Foreign Relations of the United States, 1955–1957, American Republics: Multilateral; Mexico; Caribbean, Volume VI

342. Memorandum From the Assistant Secretary of State for Inter-American Affairs (Holland) to the Acting Secretary of State¹

Washington, October 29, 1955.

SUBJECT

• Financing of Haitian Artibonite Project

Problem:

Additional financing of about $7,500,000 is needed by the end of the year to complete the Artibonite dam and irrigation project in Haiti. The Eximbank is proposing that a direct grant of $5 million be made to Haiti from ICA, or other U.S. source, to complete the project (Tab A). The need for additional funds has been caused, at least in part, by the miscalculations and delays of the American engineering firm supervising the project. It is essential that the project be finished. The Haitian Government claims it cannot, for political reasons, approach the Haitian Congress to request approval of another bank loan.

Reasons for U.S. to Make Grant:

1. The delays and miscalculations of the American engineering firm are largely responsible for the additional costs.

2. We have already had one other unfortunate loan experience in Haiti (SHADA). During World War II we induced Haiti to obtain a $5 million loan for a joint program principally involving cryptostegia rubber as well as sisal and lumbering. The cryptostegia program was a failure and the overall benefit accruing to Haiti from SHADA has in no way measured up to the financial investment which we induced her to make. The Haitians have claimed that the failures were due to errors and miscalculations on the part of the American managers and that the loan was really for the prosecution of the war effort rather than for Haiti’s agricultural development. The Haitians have formally asked us to cancel this indebtedness.

3. Because of 1 and 2, with the resulting criticism and distrust of American methods and techniques, our relations with Haiti could be adversely affected.

4. As a result of Hurricane Hazel, the ensuing drought, and depressed coffee prices, Haiti is going through a period of serious financial difficulties.

5. Other projects which are needed for Haiti’s economic development cannot be undertaken if all its credit is utilized for the Artibonite project.

6. The prestige of the Eximbank will be impaired if it becomes known that it is supporting an additional loan for a project on which engineers, approved by the Bank, made miscalculations amounting to approximately $7 million.

7. Approval of the Haitian Legislature is necessary to obtain another loan. Funds will run out by the end of this year, and the Haitian Congress is not scheduled to meet until April 1956.

8. The Magloire regime claims that it would be politically dangerous to ask Congress for an additional loan.

Reasons for Not Making Grant:

1. We should not establish a precedent of “bailing out” a country because of mistakes made by U.S. firms. This could easily have a chain reaction in Latin America.

2. We just authorized last week an emergency grant to Haiti of $3 million to repair damage done by Hurricane Hazel and the drought. This brings the total grant aid given to Haiti since the hurricane to approximately $7 million, which ARA considers sufficient to rectify that emergency situation.

3. Last year when the last loan extension on the Artibonite of $7 million was being considered, the Eximbank and the IBRD estimated that Haiti’s loan capacity was between $10–12 million, which, if correct, would leave from $3 to $5 million still unused.

4. Increased coffee production makes it appear that Haiti’s economic situation will improve considerably this year. Estimates are that there will be about 375,000 bags exportable surplus as against only 225,000 bags last year.

5. ARA does not believe that a request for an additional loan would cause the overthrow of the Haitian Government. President Magloire has just recently assured our Ambassador that he is in full control of the situation and that the Army is completely loyal to him.

6. The Legislature will do as it is told, and could be called into special session to approve a loan request.

7. All fault for the present situation does not lie with the American engineering firm. The Haitians are partly responsible. Failure to complete land clearing, disputes within the Haitian ODVA, incompetence, etc., have also contributed to the situation.

Recommendation:

In lieu of making a special grant for this purpose, the following alternatives are suggested:

1. Shift the maximum part of the present $3 million emergency grant to the Artibonite, and let Haiti borrow for projects this leaves uncovered.

2. Forgive all or part of the SHADA balance (that is the same as a grant).

3. Refinance existing debts on longer terms to reduce payments.

4. Let Haiti borrow the balance to complete the project².

1. Source: Department of State, Central Files, 838.10/10–2655. Confidential.
2. Hoover initialed his approval of these recommendations on October 31.