The Minister in Haiti (Munro) to the Secretary of State
[Received June 9.]
Sir: Since the delivery of the Department’s reply to the Haitian Government’s proposal for a reorganization of the system of financial control, the Minister of Foreign Affairs has repeatedly indicated a desire to continue the negotiations on this subject and to receive a counterproposal from this Legation. I have pointed out to him that the United States Government, in the proposal for a new financial convention which I outlined to Mr. Sannon last spring, has already indicated what it would consider desirable in the new agreement. M. Leger has replied, however, that this agreement, involving as it would a continuation of practically all features of the present control, would be absolutely unacceptable to the Haitian Government and could never receive the approval of the Haitian Congress. He has insisted that neither the Protocol nor the loan contracts give the Government of the United States any right to demand such complete control as that envisaged in the plan presented by the Legation and he has emphasized the unfairness of continuing so far-reaching an intervention in the Haitian Government’s internal affairs simply to assure the payment of the small amount of bonds which will remain outstanding after 1936.
Pending a reply to the Haitian Government’s proposal and in view of other circumstances which made me feel that the time was not yet ripe to undertake serious discussions on this subject, I have hitherto not considered it advisable to lay a concrete plan before the Department or to attempt to inaugurate active negotiations with the Haitian Government. I now feel that the time has come when an effort should be made to adjust all of the remaining questions connected with the Treaty of 1915 and that the present state of our relations with the Haitian Government makes it probable that we can obtain as satisfactory a settlement of these questions now as we could hope to obtain at any time in the future.
With reference to the financial control, there are two principal questions involved: (1) Should further changes in the existing financial control be made before 1936, and (2) what arrangements should be made to safeguard the bondholders after the expiration of the Treaty.
With regard to the first question, the United States Government would clearly have a right to insist upon the maintenance intact of the present system of financial control if it saw fit to do so. It would [Page 638] perhaps be advisable to refuse to accept changes in the present system if the service of the bonds until 1936 was the only question to be considered; but it is obvious that the character of the arrangement governing the period after 1936 will be of greater importance from the standpoint of the bondholders than the precise nature of the system prevailing during the remaining years of the Treaty. It may, therefore, prove to be in their best interests to make some concessions with regard to the present system, if it proves that such action will make it possible to obtain a better arrangement after the termination of the Treaty. I do not think that we should propose such concessions in the first instance, but I believe that we should be prepared to make them during the course of the negotiations if necessary in order to obtain a satisfactory agreement.
In considering the second question, it is necessary to have in mind the exact situation which will exist when the Treaty expires. At that time there will be between nine and ten million dollars par value of bonds outstanding, the exact amount depending upon the rate at which amortization purchases are made in the meantime. Series B of the loan will be amortized in full before or just after 1936, so that the contractual requirements for interest and amortization will amount to approximately $1,375,000.00 per annum or just under 20% of the Republic’s average annual revenue for the past ten years. The service of the loan will, therefore, still require large annual payments and the interests of the bondholders will not be secure unless the Haitian Government continues to follow a sufficiently sound financial policy to assure the payment not only of the debt service but of the essential expenses of government. Before 1915 the Haitian Government showed itself totally unable to maintain such a policy; and despite the progress which has unquestionably been made in other respects, there is nothing in our recent experience which affords any ground for hope that the Haitian Government will be more competent to conduct its finances properly after 1936 than it was before 1915. A new financial agreement involving an adequate measure of control by representatives of the United States Government will, therefore, be necessary. The problem would be solved automatically if a general refunding arrangement were effected in the meantime, but the possibility of making a refunding loan between now and 1936 seems very small under current financial conditions and in view of the difficulties created by the existing loan contracts. Any new agreement which is made will remain in effect a relatively short time, however, as the entire outstanding debt will be retired by 1946, at the latest, and by 1942 or 1943 unless there is a much greater increase in the prices of the bonds than now seems probable.[Page 639]
As stated above, the present state of our relations with the Haitian Government makes this a favorable time to begin negotiations. I believe that our own position is stronger now than it will be later. If no general financial agreement is reached, we shall unquestionably continue to have controversies on such questions as the annual budget, the finance laws, and the powers of the Financial Adviser; and the almost inevitable result of such controversies during a period when we are rapidly relaxing our control in other respects will be a loss of influence and prestige. In dealing with questions connected with the financial control, we have discovered several points where our position from a legal and a practical point of view is somewhat weak and where a controversy almost inevitably involves some loss of authority unless we assume an extremely arbitrary position. It is obviously desirable to have a clear understanding on such points insofar as they are essential to continued financial control and to reach such an understanding before they have become the subjects of long-continued and bitter controversies.
It must be realized, however, that no agreement can be reached by friendly negotiation either now or later without making substantial concessions to the point of view and to the political necessities of the Haitian Government. A plan such as was proposed last year, involving practically the continuation of the financial control established by the Treaty, might perhaps have been accepted as a part of the Haitianization agreement by President Vincent’s first Cabinet, which had been very modest in its demands, but it was summarily rejected by the following Cabinet and I do not believe that it would be voluntarily accepted by any future Haitian Government. The chief concrete advantage offered to the Haitian Government in this plan was the removal of the Financial Adviser’s control over the distribution of funds as between the different Haitian Departments and activities, but this control was in fact abandoned during the budget negotiations last year because it proved utterly impracticable and inadvisable to attempt to maintain it. Without attempting to go into the history of last year’s budget negotiations, I may point out that they offer an excellent example of the manner in which our actual authority in financial questions will be imperilled by each controversy even when we are prepared to take a very firm stand and to insist upon our point of view at the risk of serious disturbances in Haiti.
While emphasizing the fact that substantial concessions must be made if an agreement is to be reached, I nevertheless believe that we can obtain a more satisfactory agreement with less harmful concessions at the present time than if the negotiations are postponed until the Treaty is about to expire. By 1936 our control over the Haitian [Page 640] Government’s affairs in other respects will presumably have been reduced to a minimum and we shall have withdrawn or be on the point of withdrawing the Marine Brigade. The Haitian Government and people will be enthusiastically awaiting the end of the Treaty as the beginning of their second independence and will be disinclined to accept any agreement which would translate the rather general provisions of the protocol and the loan contracts into an effective financial control, except under such compulsion as the United States Government would find it exceedingly embarrassing to exercise. Whatever demands were put forward as a basis for negotiations, I believe that the Department would in the end find itself accepting as the only way out of a troublesome and noisy controversy an arrangement much less satisfactory than we can probably obtain now by friendly negotiations.
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I am enclosing herewith a draft convention embodying the suggestions which I have made above. It will be noted that this draft departs in many respects from the language of the present Treaty even with regard to matters where the powers conferred by the Treaty are to be retained. I believe that it will be helpful to the success of any negotiations that the new convention should resemble the present Treaty as little as possible. It will also be noted that the draft does not embody the maximum concessions above suggested. It is intended to serve as a first proposal and a basis for negotiations. The question of possible changes to be put into effect before 1936 has been left to be considered during the course of the negotiations.
The Financial Adviser-General Receiver has read the rough draft of this despatch and has expressed his general accord with the views and recommendations contained therein. He has made a number of helpful suggestions regarding the draft agreement, practically all of which have been incorporated in the text as herewith transmitted. A copy of a letter written by him in response to my request for his views on the subject is transmitted herewith.