837.61351/2654c: Telegram

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

374. Reference Walmsley’s telephone call this morning to the Ambassador. The Defense Supplies Corporation and the Office of Price Administration request that the proposal made by Mr. Pierson be restated in the following language and thus replace points 1 to 5 in the Department’s telegram no. 373 of November 30, 4 p.m.68 In delivering the following proposal to Dr. López Castro69 it should be made clear it is not an offer but that if the proposal is acceptable to Cuba Mr. Pierson as Chairman of the United States Commission will recommend it to the interested agencies of the United States as a satisfactory basis for a purchase agreement:

  • “1. The entire 1942 Cuban crop will be purchased at a minimum basic price of 2.50 f. o. b. Cuba for sugar, invert and blackstrap. [Page 243] This basic minimum price applies with the freight rate for sugar fixed at 34 cents and will not be disturbed by any increase in freight without a corresponding rise in the price of sugar.
  • 2. By condition of the Cuban Commission any reduction in the present tariff (15 points) will be for Cuba’s benefit. Since Cuba insists that any agreement be predicated on a 15 point reduction in the present tariff, the basic minimum price as stated in Article 1 above will be
    • 2.65 for raw sugar (freight constant at 34 cents for this minimum)
    • 2.50 for invert and blackstrap (neither of which is affected by the tariff).
  • 3. Purchase of the entire crop to be less
    (a)
    200,000 long tons for local consumption, and less the blackstrap therefrom;
    (b)
    65,000 long tons for the world market; and
    (c)
    molasses requirements of Cuban distillers for about 65,000,000 gallons of alcohol.
  • 4. The basic minimum price of 2.50, f. o. b. Cuba, will hold for invert without deduction of the usual production cost differential estimated at 20 to 30 points, but this price as applied to blackstrap will be subject to deduction of approximately two cents per gallon representing the freight differential between blackstrap and invert.
  • 5. OPA to lift the domestic price ceiling to 3.74 contemporaneously with the conclusion of the purchase agreement.
  • 6. The basic minimum price for sugar, invert and blackstrap will vary upward upon any rise of market price following any rise in ceiling price, the price to be paid to be determined by the average market price during the 15 day period prior to the arrival of each shipment United States port, except as modified by Article 7 below.
  • 7. Any rise in the domestic price ceiling due to or in anticipation of a freight rise will not affect the f. o. b. price Cuba, all such freight rises to be for Cuba’s account so long as they do not affect the basic minimum price. The pertinent agencies of the United States Government will undertake to exert their best efforts to prevent freight rises.
  • 8. Cuba agrees to produce a maximum crop and will deliver as per buyers’ indications, whether sugar or invert, it being understood that the immediate need is for invert but that United States requirements will not exceed approximately 1,000,000 long tons sugar equivalent.”

Mr. Leon Henderson, the Price Administrator, has stated that he cannot approve the proposal on behalf of the OPA before he discusses it with the President within the next day or so.

Hull
  1. Not printed.
  2. Amadeo López Castro, Secretary of the Presidency, and head of the Cuban Sugar Commission.