838.51 Bondholders/12–2746

Memorandum of Conversation, by Mr. Charles C. Hauch of the Division of Caribbean Affairs

Second Meeting

Subject: Haitian dollar bond obligations

Participants: Ambassador Joseph D. Charles—Haiti
Finance Minister Gaston Margron—Haiti
Dr. Georges Rigaud—former Minister of Commerce and Agriculture, Haiti
Mr. Livesey—OFD
Mr. Stenger—ED
Mr. Corliss—FN
Mr. Cady—ED
Mr. Barber—CAB
Mr. Price—CAB
Mr. Hauch—CAB

Ambassador Charles and Finance Minister Margron opened the discussion by presenting a note80 requesting that during the negotiations now under way there be an amortization moratorium on the six per cent dollar bonds and the J. G. White credit. During such a moratorium period, Haiti would continue to meet all interest payments. Messrs. Livesey and Corliss81 stated that no one in the Department has [Page 945] the authority to waive payments on the dollar bonds, and that this could probably not be done unless and until the present agreements are modified for this purpose. Finance Minister Margron stated that he felt consideration should be given to the proposal because (1) Haiti has always met its interest and (2) Haiti has paid more amortization than the schedule of repayment calls for as of this date. While agreeing with these factual statements of the Finance Minister, Mr. Corliss said that in order to retire the bonds by the maturity dates of 1952 and 1953, it would be necessary for Haiti to make heavy amortization payments. He added that even though Haiti is ahead of the repayment schedule at the present time, the recent schedule of amortization at $700,000 per year would not permit retirement by the maturity dates. It was left that the Department would study the Haitian request for a moratorium during the negotiations and would advise the mission later.

Mr. Livesey then referred to the first Haitian request in the mission’s note of December 23, namely, the proposal that the dollar bonds be retired through a refunding loan from the Export-Import Bank. He stated that under existing legislation and policy of the Bank, it was impossible for this debt to be converted into an intergovernmental obligation in the manner proposed by the Haitians. He said that the purchase of privately held foreign bonds is not within the power of the Export-Import Bank, and said that the desirable method of handling such a refunding operation would be to obtain a loan from a private bank and pay off all the bonds. Since there does not appear to be any immediate prospect of such a private loan, the only way for Haiti to retire its present dollar bonds is to pay them off. He stated that rapid amortization would be to Haiti’s advantage, since they bear the relatively heavy interest charge of six per cent.

Finance Minister Margron said that Haiti did not necessarily expect the Export-Import Bank to refund the bonds itself and to assume the debt. He said that if the Bank would make Haiti a loan, the Haitian Government itself would carry out the refunding operation. Mr. Livesey stated that this likewise would be impossible under the Bank’s powers, because the Bank can lend only for purposes of promoting foreign trade. The purpose of any loan must be declared, and the Bank has no authorization to make loans for the retirement of private bonds.

Ambassador Charles said that the Government of Haiti fully understood that in ordinary circumstances the Government of the United States would have no responsibility for amortization of private bonds. He said that the case of the Haitian loan was entirely different, however, since at the time the loan was contracted Haiti was under a military occupation and was compelled to accept the loan. He asserted the loan was not a regular business loan, but was a political loan. He [Page 946] added that the American occupation, of which he considered the loan to be one phase, was supposed to have been in the interest of both parties, but he felt that the present status of the loan was certainly not in the interests of Haiti.

The Ambassador went on to assert that economic and health conditions in Haiti do not permit Haiti to get rid of this loan on its present terms. He said that because of the origin of the loan the United States has a moral responsibility to assist Haiti in working out a new arrangement for repayment. He also referred to statements by high officers of this Government that it is our objective to help democratic regimes. He said that Haiti simply could not afford to continue to pay six per cent interest on the private bonds and four per cent on the J. G. White loan. He appeared to be highly agitated and said that in sending the mission to Washington the Government of Haiti had had full confidence that the Government of the United States would assist in the solution of Haiti’s financial problems.

Mr. Barber82 then said that the mission had been fully advised by Ambassador Tittmann before it left Haiti that the Government of the United States was ready at all times to discuss these questions with Haitian representatives, but that this did not necessarily indicate a willingness to accede to Haitian requests. Some discussion ensued at this point as to the meaning in English and in French of the word “confidence”, which had been used by the Ambassador, specifically whether in the French language it carried the same extreme meaning it does in English. The Ambassador reiterated that Haiti expected the Government of the United States would help them in ridding themselves of the bad financial situation in Haiti.

Finance Minister Margron then stated it would be a mistake to view the problem economically, since the most important aspect of the situation is political. He said Haiti did not expect either its creditors or the Export-Import Bank to view the problem from this point of view, but did anticipate that the American people (by this he apparently meant the Department) would give sympathetic consideration to the political needs of the situation in Haiti. At this point Dr. Rigaud said that the present Government must do something to meet the basic economic needs of the country, and that if it does not, further political unrest and revolutions will take place and the Government will fall from power. He said that the American occupation had come to Haiti to stop revolutions, and added that 25 per cent of the Haitian budget was too much for debt servicing.

[Page 947]

Finance Minister Margron asserted that Haiti has been getting along on what he termed a salary budget for the last several years. This does not leave sufficient funds for agricultural, public works, and other necessary developmental projects. He said that two classes of people particularly were suffering in Haiti, the city laboring group and the unemployed intellectuals. Both he and Dr. Rigaud said that it is not the producers and the peasants who are undergoing extreme hardship, but rather the two above urban groups.

Mr. Stenger83 inquired as to how agricultural projects would help these classes. Finance Minister Margron said that these projects would take the unemployed labor element out of the cities and put them to work in the country.

Mr. Cady84 inquired as to what per cent of the population fell into the class needing assistance. The Finance Minister estimated this group at ten per cent of the Haitian population. Dr. Rigaud emphasized the thirty to forty thousand intellectuals, who, he said, were young men of good education who could not find positions in Haiti and hence were potential political organizers and agitators. Mr. Hauch inquired whether a program of the type desired by the Haitian Government would benefit this group. Dr. Rigaud asserted that it would, and added that not only would agriculture be developed as a result thereof, but the general economy would be improved through an improvement in agriculture.

Mr. Livesey commented that it was somewhat strange that Haiti was seeking financial relief at one of the highest earning points in its economic history and stated that in this situation it appeared obvious that the desirable thing to do was to pay off six per cent obligations as quickly as possible. He asserted that Haiti was at the peak of its prosperity.

Finance Minister Margron said that Haiti was not at the peak of its prosperty for the following reasons:

Although Government revenues appear high, the purchasing power of the gourde has been reduced in recent years by one-half to two-thirds;
The seemingly high Government revenue figures have been caused in part by the imposition of high and undesirable taxes; and
Certain absolutely necessary expenses of the Haitian Government have increased and it is impossible to reduce them.

Ambassador Charles reiterated that the political phase of the program was the most important, that the new Government was imbued [Page 948] with democratic principles, but that if it failed the situation would be very bad. He added that democracy would fail in Haiti unless this Government assists Haiti in its financial problems.

Mr. Stenger said that we appreciated receiving this background on the Haitian financial situation, but the specific point at issue at this part of the discussion concerned the Haitian request that the Export-Import Bank make a loan for retiring Haiti’s dollar bonds, and as had been already pointed out, the Bank lacked power in this connection. Ambassador Charles again reiterated that Haiti was coming to the United States because the United States Government had, in effect, guaranteed the loan contracts of 1922 and 1923, and hence Haiti had the moral right to ask the United States Government for help. Mr. Barber said that this had been the procedure in the past, and that this Government had acted as an intermediary between the Haitian Government and its bondholders. He stated that we have gone to the bondholders to ask for a reduction in amortization when conditions in Haiti are bad. He said that it would be to Haiti’s advantage to pay off its debt with what amounted to “cheap money”, when, in fact, the debt had been contracted at a time of “hard money”. Mr. Livesey said that in view of the impossibility of refinancing the bonds through the Export-Import Bank, the situation boiled down to what was, from the Haitian point of view, a choice of evils: (1) continue to pay six per cent interest charges and heavy amortization payments, or (2) go into default. The latter alternative would simply prolong the period of the loan, including the necessity of paying six per cent interest. Consequently, he again said the best solution is to pay off these bonds as fast as possible.

Ambassador Charles requested the Department to make a counterproposal on the dollar bond question, if the Haitian request for refinancing by the Export-Import Bank is not acceptable. The representatives of the Department said that they could not put forward any counter-proposal at this time, but would give the matter consideration. Mr. Hauch asked whether the Haitians had looked into the question of a private refunding loan recently. Finance Minister Margron replied that they had not. Mr. Livesey said he did not think Haiti could obtain a more advantageous loan of this type at the present time.

The meeting having consumed more than two hours, it was decided at this point to resume discussions on Monday, December 30, at 2:30 pm, at which time the remaining three points in the Haitian note of December 23, regarding Export-Import Bank credits, would be discussed.

  1. Not printed.
  2. Frederick Livesey, Adviser, Office of Financial and Development Policy, and James C. Corliss, Assistant Chief of the Division of Financial Affairs.
  3. Willard F. Barber, Chief of the Division of Caribbean Affairs.
  4. Jerome J. Stenger, Special Assistant, Division of Investment and Economic Development.
  5. John C. Cady, Assistant Chief of the Division of Investment and Economic Development.