837.51 Cooperation Program/101

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

No. 2188

Sir: I have the honor to refer to my despatch No. 2030 of May 17, 1941,81 referring to previous correspondence with respect to the desire expressed by the Municipality of Habana for a credit from the Export-Import Bank for the purpose of carrying through the rehabilitation of the Habana waterworks. It will be recalled that when I was in Washington during the latter part of April, the Export-Import Bank informed me that I could state to the Mayor of Habana that if the Municipality transmitted a formal request to the Bank for the consideration of a credit for the rehabilitation of the Habana waterworks, the Bank would be disposed to consider this matter sympathetically. There was transmitted with my despatch No. 2030 the formal request of the Municipality of Habana for the consideration of such a credit by the Export-Import Bank, the Mayor of the City having been authorized by the City Council to make such a formal request. No reply to this request from the Municipality of Habana has yet been received so far as I know—unless a formal acknowledgment of the Mayor’s letter may have been sent directly to him.

During the visit of Mr. Warren Pierson, the President of the Export-Import Bank, to Habana last week for the purpose of signing the contract in the sugar loan, and for the purpose of discussing with the Cuban Government certain major matters connected with the credit of $25,000,000 extended to the Cuban Government for the carrying through of public works and agricultural diversification projects, I thought it would be desirable for Mr. Pierson to see Mayor Menocal, as the Mayor had expressed to me a very strong desire that he have an opportunity to see Mr. Pierson during his stay. I therefore arranged [Page 173] for a conversation between Mr. Pierson and Mayor Menocal on Friday, June 13.

Prior to seeing the Mayor, Mr. Pierson and I had had an opportunity to discuss briefly the Bank’s attitude in this matter. I gathered from what Mr. Pierson said that, while the Bank had over a period of years given some consideration to the Habana waterworks project and considered it one of the most effective and sound projects which could be carried through in Cuba, and while the Bank had always considered the project with sympathy, he believed that the present was, in some respects, not an opportune time for carrying through this project. It involved a considerable amount of material which it would be increasingly difficult to get from the United States because of the demands of the defense program upon our industry. The Bank, too, had limited personnel and it had been giving a great deal of time in recent months to Cuban matters, particularly the sugar arrangement and the $25,000,000 credit for public works and agricultural diversification projects. He was hoping, therefore, that action on the waterworks project might be somewhat delayed.

With this background in mind, Mr. Pierson and I met Mayor Menocal on June 13. The Mayor emphasized the desirability of the project and of as rapid action as possible in carrying it through. He said that there was great expectancy on the part of the Habana population which had appreciated tremendously the indication given by the Bank that it would be prepared to receive a formal application from the Municipality. He was daily approached by many responsible people who did not understand all that was involved and who were reproaching him because work had not actually been started.

Mr. Pierson informed the Mayor that the Bank had in the past and still viewed this project with sympathy and favor. He felt that the present moment was in many ways inopportune for the beginning of the project as there would be extraordinary difficulties in getting the necessary machinery and materials for the carrying through of the project and of which the United States was the only source. He called attention to the fact that the project was one which required considerable further study and that this would take time. He emphasized the manner in which the Bank was overburdened with the many things which were before it.

The Mayor said that these very factors he had in mind and he understood them but that, in his opinion, the question of materials should not be so great an impediment. There was preliminary work to be done and at the outset of the actual work on the project a relatively small amount of material would be needed. The project was one which would take some years to carry through, and even if work were started today it would be a year before certain types of material would [Page 174] be required. He thought there was much reason to believe that by the time certain materials were needed the situation in the United States would have sufficiently improved in the way of industrial supplies to make it feasible for the necessary materials to be secured.

With respect to the great volume of the work the Bank had to handle, he quite understood this situation and for that reason particularly appreciated the attention which the Bank had and was giving this matter.

With respect to the preliminary work to be done, the Mayor stated that this was just what preoccupied him the most. There had been various studies made of the waterworks project but perhaps none of them could be considered complete. Several years ago, the City of Habana had had a study made of a preliminary character, but it could not be considered complete. This study was its own property and the engineers who had prepared it had no financial interest therein. The Mayor also called attention to a more recent and more complete study which had been made by a group of Cuban engineers on their own initiative. So far as he could judge and knew, this was the best study which had been made. He understood also that there were studies which had been made by some American firms, but how complete they were he was unable to say. He was of the opinion that some action should be taken to get a study which would give an adequate basis for the Bank to make its decisions. He was extremely anxious that something in this direction should be done.

I took the liberty of suggesting that the best procedure might be for the Mayor to submit to the Bank this preliminary study to which he had referred as being the property of the City. Although it was not complete, it would give the Bank something concrete on which to work. If he submitted such a study to the Bank, the Bank would be able to give it its consideration and make its observations to the City. Thereafter, on the basis of the observations which the Bank might make on this preliminary study, and on the basis of further observations which the City might make, it might be found desirable for the City to have an independent study made on its behalf and for its account by competent engineers. I emphasized that, in my opinion, such a further study, if made, should be made independently of any contracting firms in the United States or in Cuba. The Mayor agreed that this procedure seemed to be the only one to follow at this time and he said that he would forward to the Bank in the very near future the preliminary study of the project which was the property of the City and in transmitting it he would make any further observations which he considered useful.

The discussion then turned to the pressures which were being brought on the Municipality here and on the Export-Import Bank [Page 175] at home by American and Cuban firms and individuals interested in the contract for the project. Mr. Pierson said that the Bank was constantly being importuned by American firms interested in the contract and had also been approached by Cuban firms. Mayor Menocal said that the pressure on him here was enormous by both American and Cuban firms. It was brought out that there are Cuban and American firms which are endeavoring to give the impression both in Habana and in Washington that they have an “inside track” and that certain formal and informal commitments have been made to them. Mr. Pierson said that he wished Mayor Menocal to know that the Bank had made no commitment whatever to any contracting firm. Mayor Menocal assured Mr. Pierson that, irrespective of what might be said, he had made no such commitment to any firm—American or Cuban.

I took this opportunity to say that, in my opinion, it was obviously undesirable to make any such commitment to any Cuban firm or to any American firm. I said that whatever further studies were undertaken should be undertaken in such a way that they involved not the slightest obligation to any contracting firm whether Cuban or American. The Bank and the Mayor of Habana had both expressed the absolute necessity of the project being carried through in the most effective manner and in a way which assured that every cent went into actual construction. Some of those interested in securing the contract were obviously more interested in what they could make out of it than in seeing the best job done. The Mayor took this occasion to emphasize again that, while he wanted this project to be carried through while he was Mayor of Habana, he had made it abundantly clear that it would have to be carried through in an entirely honest and effective manner. I may say in this connection that I believe the Mayor is sincere in his expressions.

Mr. Pierson raised the point that there was some scepticism as to whether it would be possible to carry through this project in such a sound manner in view of the attitude which the City Council might take. The Mayor in this connection said that the need for the Habana waterworks renovation was so great that the City Council could not stand in the way of any arrangement for carrying out the project which meant complete honesty. Pressure of public opinion was so great that in this particular matter any sound arrangement which the Bank might desire could be carried through. I ventured the opinion in this connection that I believed that the City Council would have to take all appropriate measures to carry through the project in a sound manner as it could not oppose itself to public opinion which would support even the most severe measures which the Bank might feel necessary to impose for the proper carrying through of [Page 176] the project and for the future administration of the waterworks in order to assure amortization and interest of the debt involved.

Mr. Pierson raised the question as to whether it would not be desirable to consolidate the Marianao waterworks with the Habana waterworks in connection with the carrying through of this project. The Mayor did not feel that this would be feasible. I am not sure whether his considerations were mainly political or not, but so far as I have given this matter study, I do not believe that the amalgamation of the two, which is desirable, is impossible. The American waterworks which are the owners of the Marianao plant have shown a disposition to sell, and I believe it is largely a question as to how reasonable this company would be in disposing of its interests.

The Mayor made a very strong plea for early consideration of this matter by the Bank and showed obvious disappointment that the matter was not developing more rapidly. He said that he would in the very near future send to the Bank the preliminary study referred to in this despatch, with further observations of the City, and would await with the keenest interest any comment by the Export-Import Bank.

May I suggest that a copy of this despatch be transmitted to the Export-Import Bank?

Respectfully yours,

George S. Messersmith
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