838.51/3021: Telegram

The Secretary of State to the Minister in Haiti ( Gordon )

55. Department’s 54, October 7, 7 p.m.,75 second paragraph. Blanchet called today and discussed with us the question of the refunding proposal submitted to the Haitian Government by the Fiscal Agent. With regard to the argument advanced in the memorandum of the Minister of Finance transmitted with your despatch No. 28 of October 4,75 to the effect that Article 26 of the agreement of August 7, 1933, had modified the text of the 1922 loan contracts as regards the dates on which the bonds could be redeemed, we stated definitely to him that this agreement between the two Governments obviously could not modify in any respect whatsoever the rights of the bondholders as set out in their contract with the Haitian Government. What Article 26 states is that the Government of the United States will not invoke Article 6 of the Protocol of 1919 as an obstacle to the Haitian Government retiring the bonds before the period of 15 years fixed in Article 6 of the Protocol “provided that the Haitian Government is able to make an arrangement for this purpose satisfactory to the holders of the outstanding bonds”.

We reviewed the background of Article 26 of the 1933 agreement, pointing out to Blanchet that in the last paragraph of the American Legation’s note to the Haitian Government of April 6, 1932,75 wherein [Page 695] it was stated that this Government was prepared to examine in a friendly spirit any proposals for an equitable refunding operation which the Haitian Government might be in a position to submit to it, the Legation stated “although it appears that present market conditions and the provisions of the loan contracts would make such an operation difficult at the present time”. As will be noted from the Legation’s telegram No. 46 of April 12, 1932,76 the Minister for Foreign Affairs requested that the phrase quoted hereinabove be omitted, since the Haitian Government wished to submit the note to Congress and he feared that the phrase would be interpreted by the Haitian public as an indication that the Government of the United States intended to block a refunding loan. We acquiesced in the Minister’s request, but in doing so (see our 21, April 13, 1932,77) instructed our Minister to repeat to the Minister for Foreign Affairs that it was our view “that present market conditions and the provisions of the loan contracts would make a refunding operation difficult at the present time”. Minister Munro’s despatch No. 387 of April 25, 1932,78 reports (page 7) that he had taken occasion on April 23 “to make certain that the Minister of Foreign Affairs clearly understood that the Government of the United States could not approve any refunding scheme which was not voluntarily accepted by the present bondholders”. It was following these discussions and negotiations that the unratified Treaty of Friendship between the United States and Haiti was signed on September 3, 1932;79 Article 14 of this treaty regarding the prior redemption of the 1922 bonds was reproduced textually in Article 26 of the 1933 agreement. In other words, in the negotiations leading up to the conclusion of the September 3, 1932, treaty, which included the article later textually reproduced in the 1933 agreement, and at all times when this matter of prior redemption of the 1922 bonds has been raised, this Government has made it amply clear that we would make no objection to such prior redemption provided that the Haitian Government was able to make an arrangement for this purpose satisfactory to the holders of the outstanding bonds.

We expressed to Blanchet our confidence that President Vincent, in order not to violate the provisions of the 1922 contract, would desire to accept the principle, in any refunding proposal, that interest payments would be made up to the call dates of the bonds on any bonds not retired prior to those dates. In this connection we pointed out that the proposal submitted by the Fiscal Agent, together with the detailed explanations given in de la Rue’s letter to Pixley of October 7, 1935, appeared to offer a plan whereunder in all likelihood [Page 696] a large part of the bonds would in fact be retired prior to the call dates so that the added expense to the Haitian Government for meeting interest payment on any bonds not retired before the call dates would not be as serious as the Haitian Government had apparently apprehended.

You may, in any discussion of this matter which may come up with Haitian officials, refer to the views of this Government as hereinabove expressed.

Hull