Foreign Relations of the United States Diplomatic Papers, 1935, The American Republics, Volume IV

838.51/2993

The Haitian Department of Foreign Relations to the American Legation in Haiti⁶²

[Translation]

Note

The purpose of this note is to reply to the note presented to His Excellency the President of the Republic last Saturday, the 7th instant, by the Minister Plenipotentiary of the United States of America.

The points raised in this latter document can be brought under the four following, some of which have already been considered and treated in the letter addressed to the American Legation by the Department of Foreign Relations on the 28th day of August, last:

1. Effect of the new loan contracted by the Republic of Haiti on the guarantee which is assigned to the service of the 1922 loan.

2. Mode and period of amortization of the bonds of the 1922 loan.

3. Onerous character of the new loan which, being disadvantageous in many respects, appears to constitute, fundamentally, too heavy a load,—in any case one beyond the strength of the Haitian state.

4. The new loan in the light of Article 17 of the Agreement of August 7, 1933.

Regarding the first point:

There would certainly be a violation of the Protocol of 1919, of the loan Contract of 1922 as well as of the Agreements of 1931⁶³ and 1933, if the Haitian receipts already pledged should have to serve, wholly or in part, to assuring the service of the new debt. That would allow a supposition of one of two things: the co-existence of the two loans or the cancelling, pure and simple, of the amount due on the second. In both cases the American Government, which is a party in interest, would have the right to intervene and to exercise any action suitable for the purpose of safeguarding its responsibility. But such is not the case. As was said and explained, in the letter from the Department of Foreign Relations to which reference has just been made, the loan of 500 million francs is, in the thought of the Haitian Government, a loan of liberation. It is that, primarily. What constitutes, in fact, the strength of the present Government and the point on which rest both the prestige and the great popularity of the President of the Republic, is the engagement which it has undertaken towards the nation, and which it has already carried out to the extent of three-fourths, with the frank and loyal cooperation of the American Government, to “free the country, without shock from the hold of the foreigner.” After the purchase of the Banque Rationale de la République d’Haiti (the National Bank of the Republic of Haiti) which substitutes for the political control of Washington the control of the interested parties and which subjects the enjoyment, in full ownership, of this Bank by the Haitian State without reservation or exception, to the payment and to the retirement of the 1922 bonds, it was to be foreseen that the Haitian Government would aim at complete enfranchisement. Furthermore, it was authorized to do so by Article 26 of the Agreement of August 7, 1933, and by the assurances which were given to it that the 1922 loan was the sole obstacle to the integral recovery of its sovereign rights. It was, therefore, necessary to refund that loan. Such is the principal purpose of the new financial operation which the legislative chambers have just sanctioned. For reasons which it has not been considered opportune to make public, the contract is silent on this subject. But there exists among the parties a secret document whereby it is recognized that a part of the first installment of the loan will be exclusively assigned to the amortization of the 1922 bonds. That was necessary in the highest degree, because, in order to arrive at that point, all the revenues of the State had to be liberated.

Regarding the second point:

Under the terms of Article 26 of the Agreement of August 7, 1933, “The Haitian Government reserves the right to retire the bonds issued in accord with the Protocol of October 3, 1919, in advance of their due date; and the Government of the United States will not invoke the provisions of Article VI of the Protocol as an obstacle to such retirement before the expiration of the period of fifteen years fixed therein, provided that the Haitian Government is able to make an arrangement for this purpose satisfactory to the holders of the outstanding bonds.

“In this case the provisions of this accord shall automatically become null and void and of no effect upon the completion of the funding operation.”

According to this text, the operation of redemption contemplated will not at all injure the rights of the holders. But the Haitian Government does not think, either, that it ought to be subject, under this head, to any prejudice, a satisfactory arrangement having been completed which cannot but have for its effect the conservation of the interests present in the matter. We have spoken on this point to the Fiscal Representative who has promised us a memorandum on a system of amortization which he believes is capable of fulfilling the purposes which we desire to achieve.

The funds necessary for this purpose will be deposited in a New York bank as property of the Haitian Government and under its direct control.

Concerning the third point:

Contrary to the fears expressed by the American Government, the contract is not (1) onerous, nor (2) disadvantageous for Haiti and (3) the annual charge for the service of the new loan is not at all beyond the possibilities of the finances of the country.

1. —The contract contemplates that the Entrepreneur be allowed a levy of 25 percent on all the disbursements on materials, matériel and labor in order to reimburse him for all the expenses assigned to the execution of the works, to remunerate him for his general expenses, to cover the special expenses necessitated by the purely financial part of the operation and to assure him legitimate profits.

Would the contract be onerous because of that percentage of 25 percent? Not at all, for that percentage results from the conversion into a single percentage—adopted for the convenience of calculations and of regulations,—of a series of percentages proper:

1) Loss at time of issue, 7 percent.

2) Expenses inherent in the financial part, 1¾ percent (stamp tax, printing and placing of securities …⁶⁴ etc).

3) Indemnities of the Entrepreneur, that is to say, 13.22735 percent of the values actually assigned to the works as was agreed upon and stipulated in formal terms in a letter from the Entrepreneur to the President of the Republic.

The foregoing shows exactly what the single percentage of 25 percent, granted only on the amounts intended for works, corresponds to.

2. —Among the numerous advantages of the contract, it is well to point out that which will result from the execution of definitive works and not works that are provisional and subject to continual and expensive repairs by the very reason of their character, the money necessary to fully accomplish them having always been lacking, in spite of the special credits opened each year by the Department of Public Works.

The expenses connected with these special credits for the last five fiscal years, a difficult period, if there ever was one, amounted to nearly one million eight hundred thousand dollars ($1,800,000.00), that is, an average of $350,000.00 a year—an obligation of which the treasury will henceforth be relieved. If we consider, moreover, that the performance of the Contract will permit of the reduction of the regular budget of the Department of Public Works by $200,000, it will result in a reduction of $550,000.00 for our finances (not taking into account large and certain economies which will be effected in several other budget allotments).

These considerations based on realities enable us to state that the annual charge for the service of the loan is not beyond the possibilities of the finances of Haiti. On the contrary: the present arrangement will permit of building up large reserves, estimated at more than three million dollars ($3,000,000) for the payment of the fourth installment, which would perhaps permit the Haitian Government to exercise the privilege conferred on it by Article 20 of reducing the amount of the last installment.

However, circumstances impossible to foresee may upset the best established calculations, under the new contract, as well as under the loan contract of 1922 now in force.

If a sudden and serious drop in receipts occurs, the Government has at present only two alternatives to escape from the quandary: either to levy new taxes on the taxpayers, who can endure no more, or else make drastic curtailments and therefore restrict still further a currency circulation already very small. It is in vain that the amortization of the loan of 1922 has in fact been advanced by ten years, because of the very mechanism of the contracts and of certain financial measures which it would take too long to analyze here. In any event, however small the receipts may be, the contractual annual payments provided in the amortization tables of Titles⁶⁵ A, B, and C, must first sternly be deducted in full, then the amounts necessary to assure the proper maintenance of the services of the Fiscal Representative and the Haitian Guard. As to the other Government services, they must be satisfied with the remainder,—and if nothing remained, we can well see what the situation would be.

With the new contract, the Government, in case of a heavy decrease in the receipts, is not exposed to the danger of being reduced to the corresponding portion, as Article 12 provides that “the service of interest and amortization would be calculated on the basis of the customs receipts by priority and precedence over all other claims, with the exception of the expenses and charges of the normal national budget, such as: the pay of the army, constitutional indemnities and salaries of public officials and employees, et cetera, in accordance with a total amount equal to the present amounts allotted to the same budget items above indicated.”

The Government is convinced, however, that no such eventualities will occur; that the great works contemplated must bring about an improvement of living conditions in Haiti, place business on a higher level, both as to importation and exportation, and everywhere bring about an increase of the general receipts of the state which will permit it to establish its finances on solid and definitive bases.

Regarding the fourth point:

It had been agreed between the governments of the United States and Haiti that the purchase by the Haitian government of the “Banque de la République d’Haiti” (National Bank of the Republic of Haiti) would result in the abrogation of the Convention of 1915 and the acts resulting therefrom, with the exception of certain restrictions concerning the budget justified by the participation of the representatives of holders of bonds of the 1922 loan in the service of the control of the debt. That had been contemplated as the accomplishment of a mere formality, as the present situation implies a de facto abrogation; from which it follows that the treaty of 1915 has fulfilled its purposes. In any event, the negotiation of the new loan by the Haitian Government would not constitute a direct or indirect violation of this act, nor of Article 17, of the Agreement of August 7, 1933. If we have been expressly forbidden to increase the expenses of the Republic, without the agreement of the Fiscal Representative, this was done merely in order to avoid obstructing the regular service of the debt, as the fiscal representative, in the last statement of our relations with the American Government, had this sole and exclusive mission. By the refunding of the 1922 bonds, the provisions of the agreement of August 7th become automatically null and void. There is therefore no longer a fiscal representative, no more debt control service, the control, in all the forms that have been given to it, having been established for the debt and for that alone, and only because the debt had been contracted under the auspices and with the guarantee of the American Government. It is self-evident therefore that, having been authorized to liberate ourselves and having the means to do so it is not our creditors that we would ask whether the moment is a favorable one. We owe no explanations as to the result of our actions, except to the American Government which has aided us since 1930, by a series of acts which it is unnecessary to recall, to resume the exercise of our sovereign rights. It is, moreover, with the support of the promises made to us by Mr. Roosevelt himself, President of the United States of America, of the declarations of Mr. Hull, Secretary of State, giving the assurance that the new policy of nonintervention which his country practices in America is absolute and permits of no exception, except when there are previous commitments, that we have availed ourselves of the privilege conferred upon us by Article 26 of the agreement of August 7th. Ref erring again to the terms of the letter of the Department of Foreign Relations already quoted, “we have not, in order to succeed, used any method nor accepted any conditions susceptible of injuring our good relations with the United States, relations which we hope to maintain always cordial and happy—and in particular, we have carefully avoided abuse of the privilege which we believe we have, and which we shall strive to conserve, of claiming, with regard to certain matters, the mediation, the good offices, and the cooperation of the American Government or even, if the occasion requires it, the sympathetic support, never asked in vain of the high moral authority which Mr. Roosevelt represents.” We have not waived this right nor any other, and as a beginning, it is to Mr. S. de la Rue, agent of the American Government, that we have looked, to find, with respect to the refunding in advance of the 1922 bonds, what may be the best system, the one best adapted to reconcile the interests of the parties concerned.

Port-au-Prince , September 9, 1935.

62. Copy transmitted to the Department by the Minister in Haiti in his despatch No. 6, September 10; received September 12.
63. Signed August 5, 1931, Foreign Relations, 1931, vol. ii, p. 505.
64. Omission indicated in the original.
65. Titres; the translator indicates in a footnote that this word may be also translated “bonds”, which is evidently the meaning intended here.