838.51/4026
The Chargé in Haiti (Sparks) to the Secretary of State
[Received September 9.]
Sir: With reference to my despatch No. 968, of August 22, 1940,25 reporting the conversation with President Vincent on August 19, 1940, relative to the Haitian economic, financial and fiscal situation, I have the honor to transmit herewith a copy of a letter of the Fiscal Representative dated September 2, 1940, enclosing a copy of a personal letter which President Vincent addressed to him in response, in particular, to the memorandum of our conversation, a translation of which was furnished the Department as enclosure No. 1 to my despatch under reference.26
An examination of the communication of President Vincent to the Fiscal Representative reveals that he is prepared to accept most of the recommendations and even to increase the percentage reduction in salaries should circumstances require. However, the President offers objections to the recommended reduction in the base pay of new enlistments in the Garde and to the use of the communal revenues for budgetary purposes.
The question of the Communes and the communal revenues is discussed in detail in my despatch No. 989 of September 6, 1940. In brief, President Vincent takes the position:
- (1)
- that enabling legislation to utilize the communal revenues for budgetary purposes would be unconstitutional; and
- (2)
- that for political reasons no one in or out of the Government would be prepared to propose and approve such legislation.
Therefore, the means of balancing the budget must be sought elsewhere. The President adds that the Government believes that these funds “can be found more easily by a greater reduction in the amounts provided in the budget for the current fiscal year for salaries, wages and all other appropriations”.
With regard to the recommended reduction in the base pay of new enlistments in the Garde, President Vincent expresses the opinion that especially now no change of this nature should be made in the organization of the Garde which is exactly the same as when it was turned over to Haiti by the United States Marines. The President refers to the recent increase in the base pay of the American soldier and declares that the Government would not be prepared, in the interest of maintaining public order, to adopt the measure proposed. Furthermore, the Government believes that it would be extremely imprudent, even dangerous, to reduce any of the allotments accorded the Garde. He then asserts that it is the imperative obligation of the Government in the present difficult times to insure more than ever domestic tranquility and to contribute eventually to the defense of the American Continent.
It would seem that the reduction in the base pay of new enlisted men in the Garde and the utilization of the communal revenues for budgetary purposes involve questions of major political importance in Haiti, and that President Vincent has been prompt to anticipate unfortunate political repercussions if these measures were adopted. As concerns the Garde, it is public knowledge that the stability of the Government would be endangered if the Garde were unduly dissatisfied. The communal revenues, on the other hand, furnish important political funds to a myriad of small politicians scattered throughout the country. Their fiscalization must necessarily deprive these politicians of their use and since they can not be replaced from other sources resentment against the Government would be immediately engendered. The Department is aware that the saving on the salary adjustments in the Garde would probably amount to less than $8,000 next year. The net proceeds from the communal revenues are estimated by the Fiscal Representative to be no less than $250,000 per annum, but the fact cannot be escaped that these must be collected by the Fiscal Representative, and that the resentment of the local politicians would undoubtedly be directed against the American Government. In these circumstances it is the opinion of the Legation that it would be unwise to press on these two points, particularly when President Vincent has in effect volunteered to make the necessary reductions in the budget.
It will be observed that the Fiscal Representative in his communication to me of September 2, 1940, takes the position that it is essential [Page 902] to obtain the communal revenues, since “the question of reduction in expenditures by the Haitian Government, at the moment, is of considerably less immediate importance than the question of finding funds with which to maintain essential governmental services, including interest payments, during the next two or three months”. While I am inclined to agree with the Fiscal Representative as to the necessity of obtaining new funds to replace or augment diminishing government revenues, I am not prepared, because of the meager information available as to the amount and particularly the time when communal revenues are collected, to subscribe to an opinion that these revenues would be of such importance during the emergency of the next two or three months, to warrant our insistence upon their use for budgetary purposes in the face of the opposition of the Haitian Government and the political repercussions which President Vincent anticipates.
The Fiscal Representative exhibits great concern over budgetary prospects for the present and following few months. In the enclosure to his letter estimating the fiscal condition as of September 30, 1940, he shows an indicated cash deficit of 611,849 Gourdes. I specifically requested him to submit recommendations as to the best method to deal with this cash deficit situation.
The Government has in bonds 405,000 Gourdes but in the present emergency it would be ruinous to attempt to convert these into cash. If the bonds are not cashed, it would appear that the Government could then have recourse to a part of the non-fiscal accounts, the minimum balance in which is said to be about 450,000 Gourdes. However, it would seem that the best immediate solution would be recourse to the National Bank which, fortunately, is in a very liquid position. The Fiscal Representative has consulted the officers of the Bank and a maximum overdraft of 750,000 Gourdes is suggested, but they would not be prepared to increase the overdraft beyond that amount. In fact, it would appear that to attempt any larger overdraft would be unwise, since the position of the Bank would be weakened immediately by the simultaneous withdrawal of deposits which undoubtedly would take place.
Therefore, it would seem that the means are available to deal with the anticipated adverse situation at the end of this month. In October and the following months, if there is not a decidedly favorable movement in coffee, Haiti will indeed be faced with a most critical situation. It is believed that this can be tempered partly by further drastic reductions in budgetary expenditures. The Fiscal Representative, however, is indeed dubious that these reductions could be sufficient to compensate the even more drastic shrinkage in Government revenues. Should the situation develop to that extreme—as it will [Page 903] in the absence of a favorable movement of Haiti’s principal export crop—we must then be prepared, if we are to assist Haiti through an emergency in which its own efforts would be insufficient, to supply the funds for financing surplus coffee and even possibly free funds.
With regard to the proposal made by President Vincent in his lengthy memorandum on the Haitian communes and the communal revenues (see my despatch No. 989, September 6, 1940) for a loan of $3,500,000 by the Export-Import Bank to the Haitian communes, which loan would be serviced by earmarking a part of their consolidated revenues, I shall make no indication to President Vincent pending the Department’s instructions. However, I submit for the consideration of the Department that sooner or later a Haitian Government will endeavor to arrange a loan on this basis. Also, the proposal for a loan might furnish a vehicle through which the Department, if it were prepared to furnish additional finances to this country, could do so in a normal manner. On the other hand, the Fiscal Representative is convinced that it is inopportune to consider seriously the proposal of President Vincent and that he would be most reluctant to see communal revenues pledged or used in any way except as a contribution to the national treasury. (See copy of letter of Fiscal Representative, September 5, enclosed herewith.)27 While I share these views in principle, I am not prepared at this time to recommend the rejection of the proposal.
Respectfully yours,