838.20/6–3052

Memorandum by William B. Connett, Jr., of the Office of Middle American Affairs to the Deputy Assistant Secretary of State for Inter-American Affairs (Mann)2

confidential

Subject:

  • SHADA

Reference:

  • Embassy Port-au-Prince cable of June 28, 19523

Organization

The Société Haitiane-Américaine de Développement Agricole (SHADA) is a bilateral agricultural development corporation, chartered under the laws of Haiti in 1941. Three of the six directors are required to be American citizens. At the time of organization the Eximbank extended a $5,000,000 line of credit4 repayable over a ten year period. The Eximbank has control of a majority [of] Shada’s stock and hence has the right to elect the officers of the corporation. The full amount of the loan is guaranteed by the Haitian Government. The Bank’s approval is required for all projects. Mr. John MacQueen is now the General Manager, and the Eximbank is represented on Shada’s board by Mr. Horace Darton.

Activities

Shada has been active principally in sisal, lumber, and rubber. During the war years primary attention was given to the development of cryptostegia rubber for war purposes.5 This program was a failure. Since the war emphasis has been placed on sisal production. Lumber [Page 1241] has also been important and a small hevea rubber production has continued.

Financial Difficulties

Shada has not proved to be a self-liquidating project. Its failure consistently to show a profit has been variously ascribed to over-capitalization, the cryptostegia program, poor management, and waste. In 1951 the unpaid balance of the Eximbank loan, amounting to about $4,000,000, was funded under terms calling for amortization in 40 quarterly payments.

The repayment on the principal for fiscal 1951–52 was to be $100,000. Interest charges for the same year on the unpaid balance amounted to $189,726. The Shada budget for fiscal 1951–1952 estimated expenditures, including interest and payments on the note, at $2,068,173 and receipts at $2,117,550, as follows:

Sisal fiber $1,430,000
Waste tow 284,200
Lumber 352,750
Hevea rubber 50,600
Total receipts $2,117,550

The receipts from the sale of sisal, which is by far the greatest revenue producer, was estimated on the basis of a price of 22¢ per pound. However, our Embassy reports that the world price has now fallen to 15¢ which apparently accounts chiefly for Shada’s inability to meet the June 15 payment of $25,000 on the note. In accordance with the loan agreement, the Haitian Government becomes liable as cosigner on default of the corporation.

Conclusions

The Shada project has stimulated a considerable amount of ill feeling among the Haitians. The cryptostegia program, in particular, irritated them because they believed it had been forced upon them and was not designed to further the general aims of Shada, namely, the furtherance of Haiti’s general economic development. They have objected also to the manner in which the program has been administered, to its waste, to its cost, to the large number of Americans it has employed. They have tried to escape responsibility themselves by claiming the whole idea was thought up by Americans, and that Americans maintained control of the organization’s policy thru the general manager and thru their control of the common stock. They say also that if the Haitian Government guarantees the loan, it should also [Page 1242] determine policy. While there is some truth in all this, the fact remains that the Haitian Government entered into the agreement freely.

There can be no doubt that if the Haitian Government has to make good the loan it will generate further ill will. Perhaps more important, Shada’s predicament may dampen enthusiasm for the Artibonite project which is similarly an agricultural development project financed by Eximbank credit.6 It may also affect the Haitian Government’s ability to pay for the Artibonite project whose estimated cost has just increased another 2.5 million.

  1. Addressed also to Director of the Office of Middle American Affairs Rubottom and Acting Officer in Charge of Caribbean Affairs Wellman.
  2. Apparent reference to telegram 215, in which the Embassy reported that President Magloire was “gravely concerned” over SHADA’s inability to meet a loan payment due to the Export-Import Bank on June 15, 1952, and that he had authorized a full investigation of the matter (838.20/6–2852).
  3. Approved by the Export-Import Bank on May 1, 1941.
  4. For documentation on the initiation of the cryptostegia rubber program in 1942, see Foreign Relations, 1942, vol. vi, p. 460.
  5. On Dec. 29, 1948, the Export-Import Bank authorized a credit of $4 million to assist in financing the agricultural development of the Artibonite Valley in Haiti; in April 1951, the Bank increased this credit to $14 million.