Memorandum by the Assistant Chief of the Division of the American Republics (Finley) to the Under Secretary of State (Welles)
Mr. Welles: You may recall that at a meeting held in your office last autumn when the Haitian situation was generally discussed, Mr. [Page 327] de la Rue was authorized, after some opposition had been expressed, to explore with the Foreign Bondholders Protective Council, Incorporated, the question of the reduction in interest rate on Haitian bonds from 6 percent to 4 percent. Mr. de la Rue broached this matter to the Council and upon his return to Haiti, the further discussions were confided to M. Lescot. M. Lescot did not press the matter with the Council, presumably because he foresaw that a partial default in the interest payments by Haiti would prejudice the possibility of a liberalization of our financial control in Haiti which he hopes to bring about if he becomes president.
There the matter stood until two weeks ago when Mr. de la Rue, basing his predictions on Haitian, re venues and expenditures during the first three months of the present fiscal year (October 1–September 30), forecast a prospective deficit at the end of the fiscal year of $135,000. Basing their action on this small estimated deficit, the Legation at Port-au-Prince and Mr. de la Rue have been pressing hard to bring about the reduction in interest rate on Haitian bonds which, if it becomes effective, will approximately take care of the estimated deficit. We are now informed that the Bondholders Council has approved the proposed reduction. Meanwhile, in our telegram no. 28 of February 1 (annexed14), we have put it squarely up to the Haitian Government to decide whether it wishes to proceed with the reduction even if it should prejudice the possibility of a modification of our financial control in that country. President Vincent has as yet come to no decision although we have no doubt that Mr. de la Rue will urge the reduction.
It is possible that the approval of the Foreign Bondholders Protective Council was obtained because they preferred this reduction plus maintenance of our present fiscal control to maintenance of the interest rate plus the possibility that the Department would proceed in due course to liberalize our control in Haiti as it has done in the Dominican Republic.
In case the Haitian Government should choose to proceed with the reduction, the operation will, in all probability, have to be consummated by an accord between the United States and the Haitian Governments modifying the Accord of 1933. This accord would be an executive agreement and would not have to be submitted to the Senate for its consideration. It would, however, be published at once in Haiti and doubtless the fact that this Government assented to the reduction would become public knowledge in this country.
During the recent hearings before the Senate Foreign Relations [Page 328] Committee on the Dominican Convention,15 both Senator Vandenberg and Mr. Francis White read into the record the following statements made in 1933 by President Roosevelt with regard to Haitian bonds:16
“This Government is under an unescapable obligation to carry out the Treaty of 1915,16a and the bondholders are entitled to insist on the terms of the treaty under which they loaned their money.”
“This obligation of the United States Government is an obligation not to any bank or particular creditor but to the holders of the bonds who have relied upon the good faith of your Government and my Government to carry out with [the] provisions of the existing agreements.”
You will recall that the Dominican Convention is still before the Senate Foreign Relations Committee, since it has not yet been reported out of the Subcommittee of which Senator Green is the Chairman.
I should like to raise the query whether the announcement at this time that this Government has consented to a reduction in the interest rate on Haitian bonds might create additional opposition to the Dominican Convention in the Senate. If so, should we not suggest to President Vincent the desirability of postponing, for the time being at least, this reduction in the interest rate. As the situation stands at present, President Vincent is free to choose whether he will or will not make the reduction.
- Ante, p. 325.↩
- Convention modifying the Convention of December 27, 1924, providing for the assistance of the United States in the collection and application of the customs revenue, signed at Washington, September 24, 1940; Department of State Treaty Series No. 965, or 55 Stat. (pt. 2) 1104. For correspondence regarding this Convention, see Foreign Relations, 1940, vol. v, pp. 792 ff.↩
- See letter from President Roosevelt to the President of Haiti, ibid., 1933, vol. v, p. 767.↩
- Department of State Treaty Series No. 623; 39 Stat. 1654.↩