838.51/951
The Secretary of State to the Minister in Haiti (Bailly-Blanchard)
Sir: Referring to the Department’s telegram of August 21, 5 p.m., for Mr. McIlhenny and to your telegrams in reply of August 27, 5 p.m., and August 28, 9 a.m.,82 transmitting his answer, in regard to [Page 840] applying a portion of the surplus revenues in the hands of the General Receiver to the arrears of interest and amortization of the foreign debt of Haiti, the Department informs you that it has given the question of the debt service careful study and has come to certain definite conclusions.
In the first place the Department believes that in view of the favorable turn taken by Haitian customs revenues since October, 1918, the current interest and amortization of the public debt of Haiti should be given priority from now on over the current needs of the Gendarmerie and the expenses of the Haitian Government, as plainly contemplated by Article V. of the Treaty. But in order to avoid the necessity of making the segregations called for by the “affectations”, it is suggested that in lieu thereof a fixed sum be segregated by the General Receiver monthly from the customs revenues collected by him sufficient to provide for the payment when due of all the interest and sinking fund requirements of that part of the public debt recognized as valid in the Protocol of October 1919, namely Items 1—2—3 and 4 of Article III. Judging by the monthly reports of the General Receiver for the five months from October 1919 to March 1920,84 the latest ones available to the Department, showing an average surplus of $300,000, it would seem that $200,000 monthly would not be an excessive fixed sum to segregate and apply. On the other hand this sum would appear to be amply sufficient to meet all the requirements of the admitted portion of the public debt. However, the Department wishes to have Mr. McIlhenny’s views as to the propriety of this sum.
The Department wishes the plan of the monthly segregations to be in the nature of a permanent arrangement, not to be varied because of a possible temporary decrease in the revenues. For example, if the surplus remaining after the segregation has been made for any month is insufficient to meet the current needs of the Government for that month this should not lead to a reduction in the segregation for the next month, but rather to immediate steps being taken to provide new revenues. In this connection it is suggested that at the first favorable opportunity the project of the Financial Adviser for increasing the internal revenues and improving their collection be again urged upon the Haitian Government.
It has occurred to the Department that in view of the clear language of Article V., providing that all applications of customs revenues to interest and amortization of the Public Debt of Haiti are to be made by the General Receiver, the Financial Adviser will undoubtedly wish ultimately at least to have the item of $3,000,000, now showing on the General Receiver’s accounts as having been [Page 841] paid to him, shown as having been expended by the General Receiver on interest and amortization. The same consideration will undoubtedly occur to Mr. McIlhenny with reference to the $2,250,000 now proposed to be expended by him for interest and amortization. In fact if, when this instruction is received by you, the authorization requested of the Haitian Government, referred to in your telegram of August 27, 5 p.m., has not yet been granted, Mr. McIlhenny may find it desirable to withdraw it and to have the General Receiver expend the sum mentioned in the manner provided and under the powers conferred, by Article V. already referred to, with the advice and assistance of the Financial Adviser. In the matter of the application of the money on arrears of amortization it is recommended that, after it has been converted into francs, the terms and provisions of the several foreign loans be strictly followed.
After the foregoing plan has been put into operation the Department believes that Haitian public credit will have improved so considerably that a loan on favorable terms for Haiti will be much easier to obtain in case the Financial Adviser should still consider a refunding loan desirable or necessary. The Department is now endeavoring, in accordance with Mr. McIlhenny’s wishes, to obtain the nomination by the French and British Embassies, of a temporary French, and a temporary British, member for the Claims Commission.85 It is in entire accord with his suggestion that the early functioning of the Claims Commission is highly desirable.
You will communicate the foregoing to Mr. McIlhenny immediately and consult with him freely in reference thereto, transmitting for him as usual any observations or suggestions he may desire to submit to the Department.
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