The Secretary of State to the Chargé in Haiti ( Jordan )
Sir: In confirmation of the Department’s telegram No. 6, January 23, 1922, 6 p.m.,18 you are instructed to hand to Mr. A. J. Maumus, the General Receiver of Customs,19 a copy of this instruction, for his guidance, as follows:
The instructions originally given to the General Receiver of Customs to set aside, commencing with the month of October, 1920, $175,000 monthly out of the customs receipts for the service of the debts recognized in the Protocol of October 3, 1919, as valid, contemplated:
- The service of the external loans.
- Setting aside a sufficient amount to meet the annual interest of $103,989.29 on the note to the Banque Nationale.
- Payment of the interest guaranty amounting to $41,280 annually on a portion of the capital stock of the P[laine du] C[ul-de-] S[ac] railroad.
- Setting aside a sufficient amount to meet the interest guaranty amounting to $212,674.90 annually on the National Railroad Company bonds.
- The use of the difference between the amounts so paid or set aside and the monthly segregation of $175,000 to pay the arrears of interest guaranty due to the P. C. S. railroad, and to establish a fund with which to pay the arrears of interest and the principal of the note to the Banque Nationale and the arrears of interest guaranty on the National Railroad bonds.
Almost immediately thereafter the world economic crisis came, and in order that the necessary current expenses of the Haitian Government might be paid authority was given to use that part of the $175,000 monthly segregation in excess of that necessary to cover items (a), (b), and (c) to meet the deficits in amounts available for Haitian Government current expenses, with the understanding, however, that the amounts so used were to be considered as an advance [Page 479] and were to be reimbursed at any time in the future when the amount available for Haitian Government current expenses should exceed the amount required for that purpose.
During the year ended September 30, 1921, items (a), (b), and (c) were served from the monthly segregation of $175,000 and the arrears of interest guaranty due to the P. C. S. railroad were paid; amounts were advanced from the monthly segregation for interest and amortization to meet the monthly deficits in amounts available for Haitian Government expenses; and there is now available of the total segregation for interest and amortization for the fiscal year ended September 30, 1921, approximately $250,000.
Of the amount so available for the preceding fiscal year the Department desires that the General Receiver pay at once the arrears of interest on the note to the Banque Nationale, amounting it is believed to $103,989.29. It is further desired by the Department that the remainder of the interest and amortization fund for the fiscal year 1920–1921 be transferred to the credit of the General Receiver in New York and remain there at interest as a special deposit for interest and amortization, to be applied ultimately to payment of the principal of the note to the Banque Nationale, or of the arrears of interest guaranty on the National Railroad bonds, or both.
With respect to the use of this $175,000 monthly segregation for the current year, the Department desires that the General Receiver apply it in accordance with Article V of the Treaty as follows, beginning with the month of January, 1922:
- The service of the external loans, the maturities of which during the calendar year 1922 will require Frs. 6,964,786.04 for interest and amortization and contractual commissions.
- Setting aside at the rate of $103,989.29 per annum a sufficient amount to meet at the end of the year or when paid, the interest on the note to the Banque Nationale.
- Payment of the interest guaranty due to the P. C. S. railroad, amounting to $41,280 per annum, as and when authorized by the Haitian Government.
- Setting aside and transferring monthly to New York the sum of $20,676.73 to the credit of the special deposit account for interest and amortization above mentioned, this being the amount necessary to meet the annual interest guaranty ($212,674.90) and also the sinking fund requirements ($35,445.81) on the National Railroad bonds.
- The service of the Compagnie Haitienne de Construction short-term notes in accordance with the terms of the notes, requiring $84,000 per annum.
- Setting aside monthly a sufficient amount to pay the interest only on the funded internal loans of 1912, 1913, 1914 A, B, and C and the Bons Fouchard. As amortization is not to be paid on these debts for the present, semiannual [Page 480] interest on these debts should be fixed by the General Receiver in such a way that maturities will be distributed throughout the year, and payment of interest should be made on the dates so fixed. This will require a total annual amount of $147,168.54. As the service of interest on all the loans is to be resumed, without regard to the product of the revenues pledged to the service of each loan, the sums now in the Banque Nationale available for the service of the internal loans will be combined and devoted to the payment of the first maturity so fixed.
- Any balance remaining after the amounts required for the above
purposes have been set aside or paid may be used as follows:
- To meet deficits in the amounts available for Haitian Government current expenses, if there is a deficit, the amount so used to be treated as an advance subject to future reimbursement, as before.
- If there is no deficit or the deficit requires the use of only a part of the balance, the balance remaining to be applied as reimbursement of the amount advanced from the interest and amortization fund during the fiscal year 1920–1921 and during the first three months of the present fiscal year, and to be transferred to the credit of the General Receiver’s special deposit for interest and amortization in New York, mentioned above, and reserved for the purposes above indicated.
- After the amounts advanced from this fund have been fully reimbursed, the General Receiver will use any remaining balances in his discretion, applying them equitably to amortization of the various debts (including arrears of interest and amortization on the internal funded debts), in consultation with the Financial Adviser.
In no circumstances will any part of the fund transferred to New York to the credit of the special deposit account for interest and amortization above mentioned be considered as available, after such transfer, to meet deficits in the amounts available for current expenses of the Haitian Government; and steps should be taken in cooperation with the Financial Adviser to apply the amounts to the credit of this special deposit account for interest and amortization to amortization of the note to the Banque Nationale, if partial amortization is acceptable to it, until the balance due on said note is reduced to $1,100,000, and to payment of the arrears of interest guaranty on the National Railroad bonds. With regard to the latter efforts should be made by the General Receiver to reach an agreement with the receiver of the railroad and through him with the bondholders to the end that such bondholders will agree, as a condition of the definite and permanent resumption of the service of the interest on the bonds, to accept payment of interest in francs and not [Page 481] exercise their right to elect to receive payment in dollars. As soon as such arrangements are completed, or immediately if the Banque Nationale does not object, the amount now in the Banque Nationale available for this interest guaranty, which is understood to be $8,126.04, should be added to this special deposit account for interest and amortization and reserved for the ultimate service of the arrears of interest on these bonds. So long as the present depreciation in the franc continues, this will permit the payment of coupons in arrears every two or three months, and possibly more rapid extinguishment of the arrears if improvement in Haitian revenues continues. If after negotiations it is found impossible to reach an agreement with the receiver and the bondholders on this basis it will presumably be necessary to resume service on the basis of payment in dollars in New York. The General Receiver should, however, arrange with the receiver to have carefully checked all cases where the bondholders accept payments in France in depreciated currency, with a view to having the receiver of the railroad account to the Haitian Government for any portion of the guaranty saved by reason of such payments by the railroad in depreciated French currency. Until the arrears of interest have been fully paid, it would not be proper to utilize the portion of the fund available for sinking fund purposes in purchases of the bonds, but when payment of the arrears of interest shall have been completed, an arrangement can no doubt be made with the receiver of the railroad whereby under proper safeguards to protect the interests of the Haitian Government the amount which may have accumulated for sinking fund purposes may be used in purchases of the bonds in Paris and in francs. If arrangements along the above lines can be made with the receiver of the railroad, it may be advisable for the receiver of the railroad to transfer a part of the special deposit account for interest and amortization of the National Railroad bonds to Paris and convert the accruals to the interest and sinking fund on these bonds into francs monthly.
It is understood that the General Receiver has on deposit in New York to the credit of his current account a sum of approximately $150,000. Under the appropriation acts of the past fiscal year, whereby the balances of prior years were made available to meet current expenses, this portion of the General Receiver’s current account was available for that purpose. Instead of using it for that purpose, however, on the occurrence of deficits in the amounts available for Haitian Government current expenses, amounts were advanced to meet those deficits from the fund for interest and amortization maintained in Haiti. The Department recognizes that it is necessary for the General Receiver to maintain a certain fund in New York with which to meet current expenses incurred in the [Page 482] United States, and while not desiring to have this practice changed believes that it should be distinctly understood that any part of this fund not needed for the purpose for which it was established should be devoted to reimbursing the interest and amortization fund for the amounts advanced from it to meet deficits in the amounts available for current expenses of the Haitian Government during the past year. In other words, so long as the advances which have been made shall not have been reimbursed, the funds to the credit of the General Receiver in New York in excess of the amounts needed to meet current expenses incurred in the United States should be regarded as obligated for the advances which have been made from the interest and amortization fund. If, in the opinion of the General Receiver, the amount now on deposit to the credit of his current account in New York is in excess of that required for the purposes for which the fund was created, the excess may be formally transferred to the special deposit for interest and amortization in New York as a partial reimbursement of the amounts advanced from the fund for interest and amortization during the past fiscal year. This will obviate any pressure for the use of such excess to meet possible future deficits in amounts available for Haitian Government current expenses.
It is desired that henceforth the General Receiver of Customs shall proceed in the full exercise of his authority and responsibility under Article V of the Treaty in the allocation of the Haitian customs revenues, and all previous instructions waiving the allocation therein provided and based upon the inadequacy of receipts to meet current expenses are revoked except so far as concerns the use of the balance remaining after service of the debts to the extent outlined above. It is the Department’s intention that henceforth the Receiver General’s minimum obligation under Article V of the Treaty as above outlined relating to the service of the recognized portion of the public debt shall not be reduced, and the Treaty observed at all costs. Should the amount remaining after the service of the debts as above outlined be insufficient at any time to meet the remainder of the budget for Haitian Government current expenses, the matter should be brought to the attention of the Haitian Government, and of the Financial Adviser, in order that appropriate steps may be taken, at once to increase the revenues to meet the deficit and prevent a new increase in the floating debt.
The Bureau of Insular Affairs has been furnished with a copy of this instruction.
I am [etc.]