Papers Relating to the Foreign Relations of the United States, 1920, Volume II

838.044/5

The Financial Adviser to the Government of Haiti (McIlhenny) to the Chief of the Division of Latin American Affairs, Department of State (Rowe)

Port au Prince, July 21, 1920.
[Received September 21.]

My Dear Doctor Rowe: I have not heretofore reported to you as to conditions in Haiti for the simple reason that up to ten days ago matters seemed to be in a process of favorable settlement. Immediately upon my coming to Haiti I called upon the President and reported to him the ill success of my mission to the United States, and laid before him the several matters which were decided while I was still in Washington were necessary to have established either by law or by arrêté. I found the President in apparently an entirely responsive mood. I explained the land law to him and he said that he was fully in accord with the purposes of the law, but raised a technical objection to one of the clauses which had no sound basis and was raised solely because of the control granted by the law to the Financial Adviser. However, he promised to draft a modification of the clause which would meet with his views and transmit it to me, and said that as soon as we were in accord on that one clause he would place the matter before the Council of State and it would be passed as submitted. I then took up with him the question of the issuance of an arrêté placing in operation section 15 of the contract of the retrait.⁶ He told me that he had given the matter careful consideration and that he and his ministers were opposed to putting the clause into operation as they did not consider it justified by the present economic needs of the country. I explained to him that it was an obligation entered into by the government and was dependent for its wise administration upon the judgment of the Financial Adviser, and that it was hardly to be expected that the authority granted to the Financial Adviser would be used to the detriment of the country. I then went on to explain to him the purposes of the provision, and at the end of my explanation he said that he had never understood the matter before and that he was fully in accord with me, but he said the restriction upon the importation of non-Haitian monies and the maintenance of the gourde as the national money of Haiti should not be left to an arrêté, with only the short life of the remainder of the period of the retrait to run, but should be established by law, and asked me if I would be willing to draft a law for him for that purpose. I told him that I would if it were clearly understood that section 15 of the retrait would be incorporated in the proposed law without change or modification. He said that that was understood and agreed to. I asked him if he would then press the law through the Council of State, and he replied that while he entirely approved since my explanation of section 15 of the retrait he could not oblige himself to the remaining sections of the law until he had seen the law, but he stated again that he fully approved of the spirit and purpose of the proposed law as stated by me. I took up then with him the question of the modifications of the bank charter and the transfer of the National Bank of Haiti to a new corporation to be called the National Bank of Haiti but incorporated under the Haitian laws.⁷ He stated in a very emphatic way that all of the delay since Mr. Farnham’s⁸ absence was due to the dilatory tactics of the banks which in spite of repeated requests had failed to appear before the Haitian Government with the proper credentials, that the modifications of the charter would be approved without further question, and that the transfer of the bank would be consummated immediately upon the appearance before the government with the proper papers of the accredited representatives of the banks. I left him then with further assurance that the program that we had decided upon would go through with the least possible delay, and centered my efforts on seeing that the bank appeared properly before the government and on the drafting of the law concerning section 15 of the retrait. As soon as the law was drafted I presented it to the President and he accepted it and told me he would study it and let me know his views later. I [A] few days later I received a memorandum from the Minister of Finance, who said that the law had been handed to him by the Council of Ministers with the request that he give an opinion upon it for their consideration, that the opinion which he handed to me in the form of a memoire had been submitted to the Council of Ministers and had met with their approval, and he therefore handed it to me as the final judgment of the government. In this memoire he makes the final and definite statement that section 15 of the retrait is not approved, and also finally and definitely states that the government does not approve of the maintenance of the gourde as the legal tender money of the republic. A few days later I went to see him with the Receiver General of Customs and told him that while the putting into operation of section 15 of the contract of the retrait was not a question on which I felt I could enter into a debate with him as the Government of the United States was of the definite opinion that it must be put in operation, still I desired to explain to him the reasons for putting the section into operation and for maintaining the gourde as the legal tender money of the republic. At the end of my interview he asked me to place my statements in writing so that he might get them before the Council of Ministers, and this was done by me shortly after. A few days later the bank people having presented their credentials in proper form before the government he notified them that a committee of ministers composed of himself, Mr. Roy, the Minister of Public Works, and Mr. Bellegarde, the Minister of Public Instruction, had been appointed to consult with the bank as to the provisions of the laws authorizing the transfer of the bank and the modifications of the charter and requested them to meet the committee at his house. At the meeting certain modifications of language in the law of transfer were suggested by the committee of ministers to the bank people and accepted by the banks’ representatives. When they came, however, in the law of transfer to the articles establishing the modifications of the charter, and reached article 10 which reads—

“After the expiration of the period set by the currency reform agreement for the retirement of the government paper money, the government will adopt such regulations affecting the importation of foreign currency as may appear necessary to safeguard the currency system of the Republic of Haiti. The Financial Advisor will consult with the Bank upon such measures as may be deemed necessary.”

they asked why this article had been placed in the law and were told by the bank people that it was a part of the modifications agreed to by the United States Government and the National City Bank at the conference in Washington, and for that reason had been included in the law. He thereupon told the bank people that his government would never agree to such an article and that before going any further in the matter of the transfer of the bank it must be eliminated from the papers. The bank people stated that they were without authority to eliminate it and would have to refer the matter to New York. Pending such reference they asked that the papers and all matters with the exception of that objectionable clause be passed upon to avoid unnecessary delay. They were notified by Mr. Féquière that he declined to accept or consider any papers as long as that clause was included in them and that the interview was thereby closed.

The next day the Minister of the United States went to call upon the President and was informed by the President that in his interview with me at the time I laid before him the different measures named above and requested that they be immediately acted upon, he had spoken in a private and unofficial capacity and that he now found his government was strongly opposed to the enactment of section 15 of the retrait and one of the modifications of the bank charter, and that he could not and would not approve it. Immediately upon returning from his interview with the President the Minister sent for me and informed me of the changed attitude of the government, and after giving the matter careful consideration I wrote to the Minister of Finance informing him that the further discussions of the budget, then three-fourths completed, would be suspended until such time as affairs of great importance to the welfare of the republic have been finally settled in accordance with the recommendations made by me to the Haitian Government. As I expected, the government has taken violent exception to my action and in a formal letter has stated that I must assume all the responsibility for the delay in the enactment of the budget. On July 14th I went to see the President with American Minister and Colonel Russell,⁹ to explain to him the reasons which had governed me in taking the action and to again insist that the measures proposed by me and agreed to by him on my first coming to Haiti be put through without further delay. He stated that he could not possibly carry in his memory all of my statements and requested that I make my statement in writing, which I have done and it has been handed to him by the American Minister.

I am sorry to say that I find the government at this time definitely and strongly anti-American, and am of the opinion that the cabinet must be reorganized and the government made to understand that it must cooperate with the Occupation both in the administration of the government and in the enactment of such laws as are necessary to assure the welfare and prosperity of the country. I enclose you herewith a draft of the project of law which I prepared at the request of the President;¹⁰ the clauses relative to the prohibition of the hoarding of gourdes and the speculation in gourdes were lifted almost verbatim from a law proposed by Minister Féquière, which included a clause establishing the American dollar as the legal tender money for the country and which has been rejected both by the American Minister and myself. While I was still in Washington I was advised that Mr. Féquière, the Minister of Finance, had since his return from America gotten very fully under the influence of the Royal Bank of Canada. Since I have been here I have gotten closely in touch with the general situation and I am satisfied that the information I received while in Washington is true. The Royal Bank of Canada has taken as its legal adviser Louis Borno, who was Minister of Finance just prior to Féquière and who was removed from the cabinet because of his aggressively anti-American acts. There is no doubt that the Royal Bank of Canada proposed to buy the French stock in the Banque Rationale de la République d’Haiti if it could by any means prevent the purchase of that stock by the National City Bank. With that end in view Borno, acting on [with] Féquière and Bellegarde, the latter a close personal friend of Borno, has persuaded the government to use every imaginable method to delay and prevent the purchase of the stock by the National City Bank and the same influence is now seeking to take from the Bank the value of its concession, which gives it the sole right of emission of paper money, by declaring that the gourde is not the legal money of the state and that the American dollar is. They ignore the fact that the gourde has been established by repeated laws as the legal tender money of the country from the time it gained its independence, and that in the contract of the retrait which was enacted into law the definitive bills of the bank have again been declared as the legal tender money of the republic, and they are determined to set aside the contract of the bank in two of its most important features. … You will recall that section 15 of the retrait, which reads as follows—

“To avoid the possibility of any currency crises during the period of the retirement of government paper money, as soon as [and as long as] such retirement shall be in process the government obligates itself to prohibit the importation and exportation of non-Haitian currency except such as may be necessary to meet the requirements of commerce in the judgment of the Financial Adviser.”

does not absolutely prohibit the importation or exportation of non-Haitian money, but does restrain the amount to be imported or exported to the commercial requirements of the country in the judgment of the Financial Adviser. Therefore the provision is not formulated in favor of or against any bank, but as a safeguard to the country. The contention of the Royal Bank of Canada to the British Chargé d’Affaires that it is to the detriment of that bank and places it and all other banks in Haiti absolutely under the control of the National Bank of Haiti is without any foundation in fact. The only other bank in Haiti, the American Foreign Banking Corporation, has no objection whatsoever to the enactment of the law, and believes absolutely that the gourde should be maintained as the legal tender money of Haiti and that the importation of foreign monies should be restricted to the actual commercial needs of the country.

. . . . . . . . . . . . . .

I have [etc.]

John A. McIlhenny

6. For papers concerning the execution of the contract, See pp. 826 ff.
7. For papers relating to this subject, See pp. 816 ff.
8. R. L. Farnham, Vice President of the Banque Nationale de la République d’Haiti and of the National City Bank of New York.
9. Col. John H. Russell, U.S.M.C., commanding the United States military forces in Haiti.
10. Not printed.