endanger the second.

I have reason to believe that Colonel Colton has or is about to make a full report on the subject to the Secretary of War. Doubtless you will find in that report a fuller and better discussion of the practical aspects of the question, especially as to the monetary stringency that is feared on account of the large remittances to New York. This is an aspect of the matter which should not be lost sight of. While production is steadily increasing with the continuance of peace, commercial operations are beginning to be hampered by the export of currency: The prices of Dominican products in foreign markets are already low and it would be regrettable if they should still further be reduced to the small cacao and tobacco grower by a scarcity of

596054F R 1906

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currency. Probably the wholesale exporter with credit abroad would receive an ultimate benefit from such a state of affairs, but this would not compensate for the suffering and discontent of the small farmers, upon whose prosperity and multiplication depends the hope of a permanently peaceful future.

The longer I live in this country the more confident I am that the danger from the professional revolutionary class can be temporarily eliminated by keeping the custom-houses out of their reach. But back of the danger from this class is the possibility of a revolution caused by sheer poverty. That is the real reason Monte Christi is such a dangerous Province, and the fall of Heureaux was due to his extravagance, which led to his interfering with the currency and the consequent ruin of the small producer and laborer.

I shall be glad to know if the department approves of the views I tentatively expressed in my conversation with Colonel Colton, and if it is desired that I continue to maintain the same attitude of reserre with this Government in regard to the railroad matter. I have, etc.,

T. C. Dawson.

[Translation from the Official Gazette of July 1, 1905. )

The National Congress in name of the Republic.

Considering that transportation facilities are the best means to promote agricultural prosperity :

Considering that it is the duty of the state to promote by all means within its power the increase of roads of communication and transport,

DECREES.

ARTICLE 1. From and after the 1st of January, 1906, 30 per cent of the present export duties shall be known as the " Internal fund," and shall be destined to the construction of railroads on account of the State in conformity with the contracts that the executive may make and Congress approve.

The executive is authorized to use a part of this revenue for the payment of premiums or guaranteeing an interest on the capital employed in the construction of private railroads built under duly issued concessions.

The interest may reach, according as may be determined, as much as 6 per cent per annum, and the premiums as much as $2,000 for each kilometer constructed.

ART. 2. The product of this revenue may not be dedicated under any pretext to another purpose than that stipulated in this decree.

Every contract or obligation contracted on the basis of this revenue shall be ipso facto null, whenever it may not be for the purpose stipulated in the foregoing article.

ART. 3. The executive in celebrating contracts or granting concessions for the construction of railroads shall try, conditions being equal, to give preference to the railroads from Moca to Monte Christi, which may connect with the Domin.' ican Central Railroad (which now runs from Santiago to Puerto Plata) ; that from Barahona to Laguna del Fondo; that from Romana or Macoris in the east of Serbo; and that rom Azua to Banica.

ART. 4. Let this be sent to the executive for constitutional purposes.

Given in the palace of Congress June 22, 1905, sixty-second year of independence and forty-second of the restoration.

RAMON LOVATON,
Vice-President, Acting.
J. D. ALFONSECA,
A. ACEVEDO,

Secretaries.

Let it be executed and communicated by the corresponding departments, being published in the whole territory of the Republic for its fulfillment.

Given in the national palace of Santo Domingo, capital of the Republic, June 27, 1905, sixty-second year of independence and forty-second of the restoration.

MORALES L. Countersigned :

FEDERICO VALESQUEZ,
Minister of Finance and Commerce.

F. L. VASQUEZ,
Minister of Fomento and Public Works.

The Secretary of State to Minister Dawson. No. 111.]

DEPARTMENT OF STATE,

Washington, May 24, 1906. Sir: The department thinks that if the Government of Santo Domingo wishes now to put in force the act of the Dominican Congress of June 27, 1905, by applying 30 per cent of the export duties received hereafter to the construction of railroads on account of the state, the Government of the United States should not regard such action as a violation of the true intent of the modus vivendi. In that case it would not be necessary to make any agreement or take any action. Colonel Colton, receiver of customs, would simply begin from the 1st of June to pay the amount of 30 per cent export duties over to the railroad fund, instead of sending it to the bank in New York.

I do not, however, think that any attempt should be made to withdraw any money which has already been remitted to the City Bank in New York; that money has been lawfully paid to the bank under the authority of the Dominican Government. It has been specifically devoted to the creditors of Santo Domingo, and no part of it could be withdrawn without creating serious disturbance and distrust, the consequences of which might be most unfortunate. I am, sir,

ELIHU ROOT.

Minister Dawson to the Secretary of State.

[Extracts.) No. 256.]

AMERICAN LEGATION,

Santo Domingo, June 9, 1906. Sir: Referring to the subject of my No. 240 of April 18, 1906, the desire of the foreign creditors for a distribution of the fund accumulated in New York, I have the honor to report that ever since the members of this Government, especially the minister of foreign affairs and the minister of finance, have shown a constantly increasing anxiety to try to reach a voluntary agreement with the creditors as to the proportions in which the trust fund should be divided among them, and even to attempt to make an arrangement fixing the capital amounts within the more important or what would amount to the same thing—the amounts to be paid annually for interest and amortization.

a Not printed.

ure.

Letters recently received from the Dominican minister resident at Washington have led them to believe that the present is peculiarly an opportune time to attempt such an arrangement, and that it ought to be made at Washington with the advantage of your advice and that of Doctor Hollander.

About ten days ago it was practically determined that the minister of finance should be sent to Washington on this mission, providing President Caceres upon his return should approve, and provided Señor Velasquez could get away in time to see you before your depart

He was also anxious to have the advice and friendly assistance of Doctor Hollander, whose abilities and extensive knowledge of the details of the numerous debts he greatly respects. He knew that you intended to leave for Brazil about July 1, and Doctor Hollander for Europe on the 14th instant.

President Caceres returned from the Cibao yesterday afternoon, and this morning the ministers for foreign affairs and finance told me that the latter would depart on his mission to-night, taking the Dominican gunboat Independencia for Puerto Plata, where he will catch the American mail steamer. At their request I sent you the following telegram:

SANTO DOMINGO, June 9, 1906. SECRETARY OF STATE, Washington:

* * * Minister of finance leaving for Washington, D. C., to-night to consult you and Hollander about an arrangement with creditors.

It is very important that Hollander remain and assist.

DAWSON. I have, etc.,

T. (. Dawsox.

LABORS OF THE DOMINICAN CONGRESS DURING THE SESSION OF

1906.

Minister Dawson to the Secretary of State.

[Extracts. ] No. 298.]

AMERICAN LEGATION,

Santo Domingo, September 10, 1906. Sir: In transmitting to you the usual review of Dominican legislation I have the honor to report that the 1906 Congress enacted few measures of importance besides the regular budget or appropriation law.

The budget estimates of revenue for 1906–7, being based on the favorable results of the preceding year, show large increases. Classifying the different sources of revenue the comparative estimates of the current and past year were as follows:

1905-6.

1906-7.

Import duties
Export duties
Port dues
Alcohol tax
Consumption taxes
Post-office receipts.
Revenue from government telegraphs.
Consular fees..
Stamp duties..
Port-lighting dues
Public sales.
Register fees

$1,700,000

262, 500

40,000 200,000 50,000 12,000 10,000 13, 300 20,000 1.000 1,000 1,200

$2,100,000

370,000 110,000 200,000 75,000 15,000 10,000 16.000 50,000 1, 400

600 2,000

A new source of revenue for the National Government was added in the form of a 10 per cent tax on foreign lottery tickets sold in the Republic. It is estimated to produce $1,000. An additional income will be derived from the installments which are to be paid on the back sugar tax of the last two seasons. Between $30,000 and $10,000 annually is expected from this source, but these installments have already been hypothecated to S. Michelena for advances made to meet the extraordinary military expenses incurred during last winter's revolutionary troubles. This matter of the back sugar tax and the loan do not figure in the budget law nor in the proceedings of Congress.

The 5 per cent tax on home lotteries, included last year in the national revenue, this year goes to the municipalities. Thirty per cent of the export duties, counting from May 1, 1906, are to go to companies or individuals who are under contract to build certain railroads on Government account. Thirty per cent of the alcohol tax goes to the municipalities in aid of local schools. The sugar production tax has been abolished, but the municipalities where the sugar is raised are to receive one-half a cent on each hundred pounds. The total derived from this source by all the municipalities will not exceed $6,000.

Leaving out the sums specifically devoted to railroads, schools, etc., the net revenue of the National Government is estimated at $2,823,000, of which $1,357,950 will go to the creditors and for expenses of collection. This leaves $1,165,050 for the ordinary running expenses of the Central Government. Judging by the receipts of last year it seems likely that these estimates of receipts are justified, or nearly so. There is hardly any doubt that the custom-house revenues-viz, import, export, and port duties collected by the general receiver—will come to the estimates if peace continues and the receivership is backed up in its efforts to stop contraband over the Haitian frontier. Under Dominican collection and accounting the internal revenues will hardly come up to the estimates, but I believe that if the same system should be applied to it as to the customs revenues the above congressional estimates would be exceeded.

Note should be taken of the fact that in addition to the $1,465,050 which the Government will receive for its ordinary expenses, $111,000 goes to railways out of the export duties and $60,000 to the municipalities for local schools out of the alcohol tax. Each municipality also exercises its right to impose a tax on imported goods consumed within its territory and to receive $6,000 sugar tax, as well as the licenses, market taxes, and other customary municipal revenues.

That appropriation part of the budget law provides as follows: Rural guard, police, army, navy, and extraordinary -

$600, 000.00 Deficit and unforeseen expenses of interior and war.

94, 316. 50 Public buildings, etc.

20, 750.00 Extension and repairs telegraph lines.

20, 000.00 Salaries and all other civil expenses, including $30,000 for railroads and wagon roads, in addition to the $111,000 above referred to.- 690, 051.00

Congress ratified the contract made with ex-President Vasquez by which the latter agrees to take charge of the construction of a railroad from Moca to Monte Christi and spend that portion of the export duties devoted thereto. A similar contract was entered into with Pedro Marin, a wealthy citizen of this town, for a railroad

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