No. 202.
Mr. Bassett to Mr. Fish.
Port au Prince, Hayti, November 6, 1872. (Rec’d Nov. 21.)
Sir: The importance which this government has of late apparently attached to the financial condition of the country, and the activity which now appears to characterize its proceedings in this regard, as well as the possible bearings of the subject in other directions, induce me to submit herewith a succinct statement of the financial history of Hayti.
From the date of Haytien independence, in 1804, to 1827, a period of nearly a quarter of a century, specie was the only circulating medium in Hayti. In 1825, however, this government engaged itself to pay to France one hundred and fifty millions of francs as an indemnity for the destruction and confiscation of the property of French subjects durine and subsequent to the war of independence. The drain made upon the circulating medium in meeting the first two or three installments of this indemnity induced the government of President Boyer to issue a paper currency in the year 1827.
This paper currency had what is termed here a forced circulation, (cours forcé;) that is to say, it consisted of notes of the national treasury issued without promise of ultimate redemption in specie, and without bearing any interest. It nevertheless was made a legal tender in all business transactions throughout the republic.
Silver coin stamped with the arms of the republic had been struck under the administration of Petion, and was continued under that of Boyer, the effigies of these chieftains furnishing the stamp for the reverse side of the coins struck under their respective administrations.
The denominations of these coins were one gourde or dollar, representing one hundred centimes, a half gourde, representing fifty centimes, a quarter of a gourde, representing twenty-five centimes, and an eighth of a gourde, representing twelve and one-half centimes. But the gourde or Haytien dollar contains such a large alloy of copper, that although about the size of the American half-dollar, it is intrinsically worth but thirty-three cents, as compared with the silver coinage of the United States or Spain.
[Page 448]The Haytien centimes are struck in copper, in pieces bearing the denominations of one, two, and six centimes. The Haytien centime bears about the same proportion to the American copper or nickel coinage as the silver coins of the two countries bear to one another; that is to say, one American copper or nickel cent is equal in value to three Haytien centimes.
But notwithstanding this disparity in the intrinsic value of the metallic coin of Hayti and that of the United States and Spain, yet under Petion, and in the first years of Boyer’s administration, the Haytien gourde or dollar circulated in this republic at par with the American or Spanish silver dollar. The result was that private parties, principally foreign traders with or merchants residing in Hayti, caused to be coined on their own account Haytien money of the exact value and metallic composition of that which was coined by this government, and brought it into the country for trading purposes. And although the government here was aware of this fact, and several persons are said to have been condemned and executed under Petion and Boyer for being engaged in this coinage, yet it was impossible either to entirely prevent it or to always ferret out the guilty parties who were engaged in this unlawful pursuit. As the private coiner thus gained two hundred per centum while the Haytien gourde or dollar circulated in the repulic at par with the American or Spanish dollar, it was a great temptation to traders who were not over-scrupulous to hazard even life itself in the illicit business.
The paper money introduced in 1827 by Boyer was issued in denominations of one, two, and ten gourde bills, which were to circulate as the equivalent of the same denomination in silver coin, though, as already remarked, without any pledge of ultimate redemption in specie, and without bearing any interest. The ten-gourde bills being extensively counterfeited, this denomination was soon withdrawn from circulation by Mr. Boyer. The one and two gourde bills were the only denominations maintained in circulation until the end of his administration, in 1843, when, in consequence of the yearly emission of paper money, the paper currency had in commercial circles depreciated in value so that four gourdes in paper were equivalent to one American or Spanish silver dollar. This showed a depreciation of thirty-three per centum, at the end of sixteen years, in the paper currency as compared with the intrinsic value of the Haytien silver coin, of which three gourdes are the equivalent of the American or Spanish dollar.
The revolutions that followed from 1843 necessitated the continual yearly emission of paper money, and caused it to steadily decline in value so as to be worth but twenty gourdes to the American silver dollar at the fall of Soulouque, in 1859; but thirty gourdes to the American silver dollar at the fall of Geffrard, in 1867, when the emissions had reached the sum of one hundred and twenty million gourdes, ($120,000,000.) Finally, at the breaking out of the revolution under Salnave, the contending parties vied with each other in printing paper money and forcing the circulation thereof. This depreciated the value of Salnave’s paper to two thousand gourdes ($2,000) to the American silver dollar, and that of the insurgents to six hundred gourdes ($600) to the silver dollar in the different localities of which they were masters. After the triumph of the revolution, in 1870, one of the first steps of the victorious government was to force the Salnave paper out of circulation, by exchanging it against the revolutionary paper at ten gourdes ($10) of Salnave paper money for one gourde of the revolutionary paper. The effect of this measure, by creating a momentary scarcity of the circulating [Page 449] medium, was to raise for a time the revolutionary paper in value from six hundred to two hundred gourdes to the silver dollar.
This rapid decline in the value of the paper currency during forty-two years of its circulation in Hayti up to 1870 is so overwhelming that the gourde bill having almost reached the vanishing point of monetary value; it would scarcely give any practical or tangible idea of its worthlessness to state in figures the percentage of the depreciation.
Hence, at the triumph of the revolution against Salnave, and the definite inauguration of the government of President Nissage in 1870, the question that seemed uppermost in all minds was that of some radical reform in the monetary system of the republic. Several merchants and other prominent men, mostly Haytiens, discussed in the journals of the country different financial schemes, but all mostly agreeing, with some slight difference of detail, in proposing the withdrawal of the treasury bills from circulation by the negotiation of a loan to effect this, and also to establish a national bank.
The question of a loan to be negotiated abroad occupied the attention of the legislative body in different forms during the session of 1870. But all action was foiled by the unwillingness of the executive and senate to concur with the house of representatives in the adoption of such a measure. The executive seemed content to demand a simple substitution of new treasury notes in place of the old ones, that were so worn and torn that it was with difficulty they could be used for ordinary business transactions. But the house of representatives, to whom belongs the right of originating financial measures, persistently refused to vote a simple substitution, in spite of the reiterated demands to that effect made by the executive during the session of 1870. The legislative body, therefore, adjourned that year without having effected anything in the way of financial reform.
At the next session, in 1871, the executive still remained firm in favor of a simple substitution, and the house of representatives remained none the less firm in its purpose to carry out a more radical reform in the monetary system of the republic. However, the old treasury bills in circulation had now become so tattered that the ends of trade could not be effected by them, and it was absolutely necessary to give some relief, even if it were only momentary. A compromise was therefore agreed upon between the executive and the chambers. On the one hand a simple substitution was voted, as proposed by the executive, to take the place of the torn bills under which commerce groaned, and on the other hand an additional customs duty of ten per centum was imposed on imports and exports, to form a sinking-fund to be devoted to the redemption and withdrawal of the paper money from circulation as soon as possible. This additional duty ought to yield about three hundred thousand dollars in specie per annum.
The substitution, thus reluctantly voted by the corps legislatif as a compromise measure, went into execution in December, 1871. But, during the first three or four months of its operation, there were such abstractions made of the new bills from the public treasury by the undoubted connivance of those charged to carry out the substitution, and so much counterfeiting of the new issue, that the executive himself, in the annual message to the corps legislatif in April, 1872, demanded the entire reform of the monetary system of the republic.
At this juncture the largest foreign commercial house in Hayti, that of White, Hartman & Company, who had evidently been studying the drift of things from the moment that the cry had been made for a financial reform of the currency of the country, came forward with a proposition [Page 450] to furnish the government with a loan of fifteen million franes for the redemption and withdrawal of the paper money from circulation. Mr. Hartmann has himself furnished me with the following statement of the proposition of his house:
To pay over to the government here the fell equivalent of fifteen million francs, the government paying eleven per centum for the two first years, and then for twelve years running a sum of two million six hundred and forty-six thousand francs for interest and sinking-fund. At the expiration of these twelve years the whole debt would thus have been liquidated.
The only guarantee asked for was a law binding the government to pay over to the lenders a sufficient share of the export duties to cover the yearly payments.
The only difficulty in the way of securing such a loan as the government desired, had been the security which it could offer. I have given Mr. Hartmann’s own statement of the security which he claims his house demanded. But there is said to have been another understanding on this point. This understanding is thus stated to me by the head of another large commercial house supposed to be conversant with most large financial transactions here:
The lenders asked as security for the money to be loaned that they should be intrusted with collecting the customs revenues of the island, paying off first the amount due yearly to the French government, and handing over to the Haytien government the surplus, after having deducted the amount due them.
This proposition was, perhaps, not to appear thus stated in a direct way; but it would be extraordinary for a foreign house, fully cognizant of affairs in Hayti, to lend large sums to a government like this, without the amplest security.
The corps legislatif, after having considered in secret session the plan proposed by Messieurs White, Hartmann & Company, declined to accept it on the ground, it is claimed, that it was a foreign loan, which might leave the country open to foreign intervention, an idea supposed to have been suggested by the recent action of Captain Batsch, commander of the German corvette Vineta, in which he initiated hostile proceedings to enforce the immediate payment of the sum of three thousand pounds sterling claimed as an indemnity due to German subjects. It therefore contented itself to apply and extend the principle already commenced in the formation of the sinking-fund.
After several conferences held between the executive and joint committees of the corps legislatif on the ways and means to be adopted, final action was taken, by which it was resolved that the ten per centum additional duties for the sinking-fund should be maintained; that a supplementary duty of twenty-five per centum should be levied on the import and twenty per centum on the export duties; and that the executive should have power to contract in the country a loan of eight hundred thousand dollars, the whole to be applied to the redemption and withdrawal of the paper money from circulation from and after October 1, 1872, at the rate of one dollar specie for three hundred Haytien gourdes or dollars. A commission, composed of seven members, has been named by the corps legislatif to co-operate with the executive in carrying out the plan resolved upon.
The following estimates will show the amount which it is thought that this measure will yield by the end of the fiscal year, September 30, 1873:
| Ten per centum sinking fund for two years | $600,000 |
| Twenty per centum and twenty-five per centum suplementary fund | 800,000 |
| Domestic loan | 800,000 |
| Total | 2,200,000 |
(Two million two hundred thousand dollars gold.)
[Page 451]That is to say, an amount of about two million dollars in specie, a sum capable of calling in and redeeming six hundred million Haytien gourdes at three hundred to the specie dollar, the rate fixed by law.
The executive and the special commission are now occupied in carrying out the details of this plan. They made application to the house of White, Hartmann & Company to effect the proposed domestic loan of eight hundred thousand dollars, ($800,000,) and published in the meantime various decrees regulating the collection of the extra duties for the fiscal year beginning October 1, 1872. A plan to collect these duties by anticipation each quarter, by allowing a discount of twelve per centum, promulgated by the executive and the special commission, does not seem to meet with much favor or ready acceptance in commercial circles, and is not likely to come up to the government’s expectations on this head. Moreover, the refusal by the corps legislatif to acknowledge the forced loan exacted by the Salnave government from Haytien citizens has caused the parties in Europe upon whom Mr. Hartmann relied to supply the funds to make the proposed loan to refuse to have any further dealings with the Haytien government. Indeed, Mr. Hartmann has himself shown me a communication from those parties, expressly enjoining it upon him to incur no responsibilities with this government without previous advices from them.
A subsequent plan set forth by the executive and the commissioners is somewhat more practical and will more probably accomplish the desired object. It is this: the collection of the amount of these additional duties, that is, the ten per centum sinking-fund and twenty-five per centum supplementary fund from and after October 1, 1872, in Haytien paper money instead of specie at the rate of three hundred gourdes to the specie dollar. It is estimated that these funds will amount annually to one million one hundred thousand dollars, ($1,100,000.) Thus, although the redemption and withdrawal of the paper money may be effected by one and the same operation, yet it will take at least two years to effect its redemption and withdrawal by the application of this amount only of the annual revenue. The executive and the special commission meanwhile will have to exercise a sharp vigilance to see that the paper money thus received shall be destroyed and not surreptitiously carried away, as it is too apt to be by dishonest officials to whom the handling of it may be intrusted, to be brought back and presented a second or even a third time for redemption.
As American silver coin has been made a legal tender by legislative sanction on and after October 1, 1872, in all business transactions, and as it is supposed that there is not a sufficiency of this coinage in the country to supply the demand of ordinary business transactions, and as the ignorant mountain people who raise and sell all the coffee and other exportations produced here are unacquainted with the value of these coins and very suspicious of all changes in the currency of the country, therefore a chaos in business affairs, amounting almost to a financial panic, has been anticipated during the two or three months dating from the commencement of the new order of things. But the speedy demonetization of the paper currency, though proposed and discussed, has wisely been deferred, and the wretched treasury bills, concurrently with the (theoretical) circulation of specie, still enjoy their old place and commercial value. It is probably owing to this state of facts that the fears of difficulty have not thus far been realized.
The silver and copper coins issued by former Haytien administrations are quite out of circulation, and foreign silver coins of a smaller denomination than twenty-five cents are equally rare here. As a step toward a [Page 452] preparation to meet the necessity which must arise in case the withdrawal of the paper money be effected, the government has already collected and sent to the United States something like a hundred thousand dollars’ worth of Haytian coinage for the purpose of having it converted into coins of small denomination.
The project of supplanting the paper circulating medium by a metallic one seems to have become the pet scheme of this administration. Its ultimate success would undoubtedly prove a great protection to the laboring classes, and, for a time at least, a solid benefit to the country. But the absence of any guarantee for a continuation of the public tranquility, * * if not a scarcity of real practical and executive ability among them, and the coldness with which the scheme is regarded by a large portion of the foreign merchants who control most of the capital of the country, and whose fortunes have been wont to receive large and quick augmentations by the remarkable fluctuation in the values of the paper currency, forbid a perfect confidence in the final and complete attainment of the end in view.
I am, &c.,