838.20/9–252
The Chargé in Haiti (Folsom) to the Department of State
No. 139
Subject:
- SHADA: Overall Comments on the Situation
[Here follows a list of despatches concerning the SHADA situation transmitted to the Department of State by Chargé Folsom between June 29 and August 29, 1952.]
Taken together, these despatches reveal the existence of an incredibly sad state of affairs. At present, I see no solution which will be satisfactory to all concerned. The Haitian Government seeks control of SHADA and to avoid financial loss. The Exim Bank seeks to safeguard its interests and to obtain repayment of some $4,000,000 outstanding on the loan to SHADA. The Department of State and the Embassy desire an equitable settlement, which will minimize Haitian bitterness and which will place the least strain on Haitian-American relations consistent with protection of American interests.
It appears to me that either the Exim Bank must face the loss of most of the $4,000,000 outstanding, or the Haitian Government will have to accept this loss. A moratorium on the debt appears to me as a possible means of easing over the situation, but I fear that in the long run the issue of loss will have to be faced. With this in mind, I should like to set forth my views on certain aspects of the situation, especially with regard to American responsibility and the possibilities of salvaging something from the ruins.
It will be recalled that the original concept of SHADA did not envisage plantation operations. Instead, as denoted by the corporation’s name, it was designed to aid agricultural development in Haiti. While the record, at least here in the Embassy, is not clear as to why SHADA entered the field of sisal, it appears likely that it was done at American suggestion or insistence to relieve the fiber shortage existing during the war. If it was at American insistence that SHADA was diverted into plantation scale operations, this fact should be considered [Page 1246] at this time and it should be recalled that this was not even entirely “development” since SHADA purchased the Liles plantation near St. Marc, an existing mature plantation.
- Secondly, it should be recalled that the Cryptostegia program, while not a part of the regular SHADA program, absorbed much of the attention and energy of the SHADA management, which might better have been occupied with purely SHADA affairs. This costly failure also left SHADA with certain overhead which later became a drain on its resources. This program clearly was of American origin.
- Thirdly, it cannot be denied that it was the American management which bought sisal plantations, which planted all the sisal at once and which in subsequent years (for various reasons) failed to cut out fields, replant, etc., in order to put the plantations in proper cycle. Mistakes were also made in other divisions: citronella was tried and abandoned and later Senator Dejoie carried out a sizable development in essential oils; a costly and completely useless cement logslide was built in the Pine Forest, etc., etc. In arguing with the Haitians, it can be said that the Haitian Government and its representatives on the Board of Directors should have controlled the management more carefully and that they bear a share of the blame for the failure of SHADA. While I have been successful in convincing the Haitians of the desirability of dropping almost completely the argument on allocation of responsibility; while I have been successful to a large degree in having this argumentative section deleted from the Haitian Commission’s memorandum1 to President Magloire; and while I have been almost blunt in refusing to accept any and all charges of American responsibility in discussions during the past three months, I would be delinquent in my duty to the Department, if I did not point out the very large share of responsibility resting on American shoulders. In addition, if one places blame upon the Haitians for the failures of their representatives on the Board of Directors, one must admit that an approximately equal amount of blame accrues to the representative of the Exim Bank. Furthermore, the Haitian argument that these representatives held and voted the largest block of stock, though shelved at present, does have validity.
The present situation of SHADA is so disastrous that it is inconceivable that it was not foreseen at least five years ago. In this respect I should like to draw to the Department’s attention the statements made in 1945 in my Ph.D. thesis, at the bottom of page 407 and the top of page 408, as well as on page 457. In fact, it should have been obvious from the beginning that if all sisal fields were planted at once, [Page 1247] they would all go out of production at approximately the same time. Just how the revised schedule of debt repayment could have been drawn up and signed in May, 1951, barely a year before the SHADA collapse is also inconceivable.
I should like to point out incidentally that the Embassy had not been kept informed of SHADA activities in recent years. The SHADA files from 1947 to 1952 are singularly bare. The Embassy received no prior notice of the present crisis from either SHADA itself or from the Exim Bank representative who was here in May. Now, of course, the Embassy is receiving full information on all phases of SHADA operations.
As I see it, SHADA operations may be conveniently divided into three parts. Foremost are the sisal operations followed by the forestry and rubber operations.
[Here follows discussion of SHADA’s sisal, forestry, and rubber operations.]
The value of the lumber and rubber operations is small. The value of the sisal operations, at present at least, is theoretical and they probably would bring little or nothing if sold. If the entire SHADA were liquidated and sold, it probably would not bring more than $500,000 to $1,000,000. Debt outstanding totals about $4,000,000. It thus appears that there will be a loss of $3,000,000 to $3,500,000, if liquidation is the solution. On the other hand, the very poor outlook of the sisal operation renders any plan to continue operations dangerous, and service on the $4,000,000 outstanding of the loan constitutes one of the major obstacles. Legally, it appears that the Exim Bank can hold the Haitian Government to its guarantee of the loan.
In view of the high degree of responsibility accruing to the Bank through the management, its voting power, and its participation on the Board of Directors, it appears to me that to place the entire burden on the Haitian Government would be inequitable. Furthermore, Haitian-American relations will be embittered for some time if the Haitians are saddled with the entire loss.
It will be seen that I am not offering a solution. In part, that might be attained by a long moratorium or cancellation of the debt, though many problems would still exist. Rather, I am suggesting what should not be done. I might add that it is my impression2 that, barring unforeseen developments, Haitian economy is due for a recession based on falling agricultural prices, restricted markets and decreasing revenues and that the budget cannot stand heavy additional charges at this time.