MID files, lot 57 D 148, “Point IV–Miscellaneous”
Memorandum by the Director for Northern Division Latin America, Foreign Operations Administration (Clay) to the Acting Regional Director of the Office of Latin American Operations, Foreign Operations Administration (Hardesty)
Subject:
- Emergency Economic Assistance to Haiti
Summary and Recommendation
The $2,000,000 worth of surplus agricultural commodities plus funds for transportation and the $350,000 worth of seeds and light agricultural tools which have already been made available have provided the means for the Government to maintain reasonably tranquil conditions in this immediate period following the hurricane disaster. On the basis of initial reports, however, it was anticipated that additional emergency assistance would be required to enable Haiti to recover from this disaster. The FY–1956 Program proposed by FOA, therefore, included $3,000,000 in addition to the normal technical cooperation program for emergency assistance. This proposed $3,000,000 was eliminated by State.
Since that time, the President of Haiti has orally requested our Ambassador, at a meeting1 attended by the Director of USOM2 and myself, for emergency assistance. The Ambassador informed the President that he did not know whether such assistance could be made available, but that in any case, an official written request would be required. Following the oral request, the Director of USOM and I met with a committee appointed by the President and on each occasion it was carefully explained—
- (a)
- that no funds were contained in the FY–1955 or proposed FY–1956 budget for such assistance;
- (b)
- that there was absolutely no assurance that funds could be obtained and it would at best be extremely difficult;
- (c)
- that any request would have to be directly related to the disaster and not for normal economic development, and
- (d)
- that before any request could even be considered, it would have to be established that the emergency could not be met through maximum feasible effective utilization of the country’s own resources and borrowing capacities.
It was added, however, that it was believed that the same type of analysis and program would be required as the basis of any loans.
The President again requested the Chargé and the Director of USOM for emergency assistance on December 22 and a formal written request will probably be submitted to the Embassy within the next two weeks. In the interim, however, both the Embassy and the USOM have reported on the basis of the information available to them that emergency assistance will be required. I fully concur in their conclusion on the basis of my own evaluation after a ten day visit to Haiti and believe that the situation requires an immediate policy decision on emergency assistance on the basis of the cables from USOM and the Embassy even prior to receipt of the official written request. It is understood, however, that the Department of State still believes that such [Page 1289] emergency assistance is not justified. I, therefore, strongly urge that someone at a high level in this Agency request State to reconsider this decision.
On the basis of preliminary estimates, it is believed that the minimum additional emergency assistance required is approximately as follows:
| FY–1955 | $500,000 to $750,000 |
| FY–1956 | $250,000 to $3,000,000 |
| FY–1957 | $1,000,000 |
It is recommended that the Mission should be immediately authorized to talk with the Haitian Government in terms of figures as possible maximums in order to induce the Government to get down to reality and to get a concrete program under way while the emergency assistance already provided permits the situation to be kept under control and before really serious trouble arises.
Background
The FY 1953–54 revenues of Haiti were approximately the equivalent of $35,000,000 of which approximately $10,000,000 was utilized for economic services and development including $3,000,000 for the Artibonite Valley development for which the Export-Import Bank is also providing a total of $14,000,000 in loans over a period of years. It is anticipated that as a result of disaster damage to coffee and other crops, revenues will fall to approximately $24,000,000 in the first year following the disaster and that three years will be required before they can be restored to a normal level, even if additional emergency assistance is made available. The Government of Haiti estimates that exports will be down by as much as 50% and although this estimate may be excessive, it is anticipated that they will be at least ⅓ below normal.
The regular normal expenditures of the Government can of course be cut and some planned development projects postponed. The budget, however, cannot be cut to the level of earlier years without bringing practically to a halt the meagre economic development program which the Government has painfully gotten under way in recent years and this, it is believed, would be disastrous. The Government, moreover, is faced with the necessity for heavy additional expenditures for reconstruction and rehabilitation essential to permit a large percentage of the population to again earn a livelihood. There will, therefore, inevitably be an extremely serious gap between revenues and essential expenditures. This gap can not all be met by internal loans or by loans from Export-Import Bank and International Bank for Reconstruction and Development. The only internal source from which the Government can borrow funds is the Central Bank which can make such funds available only by an expansion of the note circulation. The [Page 1290] Bank believes that any further drawings by the Government would result in disastrous inflation and while I do not have the information to attempt to make a precise analysis, the extent to which the note circulation could be further expanded is at best extremely limited. The Government moreover, does not have the borrowing capacity to obtain funds from the Export-Import Bank or the IBRD to meet this emergency even if repayments were long deferred. The Export-Import Bank has tentatively indicated its willingness to consider increasing the loan for the Artibonite Valley because of increased costs since the time of the original estimates, but this would not take care of internal costs which are normally met from budgetary revenues. It is believed that the maximum additional borrowing capacity above the possible increased loan for the Artibonite is required for the Port-au-Prince–Aux Cayes road and the Artibonite hydro-electric projects which are essential for the economic future of Haiti. These projects are now being discussed with the IBRD and they most emphatically should not be delayed until any loans for the present emergency could be repaid.
Emergency economic grant assistance is required primarily in FY–1956 and on a reduced scale in FY–1957. I believe, however, that it is essential that some funds be made available in FY–1955 under Section 401 for rehabilitation and reconstruction. Work on restoration of irrigation works and rehabilitation of the coffee industry should start immediately, but the Government does not have funds to do so. There is also the problem of the very existence of many of the people in the immediate disaster areas. The emergency food supplies that have been provided should last to approximately February 1. By that time there should be adequate internal food supplies in the country as a whole. A large number of the population in the immediate disaster areas, however, will have meagre crops of their own. Many of them will not have the funds with which to purchase food from other areas in Haiti and the Government will not have the funds to purchase the food for them. Under these circumstances additional surplus agricultural commodities would seriously disrupt the economy of the country and the only logical answer is immediate initiation of the rehabilitation and reconstruction program which would provide employment for at least some of these people.
Any grant emergency assistance provided to Haiti must be strictly conditioned on effective utilization of the Country’s own resources and anticipated borrowing capacity. The need is so urgent, however, that the provision of emergency economic assistance should not be delayed until the final decision is made on loans. Instead, such assistance should be made available immediately on the basis of written undertakings by the Government and funds then progressively made available as the Government performs pursuant to its undertakings. [Page 1291] The administration of a program of this kind would be most difficult under conditions existing in Haiti, but the fact that the Acting Mission Director, Stanly Baranson, was able by standing firm to get the Government to distribute the emergency food supplies honestly and effectively is at least some evidence that it could succeed.
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