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                                                                   EXHIBIT 10.35

                           DORAL FINANCIAL CORPORATION
                           1451 F.D. Roosevelt Avenue
                        San Juan, Puerto Rico 00920-2717

                              As of January 1, 2004

Mr. Ricardo Melendez
Doral Financial Plaza
1451 F.D. Roosevelt Avenue
San Juan, Rico  00920-2717

Dear Mr. Melendez:

          We are pleased to detail herein below the provisions of your new
employment agreement with Doral Financial Corporation ("DFC").

          1.   TERMS OF EMPLOYMENT

               The term of this Agreement shall be for a period commencing on
January 1, 2004 and ending on December 31, 2005, unless sooner terminated as
herein provided. With respect of any period of service after December 31, 2003,
this Agreement supersedes and cancels all prior employment, personal service or
similar agreements between you and DFC and its subsidiaries, divisions and
ventures.

          2.   POSITION AND RESPONSIBILITIES

               You will serve as Executive Vice President and Chief Financial
Officer of DFC. By your acceptance of this Agreement, you undertake to accept
such employment and to devote your full time and attention to DFC, and to use
your best efforts, ability and fidelity in the performance of the duties
attaching to such employment. During the term of your employment hereunder, you
shall not perform any services for any other company, which services conflict in
any way with your obligations under the two preceding sentences of this Section
2, whether or not such company is competitive with the businesses of DFC,
provided, however, that nothing in this Agreement shall preclude you from
devoting reasonable periods required for

                    (i)  serving as a director or member of a committee of any
organization involving no conflict or potential conflict of interest with the
interests of DFC;

                    (ii) delivering lectures, fulfilling speaking engagements,
teaching at educational institutions;

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Mr. Ricardo Melendez
As of January 1, 2004
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                            (iii) engaging in charitable and community
activities; and

                            (iv) managing your personal and family investments,
provided that such activities do not interfere with the regular performance of
your duties and responsibilities under this Agreement.

               You shall, at all times during the term hereof, be subject to the
supervision and direction of the Chairman of the Board and Chief Executive
Officer and the President of DFC with respect to your duties, responsibilities
and the exercise of your powers.

          3.   COMPENSATION

                    (a)  During the term of this Agreement you shall receive an
annual salary of $250,000 annually, payable no less often than monthly in
accordance with corporate policy.

                    (b)     (i)    During the term of this Agreement, you shall
also be entitled to receive an annual incentive bonus (commencing with the year
ended December 31, 2004) equal to 5% of the amount of Adjusted Net Income (as
hereinafter defined) in excess of a 15% Return on Equity Capital (as hereinafter
defined); provided, however, that total salary and incentive compensation
payable to you pursuant to this Agreement shall not exceed $500,000 per annum;
and

                            (ii)   The incentive bonus shall be payable annually
by DFC within 30 days following the date on which its Annual Report on Form 10-K
for the fiscal year ended the prior December 31 shall have been filed with the
United States Securities and Exchange Commission; provided that such amount
shall only be payable if you shall have served as Executive Vice President and
Treasurer to DFC pursuant to this Agreement for the entire fiscal year to which
such payments relate. As used in this Section 3, "Adjusted Net Income" means the
annual consolidated net income by DFC and its subsidiaries after all taxes
(including net income from equity interests held by DFC in any other venture and
net income of any successor of DFC which may be formed by merger, consolidation
or sale of substantially all of the assets of DFC) during the calendar year
preceding the payment as determined in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved and as shown by DFC's published consolidated financial statements
audited by its independent accountants (hereinafter referred to as "GAAP"), such
net income to be adjusted (A) by adding back to such net income any payments
made pursuant to Section 3(b)(i) hereof and payments of similar incentive
compensation to other executive officers of DFC, (B) by adjusting such net
income for any extraordinary items of income and expense such as merger related
expenses and (C) by deducting from net income dividends on shares of preferred
stock that are excluded from the definition of "Equity Capital" set forth below.
As used in this Section 3, (1) "Equity Capital" means DFC's consolidated
Stockholders Equity (excluding preferred stock or other similar instruments that
are not convertible into shares of Common Stock) at the December 31 immediately
preceding the beginning of the fiscal year for which the calculation is being
made, determined in accordance with GAAP and (2) "Return on Equity Capital" for
any fiscal year means the percentage determined by dividing DFC's consolidated
net income after all taxes

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Mr. Ricardo Melendez
As of January 1, 2004
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determined in accordance with GAAP for such fiscal year by Equity Capital for
such preceding December 31; provided that such calculation shall be adjusted as
set forth in the immediately succeeding sentence. If DFC sells securities
representing Equity Capital during the fiscal year, Equity Capital shall be
increased by the net proceeds to DFC (after expenses) of such sale multiplied by
a fraction the numerator of which shall be the number of days in such fiscal
year which had elapsed from the date of the closing of such sale to the end of
such fiscal year and the denominator of which shall be 365.

                    (c)  You shall be entitled to receive stock options to
acquire 200,000 shares of DFC's Common Stock subject to the terms and conditions
of DFC's 1997 Employee Stock Option Plan and the stock option awards granted as
of January 2, 2004 by DFC's Compensation Committee.

                    (d)  You shall be entitled to participate in the other
benefit plans of DFC upon the terms and conditions

on which such benefits are made available to other officers of DFC. Nothing
herein shall obligate DFC to continue any existing benefit plan or to establish
any replacement benefit plan.

                    (e)  You shall be entitled to reimbursement for reasonable
travel and entertainment expenses incurred in connection with the rendering of
your services hereunder in compliance with DFC policy. Nothing contained herein
shall authorize you to make any political contributions, including but not
limited to payments for dinners and advertising in any political party program
or any other payment to any person which might be deemed a bribe, kickback or
otherwise and improper payment under corporate policy or practice and no portion
of the compensation payable hereunder is for any such purpose.

                    (f)  Payments under this Agreement shall be subject to
reduction by the amount of any applicable federal,

Commonwealth, state or municipal income, withholding, social security, state
disability insurance, or similar or other taxes or other items which may be
required or authorized to be deducted by law or custom.

                    (g)  No additional compensation shall be due to you for
services performed or offices held in any subsidiary, division, affiliate, or
venture of DFC.

          4.   MISCELLANEOUS PROVISIONS RELATING TO THE BONUS AND OTHER MATTERS

               (a)  Your acceptance of this Agreement will confirm that you
understand and agree that the granting of the incentive compensation referred to
in Section 3(b) (the "incentive compensation") and the stock options referred in
Section 3(c), and any action thereunder, does not involve any statement or
representation of any kind by DFC as to its business, affairs, earnings or
assets, or as to the tax status of the incentive compensation or stock options
or the tax consequences of any payment or exercise thereof, or otherwise. You
further agree that any action at any time taken by or on behalf of DFC or by its
directors or any committee thereof, which might or shall at any time adversely
affect you or the incentive compensation, may be

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Mr. Ricardo Melendez
As of January 1, 2004
Page 4

freely taken notwithstanding any such adverse effect without your being thereby
or otherwise entitled to any right or claim against DFC or any other person or
party by reason thereof.

               (b)  The incentive compensation is personal to you and, except as
provided as contemplated in Section 3(b) above, in the event of your death or
incapacity, is not transferable or assignable either by your act or by operation
of law, and no assignee, trustee in bankruptcy, receiver or other party
whosoever shall have any right to demand any incentive compensation or any other
right with respect to it. If, in the event of your death or incapacity, your
legal representative shall be entitled to demand the incentive compensation
under any of the provisions hereof then, unless otherwise indicated by the
context or otherwise required by any term hereof, references to "you" shall
apply to said representative.

               (c)  If and when questions arise from time to time as to the
intent, meaning or application of any one or more of the provisions hereof such
questions will be decided by the Compensation Committee of the Board of
Directors of DFC or any other Committee appointed to consider such matters, or,
in the event DFC is merged into or consolidated with any other corporation, by
the Board of Directors (or a Committee appointed by it) of the surviving or
resulting corporation, and the decision of such Board of Directors or Committee,
as the case may be, as to what is a fair and equitable settlement of each such
question or as to what is a fair and proper interpretation of any provision
hereof or thereof, whatever the effect of such a decision may be, beneficial or
adverse, upon the incentive compensation, shall be conclusive and binding and
you hereby agree that the incentive compensation is granted to and accepted by
you subject to such condition and understanding. You understand that the
incentive compensation is not held or set aside in trust and (1) DFC may seek to
retain, offset, attach or similarly place a lien on such funds in circumstances
where you have been discharged for cause and shall be entitled to do so for (x)
malfeasance damaging to DFC, (y) conversion to you of an DFC opportunity, or (z)
a violation of DFC's Code of Business Conduct and Ethics, in each case as
determined in the sole discretion of the Compensation Committee of the Board of
Directors, and (2) in the event DFC is unable to make any payment under this
Agreement because of insolvency, bankruptcy or similar status or proceedings,
you will be treated as a general unsecured creditor of DFC and may be entitled
to no priority under applicable law with respect to such payments.

          5.   RESTRICTIONS ON COMPETITION

               During the term of this Agreement and for a period of one year
after you cease to be an employee of DFC or an affiliate of DFC, you will not,
without the prior written consent of DFC, (a) accept employment or render
service to any person, firm or corporation, directly or indirectly, in
competition with DFC, or any affiliate thereof for any purpose which would be
competitive with the business of DFC and its affiliates within the Commonwealth
of Puerto Rico or any other geographic area in which DFC or any affiliate of DFC
by which you were employed, conducted operations (the "Restricted Area") or any
business as to which studies or preparations relating to the entry into which
were made by DFC or any affiliate of DFC by which you were employed within one
year prior thereto (collectively, the "Restricted Businesses") or (b) directly
or indirectly, enter into or in any manner take part in or lend your name,
counsel or assistance to any venture, enterprise, business or endeavor, whether
as proprietor, principal,

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Mr. Ricardo Melendez
As of January 1, 2004
Page 5

investor, partner, director, officer, employee, consultant, adviser, agent,
independent contractor or in any other capacity whatsoever for any purpose which
would be competitive with the Restricted Businesses in the Restricted Area. An
investment not exceeding 5% of the outstanding stock in any corporation
regularly traded on any national securities exchange or in the over-the-counter
market shall not be deemed to violate this provision, provided that you shall
not render any services for such corporation.

          6.   TERMINATION OF EMPLOYMENT

               (c)  Your employment hereunder may be terminated for dishonesty,
death, incapacity, or inability to perform the duties of your employment on a
daily basis, resulting from physical or mental disability caused by illness,
accident or otherwise or refusal to perform the duties and responsibilities of
you employment hereunder, or breach of fidelity to DFC.

               (d)  At any time following a "Change in Control" of DFC, this
Agreement may be terminated by DFC or you on 30 days' written notice to you or
DFC, as the case may be, such termination to be effective as of the end of the
calendar year during which such notice is given. As used herein, a "Change in
Control" shall be deemed to have occurred at such time as (i) any person or
group becomes the beneficial owner of more than 50% of the voting power of DFC's
voting stock, or (ii) DFC consolidates with or merges into any other corporation
or conveys or otherwise disposes of all or substantially all of its assets to
any person.

               (e)  If at any time you shall voluntarily terminate your
employment, the this Agreement, except for Section 5 hereof, shall terminate
and all further obligations of DFC hereunder shall cease, provided that in any
termination pursuant to subsection (b) of this Section 6 you shall be entitled
to receive all compensation due to pursuant to Section 3 hereof for the calendar
year in which such date of termination occurs. You agree that this Section 6
shall create no additional rights in you to direct the operations of DFC.

          7.   WAIVERS AND MODIFICATIONS

               No waiver by either party of any breach by the other of any
provisions hereof shall be deemed to be a waiver of any later or other breach
thereof, or as a waiver of any such or other provision of this Agreement. This
Agreement sets forth all of the terms of the understandings between the parties
with reference to the subject matter set forth herein and may not be waived,
changed, discharged or terminated orally or by any course of dealing between the
parties, but only by an instrument in writing signed by the party against whom
any waiver, change, discharge or termination is sought.

          8.   SEVERABILITY

               Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective under applicable law. In the event
that any provision, or any portion of

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Mr. Ricardo Melendez
As of January 1, 2004
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any provision, of this Agreement shall be held to be void and unenforceable, the
remaining provisions of this Agreement, and the remaining portion of any
provision found void or unenforceable in part only, shall continue in full force
and effect.

          9.   ARBITRATION

               Any dispute arising under this Agreement shall be submitted to
arbitration in San Juan, Puerto Rico under the rules of the American Arbitration
Association.

          10.  NOTICES

               Any notice or communication required or permitted to be given
hereunder shall be deemed duly given if delivered personally or sent by
registered or certified mail, return receipt requested, to the address of the
intended recipient as herein set forth or to such other address as a party may
theretofore have specified in writing to the other by delivering or mailing in a
similar manner. Any notice or communication intended for DFC shall be addressed
to the attention of the Chairman of the Compensation Committee of DFC's Board of
Directors.

          11.  GOVERNING LAW

               This Agreement shall be construed in accordance with the laws of
the Commonwealth of Puerto Rico.

          12.  MISCELLANEOUS

               This Agreement shall be binding upon the successors and assigns
of DFC. This Agreement is personal to you, and you therefore may not assign your
duties under this Agreement. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute a part
thereof or to affect the meaning hereof.

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Mr. Ricardo Melendez
As of January 1, 2004
Page 7

     If the foregoing terms and conditions correctly embody your mutual
understanding with DFC, kindly endorse your acceptance and agreement therewith
in the space below provided, whereupon this shall become a binding agreement.

                                   Very truly yours,

                                   DORAL FINANCIAL CORPORATION

                                     By:  /s/ Salomon Levis
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                                     Name:  Salomon Levis
                                     Title: Chairman of the Board and
                                            Chief Executive Officer

Accepted and Agreed to as of the
date first above set forth:


       /s/ Ricardo Melendez
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         Ricardo Melendez