838.51/2979 suppl.: Telegram
The Secretary of State to the Minister in Haiti ( Gordon )
38. Your 77, September 3, 3 p.m. Department entirely approves your statements to the Foreign Minister. The Haitian Minister57 called at the Department on September 3, and similar views were expressed to him. He suggested that the American Government had assumed commitments under the August 7, 1933 agreement57a to assist [Page 677] in working out a plan for the anticipated redemption of the 1922 loan. His attention was invited to the provisions of Article 26 of the agreement and to the proviso therein contained that the Haitian Government must make an arrangement for redemption satisfactory to the holders of the outstanding bonds. It was suggested to him that the Haitian Government would doubtless desire to study this question at once with its fiscal agents and legal advisers in order to draw up a definite plan of redemption satisfactory to the bondholders, and that the Department would be prepared to consider such a plan immediately when presented to it.
When you call on the Minister for Foreign Affairs on Friday, the Department desires you to insist upon the point that while both the Minister and President have assured the Legation, and Blanchet has assured the Department, that the new loan contract contemplates redemption of the 1922 loan, the text of the contract is silent on this point; in view of the specific obligations undertaken both by the Government of Haiti and by the Government of the United States in existing treaties and agreements relating to the finances of Haiti and to guarantees for the 1922 loan, the Government of the United States is extremely desirous of obtaining from the Haitian Government at an early date definite and specific statements as to the intention of the Haitian Government to set aside out of the first funds available from the new loan sums sufficient to redeem in satisfactory manner the outstanding bonds of the 1922 loan, and definite and specific proposals as to the exact manner in which the Haitian Government proposes to carry out said redemption.
You should state to the Minister that were it not for the assurances already given that it is the intention of the Haitian Government to devote the proceeds from the first installment paid on this loan to the redemption of the 1922 loan, the American Government would obviously have to consider invoking the provisions of existing agreements; for instance, the new loan contract purports to give a first lien on customs revenues as security for the loan, whereas the customs revenues are, of course, already pledged under the 1922 loan contract, the 1915 Treaty58 and the 1919 Protocol59 for the service of the 1922 loan, subject only to the prior charge of payment of salaries, allowances and expenses of the Fiscal Representative and his assistants.
You should, furthermore, point out to the Minister that this Government is of the opinion, from the cursory examination it has so far been able to make of the new loan contract, having just received the text thereof, that this contract may prove to be onerous and disadvantageous to Haiti in various particulars, and that the annual [Page 678] burden for service of this loan, which increases 100 per cent within a period of 5 years to a figure approximately 35 per cent of Haiti’s present revenues, may well prove to be beyond the possibilities of Haiti’s finances; and that if it were not for this Government’s understanding that the Government of Haiti has sought this new loan for the primary purpose, through the redemption of the 1922 loan, of putting an end to the cooperation and assistance of the Government of the United States in connection with Haiti’s finances, the Government of the United States would feel obliged, in view of its obligation under the 1915 Treaty to aid Haiti in establishing her finances on a firm and solid basis, to raise serious objection to various provisions of the new loan contract. In this connection, you may advert to the fact that under Article 17 of the 1933 Agreement Haiti was, of course, committed not to assume such a financial obligation as is involved in the new loan without prior accord of the Fiscal Representative.
The Department also desires you to point out to the Minister that the new loan contract, while apparently providing for the opening of a credit of the total amount involved in the loan, and for a first installment of 235,000,000 francs to be supplied within 3 months, appears to make no provision for deposit of the sums in question in any banking institution to the order and under the control of the Haitian Government; in this connection you may call attention to the possibility that if the entrepreneur should deposit these funds in a bank in France, action may well be taken there by the bondholders of the 1910 bonds to attach such funds.
In considering this matter, we have in mind that the chances are overwhelming that this project will collapse of its own defects and come to nothing except probably a series of claims in the future against the Haitian Government, and that therefore in discussing it with the Haitian Government we should do so in the friendliest manner, seeking to avoid so far as possible causing any resentment or ill-feeling on their part which might lead them in the future to charge that it was due to our opposition that the project for the “liberation” of Haiti had failed. I shall receive the Haitian Minister tomorrow at his request to discuss this whole matter. I shall refer to the points set out earlier in this telegram and at the same time shall state something to the effect that this Government, in view of Haiti’s known desire to free itself of American assistance in connection with Haiti’s finances, and to pay off the 1922 loan, very much hopes that any effort at new financing made by Haiti will be on a thoroughly sound basis, and that I, of course, assume that the Haitian Government has investigated thoroughly the standing and responsibility of the financial interests back of this proposed new loan, as it would be a matter of great regret to all friends of Haiti if that country should be doing something [Page 679] now which might result in future prejudice to Haiti’s present fine credit standing internationally.
Reference last paragraph your telegram under reference. Copy of reply from Embassy at Paris60 forwarded by airmail September 4. The Department has cabled Embassy at Paris60 to make inquiry regarding Debachy and his financial backers and will advise you on receipt of information.