The Secretary of State to the Chargé in Haiti ( Jordan )
57. Refer Department’s 96, November 1, 7 p.m.; 104 November 16, 6 p.m.; 108, November 29, 7 p.m.; and 117, December 23, 3 p.m.; and Legation’s 90, November 13, noon; 95, November 23, noon; 100, December 7, 3 p.m.; 104, December 14, 3 p.m.; 1, January 8, 9 a.m.; and despatches 428, November 17, and 429, November 24, regarding Haitian loan.31
You are instructed to confer with Acting Financial Adviser regarding above correspondence and regarding note hereinbelow set forth, and to request of the Minister of Foreign Affairs an audience of the President at the earliest opportunity in order that you may hand him, in company with Mr. Maumus, the following note:
“During the time which has elapsed since the receipt by the Department of State of the memorandum of the Haitian Government dated November 12, 1920,32 in which the Government of Haiti advised the Government of the United States of the conditions under which it was willing to authorize the flotation of a loan for the Haitian Government in the United States, the Government of the United States, in spite of the obstacles interposed, has not been unmindful of its treaty obligation to assist the Haitian Government in the realization of this desire, and has continued its efforts to interest American bankers in a loan for Haiti. Due to the active assistance of the Department, the Financial Adviser is now able to report two tentative loan offers, one from a group represented by the National City Company of New York and the other from a syndicate composed of Speyer and Company and Blair and Company. The offers are hereinafter summarized. Before passing to a consideration of the offers referred to, the Department of State desires to make clear to the Haitian Government that in his conferences with [Page 215] American bankers, the Financial Adviser has adhered to the terms of issue authorized by the Haitian Government last fall and approved by the Department at that time in principle. However, due to the rise in the rate of exchange for francs, the continued accumulation of arrearages on the railroad interest guarantee and the arrearages in the debt service of the Haitian internal loans, which can no longer be paid out of any surplus revenues, the items upon which the proceeds of the loan were to be applied have increased as follows: Foreign debt from [$]6,250,984 to approximately [$]6,668,980; National Railroad bonds interest guarantee from [$]1,417,500 to [$]1,621,500; arrearages on service of internal bonds, which will now have to be paid out of proceeds of loan [$]1,000,000; a total of [$]1,621,996, less [$]35,000 paid to P. C. S. Railroad out of current income. The sum of [$]12,036,996 is therefore now indispensible to carry out the Haitian Government’s previous schedule. A loan of [$]14,000,000 at 95 would net $13,300,000, leaving the balance remaining, after carrying out the schedule authorized by the Haitian Government, to be applied to the payment of the awards of the Claims Commission, including the payment of all remaining debts to which income is now pledged and urgent public works, which will provide for that object, the additional sum of [$]1,263,004.
The bankers were therefore approached on the assumption that a loan for $14,000,000 would now be necessary to cover the items included in the schedule outlined in the Haitian Government’s memorandum of November 12, 1920. The sum of [$]2,059,721 for awards of the Claims Commission, including the freeing of the national income from all remaining affectations and for public works is not excessive, (1) because of the uncertainty as to the amount of such awards; (2) the wide fluctuations in French exchange; and (3) the impetus that will be given to commerce by the spending of even the small sum that will at best be left for public works. Moreover, neither loan proposal so far made offers as much as 95 net to the Haitian Government, or even 94 net. Further fluctuations in exchange alone could very largely reduce the suggested increased margin.
A summary of the tentative offers of the National City Company group and of the Speyer-Blair syndicate, respectively, is as follows: National City, maturity, 10 years; price, 92; yield at price of sale, 8.15 per cent; collateral in 30-year 6 per cent bonds, [$]21,000,000; sinking fund payments, [$]250,000 semi-annually; use of sinking fund, purchase in open market at not exceeding 10½ and interest; redemption, no right of prior redemption; conversion into 6 per cent bonds, no provisions; costs of issue, no provisions; Speyer-Blair syndicate, maturity, 10 years, price 94; yield at price of sale, 7.98 per cent; collateral in 30-year 6 per cent bonds, [$]17,500,000; sinking fund payments, [$]291,666.67 semi-annually; use of sinking fund, purchase in open market at not exceeding 105; redemption, redeemable after 5 years at 105 and interest in amounts not less than $1,000,000 to be drawn by lot; conversion into 6 per cent bonds, any time before maturity, at option of holder at 92½; costs of issue, to be paid by Haiti except counsel fees; both groups insist that in order to protect the market for the notes in New York the internal bonds shall be payable in Haitian gourdes at the ratio of 5 to 1. In the [Page 216] opinion of the Department the Speyer-Blair offer is the more favorable of the two.
All legislative acts necessary for the full validity of the note issue and to give effect to the terms of the Protocol governing the collateral 6 per cent bonds naturally are required by both groups of bankers. When authorized negotiations are undertaken there is reason to believe that the debt service can be modified so that the annual charges for amortization and interest will not exceed $1,271,356, making, with the service of the [$]5,000,000 internal bonds, a total annual funded debt service of $1,634,602.
With reference to the points raised in the note of the Haitian Government of September 7, 1921, to the Legation,34 regarding the necessity for a modification of the Protocol of October 3, 1919, in case a less amount than $40,000,000 is issued in bonds, the Department is of the opinion, after giving the matter careful consideration, that should it be determined that the loan ought to be for less than $40,000,000, Haiti would still be obligated under the Protocol.
The Department feels certain that the Haitian Government is still of the opinion that a loan is a necessity for the welfare of Haiti for the following reasons: (1) In order that the saving of nearly two-thirds in the amount of the outstanding foreign debt of Haiti can be realized; fortunately this is still possible because of the exchange situation; (2) The improvement that will immediately occur in the economic situation of Haiti by reason of the early payment of about a million dollars of arrearages in the debt service of the internal loans of Haiti; (3) The participation of the Government in the affairs of the National Railway of Haiti that will be secured by the payment of the large sum due as arrearages of interest guaranteed on the railway bonds; (4) The present very favorable situation of the bond market in New York, that may of course not soon again present itself; finally, but most important of all for the welfare of Haiti, the opportunity the loan will present to remove at an early date all export taxes on the products of the soil of Haiti.
It is, therefore, earnestly hoped and urgently recommended by the Government of the United States that, after due consideration has been given to the above tentative loan offers, concerning which further explanations will be given if requested, the Haitian Government will cause no further delay to occur in transmitting to the Financial Adviser of Haiti, now in Washington, the necessary full powers in order that he may initiate formal negotiations with one of the groups above-mentioned for whose offer the Haitian Government may express a preference. The Haitian Government is again assured that the Financial Adviser will continue to be given all the counsel and assistance that it is possible for the American Government to give. The Department hopes that the objections heretofore expressed by the Haitian Government to Mr. McIlhenny as the negotiator of the loan will have been removed by now, but in any event it is constrained to draw the attention of the Haitian Government to the fact that the Financial Adviser is the person obviously contemplated [Page 217] in the Protocol to conduct loan negotiations under the direction of the Minister of Finance and with the assistance of the American Government. As long as he continues to be an official holding office by virtue of the Treaty between the United States and Haiti, and until or unless he should be removed for cause, the American Government cannot countenance a disregard of his official standing such as would be involved in the designation of any other person to represent the Haitian Government in the matter of the loan.
In conclusion the Department of State desires to emphasize and repeat its assurance of continued interest in the welfare of Haiti and to express confidence that the Government of Haiti will acquiesce in its considered judgment and recommendations as above expressed.”
Report by telegram when you have delivered note.
- Legation’s telegrams nos. 1 and 104 and despatches nos. 428 and 429 not printed; Department’s telegram no. 117 not printed; for the other communications mentioned, see Foreign Relations, 1920, vol. ii, pp. 847–852.↩
- Not printed; for substance, see the Legation’s telegram no. 90, Nov. 13, 1920, noon, ibid., p. 848.↩
- Summarized in the Legation’s despatch of Sept. 8, p. 229.↩