File No. 837.61351/52
The Cuban Minister ( De Céspedes) to the Secretary of State
My Dear Mr. Secretary: The Cuban Government, having carefully examined the situation of the sugar industry in each of the plantations of the six provinces into which the Republic is divided, has found that the cost of production varies greatly according to their respective standing with regard to the following conditions:
- First. Class, quality, state, age, and power of extraction of the machinery employed;
- Second. Degree of fertility of the soil, the age and quantity of the cane produced per caballeria; the quantity of the cane in relation with the power or size of the machinery;
- Third. System of planting—viz., the colono system, which consists in the mill acquiring the cane from a number of small planters or farmers, many of whom own their land; or the system of planting at the expense of or directly by the mill’s owner on his own land;
- Fourth. The cost of labor, now scarce and high; the cost of living, in general excessive;
- Fifth. The situation of the mill with regard to the nearest port;
- Sixth. Method of hauling the cane to the mill for grinding—transportation;
- Seventh. The cost of hardware, fuel, ropes, oils, caustic soda, oxen, carts, and other articles and animals used on the plantation;
- Eighth. The cost of bags and storage;
- Ninth. The amount of capital invested and interest paid;
- Tenth. The taxes.
After investigating each of the preceding factors, the Cuban Government’s experts are convinced that there is not only a considerable difference between the cost of production among the plantations themselves in the six provinces, but that general conditions obtaining at present and to prevail during the next 12 months will seriously affect said cost of production, and any calculation based exclusively on what the cost may have been in previous years is not to be considered as reliable.
It is the earnest desire of the Cuban Government to cooperate with the Government of the United States of America in reducing the price of sugar.
This desire is justified by the propose [purpose] of serving the common cause, and at the same time of placing this product in the hands of the American people at a reasonable price.
The Cuban Government believes that the suppression of speculation on sugar affords of itself an important margin of economy, while the fixing of a price on the whole output will increase the benefit to the people of the United States in so much as unjustified profits will be, thereby, curtailed.
The imperative necessity of large crops to satisfy the demands of our allies can only be met by a proportionate and liberal, yet not too high price for raw sugar. The effects of the radical change in the normal system of business, brought about by the war, are in this case factors of more conservative investments, and the element of uncertainty [Page 345] that exists, as to the results, in the vast employment of capital in any industry under administrative control is an evident drawback when larger production is contemplated and energetic cooperation is required.
Under such conditions it would seem unwise to set a price for the future output of the Cuban sugar industry without taking into consideration the various problems concerned and the interests affected.
From the sources of information that my Government has at its disposal, it has been able to obtain sufficient data to establish that the price of 4 cents 50 f. o. b. in Cuban ports which has been suggested to the planters, in an informal way, does not cover the actual cost of production of many plantations. It would leave a meagre interest to the capital and labor invested in the majority of them and only assure a fair return to those great companies established in the Eastern part of Cuba on virgin soil, or possessing the most modern machinery, vast planted areas of their own, ports, and railroads, and large capitals and financial facilities at low interest.
Cuban planters representing a production of, perhaps, over 2,250,000 tons of raw sugar have addressed the Cuban Government exposing that 5 cents f. o. b. in Cuban ports would be a fair price at which they could consider their industry protected and their expectations satisfied.
After mature examination of the facts, all circumstances taken into consideration, my Government would find it advisable for it to recommend any price ranging from 4 cents 75 to 5 cents per pound, free on board in Cuba ports which would be a reasonable, and, to many, an attractive price, calculated to induce the planters to attain the maximum production; and should not be less considering the risks and other conditions involved.
The political aspect of the question not escaping my Government’s review of the matter, I beg your excellency to be good enough as to bring these statements to the attention of Mr. Hoover and the sugar commission with the recommendation that the State Department may hold it convenient to make.
With the assurance [etc.]