837.61351/7–1246

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

restricted
No. 1881

Sir: I have the honor to report that the negotiations by Secretary Anderson51 for the purchase of Cuba’s 1946 and 1947 crop sugar, molasses and alcohol have been successfully concluded. Attached is a memorandum prepared by the Agricultural Attaché concerning the progress of the negotiations. There are also transmitted copies in English and Spanish of (a) an agreement signed on July 11 as a basis for the contract; (b) the revised sugar price clause (Article Four) of the contract; and (c) a press release issued on the evening of July 11.52 Mr. Marshall, Director of the Sugar Division, telephoned the text of the press release to the Department of Agriculture on the afternoon of July 11 and requested that a copy be transmitted immediately to the Department of State.

Negotiations for the purchase of the 1946 crop have now been in progress about 13 months. Before the arrival of Secretary Anderson, Ambassador Belt reportedly had obtained assurances from President Grau that Cuba would be ready to complete the sale of the 1946 crop. The limited number of points of disagreement with respect to the 1947 crop, however, made it highly desirable, the Embassy felt, to try to reach an agreement on both crops at the same time.

Prior to the arrival of Secretary Anderson, there was considerable opposition in Cuban sugar circles to completing a contract covering [Page 796] the 1947 crop. Resulting publicity was generally adverse to the best relations between the two countries. As an illustration, the leftist newspaper Hoy on July 5 carried a cartoon showing a large, fat man, labeled “North American Imperialism” holding a small Cuban by the neck and trying to force him to sign a paper labeled “Conditions for the sugar crop sale” with the words “You take it or leave it”. In contrast, there is now a general (although, of course, not universal) feeling of relief and satisfaction not only in the sugar circles, but from the public as well. Yesterday’s newspaper headline was “Cuba and the United States Reach Complete Agreement on Sugar”. In this connection it is pertinent that the vote of the General Assembly of Hacendados was 119 in favor of the 2–year contract and 7 against it.

Credit for the success of the negotiations is due primarily to Secretary Anderson, whose tactful and frank presentations left an excellent and friendly impression in Government and trade circles.

With the exception of Secretary Anderson’s personal calls on the President on the evening of July 8 and the afternoon of July 11, the Economic Counselor and the Agricultural Attaché were present during all of the negotiations, and I attended the more important meetings.

The final drafts of the contract in English and Spanish are now being reviewed by lawyers and it is anticipated that Secretary Anderson will sign the contract in Habana on July 16.

Respectfully yours,

For the Chargé d’Affaires ad interim:
Paul G. Minneman

Agricultural Attaché
[Enclosure]

Memorandum by the Agricultural Attaché (Minneman) Regarding Sugar Negotiations in Habana

Secretary Anderson and James Marshall, accompanied by Ambassador Belt, arrived in Habana on the evening of July 8. Ambassador Belt took them the same evening to call on President Grau.

The next morning, July 9, negotiations began with a meeting in President Grau’s office attended by the Cuban sugar mission (Dr. Seiglie, Senator Casanova, Arturo Mafias, Santiesteban and Godoy), the Prime Minister,53 Minister of State, Minister of Agriculture, Sr. [Page 797] Torro (Juan de Peso) representing the Sugar Labor Federation, and, of course, representatives of the Embassy. Secretary Anderson stated that he was anxious to close the negotiations which had already continued more than a year, and was prepared to see that Cuba received fair treatment. He pointed out that the delay in the negotiations was being used by certain interests in the United States as an argument for increasing our domestic sugar production. He indicated that he was prepared to discuss the 1946 crop involving sugar only, but that since Cuba and the United States appeared to be so nearly in agreement with respect to the 1947 crop, it would obviously be highly desirable to cover both at the same time if that were possible. Dr. Seiglie, for the Cubans, reviewed the principal points of difference and asked the opinion of the Hacendados as to including the 1947 crop. The reaction to this was generally negative and skeptical. Mafias stated that the Hacendados, Colonos and aborers felt that the situation had changed considerably since our former offer, and it would be necessary to take any 2-year offer up again with the General Assemblies of the respective Associations, and implied that it would be a difficult struggle to obtain agreement. It was stated that the Hacendados did not want to specify any price for 1947 because they feared (a) increased wages and other costs in Cuba, (b) increased prices in the United States resulting from OPA suspension, and (c) possible unfavorable United States sugar legislation (other than one year’s extension of the 1937 Sugar Act). Mañas also stated that he did not know whether the Hacendados would be willing to sign a contract for 1947 without prior agreement with labor concerning wages. The Colonos added that laborers were now asking for 25 to 30 percent increase in dead season wages and that the costs (contract labor) for one cultivation of cane had already increased from $80 or $90 per caballería (33.16 acres) in 1945 to $250 in 1946. The meeting at the Palace adjourned.

That afternoon the meeting was resumed at the Ministry of Agriculture; President Grau, the Prime Minister and the Minister of State were absent. At this meeting detailed provisions of the price clause were considered and afterwards the United States representatives drafted changes in this clause and submitted it to the Cubans that night.

The evening meeting was at the Palace with President Grau and other Cabinet Ministers attending. After hasty examination of the modified price proposal, the Cubans stated that they were in general agreement, although minor points still should be ironed out. They [Page 798] added that it would be necessary to submit the new proposal to the General Assemblies of the Associations, but that this could probably be done promptly. Mañas requested a new proviso in the preamble of the contract to the effect that the Cubans were entering into the contract with the understanding that in future legislation they would receive an increased share of the United States market. Secretary Anderson pointed out that such a proviso would be impossible and would certainly have an adverse effect upon the United States Congress. The Cubans saw the point and agreed to drop this request. The Cubans also requested that a cancellation clause be inserted to the effect that Cuba reserved the right to cancel the contract in the event of United States sugar legislation detrimental to Cuba (other than a one-year extension of the Sugar Act). It was also suggested that this might be done through an exchange of notes. This matter was not raised subsequently by the Cubans and therefore has been dropped.54 The meeting adjourned with the understanding that the Cubans were to discuss the details with the Board of Directors of their respective Associations and would redraft the payment clause.

At a meeting on the afternoon of July 10, Seiglie reported that the Board of Directors of Hacendados. Colonos and laborers had agreed to the 2–year proposal and the Hacendados General Assembly was called for the morning of July 11. (Jesus Menéndez, Secretary-General of the Federation of Sugar Workers, in addition to Torro, attended the meeting.) The Cuban price draft was examined in detail and certain changes were agreed to, including removal of the Cuban suggestion that one of the factors for determining the 1947 price should be the cost of production. Reference to cost of production, however, remains as one of the grounds upon which the Cubans may request reexamination. The Cubans insisted that several other statements [Page 799] that appeared to us as being undesirable in the Cuban draft were merely platitudes intended for moral support to sell the contract to the Cuban industry and laborers.

The Cubans also asked that they have the right to sell an additional 7.5 million gallons of industrial alcohol to the United States if this quantity could not be sold as beverage alcohol. To this Secretary Anderson replied that he could not possibly increase the purchase of industrial alcohol, and hoped that the Cubans would make this available as additional blackstrap molasses to the United States in 1946 when it was urgently needed for feed. The Secretary expressed the hope that 50 million gallons of additional blackstrap molasses would be made available for 1946, but Mañas replied that part of the molasses already supplied was being used for distilling in the the United States and Europe and that it was Cuba’s declared policy that raw materials should be processed in Cuba. After consultation among themselves, however, the Cubans stated that they would ship to us any remaining quantity of blackstrap molasses (above that needed for the 7.5 million gallons of beverage alcohol) and estimated that some 15 to 20 million gallons might be available, in addition to the 115 for 1946 specified in the contract.

The labor delegates inquired particularly as to whether the food allocation commitments would stand as stated in Mr. Wilson’s letter of April 4, and were informed that this was the case.

P[aul] G. M[inneman]
  1. According to telegram 474, July 3, 8 p.m., to Habana, Secretary Anderson went to Habana July 8, at the suggestion of Ambassador Belt, to confer with President Grau in an effort to reach agreement regarding sugar purchases (837.61351/7–346).
  2. Enclosures (a), (b), and (c) not printed.
  3. Carlos Prio Socarrás.
  4. The proposed text of a cancellation clause, which had been submitted to the Cuban Sugar Mission, was transmitted to the Department in telegram 511, July 10, noon (837.6135/7–1046). In reply, Acting Secretary Acheson sent the following message to Secretary Anderson in telegram 489, July 11, 2 p.m.:

    “I have just discussed the proposed cancellation clause with the President. The President agrees to your including the proposed clause in the contract if the Cubans continue to insist. He believes that a clause of this consequence should not be dealt with by an exchange of notes outside the contract since, if it were invoked, there would be charges of secret agreements, etc. He recognized that some persons might charge that inclusion in the contract was an attempt by the Cubans to prejudice Congressional action, but concluded that this would not be a reasonable view and could be explained better than a secret provision.” (837.61351/7–1046)

    The Chargé in Cuba reported in telegram 525, July 16, 3 p.m., that the cancellation clause had been included in the purchase-sale agreement at the Cubans’ renewed insistence, and that related matters, such as foodstuffs supplies, candy shipments, and maintenance of existing sugar legislation, were to be covered by an exchange of notes (837.61351/7–1646).