838.2614/10–953

Memorandum of Conversation, by William B. Connett, Jr., of the Office of Middle American Affairs

confidential

Subject:

  • Artibonite Project
  • Participants: M. Lucien Hibbert, Haitian Minister of Finance
  • Jacques Leger, Haitian Ambassador
  • General Glen Edgar Edgerton, Managing Director Export-Import Bank
  • Mr. Phil AtterberryED
  • Mr. ConnettMID

The interview with General Edgerton was arranged directly by M. Hibbert who requested at the last minute that the interview be private. However, he did not object to the presence of representatives of the Department of State whom he had earlier asked to attend. The interview lasted for over two hours, during which time M. Hibbert did most of the talking. Early in the interview M. Hibbert requested from General Edgerton that he be permitted to call in a stenographer, Madam Nicolas, whom he had brought with him from the Haitian Embassy. General Edgerton said he had no objection but remarked that he would not feel quite as free to talk as he would if he were not speaking for the record. The General also requested that he be provided with a copy of the stenographic notes. M. Hibbert agreed to make them available both to the Eximbank and the Department of State.*

Mr. Hibbert’s exposition, which lasted almost an hour and a half, roughly paralleled what he had told Mr. Folsom in Haiti prior to his departure, as reported in Port-au-Prince despatch No. 157 of September 24, 1953.1 His presentation was divided into three principal parts: part one was designed to show the poor condition of Haiti’s finances; part two consisted of a general review of the Shada situation; and part three was a recommendation that the Artibonite project be reviewed with a view to ascertaining whether its scope might be reduced and its priorities rescheduled so as to assure the technical soundness of the project and to lessen the financial burden on Haiti. M. Hibbert’s remarks are summarized briefly below:

Part one: Haitian finances are directly influenced by the volume and value of a very few agricultural exports, principally coffee and sisal. Because of a smaller coffee crop and reduced prices for sisal and other export commodities, the Haitian economy has suffered a recession from which it is not likely to recover for some years. Two years ago, when the expanded Artibonite [Page 1271] project was agreed upon, prospects were much brighter that the Haitian economy could stand the strain.

The Eximbank has asked the ODVA where the Haitian Government will obtain the funds to pay for the Artibonite project. The ODVA, because this matter was not within its competence, referred it to M. Hibbert, the Secretary of Finance. The immediate problem involved raising the amount of 2.6 million dollars to cover the Haitian contribution to the Artibonite for this (fiscal ?) year. The long range problem involved the question of where Haiti, faced with a downward curve in the business cycle, would find these large sums in future years. M. Hibbert could not see how he could raise 2.6 million dollars this year, particularly since his Department had an over-draft with the National Bank of Haiti for 2.5 million dollars from the last fiscal year and over a million dollars from the preceding year.

Part two: Through gross managerial incompetence Shada, which ten years ago had been acclaimed by its enthusiasts as Haiti’s economic saviour with prospects of tripling the national agricultural production, had become a colossal failure. M. Hibbert, trained in economics and statistics, had foreseen this all along, although it was not until he was appointed to the Special Commission to Investigate Shada that he realized how hopelessly incompetent the American management had been. Because of inefficiency and improper planning, Haiti was despoiled of some of its richest resources, particularly the Pine Forest which was wantonly exploited without provision for reforestation. M. Hibbert himself, because he exposed the magnitude of Shada’s failure and because he spoke critically of the role played by the American directors, particularly Mr. Darton of the Eximbank, and of the American management, particularly Mr. MacQueen, was branded as anti-American and was advised by the President of Haiti not to go to the United States with the mission which in late 1952 negotiated the Shada settlement.

The lessons to be learned from Shada’s failure were: (1) The general inefficiency of bureaucracy and government planning where the profit motive is largely absent (Plantation Dauphin, operating under the free enterprise system, was an example of American management at its best). (2) The costliness of failure of large agricultural development projects like Shada which has saddled the Haitian Government with a 4 million dollar debt which has become an obligation of the Haitian treasury and will make it more difficult to pay for the Artibonite project. (3) In general Shada’s failure opened the eyes of the Haitian President and public to the dangers of a similar failure in the Artibonite, where there are signs already of faulty planning.

Part three: The Artibonite presents a number of serious technical problems; among them are: (1) the cadastral survey has suceeded in establishing property boundaries but has only established ownership in [Page 1272] 800 plots out of some 24,000, (2) the lowering of the mouth of the Estère River would deprive the inhabitants of that region of water for their rice, and hence of their livelihood, for several years to come, or until the Peligré dam and irrigation works are completed, (3) no provision has been made for evacuation and resettlement of the inhabitants of the reservoir area, (4) the reservoir will silt up in thirty years and, for technical reasons, it will not be possible, as is done in some parts of the United States, to construct another dam further up stream when it is no longer useful.

These technical problems, together with the poor condition and prospects of Haitian finances, counsel a much smaller project, along the lines of the one originally conceived several years ago by Mr. Norman Armour, then Assistant Secretary of State, and M. Hibbert. This project would have cost around 5 million dollars and would have been within the reach of Haitian finances. The KTAM engineers, however, like all engineers who know nothing of economics and give no consideration to who is going to pay and how, decided that a much bigger project would be better. The Haitian Government, at that time not fully aware of the magnitude of Shada’s failure, agreed to this proposal. The IIAA planning group elaborated an expensive agricultural development program but gave no hint in their report of how the Haitian Government was to pay for this tremendous project which they themselves estimated would require total outlays by the Haitian Government over a 50 year period of $113 million, which figure the planning group admitted would exceed by $19 million the expected revenues from the project over the same period. To make matters worse, estimated revenues from the project are not realistic and it is doubtful that they would ever reach significant proportions, certainly not during the first 15 years of the project. Practically the only crop which the peasants know how to grow and would grow is rice, and the domestic market for rice in Haiti is already beginning to decline.

The number of people to be benefitted by this costly project amounts to only some 60,000 out of a population of three and a half million. The Haitian Government would be allocating, for years and years to come, a disproportionate share of its revenue for the benefit of a small segment of the population. President Magloire has brought political stability to Haiti but this stability cannot continue unless the Government can show the public some tangible economic results. The Artibonite project cannot hope to do this; on the contrary, it will be a serious drain on the Haitian treasury with no prospect of even breaking even. It would be much more intelligent to apply these funds to developing the tourist trade which could be Haiti’s best dollar-earner after coffee. A new airport is also needed, as are roads and improved power and telephone service.

[Page 1273]

These conclusions made it imperative that the whole Artibonite project be reviewed with a view to curtailing its scope and rescheduling its activities so that it will not constitute such a drain on Haitian economy and so that it can be made technically viable. Perhaps the Canneau intake and related works could be undertaken first, and if this proves a success, consideration could then be given to constructing the Peligré dam after adequate planning for resettlement and erosion control. The decision to go ahead with the expanded project would, of course, be dependent on Haiti’s economic outlook at the time.

Following this exposition, M. Hibbert said that he would like to discuss the whole question with members of the Bank’s staff to see if some satisfactory arrangement could be worked out.

General Edgerton said that his staff would, of course, give full consideration to M. Hibbert’s proposals, though he could not promise what, if anything, could be done to meet them. He assurred M. Hibbert of the cooperation of the Bank in this matter although he added that he could not help but be disturbed that M. Hibbert doubted the economic and technical viability of the project and wished to modify it. General Edgerton said that he could understand some of the Minister’s concern, and that he knew, for example, the difficulty of obtaining the cooperation of independent farmers in government planning. He said that he was not too concerned about the silting up of the reservoir, since only a couple of reservoirs in the world had ever completely silted up. He said that even when a reservoir became largely silted up, its usefulness still remained considerable. He said also that he would have assumed that the engineering firm, in which he had great confidence, would have taken into consideration the various technical problems which M. Hibbert mentioned before proceeding, and that therefore it was not entirely clear to him why a new survey of the project would have to be undertaken now. Furthermore, he pointed out that if M. Hibbert’s proposals involved a cancellation, or even a major modification, of the construction contract this would inevitably entail extra expense. M. Hibbert then commented that he was not urging a cancellation of the contract but merely a modification of it to rearrange priorities and curtail the scope of certain activities.

In taking leave of M. Hibbert, General Edgerton again assured him that he could count on the full cooperation of the Bank’s staff. M. Hibbert said he would like to commence discussions with the staff, if possible, on Monday, October 12, and General Edgerton said he believed this could be arranged.2

  1. When these notes are received by the Department they will be distributed to the same addressees as this memorandum. [Footnote in the source text.]
  2. Not printed (838.2614/9–2453).
  3. No documents relating to subsequent discussions between Finance Minister Hibbert and representatives of the Export-Import Bank concerning modification of the Artibonite project were found in Department of State files.