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

No. 1809

Sir: I have the honor to refer to the Department’s restricted airmail instruction no. 826 of June 25, 1946, enclosing for transmission to Mr. Evaristo Sotolongo, the Acting President of the Cuban Sugar Stabilization Institute, a letter dated June 25, 1946, from Mr. James [Page 790] H. Marshall, Director, Sugar Branch, Production and Marketing Administration, Department of Agriculture, together with a suggested modus vivendi for the purchase of the 1946 Cuban sugar crop. The letter and modus vivendi are in reply to a communication addressed to Mr. Marshall by Mr. Sotolongo on June 13, 1946, with which he transmitted a copy of a modus vivendi drafted by the Sugar Institute.

Mr. Marshall’s letter and its enclosure were delivered to the Executive Committee of the Sugar Institute yesterday by Mr. Nelson Norregaard, representative here of the Commodity Credit Corporation, and the Committee’s reactions thereto are set forth in Mr. Norregaard’s enclosed memorandum of June 27. It will be noted that the possibility that Mr. Marshall’s letter be withdrawn was suggested to Mr. Norregaard, who, however, informed the Committee that he had no authority to do so. It will also be noted that the Committee was of the opinion that it would be extremely difficult to accede to the changes suggested by Mr. Marshall and that in view thereof, Mr. Norregaard was informed that Cuba would discontinue loading sugar for the United States after July 1, except in the case of vessels already assigned.

The Committee indicated that it would recommend that additional sales of sugar be made to other countries and that the difference in price between the sugars thus sold and the United States price be used to finance sugars remaining unshipped as a result of the suspension of shipments to the United States. Whether the Cuban Government will actually adopt so drastic a measure remains to be seen but the possibility that this may be merely a threat designed to force our hand cannot be entirely disregarded.

It is of interest in connection with the foregoing that 1946 crop sugar shipments to the United States up to June 15 have, according to Mr. Norregaard, totalled 1,507,000 short tons of raw and about 150,000 short tons of direct consumption sugar. Additional quantities have, of course, been shipped since that date and, as of today, there are 25 vessels assigned to load sugar here after July 1. Of these, 5 are scheduled to lift sugar for foreign claimants while 20 will lift sugar for the United States. The total amount of sugar that these vessels will load is estimated at 155,000 short tons.

The Sugar Institute, as mentioned in the last paragraph of Mr. Norregaard’s memorandum, proposes to reply officially to Mr. Marshall’s letter and a copy of that reply, when received, will be forwarded to the Department immediately.

Respectfully yours,

For the Chargé d’Affaires, a.i.:
Albert F. Nufer

Counselor of Embassy for Economic Affairs
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Memorandum by the Representative of the Commodity Credit Corporation in Cuba (Norregaard)

The counter modus vivendi, and Mr. James H. Marshall’s letter in reply to the Sugar Institute, was delivered this morning to the Executive Committee of the Institute. Those attending were Messrs. Casanova, Mañas, Puyans, and Rasco. After the letter was read by the Executive Committee, Dr. Mafias stated that he wished that the letter could be withdrawn. However, I told him that I was sure that was the way our Committee felt about the situation and I had no authority to withdraw it.

Dr. Mañas and Senator Casanova explained at length the difficulty that had been experienced in obtaining the agreement of the Hacendados, Colonos, Labor and the Cuban Government to the modus vivendi, suggested by the Institute on June 13, 1946. They stated that it would be virtually impossible to now obtain their agreement to any further changes therein.

They pointed out that the Institute, in suggesting this modus vivendi, was a body entirely apart from the Cuban Commission which was recently negotiating the sale of the crop in Washington and that the Institute had no legal right to compromise the Industry as a whole. They also pointed out that the figure of 4% increase in the cost of living index, as suggested by Mr. Marshall, would not be accepted by Cuban Labor inasmuch as this particular question was one of the important points in obtaining the approval of Cuban Labor to this modus vivendi They stated that any increase would have to begin at 1½% in order to reflect any increase in cost of living, and not at 4% which would be a protection against a general inflation. The 4% figure was accepted by them last year because they had protection on the cost of commodities sold by the U.S. to Cuba, but inasmuch as they no longer have such protection, this clause is definitely meant to reflect any increase in the cost of living.

Concerning candy, the Institute claims to have no control as this is purely a matter that would have to be decided between the two Governments.

The question of molasses and alcohol, they claim, is one of most importance and that they could not consider any contract that did not provide for the U.S. buying Cuban alcohol. The fact that the U.S. seemed to have little interest in further deliveries of molasses appeared to disturb them greatly. They also stated that the President of the Republic, in every conference concerning the sale of the crop has repeatedly insisted on protection of the distillery and candy industries.

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Senator Casanova explained the tremendous difficulties that they faced in acting as leaders of the industry and it has only been with the utmost effort that they have been able to propose their modus vivendi.

The result of the above conference was that Cuba would discontinue loading sugar for the U.S. after July 1st, with the exception of those vessels already assigned. They stated that they would have to recommend to the Government that they make sales of sugar to other countries in excess of the 250,000 tons and that the excess price obtained from such sales would be ample to finance sugars remaining in warehouse in Cuba.

Concerning the 47,500 ton loan of 1945 crop sugar, they also stated that this matter as well as the candy and alcohol was one that would have to be settled between the two Governments as the Institute had already made definite recommendations for the return of this sugar out of the local consumption quota and also for the Government to provide the funds with which to repay the Commodity Credit Corporation for the difference in price.

The Executive Committee advised that Mr. Marshall’s letter would be officially answered; however, they felt that they could not deviate from the position taken in their conversation as set forth above.

Nelson Norregaard