File No. 838.51/340.
Minister Smith to the Secretary of State.
Port au Prince, June 9, 1914.
Sir: I have the honor to report as follows upon the financial status of Haiti, as of this date:
Subscriptions were closed yesterday to an internal loan to the Government, amounting to one and one-half million gourdes, representing in American gold at the prevailing rate of exchange (viz 380 premium) about $312,500.
This loan was subscribed within the past week by small merchants throughout Haiti. About one-fourth of the total was subscribed by merchants in the coast towns and the remainder by Port au Prince merchants and investors. Practically all of these are Germans.
[Terms of the loan contract and other financial matters.]
Decidedly the most interesting development of the financial situation in Haiti is the action contemplated by the bank to refuse to renew [Page 346] for the fiscal year 1914–1915, the “convention budgetaire.” The manager of the bank tells me that the board of directors most probably will refuse to renew this convention, by the terms of which the bank, from month to month, advances all the ordinary expenses of the Government, reimbursing itself at the end of the fiscal year from the surplus remaining after the payment of amortizations and interest on the three foreign loans.
In the event the bank refuses to renew the convention, for which negotiations probably will be begun by the Government in July, and certainly not later than August, the financial situation will at once reach an acute stage.
If then, at the end of the fiscal year, on September 30, the bank shall not have renewed the convention, the Government will find itself without funds of any sort, and with no income, and undoubtedly will find it most difficult to operate. The statement that the Government, in the absence of a budget convention, will be without income is based upon the fact that under the terms of the Loan Contract of 1910, the bank is designated as the sole treasury of the Government, and as such receives all moneys of the Government, and further, is empowered to hold such moneys intact until the end of the fiscal year, which, in this particular case, would be September 30, 1915. There is nothing in the loan contract providing for advancements by the bank, and the convention budgétaire has been in the nature of an accommodation extended by the bank. As before stated, the suspension of the convention budgétaire most likely would bring the Government to a condition where it could not operate.
It is just this condition the bank desires, for it is the belief of the bank that the Government when confronted by such a crisis, would be forced to ask the assistance of the United States in adjusting its financial tangle and that American supervision of the customs would result.
[Report of public opinion.]
In the event the bank refuses in July or August to renew the convention budgétaire, it is not unlikely that the Government of Haiti will soon thereafter indicate its willingness to negotiate with the United States in an effort to find some way out of its financial difficulties. In saying this I am only repeating unofficial information, which has come to me, to the effect that an appeal to the United States for assistance is being discussed in the Palace as a probable remedy for the precarious state in which Haiti now finds herself.
I have [etc.]