358. Letter From the Ambassador in Cuba (Bonsal) to the Assistant Secretary of State for Inter-American Affairs (Rubottom)1
Dear Dick: I have lunch with Felipe Pazos every two or three weeks. I was with him today. He is as much concerned as I am about the deterioration of Cuban-American relations. I stressed to him the degree to which I believed this resulted from the words and actions of the Cuban Government. You are familiar with the line on this subject and I will not repeat it.
Pazos appears to believe that Cuba is already running into a severe exchange crisis and that, in the absence of balance of payments credits, it will have to resort to such measures as exchange rate surcharges and other means to cut down imports.
This led to a discussion of the forthcoming tariff negotiations. José Antonio Guerra, who is very knowledgeable on this subject, was present. I stressed the importance of the Cubans letting us have their proposals for the very large number of items they have mentioned as soon as possible in order to permit (a) informal discussion of the situation before formal negotiations begin, and (b) to avoid the long delay to enable our delegation to study the proposals which would be the result of waiting until the beginning of formal negotiations to submit them. I think I made some impression. However, Guerra is very firm. His view is that the ordinary process of reciprocity and compensatory concessions will not be applicable in view of Cuba’s requirements. Those requirements are a blend of protection and balance of payments needs. Guerra believes that as a minimum Cuban duties will have to be put on ad valorem basis to restore the relationship which existed between the present specific duties and the 1935–39 price levels. I asked him what the impact would be if we were to adopt such a procedure with respect, for example, to the duty on Cuban sugar. I said that under the quota system a rise in the duty would probably not affect the price at which sugar is sold in the United States. He was not sure he agreed with me on this.
Guerra then raised the point that the United States quota on Cuban sugar, which is, of course, a major consideration for the customs treatment given to United States exports to Cuba, is not subject [Page 594] to negotiation, and that this is unfair to Cuba. I have heard this before and there may be some theoretical substance to it, but I do not see what can be done about it.
Pazos tells me that Castro still visits the National Bank once a week, usually on Thursdays, and stays for several hours, and that he is intensely interested in his economic education. Nevertheless, we have a long way to go before this becomes anything resembling a coordinated operation. Although Pazos did not mention it to me, I am hopeful that perhaps the World Bank will have an opening soon to bring a study of the Cuban economy, which was made some years ago by the Bank, up to date. As you are perhaps aware, and as we are reporting separately, the Cuban Consolidated Railway has been discussing the possibility of a loan with the Bank. These discussions are in a very preliminary stage but they may prove constructive if the World Bank can get into the picture.
I spoke very strongly to Pazos about the treatment of American utilities here without, of course, going into the specific merits. I am sure that he and the others agree fully as to the disastrous effect on Cuba’s credit standing resulting from these arbitrary actions. I wish that there were some way of reaching an approximation to the truth about these situations. There has been such a long period of non-regulation in the rather loose atmosphere prevailing in Cuba that it is possible that a certain number of abuses have crept into these situations. On the other hand, it is highly probable that the action taken by the Government with respect to the Electric Company was vindictive and far too extreme. But how do you get an approximation to what would be fair?
Pazos is working on a number of minor industrialization projects. There is a possibility, by the way, that Ché Guevara may be given an important role in the country’s industrialization programs, i.e., the channeling of public funds into industry, including basic industry such as steel. This would be very bad.
Pazos expressed the fear that United States policy toward Cuba was based on a conviction that the present Government could not last, that it would “break its neck” and that this would be a good thing. I quickly told him that this was not the case, that I was convinced of the Government’s political strength and of the degree to which it symbolizes the hopes and aspirations of the great majority of the people. I said, however, that the words and actions of Cuban leaders were spreading so strong a sensation of anti-Americanism that an increasingly unfavorable atmosphere was being created in the United States. Pazos agreed with this, but did not seem to have any very constructive ideas. I shall keep after him.
[Page 595]Please forgive this rather rambling letter written under a certain amount of time pressure.
Sincerely yours,
- Source: Department of State, Central Files, 611.37/9–259. Confidential; Official-Informal. In the margin Devine wrote the following note on September 4: “No reply necessary in view of Ambassador’s imminent arrival.”↩