339. Memorandum From the Assistant Secretary of State for Inter-American Affairs (Holland) to the Special Assistant to the Secretary of State for Mutual Security Affairs (Nolting)1
SUBJECT
- Additional Emergency Assistance for Haiti
Immediately following Hurricane Hazel which struck Haiti in October of last year the United States provided emergency aid amounting to $2 million worth of surplus agricultural commodities and $350,000 worth of seeds and light agricultural tools. Although there was some thought at that time that additional aid might be required, Haiti was not included in the 1955 budget presentation as a country in which an economic development program would be carried out because there was not sufficient data to indicate whether such additional aid was actually needed.
By December of 1954, however, the Department had received a request for additional aid from the President of Haiti and our Embassy and USOM Mission had reported that damage caused to the coffee crop by the floods which followed Hurricane Hazel was extensive. The Haitian budget was cut from approximately $28 million to $26 million. Haitian government workers took a 10% cut in salaries and it was estimated by the Haitians and by our missions that total receipts for the current fiscal year would probably be $8 to $9 million short of estimated expenditures. It was also estimated that from 20% to 40% of the coffee and cacao crops had been destroyed. This plus expected lower coffee prices would, of course, seriously curtail Haiti’s principal source of income.
Secret conversations between the Ambassador and officials of the Haitian National Bank brought forth the fact that there was already an overdraft of $4,600,000 and that the Haitian economic situation was serious.
[Page 934]In addition, the Embassy reported increasing rumors of political unrest and predictions by well informed persons that unless President Magloire was able to obtain loans and grant in aid to bolster the country’s economy, the situation would become so serious by April or May that it was doubtful the Magloire regime could survive. It was pointed out that the Army remains the key to Magloire’s retention of power and although his support by the Army remains firm at the present time, it was doubtful how long Magloire could retain that support if the economic situation deteriorated to a point where it was not possible to meet salaries. Deterioration to this point was envisaged by these observers unless aid was forthcoming. Meanwhile, the Eximbank and the IBRD made separate surveys of the situation. In conversations with Department and FOA officers the Bank representatives have expressed the opinion that Haiti has a current loan capacity of between $10 and $12 million. The Eximbank is actively considering the granting of a loan of between $6 and $8 million for further development of the Artibonite Valley Project. Haiti currently has a $14 million Eximbank loan for this project but it is considered by the Bank that the project will need further financing in order to complete the important work already started. In connection with this loan, Eximbank officials have stated confidentially that they are considering declaring a moratorium of from one to four years on the present loan and any expansion thereof. The Bank also might be willing to consider a Haitian request for a power survey.
It is understood that the IBRD is considering the possibility of a loan for the establishment of a road maintenance program and some road construction. The Bank has not as yet reached a decision on this matter but undoubtedly any loan granted would be within the overall estimate of $10 to $12 million loan capacity and with regard for any loans made by the Eximbank.2
Officials of both Banks have expressed their belief that the reduced revenues of the Haitian Government and the damage caused to the coffee crop are so great that an emergency rehabilitation program is still needed over and above what the Banks might do in the fields they are currently considering. They point out that unless aid is given in rehabilitating Haiti’s principal crop (coffee) the country’s recovery would be so slow that its ability to make payments on loans which might be granted would be seriously jeopardized. The Banks feel that a program designed to rehabilitate the [Page 935] coffee crop, i.e. plant shade trees, clear out debris, bring in new coffee plants, repair damaged irrigation ditches and feeder roads, etc., is most essential and clearly falls into the category of emergency relief designed to help Haiti at a time when its own finances are insufficient to carry out these projects which are so necessary if Haiti is to be able to carry on other necessary economic programs.
The Banks have indicated they would be most happy to see FOA extend the requested grant in aid because they feel it is necessary and because they feel the Banks’ efforts must be confined to other fields.
In so far as the political picture is concerned the Embassy and the Department are of the opinion that the failure to receive adequate aid in the immediate future will leave Haiti in such a weakened economic situation that the stability of the Magloire regime will be threatened. In this respect it should be pointed out that the Haitians are aware that some consideration is being given to their request. They have been informed repeatedly that there are no funds allotted for such a program and that until data justifying the request was received, it would not be possible to present the case. President Magloire was informed that his recent visit to the United States was not the proper occasion to discuss either loans or grant in aid. Despite fears that the President would take up these matters, he adhered strictly to our advice and did not discuss them with officials here. It is probable that his failure to do so was partially the result of his conviction that Haiti would be given aid. The fact that the Haitian appetite has already been whetted is a factor which cannot be entirely ignored. Failure of the United States to aid Haiti at this time when she considers she has real need for aid would undoubtedly be reflected in the cordiality of relations between the two countries.
In view of the above background, I recommend that you forward the attached memorandum to Mr. Stassen3 requesting that, because of the political and economic considerations involved, up to $750,000 be made available under Section 103 of the Mutual Security Act4 for initiation of rehabilitation projects in Haiti. It should be pointed out that the initiation of such a program will undoubtedly call for additional grant aid in fiscal year 1956 to complete the project. While it will be necessary to obtain further data, now being prepared by the Embassy and USOM, before deciding on an exact amount for fiscal year 1956, present estimates are that such a [Page 936] program would probably call for the expenditure of between $2½ and $3 million.
- Source: Department of State, Central Files, 738.5–MSP/2–225. Confidential.↩
- In May 1956, the IBRD made a loan of $2.6 million to the Haitian Government for a program of highway repair and maintenance. For further information, see The World Bank Group in the Americas, International Bank for Reconstruction and Development (Washington, June 1963).↩
- Not printed. (Department of State, Central Files, 738.5–MSP/2–1655)↩
- For text of P.L. 665, the Mutual Security Act of 1954, enacted August 26, 1954, see 68 Stat. 832.↩