The Chargé in Haiti (Chapin) to the Secretary of State

No. 741

Sir: I have the honor to refer to my despatch No. 738 of August 26, 1935,51 and to my telegram No. 71, of August 28, 12 noon [10 a.m.], regarding the proposed international loan for refunding of the Haitian debt and for public works.

There is enclosed a copy of the proposed contract51 as it was presented to the Haitian Legislature in connection with the law of sanction. The copy was made from one of the original mimeographed copies belonging to a Deputy and lent to the Legation for a few hours through the Fiscal Representative’s office. There is also enclosed a translation, in English, of the contract. In view of the urgency that the copy and translation be furnished to the Department by the next air mail, this work was rushed at the Legation, and unavoidably the translation has been somewhat roughly made.

The Department’s attention is invited to Article 5 which provides that the entrepreneur will be entitled to 25 percent upon all disbursements for material, equipment, and labor. Likewise, it is believed the Department will be interested in Article 7, which describes the manner of payment for work done and which provides for a large initial payment to the entrepreneur from the first installment. In this connection, it may be remarked that according to several rumors which have reached this office, order No. 1, of 17 per cent of 235,000,000 francs, which represents, roughly, two and one-half million dollars, may be destined to a settlement of the 1910 loan, which presumably would be done not officially by the Haitian Government, but indirectly by the entrepreneur.

Article 10 provides for amortization. The tables which have been drawn up for each installment have not been copied, and are not found among the enclosures. The total payments, however, are approximately represented in the table submitted in my despatch above mentioned.

Article 12 specifies the security given from the customs tariff, and the Department will note that it is fairly loosely written, and does [Page 673] not appear to bind the Haitian Government to accept any foreign financial control. In this connection, it may be remarked that no where is there mention of the reported fact that the loan is to be floated at 93, and it would seem likely that there must be a further supplementary financial contract.

Article 14 pledges the entrepreneur to make known to the Haitian Government the nature of his financial backing at the time of the first payment. This payment, it is stipulated elsewhere, must be made three months from the date of notification to the entrepreneur of the ratification of the contract.

According to Article 15, it will be noted that the Government is obligated to continue with the whole contract under penalty of paying 5 per cent on the total value of the works left unexecuted.

Article 17 provides, in case of dispute, that the difficulties will be settled by arbitration by the International Chamber of Commerce at Paris as a court of last resort.

In Article 20 will be found the only reference to a bond issue (emission), and it stipulates that the Government must be consulted in connection with such an issue.

As reported in my telegram, the refunding of the 1922 loan is nowhere mentioned in the contract. The President, however, at the time of my interview with him, told me that such would be the case, and stated that the members of the Legislature were, however, being informed that such an operation was contemplated from the first installment.

It has been impossible to secure any information as to the financial backing of this proposed loan, and in fact I strongly suspect that the Haitian Government itself is ignorant on this point. There is, however, apparently a real feeling in responsible Haitian circles that the money will be forthcoming. The latest report is to the effect that the loan is, at least in part, to be subscribed by German-Jewish capital under the aegis of French financial circles. Possibly inquiry in Paris banking circles may reveal something on this point.

There is also enclosed, for the Department’s information, a copy of the President’s official message to Congress on August 26, as well as a copy of the explanatory remarks made to Congress on the proposed contract by the Minister for Public Works, on the same day.52 The texts of these speeches are those printed in the Nouvelliste.

Respectfully yours,

Selden Chapin
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  3. Neither reprinted.