Memorandum by the Assistant Chief of the Division of the American Republics (Bonsal)47

Mr. Beaulac telephoned this afternoon with regard to the project drawn up by a special committee of the Constituent Assembly for the liquidation of the credit moratorium. This project, apparently based upon Senator Casanova’s proposal of last Saturday, a copy of which was mailed to Mr. Welles by the Cuban Ambassador, was described [Page 766] in my memorandum of this morning. Mr. Beaulac states that it represents the views of the Government coalition but that it is doubtful that action will be taken upon it by the Assembly today since there are many delegates who do not understand it and wish to study the matter.

Mr. Beaulac is sending us the text of the proposal, together with certain comments which may be summarized as follows:

Obligations contracted after the moratorium of 1934 should not be treated in the same manner as those contracted prior to the enactment of the moratorium.
Adjustments entered into freely by debtor and creditor should be respected.
Amortization payments should begin this year and not be delayed until 1942.
Over-due payments of interest or principal under the moratorium should not be condoned as proposed but instead a reasonable time to cure defaults should be granted.
The average price to be used in computing interest amortization in the case of sugar mill obligations should be defined. Provision should be made for the payment at least of interest when the average is between 1.25 and 1.40—the proposal at present contemplates payments only when the average is above 1.40.
The scale of payments when the price is between 1.40 and 1.50 might be increased to 4 percent instead of 3 percent of the gross value of the crop. In a number of typical cases it has been computed that 3 percent of the gross value would only barely cover interest at the new proposed rates and leave very little for amortization.
An attempt is made in the proposal to make all obligations owed by owners of sugar mills subject to the average price of sugar. This means that, if Senator Casanova—for example—owed money on an apartment house in Habana, he would not have to service his debt unless the price of sugar were in excess of 1.40. This provision seems wholly undesirable.
The right of personal action should be retained.

  1. Addressed to the Chief of the Division of the American Republics (Duggan) and the Under Secretary of State (Welles).