File No. 837.77/98.

The American Minister to the Secretary of State.

No. 626.]

Sir: Referring to my despatch No. 579, of January 3rd,1 and to other correspondence, in regard to the Caibarién-Nuevitas railroad concession, I have the honor to submit herewith a concise resumé [Page 394] of the entire question. The many reports made on this matter by the Legation from time to time have attained such bulk as to render their consideration a matter of much time and trouble. I venture, therefore, to submit the following statement of facts for the information of the Department, believing that it may be found helpful as offering in convenient form a thorough presentation of the essential points at issue.

An act of July 5, 1906, committed the Government of Cuba to the policy of subsidizing new railroad construction in Cuba. This act provided for a recurrent appropriation of $500,000 per annum for the purpose, and authorized the Executive to grant subventions in a maximum amount of $6,000 per kilometer for the construction of twelve lines enumerated in the act.

Between the ports of Caibarién and Nuevitas lies a vast region of virgin country, said to be incomparably rich in hardwood timber, ores and agricultural and grazing lands, which, except for the narrow valley north of the Bamburanao range, has never been settled or developed for lack of transportation.

The claims of the region in question were either overlooked or ignored by Congress in 1906, or were not adequately pressed by the interested communities. The need for the line was nevertheless felt and was remittently discussed, but nothing practical seems to have been accomplished until Mr. J. M. Tarafa and associates recognized the opportunity and procured the introduction of a bill in the House of Representatives, at the session which ended in February, 1911 (reintroduced April 28, 1911), for the construction, under the terms of the act of July 5, 1906, of a line from Caibarién via Moron to Nuevitas.

Just east of Caibarién begins a range of mountains comprising the Sierras de Bamburanao, Meneses and Jatibonico, and extending in an easterly direction up to Jatibonico river. Between this range and the sea on the north there is a fair and fertile valley averaging some ten or twelve miles in breadth, watered by numerous streams rising in the mountains. This valley, as far down as the Jatibonico river, has long been under cultivation; several sugar-mills are in active operation; and the transportation facilities, while perhaps susceptible of improvement, satisfactorily answer present needs; the coast is indented by numerous minor ports, reached by cartroads from within and by small coasting craft from without, and the valley is traversed from a point very near Caibarién, at the western end, to Mayajigua, at the eastern end, by several connecting narrow-guage roads largely owned and controlled by the North American Sugar Company. These roads, originally built by the several sugar mills in the valley for their private plantation service, were welded into a connected system and made a public service railroad, or common carrier, under terms of the railroad law of Cuba, which require that it shall within a given time be rebuilt on the standard gauge; and construction into Caibarién is either contemplated or has actually been undertaken.

Here, then, we have, on one hand, a public railroad, largely if not entirely owned by American interests, built without State aid and which must, under the terms of its charter as a common carrier, be [Page 395] practically rebuilt (for conversion of gauge) without State aid; and, on the other hand, a bill in Congress contemplating the construction of a subsidized railroad from Caibarién to Nuevitas which would, through about one-fourth of its length, parallel the former. The interests thus menaced promptly bestirred themselves, and brought sufficient public opinion to bear upon representatives from Santa Clara to induce Tarafa to abandon, perhaps reluctantly, the idea of traversing the valley in question, and to make a detour to the south of the range, although the country was not only undeveloped but the cost of construction would, on account of topographical conditions, be considerably greater. Accordingly an amendment was introduced providing specifically that the Caibarién-Nuevitas railroad should be built via Morón and south of the Cordillera (range) de Bamburanao, thus relieving the existing railroad north of the range of the threatened unfair competition. The wisdom of this amendment is at once obvious: the region south of the range is not only greater in extent and breadth, but, unlike that to the north, is unsettled and undeveloped; and it would be a waste of public money and unfair to existing interests for the Cuban Government to subsidize, under the circumstances, a railroad along the northern route.

In the meantime, the Cuban Central Railways had filed with the Railroad Commission, on May 10, 1911, a petition for permission to make preliminary surveys for a railroad from Caibarién to Nuevitas via Morón. Permission was duly granted, and the Cuban Central Railways made their surveys, and filed on January 31 and February 4, 1912, “definite plans, profiles, etc.,” of the proposed line, which were in due course approved by the Railroad Commission. The project of the Cuban Central contemplated a route throughout the valley north of the range, necessarily paralleling the railroad of the North American Sugar Company and associated interests.

When the amendment was presented prescribing the southern route, the Cuban Central, which apparently had not theretofore taken any active part in the progress of the bill, took a hand in the matter, and by all manner of means at their disposal set out to force Congress to adopt the route (north of the range) which they had selected. At this time representations were made to the Department that were untenable and without foundation in fact. It is not necessary to examine these representations at this time, for the matter has reached a more advanced stage where new grounds and contentions have arisen. However, as illustrative of the tenor of the representations made to the Department in the first stage of the controversy, the Cuban Central contended, in effect, that—inasmuch as, after a bill had been introduced and was being discussed in Congress for the construction of a certain railroad with State aid, they had, in anticipation of the needs of the community and of the country at large, surveyed a certain route which was duly approved by the Railroad Commission—the Congress was precluded from prescribing any route other than the precise route called for in their plans, and consequently that the subvention could be granted to no one other than themselves! The record is clear that they sought to have the Department believe that the approval of their plans by the Railroad Commission conferred upon them an exclusive concession by competent authority to build a railroad between Caibarién [Page 396] and Nuevitas; while they knew perfectly well, from their intimate knowledge of the railroad law and long experience, that the Railroad Commission could at any time approve any number of such projects, and that such approval in no case constituted a “concession” in the accepted sense. They alleged the infringement of “vested rights” which did not exist and which they knew very well could not under the circumstances exist. They alleged also that they had commenced the construction of the line, which was shown to be without foundation. And all this, not because the Congress contemplated or proposed even by inference to grant the subvention to a particular company or to favor any particular interest, but merely because that body was considering whether in the public interest the railroad it was about to subsidize should run to the south or to the north of a certain mountain range!

The contentions of the Cuban Central did not prevail. The Congress passed, and the President approved on June 5, 1912, an act reading in pertinent part as follows:

Article 1. The following paragraph is hereby added to article 1 of the act of July 5, 1908, published in the Gaceta Oficial of the Republic on that date:

“(13) A line connecting the ports of Caibarién and Nuevitas, passing through the town of Morón and to the south of the Bamburanao range.”

Article 2. The Executive shall invite proposals of companies desiring to build the railroad, and shall award it by subasta1 to that company which makes the best propositions; but the subvention shall not exceed the amount prescribed2 in the act of July 5, 1906.

On July 12, 1912, five weeks after the enactment of this law, an Executive decree issued, and was published in the Gaceta Oficial of the 15th, inviting proposals, to be filed not later than July 30th, for the construction of the railroad in question. The Cuban Central Railways objected that the time allowed prospective bidders to prepare and file their proposals was unreasonably short, and furthermore that no formality was prescribed to govern the opening of proposals, thus possibly affording an unfair advantage to any bidder which might enjoy illicit official favor. Accordingly a second decree issued (dated July 24, 1912, and published in the Gaceta of the 27th), calling for sealed proposals to be filed in the Department of Public Works up to 2 p.m., September 30, 1912; and providing that all proposals should be opened at that hour in the office of the Secretary of Public Works and in the presence of bidders. In the preamble to this decree it is expressly announced that no specifications beyond the general requirements of the Railroad Law and the Act of July 5, 1906, and the special requirements of the Act of June 5. supra (as to route, amount of bond, etc.), could in the nature of the case be formulated for the guidance of prospective bidders, and consequently of the granting authority in choosing between proposals, but that such prospective bidder should within these general confines make his own terms and conditions.

The subasta took place at the appointed time. But two proposals were filed, namely, by the Ferrocarril de la Costa Norte de Cuba [Page 397] and the Cuban Central Railways. The former company offered to build the railroad with a subvention of six thousand dollars per kilometer (the maximum amount authorized), while the latter asked for but five thousand dollars. The money difference between the two proposals, considering only the amount of the subvention, is roughly $300,000 (not, as claimed by the Cuban Central, $592,000)1 The proposal of the Compañía de la Costa Norte included, however, an elaborate plan of direct and related development, which the President believed to offset, in immediate and eventual value and advantage to the region and to the country at large, the apparent saving of $300,000 in the amount of the subvention. Examination and analysis of what may be called the collateral propositions of the Compañía de la Costa Norte convincingly bear out this belief; but they need not be examined in detail here, for the Cuban Central have apparently never attempted to destroy this argument except by the contention that as those propositions did not directly concern the announced object of the subasta, they could not, whatever merit they might otherwise have, legally be taken into consideration by the President.

This contention is the essence of the Cuban Central’s protest; the other numerous contentions, mostly of a minor, and in some instances of a trivial, character, all hinge upon it and serve only to becloud the real issue.

The answer to this question of competence must be sought in the terms of the acts of July 5, 1906, and June 5, 1912. The former is a general act governing railroad subventions; and the latter (the text of which, is in pertinent part quoted above) is a special act authorizing the construction with State aid of the Caibarién-Nuevitas railroad under the general terms of the former act and certain additional and particular terms of the latter.

The act of 1906 authorizes the Executive to “enter into contracts with one or more companies … without the necessity of subasta, for the construction and operation, in the order named,” of twelve railroads enumerated (article 1). This was amended by the later act of 1912 in so far as it required (article 2) the holding of a subasta.

The act of 1906 further provides (article 6) that when “two or more individuals or companies offer to build and operate any of the railroads enumerated above, the Executive shall give the preference to that individual or company whose plans and other technical and economic conditions are, in his judgment, the most advantageous to the general interests of the Republic.” In the absence of any more specific provision in the act of 1912, or in any other law, governing the conduct of the subasta and method of award, or placing restrictions [Page 398] upon what may be considered “economic conditions … advantageous to the general interests of the Republic”, the best judgment of the Executive must necessarily prevail without limitation (Art. 78, paragraph 1, Constitution of Cuba). If he chooses so to regard collateral railroad development in Camaguey, the building of sugar mills, and establishment of a bank for aiding colonizers, and other considerations, he would seem to be acting well within his powers. Had the Congress desired to limit his choice to the proposal contemplating the lowest subvention, it would have done so in terms; as it is, the intent cannot even be inferred.

Moreover the proposal of the Cuban Central is vitiated by the failure upon their part fully to observe the route prescribed by Congress in the act of June 5, 1912. The prescribed route is “south of the Cordillera de Bamburanao,” clearly meaning the “cordillera” (range) of mountains comprising the Sierras de Bamburanao, Meneses and Jatibonico. The modified route adopted by the Cuban Central after the passage of the act differed from the original (northern) route only in that the single Sierra de Bamburanao is detoured to the south, and the original route is entered through the break between the sierras de Bamburanao and Meneses, and is thence followed down to Morón. The route of the rival company is to the south of the mountains all the way, and is the route clearly contemplated in the act. The Cuban Central claim that “Cordillera de Bamburanao” as used by the Congress is a misnomer, because no such “Cordillera” is shown on any map or other authoritative record of the region, each sierra being given a different name. The custom in Cuba and elsewhere is to refer to a range of mountains collectively, when they have no collective name and each group has its own name, by the name of the first component sierra or group; hence the range of mountains between Caibarién and the Jatibonico river is commonly called “Cordillera de Bamburanao,” although each sierra is shown on maps with a different name, viz: Sierra de Bamburanao, Sierra de Meneses and Sierra de Jatibonico. The act was drafted by congressmen from the region acquainted with topographical names, and they undoubtedly used the word “Cordillera” advisedly and with the full intent of reference to the range of three sierras named above. This is very clear from the controversy that arose in Congress concerning the selection of a route for the proposed railroad. The Cuban Central deliberately sought to defeat this clear intent of Congress that this line should be built entirely to the south of the mountains. Their line consequently parallels the line of the North American Sugar Company and associated interests through the greater part of the length of the latter. In this connection I invite the Department’s attention to my No. 148, of March 13, 1912,1 transmitting a copy of a letter from the President of the North American Sugar Company. It was the representations of this American company that first induced me to make an examination of this phase of the project.

I have [etc.]

A. M. Beaupré.
  1. Not printed.
  2. In its true sense subhasta is the equivalent of the Latin sub-hasta, or the English auction; but it has acquired a special meaning in Spanish administrative law, namely: a competition through the formal presentation of proposals for a public service, concession or grant. (The Minister’s footnote.)
  3. $6,000 per kilometer. (The Minister’s footnote.)
  4. The Cuban Central made alternative propositions, one of which was to utilize their existing line from Caibarién to Salamanca, 36 km. to the west, and thence to build into Zulueta 20 km. to the east, without subvention; thus traversing 56 km. in a roundabout direction in order to reach a point due south of Caibarién, distant 20 km. or less. This “free line” of 56 km. is reckoned a saving to the State at $6,000 per km., whereas it could not possibly, however regarded, represent a saving except as to the actual distance between Caibarién and Zulueta. The other proposition (and obviously the more acceptable were the concession to be awarded to the Cuban Central) was to build from Caibarién to Zulueta directly and thence to Nuevitas, applying the subvention to the whole distance. The real effect of the former proposition would be to make the contemplated railroad merely an extension of the Cuban Central’s existing lines out of Sagua and consequently to make the line into Caibarien merely a branch with Zulueta as a junction, thus defeating, in spirit at least, the purpose of the act of Congress. (The Minister’s footnote.)
  5. Not printed.