838.20/10–1052
Memorandum of Conversation, by William B. Connett, Jr., of the Office of Middle American Affairs
Subject:
- SHADA
- Participants: Mr. Herbert Gaston, Export-Import Bank
- Mr. Raymond Jones, Export-Import Bank
- Mr. Horace Darton, Export-Import Bank
- Mr. Bernard Bell, Export-Import Bank
- Mr. Thomas Mann, ARA
- Mr. W. B. Connett, Jr., ARA:MID
Mr. Gaston commenced the discussion by saying that the Bank would insist that the Shada indebtedness stand. He pointed out that this indebtedness was voluntarily contracted, that the loan agreement had been negotiated with the Bank by the Haitian Government and that the latter understood and took full responsibility at the time. [Page 1249] Furthermore, he added, Shada has contributed much to the Haitian economy in the form of salaries paid the laborers and the Haitian (as distinct from American) members of the Board, as well as in taxes paid into the Haitian treasury. He estimated that some $18,000,000 had been poured into the Haitian economy as a result of Shada’s operations. Finally, he said the Haitians could not completely avoid responsibility for Shada’s mismanagement since it was evident they could have exercised more supervision over its operations had they really wanted to.
Mr. Gaston outlined a possible solution along the following lines:
- 1.
- Reduction of the interest rate on the outstanding balance from 4 to 2 percent, the amount the Bank paid for money from the U.S. Treasury.
- 2.
- The conclusion of a contract with DPA for the purchase of Shada’s sisal production (Mr. Gaston said DPA had indicated it would be willing to sign a contract for about 13¾¢ CIF New York, though he did not know for what duration).
- 3.
- A new Eximbank loan to provide working capital.
- 4.
- Transfer of control of Shada to the Haitian Government.
- 5.
- The assignment of an expert or experts to make a survey of the Shada properties, and to reconstitute them along more economical lines.
Mr. Gaston suggested, for an example, that it might be advisable (a) to liquidate the Cape Haitian division, processing all the growing sisal leaves regardless of age; (b) to eliminate the unsuitable land from the St. Marc division so that the remainder, which he estimated at about 5,000 acres, could be consolidated into an economical unit; and (c) to continue the forestry and rubber operations, if the survey indicated it was feasible, under a revised policy.
Mr. Mann explained the heavy financial burdens and prospects of reduced revenues faced by the Haitian economy and pointed out the traditional Haitian dependence on U.S. advice and assistance. He said these factors, together with past errors in the management of Shada and the political repercussions the Shada problem might have in Haiti, should make it advisable for the Bank to make every reasonable concession to accommodate the Haitian point of view. He asked Mr. Gaston if there was not some way in which the Bank could do a little better on the indebtedness. Mr. Gaston agreed the Bank might be able to improve on the 2 percent interst rate, and said the important thing, from the Bank’s point of view, was that the Haitians recognize the indebtedness and continue to make some sort of payments on principal. In this connection, he suggested that the Bank might be willing to accept something in the neighborhood of $25,000 a quarter for principal repayment, with a nominal interest rate, or perhaps a moratorium on interest payments for a few years. Mr. Mann then suggested the possibility of TCA assistance in surveying the Shada properties and in helping [Page 1250] the Haitians manage it, pointing out that the use of IIAA technicians would save the Haitians some money in salaries. In conclusion, Mr. Mann agreed to discuss the matter further with TCA and Ambassador Léger.