Foreign Relations of the United States, 1952–1954, The American Republics, Volume IV

838.49/12–1454

Memorandum by the Director of the Office of Middle American Affairs (Newbegin) to the Assistant Secretary of State for Inter-American Affairs (Holland)¹

confidential

[Washington,] December 14, 1954.

Subject:

• Haiti’s Economic Difficulties—FOA Problems

Discussion

(1) FOA Matters

During the past few weeks we have received numerous communications describing the resentment of President Magloire and other Haitian officials at certain actions of FOA personnel in connection with the distribution of the some $2,700,000 worth of relief supplies for Haiti.² Most of the criticism was directed against Mr. Stanley Baranson, who was Acting Chief of the USOM at the time and in charge of the distribution of the relief supplies. The matter became so serious and had such a definite bearing on our relations with top Haitian officials that it became necessary to transfer Mr. Baranson and Mr. William Shaw, a customs expert.

While the FOA did a marvelous job of allocating and getting these emergency supplies to Haiti, the apparent lack of tact on the part of their representatives detracted from the overall effectiveness of the very charitable and worthwhile emergency program which we developed following Hurricane Hazel. The differences became so great that the Haitian Army is planning to withdraw from the distribution program on December 15, leaving a question as to just how much the relief supplies are needed if the Haitians themselves are not willing to continue their distribution.

(2) Further Emergency Program

On November 30 Mr. Eugene Clay of FOA proceeded to Haiti on an official visit. Although he had recommended that $3,000,000 be budgeted for an emergency program for Haiti in FY 1956, he knew before he left for Haiti that this item had been cut from the budget and that there were no funds available for additional Haitian relief.

Nevertheless, a meeting with President Magloire was held in Port-au-Prince, with Ambassador Davis, Mr. Clay and Mr. Barall of the Embassy present.³ Haiti’s economic difficulties were discussed and it was suggested that a commission be named by the President which would make recommendations as to Haiti’s economic needs over and above any assistance which might be obtained through public or private loans. It was suggested that such additional help might be obtained under Sections 401 or 501 of the Mutual Security Act, although it was pointed out that no funds for this program were now available. It appears, however, from correspondence from the Embassy that the Haitians definitely gained the impression that such funds would be forthcoming when they presented a documented request. It seems possible this impression arose from the manner in which Mr. Clay presented the matter.

(3) Artibonite Difficulties

Meanwhile, Brown & Root, the contractors who are building the dam and irrigation canals for the Artibonite Valley project, have experienced difficulties in having claims for payments which they have made on the work processed by the ODVA (the Haitian committee handling the development of the Artibonite Valley). The Eximbank had granted a loan of $14,000,000 for the Artibonite project and the Brown & Root expenses were to be paid from this loan. It now appears there are not sufficient funds to complete the Artibonite project and the Haitians will probably ask the Eximbank for a further loan. Representatives of the ODVA are leaving Port-au-Prince for Washington on December 15 and will confer with Eximbank officials from December 20–23. We consider that the Artibonite project is an important and essential one to Haiti’s economy and should be continued.

(4) IBRD Mission

A mission from the International Bank just returned from Haiti today after making a survey to determine whether there was a basis for an IBRD loan to Haiti. Apparently, the project being most considered by the Bank is a road from Port-au-Prince to Aux Cayes. Preliminary reports have indicated there might be some question as to whether the Haitians would accept the conditions which the IBRD would place on such a loan.

(5) Other Financial Difficulties

Top representatives of the Haitian National Bank called at the Embassy secretly to inform the Ambassador that Haiti’s finances were in extremely bad shape; that there was a deficit of 32,000,000 gourdes ($6,400,000) and that 23,000,000 gourdes of this consisted of an overdraft at the Bank. They estimated that there will be a severe drop in Haiti’s income as a result of damage done by the hurricane to the coffee crop and that the Government has not yet been willing to institute the genuine economies and real austerity which is required. The Bank referred to continued graft and expressed the fear that it will be called upon to finance uneconomical development projects.

(6) General Situation

All the foregoing has resulted in a sudden presentation by the Embassy to the Department of a very dismal picture insofar as Haiti is concerned. The Embassy has stated that if assistance is not given, economic chaos in Haiti might result and that even the stability of the Administration might be threatened. A recent letter from Mr. Barall states that the Haitians are so sure they will receive aid from the United States that the failure to receive any such aid will result in the United States being criticized severely and being blamed for Haiti’s condition. Mr. Barall recommends that some three to five million dollars be allocated under the emergency program and that the Embassy and the USOM be authorized to “dole out” this amount for projects in Haiti which are sound and which will benefit Haiti’s long-range economy. He believes that assistance of this type would not only satisfy Haiti’s desire for additional aid, but would also assure that the funds are used wisely.

Comment

So far, we have conflicting reports as to the exact extent of the emergency in Haiti. The Ambassador and other competent observers seem to feel that the hurricane damage has been exaggerated and that the damage to the coffee crop is not as great as at first estimated. There also seems to be a tendency to blame a lot of conditions, which have existed for many years in Haiti, on Hurricane Hazel. Further, it is a little surprising that this “extreme emergency” has developed so very fast and that we now find ourselves faced with the “urgent problem” of saving Haiti from “chaos.”

Recommendations

(1) Complete documentation of all the requests for aid to Haiti should be obtained before any approval is given.

(2) The Artibonite Valley project should be completed, as perhaps the most essential and most important project now under way in Haiti. If additional funds for its completion are needed, support for such funds should be made to the Eximbank.

(3) Any loans which the IBRD feels (as a result of its recent survey) can be made for worthwhile projects, should be encouraged. The Haitians should be urged to comply with any of the conditions required by the Bank.

(4) The Haitians should be encouraged to seek loans from private sources. It has been intimated that the Haitian-American Sugar Company and the electric company in Haiti would be willing to invest further sums if given adequate guarantees by the Haitian Government.

(5) An emergency program for Haiti under the Mutual Security Act should be considered only if it is definitely proven such help is needed over and above aid which can be obtained through private and public loans. Such emergency assistance should be given only on the basis of proven Haitian needs and should not be allowed to develop as another FOA giveaway program.

(6) Aid to Haiti should be conditioned on the basis that Haiti will do more than it has so far to help itself.

(7) No expansion of the regular FOA program should be made unless the Embassy concurs. The Embassy has just made some specific recommendations in this respect, and they should be followed closely.⁴

1. Addressed also to Mr. Cale; drafted by Henry A. Hoyt of the Office of Middle American Affairs.
2. The United States furnished emergency relief supplies to Haiti in the wake of destruction caused by Hurricane Hazel which stuck the country in mid-November.
3. No memorandum of this conversation was found in Department of State files.
4. The source text bears a handwritten notation by Assistant Secretary Holland indicating that he approved the recommendations.