The Secretary of State to the Minister in Haiti ( Munro ), Temporarily in the United States
Sir: The Department has received your despatch No. 381 of April 21, discussing the further Haitianization of the Garde d’Haïti, and your despatch No. 418 of June 6, regarding the negotiation of an agreement for the administration of Haiti’s finances after 1936.
The Department desires, if possible, to enter into an agreement with the Haitian Government along the lines proposed in your despatch No. 418. It is also prepared to enter into an agreement providing for the further Haitianization of the Garde but only upon condition that a satisfactory arrangement regarding the finances is reached. You may, therefore, notify the Haitian Government that you are authorized to discuss both questions but that the Government of the United States does not desire to enter into any agreement regarding the Haitianization of the Garde unless a new agreement regarding financial control can be signed either previously or at the same time.
As stated in the note which you delivered under instructions from the Department on April 6, this Government feels that the provisions of Article VIII of the Protocol of 1919 justify the Government of the United States in insisting upon such arrangements with regard to the administration of Haiti’s finances after 1936 as in the reasonable view of the United States will assure that adequate provision is made for the amortization and interest of the bonds issued under the Protocol. It feels that a reasonable interpretation of Article VIII of the Protocol would justify this Government in insisting upon the maintenance of the existing system of financial control substantially in its present form if this appeared necessary for the protection of the interest of the bondholders. Since it appears, however, that the interests of the bondholders would not be unduly endangered by concessions to the wishes of the Haitian Government with respect to certain features of the present system of control, this Government is prepared to make such concessions if, but only if, it proves possible to conclude a satisfactory agreement at the present time. You may advise the Haitian Government to this effect, stating that the Government of the United States reserves the right to withdraw all proposals which may be made and to reconsider the entire question of the character of the financial organization to be set up in 1936 if the negotiations which you are now undertaking are not brought to a successful conclusion before your contemplated departure from Haiti in September next.[Page 647]
If you find that the Haitian Government is prepared to negotiate a new agreement along the general lines of the draft transmitted with your despatch No. 418 of June 6 you are authorized to present this draft, modified as indicated in the enclosure to this instruction, to the Minister of Foreign Affairs as a basis for discussion. During the subsequent negotiations you will be guided by the instructions hereinbelow set forth.
I. Customs Administration
The Department concurs in your view that the officer appointed upon the nomination of the President of the United States under Article VIII of the Protocol should have full administrative control of the customs service, including (1) the right to appoint and remove personnel, (2) the right to have such American collectors and other personnel as may appear necessary and (3) full administrative authority. Articles I and II of the draft agreement submitted by you cover this subject satisfactorily so far as the views of this Government are concerned.
The Haitian Government may, however, insist that the Protocol contemplates simply that the officer nominated by the President of the United States should supervise the collection of the customs duties without justifying this Government in a demand that he should actually collect, receive and apply them as under the Treaty of 1915. If this point is raised you will insist that the control given to the American Financial Representative must be adequate really to enable him to assure that the customs service is efficiently administered and that any arrangement for control must cover the three points above enumerated. In other words, the Department cannot accept an arrangement which would make any real change in the present system of customs administration. It would, however, have no objection to an arrangement under which officers in the customs service were appointed and commissioned by the President of Haiti, provided that such officers were appointed and removed solely upon the recommendation of the American Fiscal Representative.
II. Internal Revenue Administration
This Government considers that any new arrangement regarding the administration of the internal revenue service must provide that the official nominated by the President of the United States under the Protocol shall receive the proceeds of all of the internal taxes for disposition in accordance with the provisions of the loan contracts and that this official shall have an adequate measure of supervision over the internal revenue service. In view of the considerations set forth [Page 648] in your despatch No. 418 it is prepared to relinquish any demand for complete administrative control of the internal revenue service provided that the other provisions of the new agreement afford such safeguards to the interests of the bondholders as would justify this Government in making so important a concession to the wishes of the Haitian Government. The exact measure and character of the supervision by the American Financial Representative will be a matter for negotiation. While it might be desirable to obtain, if possible, the complete supervisory control contemplated by the draft agreement in its present form, the Department feels that $84,000 per annum, the amount set aside for this purpose, represents a rather large proportion of the total cost of the internal revenue collection. You may in your discretion withhold any proposal for a specific sum for purposes of inspection until you have discussed with the Haitian Government the exact character of the inspection to be provided and you may agree to a substantial reduction in the amount allowed to the American Fiscal Representative for this purpose if you find it advisable to do so. In accordance with your oral suggestion, the amount allowed to the internal revenue service for the expenses of collection under Article V of the draft agreement should be reduced to 10 per cent if so large a sum as $84,000 is expended upon the inspection service of the American Financial Representative, but that allowance may be increased to such extent as you see fit if a less complete American supervision is provided for. It is obvious that the amount of inspection work which will have to be performed by the Haitian Director will be increased if the inspection force at the disposal of the American Financial Representative is decreased.
If you find it advisable in the interest of reaching an agreement with the Haitian Government you are authorized to accept a provision placing the new system of internal revenue administration in operation either in whole or in part before the expiration of the present treaty upon condition that no important change in the organization shall be made until the ordinary revenues of the Republic shall have reached 34 or 35 million gourdes in one fiscal year or until the Haitian Government shall have so reduced its current expenses as to be able to show a surplus of 500,000 gourdes of ordinary receipts over ordinary revenues in any fiscal year.
While the Department considers it desirable to include in the new agreement a provision similar to Article IV of the draft agreement, you may in your discretion modify or withdraw this article should you find it advisable to do so.[Page 649]
III. Maintenance of a Balanced Budget
In offering to accept changes in the internal revenue service you will say that the Haitianization of this service can be accepted by the Government of the United States only upon condition that the Haitian Government agrees on its side to satisfactory provisions assuring the maintenance of a balanced budget. The Government of the United States will feel compelled to insist upon the incorporation of provisions substantially similar to those contained in Article X and XI of the draft agreement in any new arrangement which may be signed. With reference to the final paragraph of Article XI, however, it would be prepared to accept any other adequate provision assuring the preaudit of payments made by the Haitian Government if that Government objects to this paragraph in its present form. It simply desires that the American Financial Representative should be given some adequate means for assuring himself that each payment made out of the Treasury is made in accordance with the budget or with other appropriations to which he has given his accord.
The provisions of Article XII of the draft agreement are considered desirable but not essential and you may withdraw or modify them if you consider it advisable to do so.
IV. The Accounting System
The Department does not consider a continued control over the accounting system absolutely essential and you are, therefore, authorized to withdraw or to modify Articles XIII and XVI of the draft agreement if you consider it advisable to do so. It is obvious, however, and it should be made clear to the Haitian Government, that the American Financial Representative in carrying out the duties imposed upon him by other articles in the agreement will under any circumstances maintain proper records of the receipts passing through his hands and of the expenditures to which he gives his approval.
V. Service on Payments
The Department concurs in your recommendations on this subject as embodied in Article IX and the last paragraph of Article XI of the draft agreement. As stated above, however, Article XI may be modified if it appears advisable.
VI. Restrictions Upon Changes in the Revenue Laws
You will insist upon the inclusion in the agreement of a provision that the customs duties and the internal revenue taxes will not be [Page 650] reduced in such a manner as to decrease their total yield except with the accord of the American Financial Representative. Article VII of the draft agreement appears to cover this matter satisfactorily.
VII. Restrictions on Increase in the Public Debt
While the Department would prefer the wording of Article XIV of the draft agreement, it would nevertheless be willing if necessary to accept a provision to the effect that the Haitian Government will not increase its public debt unless the revenues of the Government are sufficient to provide for the interest payments and sinking fund of the new obligation. It will, however, insist that the Haitian Government relinquish any right to issue further series of the loan authorized under the Protocol of 1919 with the exception of one possible final issue to an amount not exceding $3,000,000 to be made only after consultation and agreement between the two Governments.
VIII. Priorities in Expenditures
This Government will, of course, expect the Haitian Government to inscribe each year in its budget the sums necessary for the service of its public debt and for other contractual obligations. It is not prepared to insist upon any specific provision giving the expense of the Garde priority over other expenses of the Government, but it believes that such a provision as incorporated in Article XV of the draft agreement would be desirable.
Referring to those articles of the draft agreement which are not specifically covered in the above detailed instructions, the Department considers that provisions similar to those of Article VIII are essential to the proper functioning of the new organization and it would be very reluctant to accept any substantial change in them. Article XVII of the draft agreement, which you have presumably inserted in response to the wishes of the Haitian Government as expressed in previous proposals made by it, is unobjectionable.
Article XVIII should be modified to include a specific statement that the new agreement will take effect on May 3, 1936.
The Department will instruct you later whether an agreement along the lines above outlined should take the form of a convention or merely that of an executive arrangement. It feels, however, that in any case the agreement should be specifically approved by the Haitian Congress in order to give legal force to its provisions in so far as they establish new governmental machinery in Haiti.[Page 651]
In negotiating the new agreement you are authorized to reject without further consultation with the Department any proposals of the Haitian Government which are obviously unacceptable in the light of the Department’s views as above set forth and you are also authorized to accept such changes in the wording of specific articles as are consistent with the provisions of this instruction. You will, of course, keep the Department fully advised at frequent intervals of the progress of your negotiations and you will submit the final text to the Department for approval before signature.
The Department will send you a separate instruction regarding the proposed Haitianization of the Garde.
Very truly yours,
- Not printed.↩