837.011/417a: Telegram

The Secretary of State to the Ambassador in Cuba (Messersmith)53

60. From the Under Secretary. With reference to your conversation this morning with Duggan, I am informing Ambassador Martínez Fraga that the current proposal for the liquidation of the moratorium appears unduly favorable to the debtors and that it would consequently have a harmful effect upon Cuban credit. Please convey these views [Page 769] to President Laredo Brú and to any other persons whom you may consider appropriate, emphasizing our opinion that this matter should be disposed of upon a basis which, while responsive to the just needs of debtors, will nevertheless provide an orderly procedure for adequate and equitable repayment to the creditors. Although this Government has no desire to specify the terms of a satisfactory settlement, it would seem that the current proposal should be modified in several important particulars, including the raising of interest rates especially in the case of large obligations, the reduction of amortization periods and the exclusion from the effects of the proposal of obligations contracted after the enactment of the moratorium of 1934 or in which adjustments or waivers of moratorium provisions have taken place by mutual consent between debtors and creditors. Twelve of the New York banks which are trustees under bond indentures covering property in Cuba have telegraphed the Department to the effect that “the confiscatory character of the proposals is obvious”. [Welles.]

  1. The views stated in this telegram were expressed the same day by Mr. Duggan and Mr. Bonsal in a conversation with the Cuban Ambassador.