The Chargé in Cuba (Muccio) to the Secretary of State

No. 9343

Subject: Deterioration of Cuban Price Control

Sir: I have the honor to refer to the Embassy’s despatch no. 9241, April 27, 1945, transmitting inter alia copies of the Embassy’s note no. 294 and the Cuban Government’s note no. 731 (both dated April 26, 1945) with respect to price stabilization undertakings.77

In return for United States assurances of stable prices in selling rice, wheat flour, and lard, the Cuban Government undertook “to maintain and effectively to enforce in Cuba the wholesale and retail ceiling prices not only for these three commodities, but also for edible oils, meat, beans, charcoal, and alcohol”.

The Cuban Government is fulfilling, and apparently will continue to fulfill, the above undertaking with respect to maintenance of ceiling prices. It is not, however, effectively enforcing its ceiling prices, and there is little prospect that the agreement will be fulfilled in this regard.

The Office of Price Regulation and Supply as presently constituted is a branch of the Ministry of Commerce. Policy and procedure for price control are formulated directly and personally by the Minister of Commerce, Dr. Alberto Inocente Alvarez.

The present director of the ORPA, Dr. Leonardo Cano, regards his duties as being solely administrative and concerned principally with distribution of tires, fuels, and nominal supervision of the price structure. Determination of ceiling prices, when not undertaken directly by the Minister of Commerce, is directed by the ORPA Sub-Director, Manuel San Martin. The latter displays a vigorous interest in the academic problems of equitable price determination, but apparently is little disturbed over the failure of the Cuban Government to provide means of enforcement for established ceiling prices.

At the retail level, enforcement of ceiling prices ceased quite generally in early March. During April, enforcement practically ceased for wholesalers. Violation now is general both in Habana and throughout the island, and the cost of foodstuffs has risen sharply (see Embassy’s report no. 170, April 19, 194578 titled “Cuban Price Stabilization for Basic Foodstuffs” and other reports in the same series.)

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It will be recalled in this connection that last October the ORPA embarked on a vigorous and successful drive for enforcement of ceiling prices, fulfilling President Grau’s campaign pledge to this effect. This drive began to lag in January, when food prices came under severe pressure because of drought and reduced supplies of meat and livestock products. Deterioration since then has been rapid.

Aside from the extraordinary pressure on prices and the Government’s reluctance to face the difficult problems of control, specific causes of deterioration can be enumerated as follows: (1) failure to provide adequate funds for extension of ORPA representation throughout the island, (2) failure to provide skilled personnel within the ORPA, (3) reluctance of courts to convict the relatively few violators against whom charges are made, and (4) denial of autonomy to the ORPA which is under direct administration by the Minister of Commerce, who, although displaying excellent intentions, is so busily occupied on other problems that price control activities are neglected.

During recent weeks the Embassy has discussed with ORPA officials and with the Minister of Commerce the deterioration in enforcement of price control, with particular reference to Cuba’s undertaking in the price stabilization agreement. The ORPA officials disclaim responsibility on grounds that the Government has not provided the necessary authority, funds, or personnel for effective work. The Minister of Commerce stated his belief that control can be reestablished through more drastic penalties, and has prepared a decree for promulgation under which Government “interventors” can be placed in commercial or industrial establishments to supervise operations, at the expense of the business, by direction of the Minister of Commerce. (This decree of course will be transmitted when promulgated.)

The Embassy does not expect substantial improvement in the price control situation as a result of Government action; for example, the drastic penalties which could be inflicted by “interventors” would attack only the deficiency of present court action in convicting violators, and would leave untouched the more basic aspects of the problem. Some improvement in the situation, however, may occur in late summer as a result of seasonally larger food supplies, which normally relieve pressure on prices at that time.

Although the situation described herein represents a failure of the Cuban Government to fill an obligation, the Embassy recommends that for the time being our Government continue to fulfill its commitments in so far as possible with respect to the supply of rice, wheat flour, and lard. This will have a noticeable retarding effect on the general advance of food costs in Cuba and will facilitate any renewed efforts to reestablish price stabilization on the part of the Cuban Government.

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The Embassy recommends also, if the Department perceives no objection, that forceful representations be made to the Cuban Ambassador concerning the urgent desirability of improved Cuban price control measures in view of the joint undertaking with respect to stabilization of price and supply.

Respectfully yours,

For the Chargé d’Affaires ad interim:
Albert F. Nufer

Counselor of Embassy for Economic Affairs
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