838.51 Cooperation Program/12–3046

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

Third Meeting

Participants: Dr. Adolf A. Berle, Jr.
Mr. Raymond Pace Alexander—Haitian Mission
Ambassador Joseph D. Charles—Haiti
Dr. Georges Rigaud—Former Minister of Commerce and Agriculture, Haiti
Mr. Livesey—OFD
Mr. Stenger—ED
Mr. Corliss—FN
Finance Minister Margron, Haiti
Mr. Cady—ED
Mr. Barber—CAB
Mr. Price–CAB
Mr. Hauch—CAB

The Haitian mission introduced Dr. Berle and Mr. Alexander as its advisers. Mr. Alexander is a negro attorney from Philadelphia.

Mr. Livesey then reviewed the previous meeting of December 27 regarding the possibility of Haiti’s obtaining a loan from the Export-Import Bank to refund its dollar bonds. Dr. Berle asked whether there was not some agency of the United States Government empowered to refinance the loan. He said that the refunding could be done in Wall Street, but that Haiti preferred to deal with the United States Government.

Mr. Livesey said he was interested in hearing that the loan could be refunded through private channels, since his previous impression had been that this probably could not be done at the present time. He said that he did not know of any United States Government agency which could put out funds for this purpose, but said that we would make a careful check on this matter. Finance Minister Margron reiterated the Haitian statement at the previous meeting that the question of the 1922–23 loan was basically a political matter, since it had been forced on Haiti in the first instance. He said that in view of this circumstance Haiti wished the United States to do all it could with the Export-Import Bank or any other arm of the Government to help Haiti to retire the privately held bonds on favorable terms.

Mr. Alexander stated that the issue was also social, since it offered the United States an opportunity to put into practice the principle of support for democracy and human rights which we have stated is one of our objectives. He referred particularly to the happy effect assistance to a Negro republic would have on the colored races everywhere, and added that it would also be a method of combatting communism [Page 950] in Haiti. He said he felt it would be very unwise and unjust for the Department of State simply to refer Haiti to the Export-Import Bank for a decision on the Haitian request for financial assistance and not to take an active and sympathetic interest in the matter.

Mr. Livesey reiterated his previously expressed view that the Department has no intention of not interesting itself in the situation and of simply referring Haiti to the Export-Import Bank. However, assuming that the Bank could do nothing about refinancing the privately held bonds the question of payment would continue to be of primary interest to the Foreign Bondholders Protective Council. The Council had assented to the arrangements made in recent years relieving Haiti of full contractual amortization, and felt that in view of Haiti’s present favorable financial situation neither the Council nor the Department felt that the bondholders should be requested to accept this year treatment less favorable than that of the last two years. Finance Minister Margron stated that the financial situation was by no means favorable in Haiti and said that the seemingly high revenues were caused by the necessity of imposing additional and undesirable taxes. Mr. Livesey said that if Haiti were to pay less amortization during the current year than it has paid during the last two years, the American public concerned with financial questions would receive a very unfavorable impression of Haiti’s credit. Dr. Berle stated that the current figures for Haitian bonds demonstrate that Haiti’s credit is of the best, and he did not think the result of a partial moratorium would be unfavorable to Haiti’s international financial position. Returning to the basic issue of an Export-Import Bank refunding loan for the dollar bonds, Dr. Berle then inquired whether the Haitians would have the sympathy and support of the State Department in presenting the question to the Export-Import Bank.

No direct answer was given to this question, and Mr. Cady suggested that the discussion proceed to the remaining points of the Haitian note of December 23, in order that the Department might have an over-all picture of Haiti’s requests. Following this, the Department could give consideration to the requests and could decide what could be done on an over-all basis.

Ambassador Charles then discussed at length the second and third points of the Haitian note of December 23. With respect to the J. G. White credit, he asserted that the construction and public works carried out by that organization had been poorly done and that Haiti felt that “something should be done” about the interest and amortization on the Export-Import Bank credit advanced for this purpose. As for the SHADA credit, he stated that the Bank had advanced SHADA $5,000,000 for war products such as sisal, hevea and cryptostegia, and that the Export-Import Bank had been in actual control of SHADA [Page 951] and had been guilty of gross mismanagement. In this connection he cited the report of Mr. Reed Hill, a former SHADA officer, who left that organization after a disagreement with its management.

Ambassador Charles went on to say that the Haitian Government had not been permitted to exercise any control with respect to SHADA. He also said that former President Lescot had wanted to demonstrate that the United States had the confidence, full support, and friendship of the Haitian people in the war effort. He said that the Haitian people had not wanted to interfere in any way in the management of SHADA because it had been said in the past that they were unwilling to cooperate with the United States and that there was considerable anti-American feeling in Haiti (Note: The Ambassador’s remark that Haiti had refrained from interfering with the management of SHADA would appear somewhat inconsistent with his first remark that the Haitian Government had not been permitted to realize any control of SHADA’s activities). The Ambassador then went on to present the usual Haitian claim that SHADA had expropriated lands, destroyed crops, cut down trees, and not compensated the peasants for their losses. He said that as just compensation for these losses the Haitian Government felt that the United States Government should cancel Haiti’s obligation to repay the entire SHADA loan, since Haiti considered that the injury it had suffered as a result of the program was its contribution to the war effort and that it should not be asked to assume any additional burden in this connection. He closed his remarks by emphasizing the extreme political and economic need in Haiti for cancellation of this credit.

Mr. Cady inquired as to the use to which Haiti would put additional funds which might be made available through a reduction of debt service charges. Ambassador Charles replied that these funds would be used for agricultural, drainage, and irrigation purposes.

Mr. Stenger then asked for a clear exposition of just what Haiti wished with respect to the two present Export-Import Bank credits. Finance Minister Margron replied that on the J. G. White credit Haiti was not asking for a reduction of the loan, even though it felt the work had been poorly done. He said that Haiti wanted a reduction of the interest rate and an extension of the period of amortization, since the present interest and amortization charges are too heavy. As for SHADA, he asserted that Haiti has lost more than the Export-Import Bank and the Rubber Development Corporation combined had put into SHADA’s activities. He said that the loss to the Haitian economy was at least $15,000,000, as against the Bank’s and the RDC’s investment of approximately $13,000,000. He repeated the Ambassador’s position that a proper adjustment would be to write off the SHADA credit.

[Page 952]

Mr. Stenger stated that since the J. G. White and SHADA credits were loans from the Export-Import Bank, the Department could not take any action with respect to these credits without full consultation and agreement with the Bank. Finance Minister Margron stated that he was not asking the Export-Import Bank alone to cancel the SHADA credit, but was rather requesting that the Government of the United States, quite apart from any of its individual agencies, write off its share of war loss in Haiti. Aside from the SHADA credit, he said that what Haiti wants is a consolidation by the United States Government of its other debts into one credit with a more normal interest rate and an extended amortization schedule.

Dr. Berle then reiterated all the Haitian arguments in favor of a cancellation of the SHADA loan and asserted that SHADA has been and is a virtual failure. Mr. Barber said that Finance Minister Margron, as a member of the SHADA Board, is well aware that at the present time SHADA is operating at a profit. Mr. Margron said that this was true at the present time, but that he doubted whether this would continue during future years when amortization repayments become heavy.

Dr. Rigaud then said that it was in the cryptostegia phase of SHADA’s activities that the loss to the Haitian economy had taken place. Mr. Hauch stated that no repayment of money used for cryptostegia was expected of SHADA or the Haitian Government, since the funds expended on this program were entirely RDC money and neither SHADA nor the Government of Haiti was expected to repay one cent. Some discussion then took place regarding the alleged damage to the Haitian economy from the cryptostegia project. The Haitian mission also stated that it was impossible to separate the cryptostegia phase of operations from the other activities of SHADA. Messrs. Hauch and Barber pointed out that a liberal arrangement had been agreed to by SHADA and RDC, with the approval of the Haitian Government, at the time the cryptostegia program was terminated in 1944 and that our position is that the cryptostegia question is closed. They also said that in order to assist Haitian landholders to restore cryptostegia lands to cultivation of food crops, this Government through the Institute of Inter-American Affairs had sent to Haiti an agricultural assistance field party. Messrs. Margron and Rigaud declared that Haiti was very grateful for the help given by this field party, but asserted that due to the very meager funds which the United States Government had contributed, the group had only been able to scratch the surface in helping to ameliorate distress caused by the cryptostegia project.

Mr. Alexander quoted from a bulletin of the Food Supply Division of the IIAA which had set forth the dislocation in the Haitian economy [Page 953] which had precipitated the sending of a food supply mission to Haiti. Mr. Alexander did not continue on with a statement with what the food supply mission had done to ameliorate this situation, and, therefore, Messrs. Barber and Hauch brought this to his attention.

During this discussion on cryptostegia, reference was made to the fact that various exports of Haiti had increased in volume during the period of cryptostegia operations and in the ensuing years. Although the Haitians made no statement that sugar exports had decreased during this period, Mr. Barber took the opportunity to refer to the decrease in Haitian sugar exports. The Haitians said that any decrease in exports was simply caused by the fact that there was less sugar to export, and that the British were continuing to receive the entire exportable surplus. Mr. Barber said that there was some indication in fact that some sugar not actually consumed in Haiti was not going to the British but was being disposed of in other ways, i.e., through black market operations. This the Haitian representatives denied.

The Haitian mission declared that if an impartial group of experts were to visit Haiti and make a survey of the damage caused by the cryptostegia program, their findings would corroborate the position of Haiti on this matter. At another point in the discussion, in response to Mr. Cady’s inquiry as to whether the mission had complete statistics and facts to support their claim that Haiti requires an easing of the debt burden, the mission replied that they did not have such material and if it were required they would have to return to Haiti to do a research job on this subject. However, they felt that such statistical information and facts should not be required by this Government because the essence of the problem was political and they thought it was somewhat irrelevant to place it on the basis of economic facts and statistics.

Mr. Stenger pointed out that any action by the Government in granting a new loan is now a subject for discussion and must be approved by the National Advisory Council on Economic Foreign Policy. He explained that this is a body composed of representatives from all United States Government agencies concerned with our economic foreign policy. The Department and the Export-Import Bank are, of course, represented, but they alone cannot decide such questions as granting new loans. The Haitian representatives said they appreciated this fact, but felt that the Department could and should advocate the Haitian case before the Council.

Dr. Berle said it was obvious that the Department should consider the Haitian requests and come forward with a long run plan for Haiti’s economic and financial future.

[Page 954]

It was agreed that the next step should be for the Haitians to discuss their requests with the Export-Import Bank, and that representatives of the Department would accompany the Haitian mission for this purpose. Such a meeting had been arranged for 11 am Monday, January 6. In the meantime officers of the Department would give further consideration to the Haitian position.

The two and one-half hour meeting was then adjourned. Immediately following the departure of the Haitian representatives, the officers of the Department present informally discussed the Haitian requests. A tentative preliminary view was that it would probably be impossible to accede to Haitian requests on the dollar bonds and the SHADA credit at this time, but that the Bank might be willing to extend the J. G. White amortization schedule if it appeared that Haiti’s financial and economic picture justified such an extension. This possibility would be explored with the Bank.