[Enclosure]
Memorandum of Conversation, by the Ambassador in
Cuba (Wright)
Habana, February 25,
1939.
On Tuesday evening, February 21st, at 7 o’clock, I called upon the
Secretary of the Treasury in order to discuss with him informally
several subjects—among them the present status of the legislation
for the settlement of the balance of the Public Works Debt.
The conversation having begun with the discussion of the proposed
revaluation measure and its effect upon Cuba’s credit, I deemed it
not only opportune to discuss this further matter, which so directly
concerned Cuba’s credit, but also to inquire directly as to the
present status of the measure. Dr. Garcia Montes said that he had
gained the distinct impression from Mr. Warren Pierson, President of
the Export-Import Bank, during his visit to Habana, that he (Mr.
Pierson) was not only concerned about the revaluation proposal and
very dubious, to say the least, as to the effect which it might have
upon Cuba’s credit, but also of the opinion that unless or until the
balance of the Public Works Debt had been settled, no credits would
be extended for additional public works in Cuba. I replied to the
Secretary that, although I had not expected our conversation
necessarily to take that trend, I was glad to improve the
opportunity thus afforded
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to observe that he had correctly appraised Mr. Pierson’s
opinion—adding that, as the Secretary knew well, I had been
constrained to observe to the appropriate authorities of his
Government, including the President3 and Colonel Batista,4 that the Export-Import Bank, being a governmental
institution, could not extend credits of this nature until the
aforementioned recognized obligations of the Cuban Government had
been liquidated.
The Secretary of the Treasury is a very cautious man who, while very
well informed and of sound opinions, finds it difficult, if not
impossible, successfully to combat the political exigencies and
considerations which his superiors bring to bear upon him: he is
especially cautious when replying to direct inquiries. He said that,
as I was doubtless aware, the financial situation of Cuba was
growing worse: I replied that I was unfortunately aware of it. He
said, for that reason, the opposition consistently contended that
the Government should not incur further obligations at this time
when they faced a budgetary deficit and when the price of sugar
showed no sign of improvement: I replied that I had been informed of
this unfortunate situation and this resultant attitude by both the
President and Colonel Batista. He said that as the remainder of the
$85,000,000 issue5 was not sufficient to meet these obligations, a
supplemental issue was necessary: I replied that I was, of course,
fully aware of this fact. He then said that the Government was
compelled not only to seek further revenue in order to offset the
inevitable debt settlement, but was also obliged to consider the
levying of further taxes in order to afford proper security for this
supplemental issue: I inquired whether he had in mind a renewal of
the proposal for the taxation of petroleum derivatives. He replied
that he had.
As the conversation then became devoted to that phase of the
question, I said that I felt obliged to bring several considerations
to his attention: that Warren Brothers6 had specifically waived their
insistence upon this form of security; that the oil companies and
interests, not only foreign, but Cuban, had several months ago
informed me of their intention to resist the imposition of further
taxation upon their products and that if such was undertaken there
might be expected a renewal of this resistance; further, that any
imposition of taxes of this nature at this time would run counter to
the provisions of the Reciprocal Trade Agreement7 which
provided that no such
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changes might be made without previous negotiations between the
respective Governments—a matter which I had several times brought to
the attention of the Cuban Department of State during the last year.
I stated further that I did not wish to occupy a position in favor
of legislation which would benefit one group of American interests
to the detriment of another, but that I should be remiss if I did
not again call his attention to these facts.
The Secretary said that he was aware of this situation and that he
was at present devoting all efforts to devising some means whereby
revenue might be obtained from these sources without the renewed
opposition of the oil interests. I inquired whether he had in mind
the taxation of certain derivatives and not others: he replied that
such was in his mind: I inquired whether he had kerosene, for
example, in mind: he replied that he had and that he was further
examining the possibilities of taxation (or other charges) upon
products from the selling of which the companies were making large
profits: reverting to the general question, I inquired whether he
expected early passage of the bill: he replied that he believed that
such would be possible, but again emphasized the phase of the matter
to which he had previously referred. The conversation terminated at
that point.
On the same day I was informed upon fairly good authority that
Senator Albanés, who belongs to the Opposition, had stated that he
was so convinced that liquidation of the Public Works obligations
was essential to the restoration of Cuba’s credit and the extension
of credits from the Export-Import Bank that he had informed the
leaders of the Government party that he was prepared to vote for the
passage of the bill.
Senator Verdeja, President of the Senate, also informed me recently
that he believed that it was essential to Cuba’s credit that the
bill be passed.
In view of the fact that I had several weeks ago received what
appeared to be credible assurances from responsible parties that the
question of taxation upon petroleum derivatives would not again
arise, and as I had informally mentioned to one of the American oil
interests here that such assurances had been conveyed to me, I
deemed it proper to inform the same American oil interests—equally
informally and unofficially—that I had received information that the
question might be renewed. I have reason to believe that the
American interests will not only take renewed steps to meet the
situation if it recur, but they are willing to discuss with other
oil interests, and with the Cuban authorities, methods by which the
desired ends may be obtained without resorting to open friction
which characterized the last incident of this nature.
