Papers Relating to the Foreign Relations of the United States, With the Address of the President to Congress December 5, 1916

File No. 838.77–143

The Minister of Haiti to the Chief of Division of Latin-American, Affairs

Legation of Haiti,
Washington, September 21, 1916.

Sir: I have the honor to transmit herewith two copies of the reply of the Haitian Government to the memorandum of the National Railroad Company of Haiti which you sent to me June 15th last.

Be kind enough to keep one copy for the Department of State and transmit the other to the representative of the company at New

Accept [etc.]

Solon Ménos

[Inclosure—Translation]

[Untitled]

The grievances alleged against the Haitian Government are above all made to order, and the company itself does not attach any but incidental importance to them, for it is only when it finds itself at fault and tries to evade impending or deserved forfeiture that it brings them to light and exerts its ingenuity in dressing them up to a certain extent. But they nevertheless remain hollow as will easily be seen from the following remark:

I. The company alleges that between July and August, 1911, its property and in particular much of its building material was destroyed, damaged or stolen by the revolutionary or even the Government forces at Cape Haitien and thereabouts, at Gonaives and between St. Marc and Port au Prince. There can be no doubt that if at that time it had suffered injury which it did not itself consider trifling it should not have failed to cause verifying statements to be drawn up with or without the proper authorities’ participation and to call for a regular investigation with a view to one of these convenient claims which so often bring wealth at the expense of the Republic of Haiti. Far from taking that course, it promptly put forth, in August, 1911, the delays that had hindered its work on account of the political events that had lasted but one month, and asked for four months’ extention of time which, the Haitian Government promptly granted, “in evidence of its great concern in works that are acknowledged as public utilities”. (Let it be noted that it is the President of that very Government who is charged by the company with having shouted a few weeks earlier “Down with the railroad! Down with the Americans!” Let it also be noted that to serve present circumstances, that last has taken the place of “Down with McDonald” which appears in a letter addressed by the counsel of the company to the Department of Public Works, October 12, 1914.)

What is more, the company had hardly begun building the Cape-Grande Rivière section and there were but a few rails dumped here and there along the right of way. No depot or station in course of construction; not even any ties on which to lay the rails, for it did not import, by special favor of the Haitian Government, fifty thousand ties from the United States until later. So it is difficult to see what makes up these losses which in October, 1914, were set at $66,028.65, and are now said to exceed $200,000.

The company is in error when it says that, during the period from April 15, 1911, to April 1, 1915, there were only eighteen months during which the work of construction could be prosecuted without hindrance. As a matter of fact it is known, firstly, that the revolutionary disturbances of July, 1911, did not last one month, and secondly, that there was no revolution in Haiti in 1912 or 1913.

On the contrary, during the period from April 5, 1911, to April 20, 1912, the company benefited by three extensions amounting altogether to eleven months, without counting the period for the completion of the sections accepted and turned over to traffic.

II. Article XII of the specifications appended to the contract for the railroad from the Cape to Port au Prince exempts from

all customs duties and taxes, except those which have been assigned to another concession, the materials, machinery, tools, and all apparatus and supplies necessary for the establishment, operation, and up-keep of the railroad.

This exception, constituting a privilege, that is, a derogation from common law, ought, like all other exceptional provisions, to be interpreted strictly and not beyond its terms.

It follows that the supplies referred to in said article can only be understood as meaning those without which the railroad could not be established, operated, or kept up, and it is evident that they cannot include the feeding, clothing, and in a word, the maintenance of the agents and employees of the company, any more than the forage for the mules and horses of the company or of its agents and employees.

The truth is that every time the company applied to the Department of Public Works to obtain the exemption provided for in Article XII, everything necessary was always done in order to afford it satisfaction, and that no part of the company’s equipment was subjected to the customs duties. However, when the company wished to abuse its privilege by claiming that the exemption from duties extended to everything it might be pleased to import, it was the duty of the Haitian Government to oppose this. Thus it had to refuse exemption for, victuals, such as ham, sausage, cheese, and other preserved food, which can not be classed as railroad equipment. Any other stand would have been against the interests of the public treasury and would, moreover, have raised righteous protests on the part of merchants importing these articles.

Besides, it must be added that since the company was invited, on June 21, 1912, by the Department of Public Works to amicably draw up a list of the articles which might enjoy customs exemption, there was no further demand for the exemption of victuals, and it was not until October, 1914, that the company, having incurred a forfeiture, deemed it opportune to lay claim in this respect.

On the other hand, as far as tonnage dues are concerned, Article XII cannot be seriously invoked by the company, since it is a question there only of a tax on navigation, these duties not being collected on merchandise, but affecting the body of the vessels engaged in foreign trade. If the company has had to pay at New York, or in some other foreign port, for the transportation of its material to Haiti, sums in which the amount of tonnage dues which the vessel must pay was taken into account, this is not the business of the Haitian Government, which cannot be responsible for the conditions of the tariff of navigation lines.

III. The Haitian Government has always afforded the most ample protection to the company, and every time it complained on just grounds of any occurrence, active steps were taken to give it full satisfaction. It has never failed to remind the military authorities of the importance which it attached to the construction of the railroad and to the necessity of safeguarding the work as well as the laborers. It did not even hesitate to recall one of the most devoted lieutenants of President Leconte, on the mere representations of the vice president of the company. Furthermore, it exempted the company’s workmen and other Haitian employees from military service, asking the company to give them a special uniform or to provide them with an identification card which would make them recognizable by the police or by any other officer of the law.

And then, it is appropriate to observe again that these charges by the company concerning the molestation of its workmen and the breaking of its wire fences are not supported by any verifying documents, affidavit or evidence. They are not any more substantial than its allegation regarding attacks claimed to have been made on its white employees “by the inhabitants of the country and by political speakers”; whereas it is a notorious fact that the construction of the railroad was very well received by all those who hoped to find therein either employment or a convenient means of personal travel or of transportation for their commodities and the goods bought by them, that is to say, by all of the inhabitants of the regions concerned, and that the Haitian Government encouraged and favored it in every way, even in the case of interruption in the telegraph service through the fault of the employees of the company, or in case of obstruction of the public highways, disorders in the workyards, wounding and murders, etc.

IV. In order to form a proper idea of the grievance which the company bases on the delay of the Haitian Government in fulfilling its engagements, it is necessary to take the following into consideration:

The law of August 10, 1905, sanctions the concession to the company of the construction and operation of a line from Les Gonaїves to Hinche. In July, 1906, the first section of twenty kilometers, although not completed and imperfectly equipped, according to the report of the engineers of the Department of Public Works, was accepted, on the promise of the company to perform thereon, within four months, additional work as determined by an agreement of August 1, 1906.

On September 16, 1906, a new concession was sanctioned to the company for a line from the Cape to Port Au Prince. On October 22, 1907, a report of a special commission stated that the Convention of August 1, 1906, had not been carried out by the company and that

the operation of this section of twenty kilometers does not amount to anything serious, inasmuch as the equipment provided by the law or required by the needs of such an industry, in order to render the operation regular, exists only in part.

It is useless to add that the said additional work was never completed. Nevertheless the company obtained in 1910 a contract modifying its first concessions and involving notably an increase in the cost per kilometer of from $15,000 to $20,000, while at the same time, the line of the railroad which, according to the old plan, was to penetrate into the interior of the country toward the high plateaux, crossing a belt of mountains, was increased by over fifty kilometers, in order to permit the construction in flat country of a coast line of 105 kilometers, without any result other than to increase the burdens of the Republic of Haiti. Besides, the $300,000 worth of bonds which had been issued since August, 1906, after the receipt of the first twenty kilometers, were exchanged for $400,000 worth of new bonds, on which the Haitian Nation assumes an interest guarantee of 6 per cent per annum, independently of a

guarantee of the semi-annual payment of one-half per cent, starting with January 1, 1916, on the total amount of the bonds for the creation by this company of a sinking fund for the complete redemption of the said bonds.

On its part the company was to pay, under penalty of the forfeiture of the Cape-Grande Rivière line, the sum of $80,000, to the Nation on account of the old stockholders, four months after the promulgation of the law sanctioning the convention of April 16, 1910. This promulgation having taken place on August 5, 1910, the failure to pay the said sum involved the forfeiture as early as December 5, 1910. However, in March, 1911, the Haitian Government relieved the company of this obligation by granting it an extension of four months, beginning April 5, 1911 (that is, in reality, for eight months), in order to pay this amount and to begin the quarterly payments on the sum of $75,000 likewise fixed by Article VIII of this agreement.

Similarly, the company was to resume, under penalty of forfeiture, the work of construction within two months after the promulgation of the aforesaid sanctioning law, and this forfeiture was incurred by October 5, 1910. However, the Government preferred to shut its eyes.

The company was furthermore under obligation, under penalty of forfeiture, and within the first year and after the said promulgation, to turn over to traffic at least one section and, every twelve months following, an average of five sections. The first section ought, therefore, to have been “entirely completed and equipped” and turned over to traffic by the 5th of August, 1911, at the latest. But this time, too, the Haitian Government came to the rescue of the company by extending the date of forfeiture first to December 5, 1911, afterward to April 5, 1912, and finally to July 5, 1912. And it was not even until September 27, 1912, that the first section—Cape to Grande Rivière—could be accepted and placed in operation, not fully completed and equipped, as prescribed in Article 5, of the contract, but upon the obligation being assumed by the company to execute certain work of completion recognized as immediately necessary, etc., etc.

Then, in January, 1913, the Gonaives-Emery section, which was presented as being completed, gave rise to objections on the part of the engineers charged with passing upon it, for they point out the urgent necessity of certain additional work. The company replied to the Secretary of Public Works that it would comply with certain of his demands

on condition that the Haitian Government immediately and unreservedly accept the section as constructed, that the bonds relating thereto be delivered to it, duly signed, and that the notices be given by the Department of Finance to the National Bank of the Republic of Haiti for the payment of the guaranteed interest.

And the said section was accepted on January 23, 1913.

On March 24, 1913 the sections from Port au Prince to Arcahaie, Arcahaie to Montrouis, and Montrouis to St. Marc were offered but a report of Engineer Doret revealed the fact that these three sections were not completed. It was then that the company, although it had agreed not to resort in any case or for any reason to diplomatic means, appealed to the Department of State, but the high official who came to the spot had no trouble in recognizing the defective and even ridiculous condition of the work and it was through him that an arrangement was reached which enabled the three sections to be accepted on July 19, 1913, and consequently the guarantee to be placed on the bonds relating thereto.

And it is after all these delays and all the leniencies which it has so often enjoyed that the company (in which are interested the National City Bank of New York, the National City Company of New York, W. H. Grace & Company, of New York, etc., etc.) reproaches the Haitian Government with not having viséed the bonds promptly enough, and with having thereby placed it in such a position that its credit has been seriously affected:

It moreover tries to confuse dates in order to convey the idea that it was on August 1, 1913, that an interest coupon of the bonds already issued and guaranteed was not paid and that

this failure, together with the failure to deliver the other two million dollars’ worth of bonds, caused such injury to the Company’s credit that the latter has not been able to make the necessary financial arrangements to enable it to continue the construction, for which reason the work was suspended on September 1, 1913.

The truth is that the bonds in question were delivered to it in August, 1913, while the interest coupon referred to was supposed to be due August 1, 1914, and that consequently an obviously false assertion cannot explain the suspension of the work. It is furthermore true that the company was under obligation to deliver, on September 27, 1914, at the “latest, five new sections, and that the payment of $104,999.54 of interest on August 1, 1914, to third parties holding the bonds would not have enabled it, with or without credit, to construct and turn over to traffic one hundred kilometers of railroad in less than eight weeks. The incontestable fact is that, recognizing its inability to perform the obligations devolving upon it and particularly Article II of the contract of April 16, 1910, and being no longer able to avoid the forfeiture from which the benevolence of the Haitian Government had until then so frequently saved it, it wished to “put up a bluff” by taking the start and declaring the construction and operation of the railroad stopped, although it could really not have believed itself warranted in going to such an extreme by any clause of the contract or any provision of the law.

V. The obligation of the Haitian Government with respect to the interest to be paid to the bondholders of the company is not a direct and principal obligation, but guaranteeing obligation and consequently an accessory and subsidiary obligation, and this is why Article III of the concession contract provides, in case of insufficiency of the receipts, to pay all the interest, that the Nation shall pay only such proportion as may be necessary to make up the difference.

It goes without saying that, in conformity with Article V, of the contract of September 12, 1906, the deficits will be settled during the course of the following fiscal (budgetary) year. Only in case of need are they to be settled every six months, instead of being settled by twelfths. If the text invoked by the company says that the balance due from the Nation is to be paid every six months, this is a manifest proof that this balance is not to be paid immediately.

VI. The company, in a note reproduced by a letter of the Secretary of State under date of September 13, 1916, seeks once more to convey a wrong impression by recalling the fact that a period of four years and three months elapsed between April 15, 1911, and the date of the intervention of the United States in Haiti (July, 1915). There is no objection to be made against this mathematical demonstration, but that is not the question. What we must remember from its statement is that, having begun the work of construction on the railroad April 15, 1911, it stopped the same in September, 1913, by reason of continual revolutionary disturbances. It is nevertheless an incontestable fact that during that period of time—two years and five months—the only revolutionary upheavals were from July to August, 1911 (less than four weeks), and that the company obtained in compensation a period extension of four months and the permission to import 50,000 ties, contrary to the formal provision of Art. VI of the specifications.

Consequently, the pretext invoked by the company is purely imaginary. It is inadmissible, on the other hand, that it should have decided to stop the work in anticipation of what might happen in 1914 and 1915.

Furthermore, even if it had been confronted by uncontrollable accidents or the nonfulfillment of an obligation on the part of the Haitian Government, it would not have been warranted either in abstaining from notifying the Department of Public Works, within the sixty days fixed by Article VII of the contract of 1910, of the exceptional circumstances apt to justify a further period extension, or in deciding on its own authority to relieve itself of all its engagements.

To sum up, the company has permanently forfeited its rights. The procedure consequent upon forfeiture was rightly prosecuted against it and may be resumed any day, in the absence of the bases of an understanding which the company had promised to present within a stipulated period.