838.51/3016: Telegram
The Minister in Haiti (Gordon) to the Secretary of State
92. Please see my despatch No. 9 of September 13.72 The Minister for Finance has handed Pixley73 a memorandum rejecting the proposal contained in the letter of September 23 from Pratt of the National City Bank to de la Rue enclosed in the latter’s letter of September 25 to Edwin Wilson.72 The memorandum is based on contention that the right to redeem the 1922 bonds “necessarily implies the cessation of interest payments as soon as the decision to redeem all outstanding obligations is brought to the knowledge of the bondholders”.
The memorandum ignores the provision in article 26 of the Accord of August 7, 1933, that the Haitian Government can only effect an anticipatory redemption of the bonds provided it is able to make an arrangement for the purpose satisfactory to the bondholders.
The Department will note that the proposals submitted to the Haitian Government by de la Rue with respect to the method of refunding (see enclosure 1 to my despatch under reference) were necessarily [Page 693] based throughout on the postulate that interest is payable on the bonds up to their respective call dates.
The Ministers for Finance and Foreign Affairs both took the position yesterday in conversations with Pixley that at the conference held at Kenscoff on September 12 the President stated that he did not accept the basic postulate above referred to, whereas enclosure 2 to my despatch under reference shows clearly that de la Rue in no wise understood that to be the President’s position. The Foreign Minister went so far as to state that he thinks that there was a definite misunderstanding due to difference in language.
It seems difficult, however, to see how there could have been a misunderstanding on such a cardinal point, and if the Haitians present at the interview felt that de la Rue had not fully comprehended the President’s position it is even more strange that they should have requested him to proceed to the United States to work out a refunding scheme if they had any reason to think that through his misunderstanding of what had been said he would go about this task on a basis unsatisfactory to them.
Since dictating the foregoing, I have just seen the Foreign Minister who says that at the very beginning of the Kenscoff Conference the President stated that he considered that if there were to be a redemption of the bonds prior to their call dates, they would cease to bear interest as from the date of such redemption and that de la Rue did not oppose this contention. The Foreign Minister said that he was surprised at the time and that now that de la Rue had sent down from New York a proposal taking no account of the President’s contention, the Foreign Minister feels sure that there was a definite misunderstanding and that he has so informed the President.
I adduced to the Foreign Minister the consideration set forth in the next to the last paragraph herein above and added that irrespective of whether or not there had in fact been a misunderstanding and of the extent thereof I wished to express to him my conviction that the bondholders would not accept such an interruption of their rights as the President contended for. The Foreign Minister replied that he was not prepared to contest this and added that he was engaged in preparing a study of the question from its purely juridical point of view for submission to the President.
In fact, the Foreign Minister gave me to understand that he felt that if the President could be shown that his position was not well founded he might be brought to modify it. The first step was for de la Rue to be informed of the misunderstanding which is claimed to have arisen and the Foreign Minister thought de la Rue’s reply would clarify the situation and assist in the process above indicated. The Department will I am sure treat the foregoing as of the utmost confidentiality.
[Page 694]By today’s air mail Pixley communicated with de la Rue in the premises and transmitted a copy of the memorandum in question. The former has just reported to me that in a conference which he had with the President this morning the latter reiterated all the arguments set forth in the memorandum of the Minister of Finance above referred to and insisted that redemption of the bonds at par must necessarily constitute an arrangement satisfactory to the bondholders.
I am informed that the President has received a letter from Blanchet dated September 28 saying the latter had not yet seen de la Rue.
I presume that the Department will at once get in touch with de la Rue and I shall appreciate receiving instructions as soon thereafter as possible. With respect to such instructions may I venture to suggest that at this stage of the proceedings I should think that Vincent would be more amenable to arguments emanating from the office of the fiscal representative rather than to representations from me which might necessarily partake more of political character.