838.51/2116
The Secretary of State to the Chargé in Haiti ( Grummon )
Sir.: There is enclosed a copy in translation of a note received from the French Embassy with further reference to the question of the exchange of Series “C” bonds39 and the Department’s reply thereto.40
You are instructed to take up this matter with the Financial Adviser and to inform him that the Department feels that it is very desirable that a method be found for reaching a settlement with these remaining bondholders. Aside from the question of policy the Department is inclined to feel that considerations of both law and equity point to the desirability of such a step. While the terms of Article V of the law of December 27, 1923, appear to constitute an attempt by the Government of Haiti to rid itself of its obligation as guarantor of the interest and amortization of the National Railroad bonds, it is not perceived that the Haitian Government could by its sole act divest itself of this obligation. It would seem that the legal significance of the statute in question would amount only to an attempt by the Government to induce holders of the railroad bonds to consent to an exchange for the Series “C” bonds. It may be noted that there are outstanding only 471 certificates representing about $51,000 on the basis of the settlement previously effected.
In view of the limitation of the time for deposit of Railroad bonds to March 31, 1926, contained in the contract of May 26, 1925, with the National City Bank as fiscal agent, it would appear desirable that an attempt be made to arrive at an informal understanding with the bank before the question is taken up with the Haitian Government. If the bank offers no objection to a modification of the loan contract, it is suggested that this matter be brought to the attention of the Haitian Government with the suggestion that legislation be enacted which will authorize the Financial Adviser to place on deposit with the fiscal agent sufficient “C” bonds to effect the exchange of the remaining outstanding 471 certificates of the National Railroad. While it would be [Page 223] desirable that the exchange be effected within a relatively short time, it is not believed that a period limiting the time for exchange should be specified in any new legislation which may be passed.
I am [etc.]