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

838.20/7–252

Memorandum of Conversation, by the Chargé in Haiti ( Folsom )¹

confidential

Port-au-Prince , June 30, 1952.

• Participants: Foreign Minister Etheart and Mr. Folsom

Subject:

• The SHADA Situation.

Minister for Foreign Affairs Etheart called me about 9:00 a.m., June 30, to request that I call on him at 10:00 a.m. I said I had an appointment at 10:00 a.m. with the President² but that I could see him at 11:30 a.m., which hour was agreed upon.

Upon my arrival, the Foreign Minister formally presented me with a copy of the report³ on SHADA (I had returned the President’s personal copy during my call on him). The Foreign Minister enlarged upon the situation, speaking of its serious consequences for Haiti, with which I stated my general agreement.

Taking up the conclusions of the report (Section VI), I said that I had received no instructions on the matter and could only give him my personal views. I said I doubted whether SHADA could pass to Haitian administration in view of the Agreements and Contracts, etc. of 1941, though I said it might be acceptable. I said I agreed with the second point on the need for economy and that the third and fourth points⁴ hinged on the decision on the first point. I said that I doubted the wisdom of presenting the fifth point (i.e. cancellation of the $5,000,000 loan), as I believed it highly unlikely to be acceptable and as I believed further it would prejudice future Exim Bank loans.

I then said that Haiti’s history of actual payment of its foreign debt had been good since 1922, that interest and amortization had been paid according to schedule on the 1922 loan until 1938, when, by mutual agreement,⁵ a reduced amortization schedule had been adopted and prolonged from year to year until final funding and extinguishment of the debt by the Internal Loan of 1947.⁶ I noted also that payments of interest and amortization on the J. G. White Loan of 1938⁷ had been met regularly and that the loan had now been paid off and, finally, that the SHADA loan had been serviced, the agreement of May 24, 1951, signed and payments under it met.

I said, however, that I wished to be frank—that the attitude of Haiti had not been as good as the record of performance. I pointed out that there had been grumbling and criticism of the repayment of the 1922 loan; that the J. G. White expenditures had been severely criticized when the time came to pay the loan back, and that now the same sort of criticism of SHADA was taking place. I said I did not recall the exact facts but that my impression was that on occasions in the past other requests had been made for cancellation or reduction of outstanding debts. I said any new request for cancellation, this time of the SHADA loan, would be viewed in this context and that it could not but react badly on future loan applications.

The Foreign Minister thanked me for my frankness and said he would bring this idea to the ears of the President.

I stated also that usually two tactics were open to a Government making demands: (1) to present a very large request and to recede from this, and (2) to make a reasonable approach allowing the facts to speak for themselves. I said in the present case I believed the SHADA situation should be examined carefully and fully without demands and the results of the investigation would suggest the proper solution. I emphasized, however, that I was in no way forcing my views which were completely informal and personal and that the Haitian Government should choose its own course of action and tactics. The Foreign Minister again thanked me for my frankness.

The Foreign Minister then reviewed briefly the four SHADA administrations along the same lines as the President had done on Saturday. He pointed out that the Export-Import Bank had the largest bloc of stock hence the larger vote, that while the Board of Directors was composed of three Haitians and three Americans, actually the Americans controlled SHADA since the American manager could vote to break any tie.

At this point I interrupted and asked if I might again be very frank and perhaps blunt. The Minister answered me he wished to have my views. I said that I wished to warn him against any emphasis on American domination. I admitted the facts as he outlined them, but said any linking of American domination charges with the present sad state of SHADA appeared to me to imply (1) that the American members of the Board had voted along national lines—an assertion I could not believe or accept as I believed them to be men of character and honesty who would vote on the basis of convictions as to what was best for Haiti, SHADA and the Export-Import Bank (2) that the American members were either incompetent or intellectually dishonest—both of these implications I rejected categorically. I said that I believed that the facts would demonstrate that Mr. MacQueen as manager had never been forced to cast his vote to break a tie vote (whether the division was mixed or along national lines). I added that if there had been any American domination or collusion between American Board members and the American management—a suggestion, which I rejected—the Haitian members had clearly been derelict in not forcing a tie vote on each issue of importance, thus forcing the manager to cast his vote and thus demonstrate such collusion, which then could have been brought to the attention of the proper authorities. I said I was confident the minutes of the meetings of the Board of Directors would show no such list of the votes along national lines. Thus, I said, I believed any discussion or emphasis on alleged American domination of SHADA could only arouse extreme resentment, could be interpreted as an allegation of American sabotage of SHADA, could be refuted as I had done and that in the refutation it would appear that the Haitian Board members had been derelict in their duty.

The Foreign Minister said he deeply appreciated my frank statement and admitted the correctness of my position. He said he would caution against any such approach and would recommend that the much safer approach would be that the first administration had been bad, the second two excellent or good and that the fourth is poor and discuss the subject on the merits of the case, basing any request for Haitian management on a record of 50 percent unsatisfactory performance (from the point of view of the Haitian Government) by American management and a desire to try Haitian management, who presumably would know the country and its problems better.

In closing the interview on the subject of SHADA, I said that I regretted the need to have been so frank and blunt, but that I felt the circumstances required it. The Foreign Minister stated that, on the contrary, he was very pleased at my frankness, denying that I had been blunt. He said he greatly appreciated my views, that he knew I am not only interested in protecting the interests of my Government but also that I am a friend of Haiti, and his friend and that I should speak frankly. He said he believed we could accomplish much more by complete honesty and frankness.

1. Transmitted to the Department of State under cover of despatch 2, from Port-au-Prince, dated July 2, 1952, not printed (838.20/7–252).
2. A memorandum of conversation between Chargé Folsom and President Magloire, dated June 30, 1952, was enclosed with despatch 2 of July 2.
3. A copy of the referenced report, in French, containing the results of the investigation previously authorized by President Magloire, dated June 1952, was transmitted to the Department of State under cover of despatch 820, from Port-au-Prince, dated June 29, 1952, not printed (838.20/6–2952). No translation of the report was found in Department of State files.
4. These were essentially as follows: (3) Assistance would be provided to Haiti under Point Four for the purpose of achieving a complete inventory of SHADA’s operations and also for establishing a new development plan together with a new financial arrangement; (4) the Haitian Government would establish a new institution to succeed SHADA which would be under Haitian control and have the assistance of technical personnel provided in part by Point Four.
5. For documentation on this subject, see Foreign Relations, 1938, vol. v, pp. 573 ff.
6. For documentation relating to this loan, see ibid., 1947, vol. viii, pp. 727 ff.
7. Reference is to an Export-Import Bank loan of $5.5 million approved on June 18, 1938, to assist in financing public works projects in Haiti; the Haitian Government engaged the J. G. White Engineering Company to carry out the projects.