837.51 Cooperation Program/60

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

No. 1563

Sir: I have the honor, with reference to the Department’s strictly confidential instructions to me No. 421 of January 11, 1941 and No. 463 of February 1, 1941, to state that I took up with the Minister of State, Dr. Cortina, on Monday afternoon, February 10, the various items in the above-mentioned instructions. Although the Department’s instruction No. 463 of February 1 authorized me not to await the conclusion of the sugar financing operation under contemplation of 400,000 Spanish long tons, it did not seem advisable to discuss credits for agricultural diversification, public works, and cooperation along other lines, immediately on receipt of the Department’s confidential instruction 463. The Government had been much concerned and preoccupied with recent developments in the internal political situation, which I have separately reported upon, and it was not until Monday, February 10, that I thought it advisable to act on these instructions.

For my own guidance with the Minister of State, I had prepared a memorandum based upon the Department’s instructions Nos. 421 and 463, of which memorandum I submit herewith a copy.54 I began my conversation with the Minister by conveying to him orally, in Spanish, the contents of this memorandum following the text herewith transmitted.

The Minister expressed his satisfaction that it would be possible to continue the discussions on credits for agricultural diversification and public works and on the possibility of establishing a central bank with facilities for granting credits to agriculture. He said that he had just completed the message which the President would send to the Congress on the legislation necessary by the Cuban Congress in order to carry the sugar arrangement into effect and that he had every hope that this arrangement would soon be satisfactorily carried through. I took occasion at this point to say to him that, in connection with the sugar arrangement, I was sure he would keep in mind that the offer of the Export-Import Bank to carry through this sugar financing was based [Page 138] on two fundamental considerations; first, that the crop this year should not exceed 2,400,000 tons, and, second, that the Cuban Government would extend Decree-Law 522 without substantial alteration. I emphasized that, although my Government was prepared to continue the consideration of agricultural and public works credits independently of the action which might be taken on this sugar financing, one of the indispensable preliminaries to such consideration would be the prolongation of Decree-Law 522 without substantial alteration.

The Minister said he understood this situation but that he did not consider, and the Cuban Government did not consider, the sugar financing arrangement as a part of our conversations on economic cooperation in the same sense as the agricultural and public works credits. The sugar arrangement was made at the request of the Cuban Government but was more a purely financial operation on a purely banking basis. It was an arrangement of primary and urgently immediate importance to the Cuban economy, but he hoped that this arrangement which involved the lending by the bank of some $12,000,000, would not interfere with the granting of agricultural diversification and public works credits by the bank in an adequate amount.

With respect to the conditions which my Government had set forth as being indispensable with respect to the granting of credits for agricultural diversification and public works, the Minister made the following observations which he indicated were of a purely preliminary character. The Cuban Government had, by action of the Cuban Congress, passed the Gold Obligations Law which removed from the relationships between our two countries this longstanding and disturbing question. The provisions of the law were being carried through and the bonds would shortly be issued to the creditors. He remarked that since these instructions, which we were discussing, had been given to me, there had been a very considerable change in the Cuban internal situation which, in his opinion, should go far towards satisfying our Government and in giving it increased assurance. The authority of the civil Government had been reestablished in a definite form. The Fourth of September 193355 had been liquidated. Various administrative functions of the Government, which had been in the hands of the Army and the Navy, had been returned to the appropriate civil administrations. The most definite instructions had been issued to stop the malpractices in the Army and Navy and in the Customs, which had led to the diversion of revenues.

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With respect to the Morris claim, he stated that there should be no difficulty in reaching a solution. There was a decision of the Supreme Court in this case and there was an obligation of the Cuban Government to settle this matter by negotiation with the creditors without delay. I pointed out to him various reasons indicating the importance of the settlement of the Morris claim without any delay, which considerations the Minister understood and appreciated.

With respect to the examination, and provision for eventual liquidation of other United States claims, he stated that these were matters which would have to be gone into by the Cuban Government, but said that this matter would have to be approached with great care. He said that if it became known that the Cuban Government was examining old and outstanding claims against it by American citizens and interests, it would result in the resurrection and pressing of many claims for which there was no foundation whatever. In this connection, I limited myself to saying that it was the opinion of my Government that these claims, as well as the Morris claim, should receive immediate consideration by the Cuban Government in such a form as to indicate the intention of the Cuban Government to proceed with settlement thereof.

With respect to further manipulation of the direct consumption sugar quotas prejudicial to American mills with refineries in Cuba, the Minister stated that this matter had been receiving his attention since I had left with him a few days before a memorandum calling his attention to two decrees issued by the Cuban Government in the last days of the Presidency of Dr. Laredo Brú. In this memorandum which I had left with the Minister I had brought to his attention the resolution of the Sugar Stabilization Institute requesting the Cuban Government to abrogate these two decrees which had worked out prejudicial to American interests. The Minister said that he saw no difficulty in appropriate action being taken by the Cuban Government to prevent further manipulation of the direct consumption sugar quotas which would be prejudicial to the interests of American mills with refineries in Cuba.

With respect to reform and reorganization of the fiscal system in administration, the Minister stated that I was familiar with the steps which the Cuban Government was already taking. The decree placing certain administrative functions formerly in the Army and Navy and Customs was an important step. A committee had been set up which was studying economic problems and reform of the fiscal and tax system. The Secretary of the Treasury was a man of unimpeachable honesty. The Government was determined to carry through the necessary fiscal and administrative reforms.

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With respect to the net reduction in actual budgetary expenditures by approximately 7,000,000 pesos, the Minister said that the Government was giving this matter of the budget and reductions therein its earnest attention. It had already been decided to change the Cuban fiscal year from the calendar year to a fiscal year beginning July 1 every year. There were certain reductions in the budget which would have to be made in view of the financial situation of the Government. There were increases in items of the budget which would have to be made because of constitutional prescriptions which would have to be carried through. The Government realized that it would have to fix its budget in a manner which would involve payment of expenditures through receipts and without dependence on internal or external loans. It was now studying proposals for tax increases which had been made by committees set up for this purpose. It was too early to state just what could be done, but he hoped that we would not insist on any arbitrary figure or reductions.

The Minister expressed his belief that it was desirable to begin as soon as possible studies with the collaboration of our Government, and on the basis of the offer made, which would form the basis for the establishment of a central bank and facilities for extending agricultural credits. No aid to Cuba, he said, in his opinion, would be properly effective and adequately fruitful unless such banking facilities were provided for. I said in this connection that I did not believe that it was the intention of my Government that its collaboration in the making of such studies was dependent upon the fulfillment of the conditions which had been set forth with respect to the granting of credits for agricultural diversification and public works. I believed that I could assure him that we would be prepared at any time, on the request of the Cuban Government, to make available experts of the Treasury, the Federal Reserve System, and the Farm Credit Administration, to assist the Cuban Government in the preparation of a complete plan for the reorganization of the monetary banking and exchange systems including agricultural credits.

With respect to the treaty of residence and establishment, I emphasized to the Minister that my Government had received no reply or comment on the proposal for such a treaty which we had submitted to the Cuban Government in March 1939.56 I did not believe that my Government would make the beginning of negotiations for such a treaty dependent upon the fulfillment of the considerations which had been set forth. I expressed the opinion that my Government would be prepared to begin the negotiation of such a treaty immediately. As the first step, I suggested that it would be desirable for the Cuban Government to address a note to my Government, either [Page 141] through this Embassy or through the Cuban Embassy in Washington, acknowledging this proposal of my Government made in March 1939, and stating that the matter was being considered by the Cuban Government which hoped very shortly to submit its detailed comment. The Minister said that he saw no reason for not proceeding with urgency on the negotiation of such a treaty and could foresee no reason why a mutually satisfactory treaty should not be completed rapidly.

With respect to the negotiation of a limited supplementary trade agreement, the Minister expressed his desire that something be done in this direction without delay. I told him that the matter could be initiated by his addressing a note to the Embassy, or through the Cuban Embassy with the Department, requesting on behalf of the Cuban Government the negotiation of a supplementary trade agreement. I said that in this connection the Cuban Government could mention its memorandum of December 27, 1940.57

I said that so far as I knew, I did not believe that the opening of the negotiations for a supplementary trade agreement was dependent upon the fulfillment of the conditions which had been set forth for the granting of credits for agricultural diversification and public works.

The foregoing conversation lasted several hours and the Minister expressed a desire, before I saw the President on the basis of my instructions, that I would have a further conversation with him. He said that he wished to consider the substance of the statements which I had been good enough to convey on behalf of my Government and to discuss the various items further with me before I saw the President. I said that I saw no inconvenience in this and that I was prepared to resume the conversation at any time he desired.

The foregoing observations on the conversation with the Minister should I believe, therefore, be considered by the Department as preliminary in character. In my next conversation with him, I will be able to enter into greater detail on various items under my instructions.

I may say that I considered the conversation, on which I am reporting in this despatch, as of a satisfactory character.

Respectfully yours,

George S. Messersmith
  1. Not printed.
  2. Overthrow of Cuban Government by non-commissioned men and enlisted men of the army led by Sergeant Batista. See telegram No. 191, September 5, 1933, 1 a.m., from the Ambassador in Cuba, and later documents, Foreign Relations, 1933, vol. v, pp. 379 ff. Batista became President of Cuba on October 10, 1940.
  3. See footnote 52, p. 135.
  4. Not printed.