SANTO DOMINGO'S FISCAL AFFAIRS
For some years the Santo Domingo protocol and treaty were before
the Committee on Foreign Relations, and in the Senate. They came
before the Senate very suddenly. On January 20, 1905, there appeared
in the press what purported to be a protocol, agreed to by Commander
Dillingham on the one hand, and Minister Sanchez of the Dominican
Republic on the other, by the terms of which the United States was
to take charge of the custom houses of the Dominican Republic,
adjust and liquidate its debt, and generally to take charge of the
fiscal affairs of the Republic. By the terms of this protocol, it
was to go into effect February 1, and there was no provision at
all for Senatorial action. Senator Bacon and other Democratic
Senators became very much aroused over this as a usurpation of the
rights of the Senate. Resolutions were introduced, calling upon
the State Department for information, and the subject was considered
by the committee at several meetings.
I confess that I too was considerably surprised at the action of
the State Department, and I called on Secretary Hay one morning
and asked to be informed as to the facts.
Secretary Hay stated that he would communicate with me in writing,
which he did on March 13, 1905, saying:
"In answer to your verbal request, I submit herewith a statement
of the facts with reference to the making of the Santo Domingo
protocol, and enclose herewith a copy of the protocol of January
20, 1905. That protocol was not drawn up by the Department of
State and was never seen by any of its officials until it appeared
in the newspapers on January 22d last, as given out by the Dominican
officials. The Department has never authorized its signing; it
never gave any instructions authorizing its signature; and no full
powers had ever been given authorizing the signature on the part
of the United States Government. The Minister of Foreign Affairs
of the Dominican Republic visited Washington during the Spring of
1904, and during a stay of nearly three months repeatedly solicited
the assistance of the United States Government for the restoration
of order in the island and for the regeneration of his country,
but the responsible officials of the Department advised against
meeting his request, and the President, to whom the matter was
referred, decided against taking any action as long as it could
wisely be avoided.
"The Dominican Government again brought the matter to the attention
of the United States Minister at Santo Domingo the latter part of
1904. In the meantime an investigation had been going on quietly
by our Government through Commander Dillingham, to obtain information
as to the real condition in the island. After the President became
thus familiar with the situation there, and on the report of the
United States Minister, and after repeated requests for help from
the Dominican Government, the Department of State, on January 6,
1905, prepared a cablegram setting forth the basis on which alone
the United States would be able to render assistance. . . .
"Neither that cablegram nor any other despatch whatsoever went
further than simply lay down a basis; and acting on this, but
without instructions authorizing it, the Dillingham-Sanchez protocol
was signed. The Department was advised by cable on January 20 that
an arrangement had been agreed to, and thereupon the Department
officials at once set to work to prepare a treaty; and its officials
were actually engaged in drafting one to send to Santo Domingo,
when the publication of the protocol of January 20 appeared. The
Department at once cabled to Santo Domingo to forward a copy of
the protocol; and as soon as its text could be received, the
Department began work in making amendments and adjusting terms on
which the United States Government could consent to act. As soon
as the two Governments could arrive at substantial agreement as to
the terms, full powers were communicated to Dawson, and the protocol
now before the Senate was accordingly signed.
"In view of the misapprehensions that at once arose, growing out
of publication of the protocol, which upon its face stated it was
to go into effect February 1st, and from which it might naturally
be inferred it was intended to go into effect before the Senate
could have an opportunity to consider it, and without its having
been referred to the Senate for consideration, I considered the
question of the propriety of stating the fact that no instructions
and no powers had ever been granted authorizing the signing of the
protocol of January 20. The decision was reached that repudiation
of the action of Dillingham and Dawson might be construed as a
censure, and that it might cause offence to them as well as to
their friends, who might feel that when the circumstances should
become fully known, that Dillingham and Dawson were justifiable in
assuming the responsibility they did in signing the protocol instead
of making a formal memorandum of the basis agreed on and communicating
it to the Department for the drafting of a treaty. Both of these
officials have a record of faithful and skilful service and
competency, and it was hoped when the facts should become more
fully known, a correct understanding of the actual situation would
remove any ill effects of previous misapprehension.
"The department has been advised that the protocol of January 20
was given out for publication by the Dominican Government in order
to calm the popular mind on account of its uncertainty as to the
character of negotiations which were actually being carried on
between the two Governments.
"(Signed) John Hay."
From 1865, until the time that the United States assumed the
collection of customs, conditions in Santo Domingo were about as
bad as they could be in every respect. One revolution succeeded
another. There had been twenty-six different Administrations since
1865, only one of which was brought about by means of a regular
election. Most of the others were caused by revolutions, assassination,
forced resignations, and a general condition of anarchy. Debt
after debt, bond issue after bond issue, piled up, each Administration
seemingly bent only on seeing how much actual cash could be raised,
utterly regardless of obligations assumed. None of the principal
and only a trifling portion of the interest were paid, and it seems
that the different Administrations never had any intention of
liquidating the obligations of the Republic. The principal portion
of the bonds was held by European creditors.
But finally the Santo Domingo Improvement Company, an American
corporation, succeeded as the fiscal agents of the Republic, to
float its bond issues. The improvement company was displayed, and
its claim was settled for four million, five hundred thousand
dollars. Then a protocol was entered into between the United States
and Santo Domingo by which the manner of payment was submitted to
arbitration, our arbitrators being Judge George Gray and John G.
Carlisle. An award was rendered providing that an agent of the
United States should take possession of certain custom houses, in
order to pay a debt which the Government of Santo Domingo had
acknowledged to be due an American corporation.
This did not satisfy foreign creditors, French, Belgian and Italian,
who had actually been given, by an agreement with Santo Domingo,
the right to collect revenues at certain custom houses. Santo
Domingo appealed to the United States and the foreign Governments
threatened that if the United States did not enforce some remedial
plan, they would be compelled to take action for the relief of
their own citizens, whose claims aggregated twenty million dollars.
Italian warships were already in Santo Domingo waters ready to
enforce their demands. This, briefly, was the condition of affairs
when the protocol of 1905 was submitted to the Senate for
ratification.
For more than a quarter of a century we have had a peculiar interest
in Santo Domingo. As is well known, under the Administration of
President Grant a treaty was negotiated and sent to the Senate
providing for the annexation of Santo Domingo. Senator Sumner was
Chairman of the Committee on Foreign Relations, and as such was
able to prevent the consideration of the treaty by the committee,
and its ratification by the Senate. Some one said that the only
objection that Charles Sumner had to the treaty was that President
Grant had suggested it first. This was one of the reasons why
Senator Sumner was deposed as chairman of the Foreign Relations
Committee. It would probably have been better for the United
States, and it certainly would have been better for the Dominican
Republic, if the treaty had been ratified.
The protocol submitted to the Senate involved very large responsibilities
on the part of the United states. It provided that the United
States was to adjust all the obligations of the Republic, the
arrangement of the payment, to pass upon all claims of Santo Domingo,
determine their amount and validity, take charge of all the custom
houses, and collect and disburse the customs receipts, giving to
Santo Domingo forty-five per cent of the customs receipts and
devoting the balance to the liquidation of her debts.
This protocol had the active opposition of the minority of the
committee and in the Senate and, in addition, such conservative
members as Senator Hale and other prominent Republicans opposed
it. We fought over it in committee month after month; but finally,
on March 10, 1905, it was reported by me to the Senate with a large
number of amendments. It was considered by the Senate, recommitted
at the end of the Congress, and again reported at the following
Congress. But those in favor of it became convinced that we did
not have the two-thirds necessary to ratify it, and it was never
brought to a vote. It was thought that nothing more would be heard
of the Santo Domingo protocol; but Senator Root, when Secretary of
State, took the subject up _de novo_, and made a new treaty, in
which the United States did not assume the broad obligations it
assumed under the first one, and which was not generally of so
complicated a character.
It imposed the duty upon the Santo Domingo Republic itself of
arriving at an adjustment with its creditors, conditioned only on
the administration of the custom houses by the United States.
In the meantime, an arrangement was made by American banking houses
to furnish the money to liquidate the debt; the creditors were
satisfied; the foreign debt was liquidated on a basis of fifty per
cent of the face value, and domestic debts and other claims less
than ten per cent. A loan of twenty million dollars was made
through Kuhn, Loeb & Company, of which the Dominican Republic
received nineteen million dollars for the payment of its debts;
seventeen million dollars was used to satisfy thirty-one million,
eight thousand dollars worth of bonded debts, and the remaining
two million, two thousand dollars were to go for internal
improvements.
There was some objection to the ratification of the treaty negotiated
by Secretary Root, but not of a very serious character, and the
treaty went through, even Senator Morgan not opposing it. I had
the honor of reporting it and having charge of it in the Senate.
The treaty has now been in force several years, and it has proved
even more advantageous than was expected when it was ratified. It
has restored order in the Republic, and the country's debts are
rapidly being liquidated. The time may come when the United States
may be compelled to take similar action with some of the other
republics south of us. Such action would be beneficial both to
the United States and to the people of those republics.