838.51/3999a
The Acting Secretary of State to the Chargé in Haiti (Bacon)
Sir: Upon the return of Messrs. Sparks and de la Rue to Haiti, they are requested jointly to seek an interview with President Vincent and to discuss with him in detail the Haitian economic, financial and fiscal situation.
President Vincent should be informed that careful and sympathetic consideration was given during recent conferences in the Department to the problems which Haitian economy faces as a result of the decrease in commodity prices and the closing of European markets to Haitian agricultural products. He may be assured that Haiti will benefit from any improvement which it may be possible to bring about in coffee prices, as well as from any plan which will insure disposal of agricultural surpluses in this Hemisphere. Thus, while these plans have not as yet been fully developed, Haiti is assured in advance of its full share of the benefits of any general plans which it might prove desirable or necessary to elaborate.
Meanwhile, the exigencies of the present situation and particularly the drafting of the Haitian budget for 1940–41 have given the Fiscal Representative and the Department cause for considerable concern. It is evident that, barring an immediate improvement in the general world economic situation and especially in the coffee situation, the present Haitian fiscal year will close with the cash position reduced to a level at which the continuance of the essential services of the State will be imperiled.
Immediate steps will therefore be necessary pending general improvement or the putting into effect of special emergency measures. For the loyal and effective carrying out of these recommendations which have been carefully and sympathetically developed, the Department confidently counts upon the cooperation of President Vincent and [Page 896] his Government. The urgent need is to increase revenues available to the State and reduce, wherever possible, budgetary expenditures.
President Vincent has already been informed of the willingness of the Export-Import Bank to increase its credit to Haiti by $500,000, should that be desired by the Haitian Government. This permits the assurance that expenditures of the J. G. White Engineering Corporation in Haiti during the 1940–41 fiscal year will average at least $160,000 per month. The President’s attention should be invited to the fact that, now that equipment has in the main been already purchased, a larger proportion of the expenditure will immediately benefit the Haitian State and people.
In addition, President Vincent may be informed that the Export-Import Bank has been pleased to consent to a reduction of the interest rate on the Haitian credit as of July 1, 1940 from five percent to four percent.
Messrs. Sparks and de la Rue may likewise inform M. Vincent that the Department will interpose no objection if the Haitian Government should, on the occasion of its application for a renewal of the present moratorium on amortization charges on its outstanding debt, request the elimination of the token amortization payment now being made.
In strict confidence, the President may likewise be advised of the likelihood that, with the approval of the Haitian Government, the United States may be prepared to spend in the neighborhood of $250,000 in the improvement of air facilities in the Republic.
These new sources of revenue will, it is hoped, go far to ameliorate the present situation, provided the Haitian Government itself is willing to cooperate, as in some respects it has already given evidence of its preparedness to do. Thus, the reduction in Government salaries, already partially in effect, if brought to the level of approximately ten percent, will entail savings of consequence to the budget. The Department appreciates highly the steps which President Vincent has already taken in this direction.
Without in any way imperiling the present structure of the Haitian Garde, there should be recommended to President Vincent a plan whereby new enlistments in the Garde d’Haiti, as they occur, should be at a rate of pay somewhat lower than now prevails. Thus, it is confidently believed that sufficient new recruits could be obtained, for example, for twenty gourdes per month instead of fifty gourdes, and that re-enlistments could be maintained if an additional five gourdes per month were paid for each re-enlistment thereafter. This saving to the State in the course of several years would be substantial.
The President’s attention should also be invited to the fact that, in the present circumstances, ample justification can be found for the elimination of such international payments as those of the quota for [Page 897] the League of Nations, which is necessarily inactive at present, and for such organizations as the Society for the Protection of International Works of Art, et cetera.
Messrs. Sparks and de la Rue should thereupon refer to the very important source of revenue which is inherent in the so-called communal revenues. They should say, in the first place, that neither they themselves nor any of those who participated in the recent conferences felt that the Communes of Haiti should be permanently deprived of the fiscal management of their own affairs unless that is desired by the Haitian Government. It was appreciated that communal revenues provide local administrations with funds with which ordinary political purposes of the commune are carried on. Moreover, it was conceded that, irrespective of the Constitutional provision (Article 46) which placed the control of the Communes under the State, there should be no recommendation that these revenues should be permanently fiscalized into the revenues upon which the service of the debt and the Haitian budget depend. In the present emergency, however, it should be most heartily recommended to President Vincent that temporary measures be taken, whether by decree or by legislation, which would permit for the time being the State, through the Internal Revenue Service, to collect all the communal revenues and to disburse the expenses of the Communes in accordance with the plan which the Fiscal Representative will develop. It is believed that, while the State might exercise a most generous attitude toward the legitimate needs of the Communes, this temporary control by the State of collections and expenditures might well result in the more effective use of the money spent and at the same time bring to the aid of the State’s financial situation in this emergency substantially increased revenues. The Department will not oppose, when conditions improve, the defiscalization of the communal revenues and the return to any system of communal fiscal control which may then be thought desirable. Messrs. Sparks and de la Rue should urge this measure upon the President.
The Legation will, of course, report the result of the conversation here outlined. While Mr. de la Rue has been granted authority to speak in a preliminary fashion with the Foreign Bondholders Protective Council and to outline the present situation which may later counsel a reduction in the interest rate on the outstanding 1922 bonds from six percent to four percent, no suggestion of this sort should be made for the time being to President Vincent or the Haitian Government. On the contrary, the definition of this project should be delayed pending further development of the situation.
Very truly yours,