838.51/2572: Telegram
The Secretary of State to the Minister in Haiti (Armour)
79. Your despatch No. 22, December 9, and telegram No. 134, December 15, 10 p.m. You may withold delivery of the note enclosed with Department’s instruction No. 10 of December 8 until further instructed.
We feel, however, that you should take an early opportunity to discuss fully and frankly with President Vincent the Department’s view as set out in its instruction No. 10 regarding an agreement covering financial administration after 1936 before final consideration can be given to approval of any increase in Haiti’s public debt. You will of course make it clear that there is no desire whatsoever on the part of this Government to bring pressure to bear for ratification of the Treaty of September 3, 1932, but any new financial arrangement must inevitably bring to the fore the question of the future relationship between Haiti, the bondholders and this Government. The action to [Page 703] be taken in Haiti on this treaty (with particular reference to the provisions for financial control incorporated in Protocol B), whether it be to resubmit it for the approval of the legislature or to discuss with you modifications which would not affect the essential provisions thereof, or simply to let matters drift, is for the Haitian authorities to determine. The situation, however, which confronts the United States Government is that, on the one hand, the Haitian legislature has declined to approve an agreement defining the responsibilities of the United States Government regarding financial control in the period after 1936 as is required by the Protocol of 1919, and has furthermore gone on record as opposed even to the principle of such an agreement, while on the other hand the Haitian Government is now seeking the approval of the United States Government for a loan which would increase Haiti’s public debt and thereby enlarge the responsibilities of the United States Government as regards Haitian finances. Even in the event that the plan proposed would provide for its own liquidation before 1936, its execution is very likely to have a bearing upon the Haitian financial situation and the position of the bondholders; furthermore experience in many countries shows that when a banker’s advance is introduced into an existing bond situation, the two are very likely to become closely connected before the banking operation is finally completed. There is an obvious inconsistency in this approach to the problem on the part of Haiti which should be apparent to President Vincent and he should be able to appreciate that despite the sympathetic consideration which we desire to give to Haiti’s financial and economic problems we must be in a position to know exactly where we shall stand regarding our financial responsibilities in Haiti after 1936 before we can agree to any enlargement of such responsibilities.
With reference to your statement on page 7 of your despatch under reference that you assume that the “definite agreement” mentioned in our telegram No. 77 of December 7, 2 p.m.,17 signifies an accord “covering all of the pending issues and subject to legislative ratification” you are advised that in so far as this question of an increase in Haiti’s public debt is concerned, we have reference only to an agreement covering the question of financial administration as set forth in Protocol B of the Treaty of September 3. We should not of course feel it necessary that in connection with this question the entire treaty of September 3 should be placed in effect. In other words, if President Vincent should desire to negotiate with you a separate agreement covering financial administration and embodying all the essential features of Protocol B of the September 3 treaty, there would be no objection on our part to considering this method of approach. However, [Page 704] it has been the Department’s understanding that there has been no criticism in Haiti of the other provisions of the September 3 treaty covering Haitianization of the Garde, etc. We feel that any agreement providing for financial administration must be subject to legislative approval and that an executive agreement would not be satisfactory.
We were advised by De la Rue on December 14 that he was sailing for Haiti on December 15. He stated that the National City Bank, with which he had discussed the Haitian proposal to obtain a loan, was not in favor of the project outlined in the Haitian Government’s note to you of November 18, but that he had been discussing with the Bank an arrangement for financing the Artibonite project through the setting up of a revolving fund in the amount of about $400,000, the Haitian Government to put up B Bonds held in its investment account as collateral. De la Rue expressed the view that there would be surplus revenues this year which Haiti could pay back into the revolving fund, thus keeping this fund alive. His plan contemplates a total expenditure of about one million dollars for the Artibonite project spread over 3 or 4 years. He seemed to feel that the National City Bank was looking with favor on this plan, and advised that a representative of the Bank would come to Washington in the next few days to lay the matter before the Department. De la Rue felt that the creation of a revolving fund would not constitute an increase in the Haitian public debt requiring the approval of this Government under the 1915 Treaty. For your information, however, it is our present view, without of course having had an opportunity to know the details of this plan, that the setting up of such a revolving fund would in fact constitute an increase in the public debt of Haiti within the meaning of Article 8 of the 1915 Treaty.