838.51/2582
The Minister in Haiti (Armour) to the Secretary of State
[Received January 5.]
Sir: With reference to my despatch No. 32, of December 26, 1932, in which I recommended that the Department give its approval to the proposed short-term loan of $400,000 offered Haiti by the National City Bank, I have the honor respectfully to suggest conditions which I feel should be attached to such approval and certain facts of possible use to the Department in its consideration of the matter.
Before discussing the latter, I believe that it would be useful briefly to review the discussions with the Haitian Government of the past two months.
When these discussions began, President Vincent was in a state of extreme political discouragement, largely as a result of criticism and the rejection of the Treaty of September 3, 1932. While he was sincerely interested in the project of the Artibonite development and other public works which he hoped would restore his popularity he was sceptical of the possibility of obtaining a loan to execute them and reluctant to accept the solution of borrowing in the United States [Page 711] from fear of political opposition. Hence his proposal of a moratorium on amortization of the 1922 loan as a means to secure the necessary funds. At that stage he made it plain that he did not believe it was politically possible to revive the Treaty.
Under these circumstances to have made the ratification of a Treaty along the lines of the convention of September 3, 1932, a condition precedent, not alone to approval of the loan, but to its mere consideration by the Department would have resulted, at that time when there was no assurance that the money would be forthcoming, in refusal, impaired relations and undesirable publicity. The task as we saw it here was to build up the President’s morale, at the same time not letting him forget his obligation under the Protocol of 1919 to reach a definite agreement regarding future financial control.
For reasons set forth in the Legation’s despatch No. 32 of December 26, 1932, the President has, I feel, rapidly regained his former confidence and there is now evidence of determination to exert authority and meet the responsibilities of his office. As stated, this is partly the result of the favorable reception accorded him on his recent trip to the South, and the absence of press criticism of his unexpected and firm defense of the Treaty of September 3, 1932. As the Department is aware, he has now orally promised, in return for approval of the loan of $400,000 and anticipating that it will be necessary to have approval of further borrowing to complete the Artibonite development in which, he is apparently showing a real interest and study which he has not usually devoted to other Government problems, to submit and obtain ratification of a new Treaty differing only in non-essentials from the convention of 1932.
If it were a question of the loan of $2,000,000 originally sought by the Haitian Government, we could with reason now insist on ratification of a satisfactory Treaty on the pending issues as a condition precedent to consideration of the request for approval of the loan. If the present favorable reaction toward a loan for public works and the present more reasonable attitude toward a new Treaty continue to develop I believe that later it might even be possible, to put it bluntly, to trade our approval of the $400,000 credit now offered for a ratified accord on the question of future financial administration and other pending issues.
However, I do not feel that such is now the case, and I do not believe that the Department should incur the risks inherent in such a stand if indeed it is contemplating taking this position. In the first place, the loan is too small to have any immediate effect on legislative opinion in its present state of antagonism to the Treaty of September 3, 1932. It is furthermore a short-term borrowing on reserves accumulated in years of excess revenues for just such measures of Treasury protection [Page 712] as we feel this Artibonite development to be. The fact that this reserve is in the form of bonds, because of the higher interest that can be gained thereon, instead of in cash on deposit and the fact that these bonds must be pledged for a loan instead of sold by reason of the depressed bond quotations, is accidental. Essentially, the operation envisaged is the utilization of treasury reserves. To attempt to insist on a Treaty as a prior condition under these circumstances would, I feel, cause possibly successful opposition and press criticism which can and should be avoided. Furthermore, imposing such a condition would necessarily result in delaying the Artibonite development, the value of which I feel more than ever since I have visited St. Marc and the valley itself. The Standard Fruit Company already has one man on the ground and other experts from this company and from the United Fruit Company, which is also interested, are expected to arrive within the month. After ten years the Government has finally succeeded in really interesting the fruit companies in banana culture in Haiti upon the condition of irrigating the Artibonite and further delay now might be fatal.
Additional borrowing to complete the Artibonite project is extremely probable as there is no likelihood of Haitian current revenues being able to finance such work for a long time to come. If the initial work is as successful as hoped there should be no difficulty in finding this additional financing. Faced with the necessity of further financing, the Treaty can then be resubmitted and I believe the Government, backed by popular interest in the development, will be able to secure ratification.
I am personally convinced that by following the procedure proposed we can secure ratification of the Treaty and avoid exposing the United States to criticism of having used its special position to exert pressure to obtain it, as was the case in connection with the ratification of the Treaty of 1915.
While I am of the opinion that the Department should give its approval to the proposed loan, provided that its final terms are substantially as reported by Mr. de la Rue, (see enclosure No. 2 of my despatch No. 32 of December 26, 1932) I feel that the following conditions might well be attached to our consent:
- 1.
- That, except by agreement with the Financial Adviser, the proceeds of the loan shall be used solely for the execution of the Artibonite development project as outlined in the Haitian Government’s note of November 18, 1932.
- 2.
- That the plans and execution of this project shall be subject to the approval of the Financial Adviser.
I believe that our note should state our position, as set forth on page 3 of the note transmitted in the Department’s instruction No. 10 [Page 713] of December 8, as regards the necessity of an agreement on financial administration following 1936 before the United States could be expected to assume further responsibilities in respect to Haitian finance which might prolong our control which we desire to terminate at the earliest possible moment. (I am doubtful ((see my despatch No. 29 of December 21, 1932,23)) whether in our reply we should refer to the financing at present proposed as an increase of the public debt). However, in deference to the view of the Haitian Government that work on the Artibonite project should start without delay we will not insist on such an agreement as a condition precedent to our approval of the present loan. The note might then conclude with the statement that the Haitian Government will understand that the United States cannot give its approval to further loans or utilization of treasury reserves for such purposes until the commitments regarding future financial administration contained in the Protocol of 1919 have been fulfilled.
Personally I do not feel that anything would be gained by referring in the note to the request for an advance of $200,000 from treasury reserves for public works other than the Artibonite. Later, if the fiscal situation improves (see page 2 of my despatch No. 32 of December 26, 1932) we can perhaps give consideration to the proposition of a small special credit for this purpose.
Mention has not hitherto been made of the fact that the Standard Fruit Company has stated that it would supply without charge an irrigation expert to advise the Haitian Government should the preliminary studies now being conducted by their expert continue to be favorable. We should, I feel, insist upon a consultant opinion before work actually starts on the development.
In view of the favorable nature of the terrain, it is believed here that it will be feasible to utilize the small loan proposed to effect the irrigation of one section of the Artibonite using temporary diversion dams and gravity flow. This initial development, it is believed, could later be absorbed into the scheme of the complete development project without loss. The Haitian Public Works Department is now studying such a project.
Respectfully yours,
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