Foreign Relations of the United States Diplomatic Papers, 1941, The American Republics, Volume VII

837.51 Cooperation Program/70

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

No. 2000

Habana, May 8, 1941.
[Received May 10.]

Sir: I have the honor to refer to previous correspondence with the Department relating to the desire of the Cuban Government to secure a credit from the Export-Import Bank for agricultural diversification and public works projects, and particularly to my despatch No. 1914 of April 20, 1941, with which was transmitted a copy of a note from the Cuban Government, dated April 15, 1941, requesting a credit of $30,000,000 for public works and agricultural diversification projects and requesting favorable consideration by the Export-Import Bank of the financing of the rehabilitation of the Habana waterworks. In this connection, I also have to refer to my despatches, No. 1910 of April 20, 1941,⁷⁰ requesting consideration by our Government of the establishment of a central bank in Cuba with agricultural facilities, No. 1912 of April 20, 1941,⁷¹ requesting consideration of more favorable treatment for Cuba in the matter of cigars, cattle and sugar, and No. 1913 of April 20, 1941,⁷² requesting consideration by our Government of a reduction of fifteen points in the customs duties paid by Cuban sugar on entry into the United States.

During my recent stay in Washington on consultation, under instructions of the Department, I was able to discuss the notes and memoranda, referred to in the above-mentioned despatches, with officers of the Department and of the Export-Import Bank. It will be recalled that after appropriate discussion in the Department, a letter was addressed by the Department to the Federal Loan Administrator strongly recommending that the Bank open a credit of $30,000,000 in favor of the Cuban Government of which $25,000,000 would be devoted to agricultural diversification and public works projects and $5,000,000 for the purpose of aiding in the establishment of a central bank in Cuba with agricultural credit facilities. The Department also in this letter strongly recommended to the Bank for its favorable consideration the opening of a credit for the rehabilitation of the Habana waterworks, this being in addition to the recommendation made for agricultural diversification, public works, and the central bank.

After thorough discussion of these recommendations with the officials of the Export-Import Bank, the Bank at a meeting of its Executive Board last week decided to extend a credit of $25,000,000 to the Cuban Government for agricultural diversification and public works projects, an announcement of which credit was to be made at a time in the near future to be agreed upon between the Bank and the Cuban Government. The Bank did not deem it advisable at that time to make a definite commitment with regard to the assistance which it could render in the establishment of a central bank with agricultural credit facilities, in so far as the amount involved was concerned. It did, however, go on record as expressing itself sympathetic to this project and willing to aid therein to the amount of $5,000,000 when and if proper and acceptable plans for the organization of such a bank had been made. The Bank expressed its approval that its attitude in this respect be communicated confidentially to the Cuban Government, but it did not wish any public announcement of any kind to be made with respect to its willingness to consider and to aid in the establishment of such a bank.

With respect to the rehabilitation of the Habana waterworks, the Bank stated its willingness to consider sympathetically and favorably an application from the Mayor and Municipality of Habana for a credit to the Municipality for this purpose. The Bank stated that it had not received as yet a formal application from the Municipality of Habana for the consideration of this matter and stated that the Cuban Government and the Mayor of Habana could be informed that a formal application would receive consideration.

The Cuban Government, in the communications above referred to, had also requested consideration by our Government of a reduction of fifteen points in the customs duties paid by Cuban sugar on admission into the United States; more favorable treatment for Cuban sugar in general; and more favorable consideration of importations of tobacco, cigars and cattle. These matters had already been under consideration by the Department of State and I had conversations with the Secretary, the Undersecretary, and with the officers of the Division of American Republics, and of the Division of Commercial Agreements in the Department with respect thereto. In these conversations I emphasized the importance and immediate necessity, in the opinion of this Embassy, of as favorable consideration as possible being given to the requests of the Cuban Government. I found these views shared in the Department, and the steps which were being taken in the Department were indicated to me. These steps took the form of the preliminaries for the negotiation of a supplementary trade agreement in which the Cuban desires would be met as far as possible. The Division of Commercial Agreements indicated that the Inter-Departmental Committee on Commercial Policy had approved^72a a reduction of fifteen points in the duty on Cuban sugar, after going into the matter both from the political and economic factors involved. With respect to tobacco, it was hoped that some concession favorable to Cuba could be worked out. It was indicated that the Cuban request for the stabilization of the sugar quota, which is so highly desirable in the best interests of both Cuba and the United States, could not receive consideration now as this would involve action by the Congress. With respect to cattle, it was pointed out that there was no hindrance to the importation of fresh and frozen meats from Cuba and that the question of the importation of live cattle would be gone into, and would be largely resolved by the action taken by the Cuban Government in establishing tick-free zones.

The opportunity which I had while in the Department to discuss these matters was of great value to me and I appreciate particularly the considerable time which the officers of the Department were able to give to these matters in spite of the many heavy burdens resting upon them.

In order that there should be no misunderstandings with respect to what I could say to the Cuban Government on my return to Cuba, a meeting was held in the office of Mr. Bonsal, the Chief of the Division of American Republics, at which were present—in addition to Mr. Bonsal—Mr. Duggan,⁷³ Mr. Collado and Mr. Walmsley.

It was agreed that on my return I could say to the Cuban Government the following:

1. The Export-Import Bank has agreed to give to the Cuban Government a credit of $25,000,000 for the purpose of financing agricultural diversification and public works projects. There is no division in this amount as to the portion to be devoted to public works and to agricultural diversification. It is believed by the Department and by the Bank that it is in the interests of both Governments that there should be no arbitrary division as to the amount to be devoted to the one or to the other purpose.

The projects to be embarked upon are to be approved by the Cuban Government and by the Bank. No part of the credit shall be issued for a project which has not been approved by both the Bank and the Cuban Government. For this purpose, the Bank will use the cooperation of the Department of Agriculture and of such other Departments of our Government as it will see fit, both in the study and selection, as well as in the approval, of projects, and in certain supervisory measures which it may deem desirable and necessary.

In view of the practice of the Bank not to extend credits for more than ten years, the credit shall be for a period of ten years and the sums advanced shall bear interest at the rate of four percent. Interest and amortization periods of ten years shall begin in each case with the amount or amounts actually advanced to the Cuban Government for the inauguration and carrying through of approved projects. The credit shall be amortized in such a manner that each advance shall be repayable in nineteen semi-annual instalments, each in the amount of two-and-one-half percent of the advance, the first instalment to become due and payable not later than six months from the date of the advance.

In view of the fact that this arrangement contemplates the amortization of one-half of the loan in equal semi-annual payments over a period of ten years and a final payment at the end of ten years of 52½ percent, the Bank recognizes that for so considerable a loan the period of amortization is short and a heavy burden on the Cuban economy and budget. The Bank has therefore written me a letter, dated May 2, 1941, of which a copy is hereto attached,⁷⁴ stating that if when payment of the last half becomes due at the end of ten years, it is not convenient for the Cuban Government to pay this considerable sum, consideration will be given to an extension provided all maturities have been met.

An appropriate bill for presentation to the Cuban Congress guaranteeing the loan, etc., must be drawn up and enacted before any advance can be made under this credit. Announcement of the credit of $25,000,000 is to be made by the Bank and by the Cuban Government simultaneously not later than Wednesday, May 7th, and it is understood that after I have returned to Habana on Tuesday, May 6th, and appropriately informed the Cuban Government of the foregoing, I will telephone the Department of State to indicate the hour, on May 7th, when the simultaneous announcement may be made. To this end a press release to serve as the basis of such announcement was agreed upon by the Department and by the Bank, and of which a copy is to be carried by me to Habana.

2. With respect to the memorandum of the Cuban Government requesting our favorable consideration of assistance in the organization and capital of a central bank with agricultural credit facilities, I am to say to the Cuban Government that our Government in principle views the establishment of such a bank with sympathy. I may say specifically that the Export-Import Bank views with sympathy the establishment of such a bank and is prepared to collaborate eventually in the organization of such a bank and in furnishing a part of the necessary capital therefor. The Bank, however, wishes this information to be kept in confidence by the Cuban Government and does not wish any publicity whatever given at this time to its sympathetic attitude. Although the Bank has indicated that in principle it would be prepared to participate in the capital structure of a central bank in the amount of $5,000,000, I will not mention this sum to the Cuban Government. I will say further that when the plans of the Cuban Government for such a bank are submitted to my Government, the project will receive consideration. I will also say that the need for this bank with agricultural credit facilities is not so immediately urgent as its usefulness will become more evident and immediate as the various projects authorized under the credit of the $25,000,000 are actually in process of being carried through.

3. With respect to the Habana waterworks, I will say that the Bank is prepared to look with sympathy and favor on this project which it considers to be one of the most useful which can be carried through in Cuba. I will say that the Bank is prepared to consider this project in addition to the credit of $25,000,000 above mentioned. The Bank has before it no formal application of the Mayor and Municipality of Habana for the consideration of the rehabilitation of the waterworks and that it is prepared to receive such an application. It is to be clear that the Bank has not committed itself to any particular project, but is merely prepared to view with favor and to consider seriously the application of the Municipality of Habana. I am to convey this information to the Cuban Government and to the Mayor of Habana.

4. With respect to the desire of the Cuban Government for a reduction of fifteen points in the duty on Cuban sugar, and for consideration of more favorable treatment for certain Cuban products, I may say that our Government is giving serious consideration to the possibility of opening negotiations for a supplementary trade agreement in which these matters can be considered.

5. With respect to the request of the Cuban Government for stabilization of the Cuban sugar quota permitted entry into the United States, I am to state that this is a matter requiring legislation by the Congress and cannot therefore receive immediate attention.

On my return to Habana on Tuesday morning, May 6th, I got in touch with the Minister of State, Dr. Cortina, and conveyed to him the foregoing listed under points 1 to 5. I had a very long conversation with him particularly with respect to the amortization and budgetary problems involved in the $25,000,000 credit.

Later in the day I had a very long conversation with President Batista and Dr. Cortina in which I again went over the statements I was authorized to make and above set forth. The Department will be interested to note as an evidence of good faith of the Cuban Government that the question of amortization and budgetary problems was gone into very carefully by the President and the Minister of State. They were particularly interested in these details and the measures which would be necessary by the Cuban Government in order to properly meet the payments as set forth in the Bank’s offer. In this connection I should state that just before I left Washington I was furnished through the courtesy of the Bank a copy of the Resolution of the Bank authorizing the $25,000,000 credit. I was told at the time, however, that this was not yet an official copy of the Resolution and that there might be some changes therein. A copy thereof would be transmitted to me by the Bank through the Department in due course. I was therefore able to use this preliminary copy of the Resolution only for my informal guidance in the conversations above mentioned, and I could not make direct reference to it. I will appreciate the receipt of a copy of the Resolution of the Bank authorizing the credit as soon as possible.

During the conversations with the Minister of State and, later, with the President and the Minister of State, on Tuesday, May 6th, I gave them a copy of the press release which the Bank intended to give out on Wednesday, May 7th. It was agreed that I would call on President Batista at the Palace at 11:30 a.m. on May 7th and after this call he would give out a press release at 12 o’clock. As I did not finish the conversation with the President and the Minister of State until after 8 o’clock in the evening of May 6th, it was too late to telephone to the Department to fix the hour of the release for the next day, as had been agreed upon prior to my departure from Washington. On the morning of May 7th I noticed in the morning papers an Associated Press despatch from Washington to the effect that the Bank had made its announcement of the credit on May 6th. When I called on the President at 11:30 on May 7th he was considerably disturbed that the announcement had been made in Washington prior to the Cuban Government being able to make a simultaneous announcement here. I explained to the President that as a result of telephone conversations with the Department that morning I was able to say that this premature statement had been made due to a regrettable and inadvertent misunderstanding.

This incident was somewhat unfortunate as the Cuban Government has been refraining most meticulously from any mention of these negotiations with the understanding that we would follow the same course. After the unsuccessful negotiations during the latter part of 1940, which had a very considerable disillusioning effect in Cuba, the Cuban Government and the Cuban press have been silent on the negotiations. It was the particular desire of the Cuban Government, as I had indicated in Washington, that, if the present negotiations were successful, a simultaneous announcement should be made in Washington and in Habana because of the psychological effect. I am merely making reference to this matter to make it clear that the Cuban Government kept full faith in this matter.

In my conversation with the President on Wednesday, May 7th, at which no other official of the Cuban Government was present, I touched on the considerable pressure which would be brought on him and on the Cuban Government for all kinds of projects—come good and some bad. He said that he appreciated that he and the Government would have a very real problem. There was so much to be done in various parts of Cuba that there would be all kinds of pressures. He expressed particular gratification that the Bank had expressed a willingness to consider, in addition to the credit of $25,000,000, the rehabilitation of the Habana waterworks. This would make it possible, he said, for really useful and productive projects to be carried through in all the Provinces, and it was his desire and hope that projects would be approved in all of the Provinces. I took this opportunity again to emphasize not only the importance of the careful selection of the projects by the two Governments, but also the carrying through of the individual projects in such a manner that no criticism could attach thereto. The President said that he was adequately cognizant of this and realized that the success of the program depended thereon.

The President expressed the desire that actual progress be made as soon as possible, and he therefore authorized me to discuss directly with the Minister of State a project of law to be approved by the Congress guaranteeing the loan. The preparation of such a draft-law and its approval by the Cuban Congress would take at the best a certain time, particularly as the law would have to be passed in a form satisfactory to the Bank. He expressed the hope, therefore, that while this process was going on, actual work on the study and preliminary selection of projects might be made so that with the approval of the law by the Congress definite approval could immediately be given to certain projects and work thereon started. Unless this were done, he said, there would be a very considerable time which would elapse before the credit could become effective. In this connection I said that, of course, the Bank would not advance any money for particular projects under this credit until after the actual approval of the law by the Cuban Congress. I said that I did not see any reason, however, why certain preliminary studies could not be made by the appropriate officials of both Governments of certain projects without delay. I believed that my Government and the Bank would take this view, but it was a matter which I would have to explore and on which I would have to seek instructions. I am strongly of the opinion that it would be desirable to arrange to begin the study of certain projects without delay. The Minister of State will undoubtedly raise this question with me in the near future and I will then take up this matter with the Department.

With respect to the rehabilitation of the Habana waterworks, the President said that he would ask the Mayor of Habana to come to see him today and thereafter ask him to see me⁷⁵ in order that the necessary steps might be taken for a formal application by the Municipality of Habana for a credit for the rehabilitation of the Habana waterworks.

The President and the Minister of State have asked me to convey to the Department and to the Bank their deep appreciation and that of the Cuban Government and people for the sympathetic and understanding consideration which they have given to the needs of Cuba. The Prime Minister and other Ministers of the Cuban Government have spoken to me in the same sense. The reaction of the press, which will be more apparent in editorial comment in a few days, is already such as to show that this action on the part of our Government in extending this credit is deeply appreciated by this friendly people who feel themselves bound to us by unseverable ties.

I believe that I should take this occasion to again bring to the attention of the Department how helpful has been the attitude of the Minister of State, Dr. Cortina, during the conversations which we have had with the Cuban Government since the beginning of this year in the matter of these credits. It was to a large extent due to his indefatigable labors and complete understanding that it was possible to bring about developments in the internal situation of Cuba which made feasible the granting of these credits.

I shall not fail to keep the Department promptly informed of further developments.

Respectfully yours,

George S. Messersmith

70. Despatch not printed; for enclosure, see p. 146.
71. Not printed.
72. Despatch not printed; for enclosure, see p. 196.
73. Properly should read “had recommended”, since only the President could approve.
73. Laurence Duggan, Adviser on Political Relations.
74. Not printed.
75. In despatch No. 2002, May 9, the Ambassador reported a conversation with Dr. Menocal, Mayor of Habana. The Ambassador presented to the Mayor a letter from the Deputy Federal Loan Administrator saying that the Export-Import Bank would be ready to receive a formal application for credit for the rehabilitation of the waterworks of Habana. (837.51 Cooperation Program/71.)