Memorandum of Telephone Conversation, by the Ambassador in Cuba (Messersmith)63

Mr. Pierson64 called me on the telephone at 11:30 today to say that they were having their troubles in coming to agreement with the Cuban Sugar Commission on the purchase of the 1942 crop. At the meeting yesterday, we had offered the Cubans what was equivalent to 2.40 for sugar and 2.30 for 1,000,000 tons sugar content molasses. He pointed out that the Price Comptroller had agreed to raise the selling price of sugar from 3.50 to 3.64. This made it possible to offer the Cubans 2.40 instead of the present 2.26 for sugar. The Cubans had remained firm in asking 2.75 for sugar and molasses and the meeting ended yesterday on that basis.

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Mr. Pierson said that they had had a meeting with OPM65 this morning, which had just ended, and that OPM had indicated that it could not pay a higher price than 2.30 net for molasses. OPM felt that by rationing alcohol for use in gin and alcoholic beverages and by using some 600,000,000 bushels of corn for alcohol, and certain other steps, it could meet the needs without consummating this purchase of the Cuban 1942 crop.

Mr. Pierson said that in addition to asking 2.75 for sugar and molasses, the Cubans had insisted that they be given corresponding benefit of any increase-benefit-payments paid to American producers. This, he said, had caused a bad impression among the representatives of Agriculture.

Mr. Pierson further said that our people had conducted the conversations very fairly and had arrived at the conclusion that the Cubans were assuming an unreasonable attitude.

I told Mr. Pierson that I hoped very much that some arrangement could be arrived at. We had asked the Cubans to come up on this matter and the initiative was ours. We had our relations with Cuba on a sounder and firmer basis than we had had them for years and I feared very much that failure to reach an agreement on this matter would have a very bad effect and complicate our relationships. I pointed out that these negotiations for the purchase of the 1942 crop were tied up with our trade agreement negotiations which were also in a crucial stage, and that these whole negotiations were particularly important, both for us and for Cuba from the long-range point of view. I said that with regard to the technical aspects of the sugar purchase, there were those who knew so much more than I that I could not offer any helpful comment. I did want to stress again the importance of the negotiation not failing because of what I believed would be an inevitably undesirable effect on our general relations which were so important.

In this connection, Mr. Pierson said that the negotiations were not being broken up and it could not be said of them that they were a failure, but that the Cubans would be returning “to report” and would have an opportunity to reflect.

Mr. Pierson also said that he had had a conversation with Dr. Mañas this morning in which he had informed him of the alternatives which we had and could use, such as using corn for alcohol and rationing alcohol for beverages. I told him that it was important to stress these factors with the Cubans who perhaps were too strongly impressed with their belief of our dependence upon them. I failed to mention it, but of course, in this connection, I am sure that there [Page 242] is being brought to the attention of the Cubans the possibility which exists of some kind of agreement with the Japanese, as a result of which Philippine sugars will continue to come into our market. These alternative measures and sources should, I believe, be brought strongly to the attention of the Cubans.

Mr. Pierson suggested the advisability of my seeing President Batista to bring to his attention the possible results of failure of the negotiations for the Cuban economy. I told Mr. Pierson that I had already had this in mind and mentioned it to Mr. Walmsley66 this morning. I also told him that I had had a talk with Mr. Welles67 this morning in which I expressed the hope that some arrangement would still be found in view of our present and long-range relationships with Cuba. I said to Mr. Pierson that I did not think I should see the President here until I had more news from him and until I had some pertinent facts which could be sent me by airmail or by cable.

Mr. Pierson said that the British had agreed for the present not to buy any sugar except at present prices.

George S. Messersmith
  1. Transmitted to the Department by the Ambassador in Cuba in his despatch No. 2991, November 25; received November 26.
  2. Warren Lee Pierson, President of the Export-Import Bank of Washington.
  3. Office of Production Management.
  4. Walter N. Walmsley, Jr., Assistant Chief of the Division of the American Republics.
  5. Under Secretary of State Sumner Welles.