The Secretary of State to the Minister in Haiti (Mayer)
Sir: The Department refers to its telegram no. 182  of December 24, 1 p.m., and to your telegram in reply no. 167 of December 27, 12, noon, regarding the difficult financial situation in Haiti.
In the course of recent conversations between officers of the Department and the Fiscal Representative, Mr. Sidney de la Rue, this situation was discussed at length. The Department is in agreement with the Fiscal Representative’s opinion that it is now evident that the Haitian Government will in fact be unable to maintain the complete [Page 577]contractual service on the two remaining series of the 1922 loan if the essential services of government are to be maintained in Haiti. The Department believes that the best ultimate protection for the bondholders is the maintenance of such orderly government in Haiti. The Department believes, furthermore, that in view of the fact that the amortization schedule of the 1922 loans had been advanced to a point where the loan in normal circumstances would have been retired in 1943, or approximately nine years before its contractual due date, that the most equitable arrangement for the bondholders would be a temporary partial default in the present amortization schedule.
Accordingly, efforts have been directed towards the elaboration of a plan which would permit Haiti to make such a default with the least temporary dislocation of the existing financial structure, with the least prejudice to the rights of the bondholders, and with the least damage to the financial credit of the Haitian Government. There is enclosed a copy of a memorandum of December 30, which contains the substance of the views of the Department in this matter, and which suggests a procedure for effecting the proposed default in contractual amortization. There is also enclosed a draft of a proposed Accord8 to be signed by you and a plenipotentiary to be designated by the Haitian Government, modifying for the balance of the current fiscal year the Accord of August 7, 1933.
Mr. de la Rue is thoroughly familiar with the Department’s views on the prospective default in amortization and has assured the Department of his readiness to cooperate by assisting the Haitian Government in drafting the proposed basic note mentioned on page three of the enclosed memorandum. In view of the urgency of the matter, since it seems unlikely from Mr. de la Rue’s statements, that the Government of Haiti will be able to meet the amortization installment due January 15 and still conserve enough cash in the Treasury to meet its budgetary payroll at the end of January, the need for prompt action is apparent. You are authorized, accordingly, to enter immediately into such conversations as may be initiated by the appropriate officials of the Haitian Government in order to reach agreement on the text of the notes to be exchanged and the Accord to be signed.
There is also enclosed a copy of a memorandum of December 29,9 from the Legal Adviser’s office of the Department relative to the effect of the signature of the proposed new Accord upon the responsibility of the Fiscal Representative as respects the bondholders in the event of the signature of the proposed Accord. As you will note, the suggested additional paragraphs contained in this memorandum have already been incorporated in the memorandum of December 30. This memorandum also contains an opinion with respect to the responsibility [Page 578]of the Fiscal Agent under the loan contract should the Haitian Government default wholly or in part on its amortization payments.
Please forward as soon as possible by air mail the text of the proposed Haitian note. In the event that the text appears to be substantially satisfactory the Department will notify you by cable of such changes if any as may seem desirable and will authorize you to sign the agreement.
Very truly yours,