350. Memorandum From the Acting Assistant Secretary of State for Inter-American Affairs (Rubottom) to the Under Secretary of State (Herter)1
SUBJECT
- Financial Assistance to Government of Haiti2
Since the downfall of President Magloire in December 1956, there has been a rapid political, financial, and economic deterioration in Haiti. There have been two provisional Presidents since Magloire and at the present time a council made up of representatives of the various presidential candidates is acting as the executive authority. On May 7, we recognized this Government and our new Ambassador is now in residence. Minority elements are now seeking to replace the Executive Council by a military junta. Therefore, although general elections are now scheduled for June 16, any further change of executives could result in postponing the date.
The Haitian Government is virtually without financial resources and is unable to borrow further from the National Bank to cover its operating expenses because its account is heavily overdrawn. The U.S. dollar reserves are down to $6 million, the lowest level in many years, and are being drawn down at the rate of $1 million a month. The current coffee crop, the major export item, was bad, sisal exports have slowed down, and the tourist trade continues adversely affected by the political unrest. Haiti owes the ExImBank about $30 million and defaulted on amortization payments in March.
During FY 57, Haiti is receiving $1.3 million under the Mutual Security Program as grant aid from previous year’s appropriations. This, plus export and tourist earnings and foreign exchange reserves is not enough to carry Haiti to June 30. The “dead season” has already started in which there are low coffee and tourist earnings. An additional $1 million in U.S. dollar grant aid will be needed from [Page 954] this FY’s funds to maintain essential imports and to prevent a collapse of the National Bank and the economy during the next two months. When recourse to such aid is found necessary, it is contemplated that it will be disbursed in small increments to ensure its use is limited to the barest interim essentials. The U.S. Executive Director of the IMF agrees that $1 million in additional aid is needed as a stop-gap for the next eight weeks until a new President takes office and a stabilization program agreed upon.
For FY 58 a stabilization program is being worked out with the International Monetary Fund which is expected to be supported with $4 million of U.S. emergency grant aid and up to a $7.5 million drawing from IMF. It is anticipated that such a program would be predicated upon the institution of adequate fiscal controls and the appointment of a U.S. citizen acceptable to the U.S. to assist in supervising the stabilization program. Haiti received actual grant aid of $1 million in FY 54, $1.6 million in FY 55, $3.2 million in FY 56, plus emergency assistance under PL 480, Title II of $2.7 million in FY 55 and $1.5 million in FY 57.
Recommendation
It is recommended that you sign the attached memorandum requesting Mr. Hollister, Director ICA, to allocate and commit for Haiti an additional $1 million for FY 1957.3
- Source: Department of State, Central Files, 838.10/5–1557. Secret.↩
- In a memorandum of May 14 Rubottom informed Ambassador Drew of discussions between the Department of State, the International Monetary Fund, the International Cooperation Administration, and other governmental agencies on financial assistance to Haiti. The memorandum states in part: “I think it accurate to summarize our basic attitude as follows: 1) We want to restore Haitian financial stability. 2) We want to see the Haitian economy dynamic instead of stagnant, and we hope for rising living standard achieved through greater productivity of the working force. 3) We don’t think these objectives can be achieved without U.S. and international aid, and increased private investment. 4) We don’t think additional aid will be wisely utilized unless international and U.S. influence is exercised at certain key points.” (Ibid., Rubottom Files: Lot 59 D 573, Haiti)↩
- A handwritten notation on the source text indicates that the memorandum to Hollister was signed by Herter on May 16. (Ibid., Central Files, 738.5–MSP/5–1657)↩