The Secretary of State to the Ambassador in Cuba ( Guggenheim )
119. Your telegram No. 122, November 29. It appears that the plan proposed by the Chase Bank in its recent letter to Secretary Averhoff (the Department has not seen a copy of the latter’s reply) envisages a default on December 31, 1932, of between 30 and 40 per cent of the amount due on the principal of the Public Works Serial Certificates (unless the proposed advances of the oil companies are expected to reduce this amount). This may or may not be followed by a more serious default on June 30, 1933, depending upon conditions at that time.
On the other hand, if the Department now raises objection to the plan apparently agreed upon between the Cuban Government and the Chase Bank and in which certain other companies are considering cooperating an important default not only on the principal of these certificates but presumably upon interest payments on the Public Works Gold Bonds (in view of the priority of the serial certificates over the latter) will inevitably occur this December. You, yourself, told Mr. White over the phone on November 4 that “some objectionable features in the plan” had been eliminated and that you considered it “the lesser of other possible evils” (see enclosure No. 1 to the Department’s instruction No. 688 of November 191). Your statement [Page 562] was, of course, made before the possible participation of the other companies had been brought up, but the Department does not perceive how this fact materially alters the situation.
As the Department understands the plan, it involves in effect the assumption by a banking group headed by the Chase Bank of the sum of $1,650,000 due by the Cuban Government for interest on its Public Works Gold Bonds and on the existing so-called bank credit. It does not appear to involve any increase in Cuba’s public debt. The Department, therefore, is at a loss to understand your statement that our “tacit approval” of this feature of the plan is “in violation” of Article II of our Permanent Treaty. (In this connection you will have observed from the enclosures to instruction No. 688 that the Department carefully refrained from expressing any “approval” of the plan.)
The Department feels that to indicate its disapproval of the plan which has been voluntarily worked out between the Chase Bank and the Cuban Government on their responsibility or of participation therein by American oil companies would constitute an unwarranted interference in Cuban affairs. The Department, therefore, desires you if approached by the Cuban Government, the bankers or the other companies, to make it quite clear that all responsibility in the matter rests upon the parties concerned and that the Department desires to take no position in the premises.