File No. 837.77/90.

The American Minister to the Secretary of State.

No. 538.]

Sir: Referring to previous correspondence in regard to the Caibarién-Nuevitas railroad, I have the honor herewith to transmit copy and translation of a note dated the 10th instant which I have received from the Cuban Secretary of State in reply to a note which, in pursuance of the Department’s telegraphic instruction of December 4, I addressed to the President and of which a copy was transmitted to the Department with my despatch No. 530 of the 5th instant.

I have [etc.]

A. M. Beaupré.

The Cuban Secretary of State to the American Minister.

Mr. Minister: With reference to the note dated the 5th instant which your excellency addressed to the President of the Republic, and of which you kindly sent a copy to this Department, I am instructed by the President of the Republic to reply thereto in his name as follows:

In the first place, the receipt of the note in question could not but have surprised the President, inasmuch as it was written at the instance of a friendly nation which has a duly accredited representative here, whose representations have always been heeded as far as possible, as in respect of this same matter when his request for postponement of the date of the subasta for the Nuevitas-Caibarién railroad concession was granted; and, moreover, because the only point which can be regarded as worthy of attracting the attention of your excellency’s Government is as a matter of fact the most groundless, that is to say the statements attributed to a high Cuban official whose name is not mentioned and who in making them disregarded the fact that they are clearly repugnant to our laws, statements which are, even cursorily examined, so extravagant [Page 391] [“contrarias a la realidad”] that they need not have caused a moment’s anxiety to your excellency’s Government.

The British Embassy alleges, as the first ground of its complaint on behalf of the English company, that the latter had vested rights under prior concessions; but this statement is not correct, inasmuch as the Cuban Central cannot claim any concession of the new line to which the subasta referred; that company merely filed with the Railroad Commission a project for building a railroad from Kuevitas to Caibarien to the north of the Bamburanao hills, and the Commission reported that said project accorded with the necessary technical requirements, which did not vest any right in the company; indeed, the company itself withdrew the project in question upon the announcement being made that Congress had authorized a subvention for a line south of the hills, in which action the company was prompted by the purpose of taking part in the subasta and by the wish to remove any objection to the admission of its bid. Hence the Cuban Central, which took part in the subasta as a bidder and previous to that had asked for a postponement of the subasta, cannot now reasonably allege the incompetence of the Executive. The proposals of the Cuban Central were carefully examined and duly compared with those of the North Coast Railway Company, in the resolution by which the construction of the proposed railroad was awarded to the latter company.

It is also alleged that lines other than the Nuevitas-Caibarién line were granted without due formalities, reference being apparently had to the Camagliey-Santa Cruz del Sur railroad, in disregard, however, of the fact that the construction of this line was authorized by the act of July 5, 1908, and of the fact that article 6 of that act provides: “that after one year from the date this act becomes effective the Executive may contract for the construction of the railway lines enumerated” (there were ethers in addition to the line mentioned) “if solicited by any person or company.” Hence in conformity with the provisions of that law other lines were previously contracted for upon the mere application of some company without any protest in consequence thereof; and in the case referred to in the note the North Coast Company made application for building the Camaguey-Santa Cruz del Sur Railroad. That company was the only one that had applied therefor during the six years in which the offer was open without a taker, and there was no cause or reason for refusing said company the concession merely because application was made simultaneously for another line.

Up to this point I have referred to the first paragraph of the document embodying the complaint of the British Embassy. As to the second paragraph, in which it is alleged that the award is economically unwise because the subvention granted to the North Coast Company is higher than that asked for by the Cuban Central, it should be borne in mind that the first thing that the Cuban Government did was to make a comparative examination of the two proposals that had been formulated, as a result of which, as set forth in the resolution, the Cuban Government observed that the proposal of the North Coast Company offered, in free transportation and the creation of new sources of taxation, effective and permanent advantages to the State of far greater import than the saving of one thousand dollars per kilometer offered by the proposal of the Cuban Central.

The Cuban Central now states that it will build the line without subvention if given a reasonable time in which to do it. This offer is untimely and cannot be taken into consideration. When that company went to the subasta, among the proposals that it made and which were the only ones that the Cuban Government could take into consideration, there was none offering to build the line without a subvention; and since the subasta has been held and the concession awarded, it is impossible to admit such offers, because they are too late and are inapplicable, particularly when the offer is qualified by the condition called “a reasonable time”, which is in itself a very elastic phrase that might readily give rise to constructions contrary to the text of the law which, in providing for the subvention of the line and directing an immediate subasta, sought to avoid delay in its construction and did not leave the question of time to the convenience of any company.

It is added that the concessionaire may build the railroad with the subvention and thereafter withdraw it from public service, which is a manifest error because such an outcome is absolutely impossible inasmuch as the concession was granted under the specific and unavoidable condition that the railroad should be for public service, to which may be added the fact that obligations of the company have been accepted giving the railroad that character.

[Page 392]

The allegation of the Cuban Central that it is a going concern while its competitor, the North Coast Company, is a new concern and has never operated railways, is an argument that per se could not very well be taken into consideration. The Cuban Government could not take such circumstances into account but could only examine the respective advantages offered and the guaranties given in assurance of the fulfillment of the obligations to be contracted; particularly because, if such an argument were admitted as valid, the necessary consequence would be the institution of a kind of privilege—in every aspect unconstitutional and unjustifiable—in favor of companies already established, which would result in closing the doors to new companies, national or foreign, which might, to the advantage of Cuba, seek to invest capital in the construction of railroads.

It is also incorrectly stated that the Executive failed to take into due account the technical reports favorable to the Cuban Central, when as a matter of fact he did take them so carefully and intelligently into account that, finding the proposal of the North Coast Company too ample and favorable in relation with the bond prescribed by the law, the Executive demanded that that company double the amount of its bond.

It is stated in the third paragraph that, according to advices received from the Cuban Central, a high official of Cuba has promised that the Government of Cuba would guarantee the bonds issued by the concessionary company if necessary for their sale. It is a pity that so gratuitous an imputation should be made in respect to the Government of Cuba by a company of presumably reputable and sound standing, for such a thing is contrary to our laws, according to which Congress alone is competent to place obligations upon the Treasury, and Congress itself is competent only upon compliance with the provisions of the Constitution prescribed for that purpose, and also taking into account the prohibitions contained in the Appendix to the Constitution.

It is therefore clear that no official, however high his rank, can guarantee future obligations of that kind; and up to the present neither the Government nor anyone in this country has any knowledge of such a financial operation, which would, as stated, require the intervention of Congress, whose deliberations are public; there would in any event therefore be sufficient opportunity for observations which are now groundless and unreasonable.

The Government of the United States in transmitting through diplomatic courtesy the note in question states that in its eyes the allegations contained in the second and third paragraphs are alone of any importance, and in the opinion of the President [of Cuba] they are without foundation or reason, for the reasons herein given.

I avail [etc.]

Manuel Sanguily.