The Acting Chairman of the Export-Import Bank of Washington (Gaston) to the Ambassador in Cuba (Norweb)92


Dear Mr. Ambassador: As you no doubt are already aware, the procedure under which this Bank has administered the $25,000,000 credit extended to the Comisión de Fomento Nacional in April, 1942,93 has consisted of approving definitive projects of the Comisión’s various programs and of allocating thereto the funds estimated as necessary for the completion of those projects. In following this procedure the Bank has been fully aware of the ever-present possibility that from time to time additional allocations for previously approved projects might be necessary because of the inadequacy of original estimates, changes in wage schedules and prices of materials and for other causes. For this reason, the Bank has consistently followed a policy of reserving a portion of the credit to meet such contingencies as might arise. The wisdom of this policy has been fully justified by actual experience during the past three years, as it has been found necessary in almost all instances to supplement the original allocations in order to provide for the completion of the works involved.

Shortly after the present Cuban Administration took office, we were requested by the Comisión to allocate funds for the construction of the first sections of three country roads forming part of a country road program which was deemed by President Grau San Martín to be of paramount importance. With some reluctance, we acceded to this request and early in 1945 allocations aggregating $469,794.83 were approved for this purpose. Subsequently, the Comisión requested further allocations with which to carry out the second sections of these [Page 764] same highways which were then estimated to cost $666,325.74. In addition the Bank also gave its approval to the utilization of the credit for the purchase of equipment and materials for country road construction in an amount of $685,876.35.

We have recently been advised by the Comisión that the original allocations of funds for the construction of the first sections of the three country roads have been enxtirely exhausted, and we have been requested to approve an additional allocation of $790,139.46 to permit the completion of this work. Presumably, a similar situation exists with respect to the second sections of these same highways but we have not yet been informed by the Comisión as to what additional funds are estimated as necessary for the completion of these second sections.

The Bank is not unaware of the political importance of the country road program from the standpoint of the present administration in Cuba. On the other hand, it appears from the facts available to us that the money which is being expended on this work is not being spent wisely. Obviously, we are loath to be involved in the financing of uneconomic projects or of construction which is not being carried on in an efficient and economic manner. Were it not for the political considerations involved, our immediate reaction to the pending petition of the Comisión would be to deny its request. We feel, however, that such action on our part would be unwise until your Embassy has had the opportunity to explore fully this situation and to give us the benefit of its comments and advice. We hope, therefore, that you will discuss this matter with President Grau San Martín, the Comisión and its consulting engineers, the Frederick Snare Corporation and advise us as to your conclusions. Inasmuch as we understand that work is still proceeding on the country road construction, there is some urgency in reaching a decision as promptly as possible.

For your information, we are enclosing a copy of a staff memorandum of February 494 which sets out in more detail the country road situation as we understand it. It should also be pointed out that the present unallocated balance of the credit, according to the best information available to us at present, is about $1,200,000. The exact amount is somewhat indefinite inasmuch as we have not yet received the Comisión’s final estimates of the probable cost of completion of the various tributary road construction projects which it now has under way. There is also some possibility that a portion of the presently unallocated funds may be needed to defray overruns in the presently estimated costs of the construction of the Central Highway and of the sanitation programs in Santiago and Guantánamo.

If we can be of any assistance to you in furnishing further details concerning the status of the credit please do not hesitate to call on us. [Page 765] In the meantime, we trust that we will have your early advice with respect to the procedure which we should follow in connection with the country road program.95

Very truly yours,

Herbert E. Gaston
  1. Copy of letter transmitted to Habana in instruction 528, February 19; this instruction (not printed) requested the Embassy’s comments and recommendations concerning the question of approval by the Export-Import Bank of the allocation of additional funds for Cuban road construction.
  2. With regard to the signing of the agreement for the $25 million credit by the Export-Import Bank, see telegram 178, April 8, 1942, to Habana, Foreign Relations, 1942, vol. vi, p. 294.
  3. Not printed.
  4. In response to the Department’s instruction 528 of February 19, 1946, the Ambassador in Cuba reported in despatch 1180, February 28, as follows: “While the Embassy fully appreciates the misgivings of the Export-Import Bank and of the Department in connection with this country road program in view of the heavy additional request for funds, so far as it is possible to ascertain the work is being done efficiently and well, at costs which under existing circumstances cannot be materially reduced, and it believes that whatever funds are available from the Bank credit for this country road program will be well spent and to the decided advantage of the Cuban economy.” (837.51/2–2846)

    The Department informed Ambassador Norweb in telegram 187, March 21, 1946, 2 p.m., that the Bank’s Board of Directors had approved the request of the Comisión de Fomento Nacional for additional allocation of $790,139.46 for completion of the first sections of three country roads under construction (837.51/3–2146).