The Secretary of State to the High Commissioner in Haiti ( Russell )

No. 6

Sir: With reference to the Department’s telegrams of November 1, 1920, 7 p.m.,33 and March 21, 1922, 6 p.m.,34 regarding the bonds of the internal funded debt of Haiti, the Department has deemed it advisable to inform you of its opinion regarding the maintenance of the service, and the possible refunding of the internal bond issues by the Haitian Government.

On November 1, 1920, the Department instructed the American Legation to inform the President that it had determined, after consultation with the Financial Adviser, and in accordance with his advice, that the internal funded debts of Haiti, as represented in the bond issues of 1912, 1913, and 1914, A, B, and C, do not come within the provisions of the Protocol as “pecuniary claims”, but are liquidated debts, and may, therefore, be paid or served without submission to the Claims Commission. The Department adopted this determination out of consideration for the wishes of the Haitian Government, and upon the understanding that the Haitian Government desired to effect a readjustment of these bond issues by direct negotiations with the holders, or by other means. The Department was subsequently informed that the Haitian Government had elaborated a plan for the readjustment of these internal debts on the basis of the actual rate of exchange at the period of flotation.

The Department feels that the holders of these bonds might very properly be offered the payment of the principal and interest upon the basis suggested by the Minister of Finance, converting the dollar into gourdes at the rate prevailing when the bonds were issued, [Page 494] rather than at the fictitious rate provided for in the bonds. The original holders, it appears, either bought these bonds at a very large discount from their face value, or acquired them in other ways without making any substantial payment to the Haitian Government. Many of them are now understood to be in the hands of speculators who have purchased them at low prices.

It was these conditions which led the Department to send its cable of March 21, 1922, instructing you to authorize the General Receiver to say to the Minister of Finance that if it would aid him in the negotiations for a readjustment he might assure the holders of the internal bonds that three years arrears of interest on the new basis would be paid when the proposals for readjustment were accepted, and that the extinguishment of the remaining arrears of interest would be hastened by the payment of six months interest on the new basis every three months thereafter. It was further stated that the Department would approve a conversion of the internal loans at the new par into an internal series secured by a lien on all of the revenues after the new loan was floated.

The Department feels that it could not, without further careful consideration, agree to the complete resumption of interest and sinking fund payments on the internal bonds at their present face value. The offer to make rapid payment of the arrears of interest, and to convert the internal bonds into the new series of internal bonds, secured by the revenues collected by the General Receiver, was made upon the assumption that the Haitian Government itself would effect a suitable adjustment with the holders of the internal bonds. It is still hoped that such an adjustment will be possible in spite of the failure of the Minister of Finance, as reported in your telegram of April 22, 11 a.m.,36 to come to an agreement with the bondholders of the internal debt.

You are requested to discuss this matter with the appropriate Haitian authorities and with the Acting Financial Adviser, and to give the Department an expression of your views.

I am [etc.]

Charles E. Hughes