Foreign Relations of the United States Diplomatic Papers, 1940, The American Republics, Volume V

837.011/404½

Memorandum by the Assistant Chief of the Division of the American Republics ( Bonsal ) to the Chief of the Division ( Duggan )

[ Washington ,] May 22, 1940.

Mr. Duggan: I have examined the “amendment” to the transitory provision approved by the Coordinating Committee of the Cuban Constituent Assembly which was proposed by Senator Casanova on May 18 and a copy of which was enclosed with Ambassador Martínez Fraga’s letter of May 20 to Mr. Welles.⁴⁶ The document is not an amendment to either the majority or minority proposals with which we are already familiar; it is an entirely new proposal. Furthermore, the Ambassador’s covering letter is misleading in that, unintentionally I am sure, he gives the impression that Casanova’s proposal has some relation to the “minority proposal” of Dr. Miguel A. Suárez Fernández, concerning which we expressed ourselves favorably last week.

The Casanova proposal appears to be extremely favorable to the debtor class; it goes further in this direction than the bill for the liquidation of the moratorium which President Laredo Brú vetoed last October and concerning which we submitted a number of informal unfavorable comments.

The principal characteristics of the Casanova proposal are as follows:

(a) It applies to obligations connected with the sugar industry contracted after the enactment of the current moratorium in 1934 and would apparently do away with all adjustments or waivers which may have taken place directly between debtor and creditor.

(b) Although the capital amount of obligations is not reduced, an amortization period of some twenty to thirty years is granted, the shorter period being for amounts of less than $50,000 and the longer one for those in excess of $200,000.

(c) Over-due interest apparently would be added to the capital amount. The general interest rate is fixed according to a scale beginning at 3½ percent for amounts of $25,000 or less and decreasing to 1 percent for amounts in excess of $1,000,000.

The Casanova proposal contains other features of lesser importance. We have not yet heard from the Embassy in Habana in regard thereto nor have we had any analysis from banking sources. I believe it is fair to conclude that the proposal, which makes no provision for a sliding scale of payments in accordance with the price of sugar, will not be considered satisfactory by us when we have had the chance to analyze it completely.

As you are aware, recent European developments have had a highly depressing effect on the price of Cuban sugar, both for the United States and for the world markets. The situation is so uncertain that I am inclined to feel that, if there is no chance of the Constituent Assembly’s adopting the minority proposal and if it is considered appropriate for us to express a further opinion, we might suggest a continuation of the present moratorium until the situation becomes stabilized. Such a continuation would imply the maintenance of interest and amortization payments at present levels and the avoidance of the increases which, in accordance with moratorium decrees, would go into effect after June 30 of this year.

46. Not found in Department files.