837.51 Cooperation Program/100

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

No. 2196

Sir: I have the honor to inform the Department that Mr. Warren Pierson, President of the Export-Import Bank, arrived in Habana on Thursday, June 12th, towards midday. The majority of the members of the Executive Committee of the Sugar Stabilization Institute were at the airport to meet him.

It had been planned that the contract for the Export-Import Bank loan, to make possible the production of an extra quota of 400,000 long tons of sugar, was to be signed by President Batista and Mr. Pierson at noon, June 12th, at the Palace. President Batista was confined to his bed on account of a sudden illness, and was unable to sign that day, hence the ceremony was postponed until June 13th at the same hour. In a separate despatch82 the Embassy has reported that the sugar loan [Page 177] contract was signed on June 13th, 1941, at 12 o’clock by Mr. Pierson, by President Batista and other appropriate officials of the Cuban government.

Mr. Pierson was accompanied by Mr. Mersereau, of the Bank; Mr. West, a Public Works expert of the Bank, and Mr. Laguardia, of the Department of Agriculture, had arrived the day before. During the afternoon of June 12th, Mr. Pierson and I were able to go into a number of matters connected with the $25,000,000 credit and later to go over these with the experts who accompanied him.

In order to arrange for the first contact between the Cabinet Committee of the Cuban government and Mr. Pierson and his associates, I invited them to dinner at the Embassy. After dinner there was the opportunity for at least three hours discussion on some of the basic questions which had to be considered in connection with the $25,000,000 credit. There were present for the Cuban government the complete Cabinet Committee composed of the Prime Minister, Dr. Saladrigas; the Minister of State, Dr. Cortina; the Minister of the Presidency, Dr. López Castro; the Minister of the Treasury, Dr. Morales del Castillo, and Dr. Oscar García Montes. There was present as interpreter of the Cuban Committee Mr. Arango, the son-in-law of the Minister of State. For us there participated Messrs. Pierson, West, Mersereau and Laguardia. Mr. Nufer, the Commercial Attaché, and Mr. O’Donoghue, of the Embassy, were present.

I opened the conversation by saying that I thought this meeting was an ideal opportunity to bring the Cuban officials in direct contact with Mr. Pierson and his associates for an informal and exploratory [ex]change of views on various major factors connected with the $25,000,000 credit for public works and agricultural diversification. I asked Mr. Pierson to open the discussion.

Mr. Pierson stated that so far as the Bank was concerned the credit had been authorized and now it was the Bank’s desire that the machinery be set up for as rapid utilization of the credit as may be feasible and possible. He said that the Bank wished to see this money expended in work which would redound to the benefit of Cuba, of the Cuban people and to the Bank’s interest. He said that the Bank was not interested in providing money for the support of the Cuban government, nor for political purposes and ends, but rather the Bank desired that such arrangements be made so that every penny of the credit went into actual work. The Bank was not interested in creating new jobs in the Cuban government but in getting constructive projects carried through in a sound and clean way.

Mr. Pierson went on to say that the Bank was not interested in seeing money spent in maintaining old projects but rather desired to see the money spent on new works. Merely as a suggestion, and not as an [Page 178] idea to which he was completely wedded, it was his opinion that it would greatly simplify matters if a Corporation were set up by the Cuban government, or a well defined committee composed of appropriate members of the Cuban government (indicating that those present would be very acceptable). This committee would have sole and responsible charge of the selection of the projects and of carrying them through for the Cuban government. This would facilitate the work of the Bank and of the Cuban government. It would be quite impossible, Mr. Pierson said, to endeavor to carry through these projects by individual departments of the Cuban government—this would result in confusion and lack of efficiency.

This committee could very well be aided by a sort of General Manager, as it was obvious that the members of the Cabinet Committee or corporation would not have the time to devote themselves fully to this work. Such an executive was needed. He could be an American or a Cuban. There should also be a controller, and in this position an American could serve very well, but he had no set views on this subject. Mr. Pierson strongly brought out the necessity for a businesslike and well set up and organized body to carry through these projects. He emphasized that the corporation or committee should have charge not only of the selection of the projects but of carrying them through from beginning to end.

Mr. Pierson stated that the recommendations made by the corporation or committee for projects should be, of course, submitted to the Bank for its approval and he could assure them that the Bank would not be long in giving its opinion. It was a desire of the Bank to facilitate the carrying through of the projects.

At first Dr. Cortina and Mr. López Castro appeared to be opposed to the idea of a corporation or a committee to be charged with the work and the selection of the projects. Mr. López Castro particularly did not seem to take to the idea and I could readily see that he did not understand what Mr. Pierson had in mind. I explained, therefore, very fully what Mr. Pierson had in mind, and that it would be quite impossible, from our point of view, to select these projects in the public interest and to carry them through in a sound and effective way as the individual Ministries under which they ordinarily fell had no direct responsibility. I said that what Mr. Pierson had in mind was that there must be a corporation or committee especially set up for this purpose and with sole control. It, of course, would call upon the existing organisms of the Cuban government for help in the work, but they would be acting for and under the corporation or committee. When Dr. Cortina and Mr. López Castro more thoroughly understood Mr. Pierson’s suggestion, they warmed up to it and towards the end of the meeting on several occasions expressed the opinion that Mr. [Page 179] Pierson’s suggestion should prove a practical one, greatly facilitate the work and eliminate a good deal of detail.

There was then some general discussion with respect to the authorization act for the credit. Dr. Cortina said that the Prime Minister and Mr. García Montes had been giving this attention. It was their thought that the law should be sufficiently general but at the same time should contain sufficiently specific provisions to give power to control the work so that it would be properly carried through. Dr. Cortina went on to say that President Batista had only a few more years to serve as President. Under the constitution, which President Batista himself helped to establish, an interval of eight years would have to pass before he could serve as president again. He emphasized that President Batista had as his principal ambition the desire to do something useful for his country and to secure prestige for himself during his term of office. The President, therefore, was interested in the rapid, sound, clean and efficient carrying through of the projects under this credit.

Dr. Cortina said that he believed the Cuban government would be prepared to carry through the suggestion for a corporation or committee made by Mr. Pierson. He was sure we would find that the Cuban government would be prepared to accept any suggestions which will provide for a proper selection and execution of the projects. He emphasized again that the Cuban government is as much interested as is the Bank that these works be carried through in a clean and constructive manner.

Dr. Cortina said that he was not sure whether it would be advisable to put the provision for the corporation or committee in the authorization act or not. It might make difficulty in getting the bill through Congress if this provision is in the act. He said, however, if the provision for the corporation or committee was not in the authorization act, there would have to be a well defined confidential agreement between the President and the Cuban government and the Bank that the President would by decree set up the corporation or the committee. Mr. Pierson and I said that it seemed immaterial, so far as our government was concerned, as to whether the committee or corporation was set up in the authorization act or by decree. This was a matter to be decided more by the Cuban government than by us.

With respect to the projects to be selected, there was agreement that there should be no announcement of any decision with respect to projects until after the authorization act is approved. It was agreed that this was desirable in order to prevent jockeying in the Congress for votes. Mr. Pierson and I both emphasized the importance of the authorizing act being approved quickly, as it was not possible to do anything concrete until this act was passed and the contract signed. [Page 180] In other words, there could be no real progress until the law was passed and the contract signed. In this connection, Mr. Pierson emphasized that naturally, in view of the defense program, there would be certain difficulties in securing necessary materials for the carrying through of some of the projects. The sooner the law was passed and the contract signed, the sooner would they be able to determine projects to be realized and to establish what materials would be necessary.

Mr. Pierson said that in certain cases it might be possible to secure priorities for materials. He could make no commitments in this respect but the Bank would be willing to do what it could in order to get necessary materials. Mr. Pierson further made the useful and concrete suggestion that the projects first approved could very properly be such which would not require too much material or material which could be more readily obtained. Mr. López Castro said they had this very much in mind and were making their plans accordingly.

Various members of the Cuban Committee expressed themselves on the necessity of the projects being carried through in a clean and sound manner. They said they realized that if they carried through these projects in an entirely acceptable manner there was a chance of further needs of Cuba being considered. Mr. Pierson said he could make no commitments with regard to further credits, but that he knew of nothing which would create a more favorable atmosphere for further credits than an altogether sound realization of the projects under the present credit.

The conversation then turned again to the general lines which would be followed in the selection of projects. Mr. García Montes, a former Minister of the Treasury and, who, together with Mr. López Castro, has been studying projects said he thought Mr. Pierson’s observations respecting new and old public works required further clarification. At this point Mr. López Castro took exception also to Mr. Pierson’s remarks respecting new and old works. He said there could be no general rules laid down which could be followed explicitly. He said in general he agreed that the projects should be new projects but that there were certain projects which would have to be considered and which were really old projects. In his opinion one of the principal projects would be the repair and actual reconstruction of certain sections of the central highway.

[Here follows discussion regarding the need for repairs on the central highway.]

Mr. Pierson said that his remarks with regard to old and new works had been made for the purpose of stressing an important principle rather than for the purpose of opposing the idea of repairs for the central highway. He realized as things were that the central highway would probably have to be repaired from funds out of the $25,000,000 [Page 181] credit. Mr. Pierson said that he recognized not only the economic but the strategic and defense importance of the central highway.

Mr. West and Mr. Laguardia expressed the view that in spite of the considerations given by Mr. Pierson they were of the opinion that under the actual circumstances which had to control, it would be necessary to make the appropriate repairs to the central highway out of this credit. The central highway was the backbone of the transportation system of Cuba and unless it was in altogether good condition almost any help that could be done under the credit would not be fully realized.

The Minister of State remarked that, being a very systematic and orderly person, he wished to restate what in general he thought was a résumé of the conversation. He said it was his understanding it was the opinion of all present that the projects must be such as to redound to the benefit of Cuba and its people; that the works must be carried through in an orderly, sound and honest way; that it is not controlling in the selection of works as to whether they are old or new projects, the completion of those under way or the maintenance of old ones, provided they tend to improve the general economic situation. So far as the creation of a central committee or corporation for selecting the projects and carrying them through is concerned, he felt that this was a matter which they naturally must take up with the President, but in his opinion, which he repeated several times, there should be no difficulty on this point.

The meeting terminated, I believe, with the general feeling on both sides that it had been a helpful one. There is no doubt that Mr. Pierson had been able to get across to the Cuban officials his two main ideas respecting the creation of a central committee or corporation and that in the future there be provision for maintenance out of current funds rather than depending upon loans for maintenance. The Prime Minister stated at the end of the meeting that the Cabinet Committee would meet with the President the following day and would like to meet with Mr. Pierson and me afterwards.

The Cabinet Committee had a meeting with the President on Friday, June 13th, after the signing of the sugar contract, during which meeting they went over the whole situation with the President, taking up the points raised in the conversation the evening before. Mr. Pierson and I met the full Cabinet Committee at Dr. Cortina’s house in the late afternoon on Friday, June 13th, for a conference of several hours. Dr. Cortina explained that the various points raised the evening before had been discussed with the President and that the President was quite in accord with the ideas on which general agreement had been reached. The President had expressed his willingness that a corporation or committee should be set up which would have sole authority in selecting [Page 182] and carrying through the works, rather than having this responsibility in the different Ministries. The President was also in accord with the idea of a General Manager. The President had reiterated his desire that the work should be carried through in a sound, honest and constructive manner. He wished during his term of office to do something constructive and lasting for Cuba and did not conceal that his sole personal interest in the matter was the prestige which would accrue to him through the proper carrying through of the work.

Mr. Pierson raised the question of a controller and stated that so far as the Bank was concerned he did not believe it was material whether he was a Cuban or an American citizen. The important thing was that there should be a competent General Manager and Controller to serve as the executives of the corporation or cabinet committee. Mr. Pierson reiterated his opinion that it was for the Cuban government to decide whether the corporation or committee should be set up in the authorizing act or by presidential decree.

Mr. Pierson further said that, of course, the Bank would need to have certain people here in Cuba acting for it and that vouchers for payment for work as completed would have to be approved by the representatives of the Bank. The Cabinet Committee did not offer any objections to this procedure, but it indicated it felt that the Bank’s representatives here should be persons with adequate authority. Mr. Pierson assented to this.

There was further discussion of the general types of projects and Mr. Pierson again emphasized that the Bank’s one interest was that the projects should be constructive and sound, and that when recommendations reach the Bank for particular projects they would be quickly acted upon.

The Cabinet Committee expressed appreciation of the action by the Bank in having Messrs. Mersereau, West and Laguardia here, and who have stayed after the departure of Mr. Pierson.

The Cabinet Committee agreed to facilitate the work in the preparation of the draft of the authorizing act and of the contract. Mr. Pierson emphasized that no definite step could be taken in actually doing work until the authorizing act has been passed and the contract signed.

After the meeting with the Cabinet Committee on June 13th, Mr. Pierson and I went over the conversations with Mr. Pierson’s associates so that they had the full background.

Mr. Mersereau is working with Mr. García Montes on the draft of the authorizing act and on the contract. Messrs. Laguardia and West are working with Mr. López Castro and other members of the Cabinet Committee on the preliminary examination of projects.

It is my opinion that the visit of Mr. Pierson to Habana has been most useful. The signing of the sugar contract in the Palace gave [Page 183] this action of our government another opportunity for helpful and constructive public and editorial comment. The conversations which Mr. Pierson was able to have with the Cabinet Committee during his stay did much to clarify the position. I had been trying to build up over months a certain situation and the visit of Mr. Pierson helped to accentuate what I had already said to the Cuban government. The agreement of the Cuban government to the setting up of a corporation or cabinet committee, which shall have sole control of the selection and carrying through of the projects, is a great step forward. It will facilitate not only the contact between the Bank and the Cuban government, but it will provide the machinery for the honest and effective carrying through of the projects. It was most important that the projects should not be carried through by individual departments of the Cuban government but through such a central organization. I am sure the Cuban government appreciates very much the action which the Bank took in making it possible for Mr. Pierson to come here, with his associates, at this time.

I fear that under the best circumstances the progress which will be made will not be as rapid as the Cuban government and the Cuban people desire, but we have made it clear that whatever delays there will be will not be any responsibility of the Bank or of our government. While I believe the Cuban government has the desire to facilitate the passage of the act and the signing of the contract, this is bound to be a somewhat slow process, although there is, of course, the possibility that it may be done quickly.

President Batista has indicated that he is prepared to call a special session of Congress before the end of June or in early July—just as soon as the authorizing bill is ready for presentation to the Congress. The message to accompany the authorizing bill is already prepared.

I shall continue to keep the Department informed of developments.

Respectfully yours,

George S. Messersmith
  1. No separate despatch found in Department files; however, there is a letter dated June 14, 1941, from the Ambassador to Under Secretary Welles commenting on the signing of the contract (837.51 Cooperation Program/119).