837.61351/7–1746

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

restricted
No. 1898

Sir: I have the honor to report that the contract for the purchase of Cuba’s 1946 and 1947 crop sugar, molasses and alcohol was signed at the Palace on the evening of July 16.55 One unsigned copy of the English text and one of the Spanish text of the contract are transmitted herewith for use of the Department.56 One original signed copy of the contract in English and one in Spanish are being transmitted to the Commodity Credit Corporation under separate despatch.

[Page 800]

There is also transmitted herewith a copy of a note from the Embassy to the Foreign Office concerning Cuban domestic consumption sugar, exports of candy, continuation of Cuban sugar production control legislation, and United States allocations of food products. This note is based on Mr. Wilson’s letter of April 4 to the Cuban commission.

The contract was signed for Commodity Credit Corporation by Mr. Clinton P. Anderson, Secretary of Agriculture; and James A. Marshall, Director of the Sugar Branch. For the Cubans it was signed by Carlos Prio Socarrás, the Prime Minister; Dr. Oscar Seiglie, the President of the Cuban sugar mission; Tomás Puyans, President of the Institute; and Senator Jose M. Casanova, member of the Institute’s General Assembly.

Sugar, molasses and alcohol are all covered in one contract. It provides for purchase of all exportable surplus of sugar of the 1946 and 1947 crops, with the exception of 250,000 Spanish long tons for free export and 20,000 tons for UNRRA from the 1946 crop and 300,000 long tons from the 1947 crop. The price is 3.675 cents per pound of raw sugar, f.o.b. Cuban port, subject to escalator clauses, the principal one of which provides for a price increase if the Bureau of Labor Statistics cost of living or food price indices rise more than 2 percent above those for the last quarter of 1945.

The purchase includes a minimum of 115 million gallons of blackstrap molasses from the 1946 crop and a total of 165 million gallons from the 1947 crop at a price af 13.6 cents per gallon, f.o.b. Cuban port. A total of 40 million gallons of industrial alcohol is to be purchased under the two-year contract at a price of 65 cents per gallon.

This contract completes the negotiations that have been in process for more than a year and for the first time covers two crops in one contract. Conclusion of these negotiations should go a long way toward guaranteeing supplies of sugar to the United States and other claimants, particularly since a large crop is anticipated in 1947. The total value of three products covered by the contract for the two years represents an estimated 750 million dollars, and if the operation of the escalator clause results in appreciable price increases, it might approach a billion dollars. As a part of the negotiations, the United States Government has made certain specific commitments to provide minimum quantities of rice, wheat flour, lard and vegetable oils to Cuba.

Respectfully yours,

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

Agricultural Attaché
[Page 801]
[Enclosure]

The American Chargé (Woodward) to the Cuban Minister of State (Alvarez)57

No. 494

Excellency: I have the honor to refer to the negotiations, now happily concluded, as a result of which an agreement was reached by representatives of the Cuban Government and the Government of the United States for the sale to Commodity Credit Corporation of a portion of Cuba’s 1946 and 1947 sugar and blackstrap molasses production and a quantity of Cuba’s production of industrial alcohol during 1946, 1947 and the first six months of 1948. As in previous years during which similar agreements have been reached, the discussions relating to the purchases included various matters over which the Cuban Government and the Government of the United States maintain control. I am pleased to record in the succeeding paragraphs the agreements which the United States Government understands have been concluded in this connection.

Sugar Legislation

The statements of the representatives of Your Excellency’s Government that no change should be made in the sugar legislation from the existing sugar legislation in Cuba for the 1946 and 1947 crops and that the distribution of sugar production should be based on the existing system of quota allocations have been noted with satisfaction by my Government.

Cuban Local Consumption Sugar Quota

It was agreed that the institute will reserve for local consumption in Cuba 350,000 long tons of sugar each of the 1946 and 1947 crops and that any proportion of this sugar not used for local consumption will be released by the Institute for shipment to the Commodity Credit Corporation, provided the Cuban Government’s authorization to [Page 802] effect such shipments is obtained. In accordance with the Cuban Government’s Decree no. 325 of February 15, 1946, the abovementioned sugar quota is destined to satisfy consumption requirements in Cuba, including the requirements of industries which use sugar for the production of manufactured articles, whether for internal consumption or for export.

In view of the critical need for sugar in the United States and those other nations which look to the United States for their sugar supplies, the Government of the United States is confident that, should the occasion arise, the Cuban Government will be disposed promptly to authorize the release for shipment to the Commodity Credit Corporation of any sugar reserved for Cuban domestic consumption that is not used for that purpose. For the same reason, the United States Government ventures to express the hope that the Cuban Government will be good enough to take such steps as may be necessary to prevent the exportation, aside from the foregoing, of any part of Cuba’s local consumption sugar quotas to any destination in the form of sugar, liquid sugar, molasses or syrups. Such a divergence of these local consumption sugar quotas, while reducing the amount of the sugar which might otherwise become available to the Commodity Credit Corporation at a time when it is desperately needed, makes little if any definite contribution to Cuba’s overall economy, contrary to what is the case in respect to candy, confectionery and other similar manufactured articles which involve further manufacturing processes and which afford additional employment to Cuban labor.

Candy

It was agreed that:

1)
For 1946, within the quantity of local consumption sugar of 350,000 long tons, raw value, a quantity not to exceed 30,000 short tons of sugar equivalent may be set aside during the calendar year 1946 to cover the needs of the confectionery industry of Cuba for export to the United States; that candy and other confectioneries composed of 20 percent or more of sugar by weight may be exported from Cuba to the United States only upon issuance by the Cuban Government of an export license; and that export licenses will not be issued for such candy during 1946 in excess of 30,000 tons of sugar equivalent and not in excess of 75 million pounds of candy.
2)
For 1947, within the quantity of local consumption sugar of 350,000 long tons, raw value, a quantity not to exceed 40,000 short tons of sugar equivalent may be set aside during the calendar year 1947 to cover the needs of the confectionery industry of Cuba for export to the United States; that candy and other confectioneries composed of 20 percent or more of sugar by weight may be exported [Page 803] from Cuba to the United States only upon issuance by the Cuban Government of an export license; and that export licenses will not be issued for such candy during 1947 in excess of 40,000 tons of sugar equivalent and not in excess of 100 million pounds of candy.
3)
Any import control will be administered by the United States Department of Agriculture on the basis established in (1) and (2).
4)
The Ministry of Commerce of Cuba will endeavor to spread the issuance of export licenses over the year, as far as possible, in order to avoid concentration of shipments in the early part of the year and early exhaustion of the quota.

Food Supply

The United States has agreed to assist Cuba, if necessary, in the procurement of such foodstuffs as are allocated to Cuba from United States sources, it being understood that all prices for commodities obtained in the United States will be at the prevailing prices for such commodities at the time of procurement.

Flour: The United States guarantees Cuba 2,000,000 bags (200 pounds each) of wheat flour for the year 1946 and a similar amount for the year 1947. United States regulations have been amended to enable millers to produce export flour of 72 percent extraction.

Rice: The United States guarantees that Cuba will receive an allocation of rice from United States sources of 70 million pounds for the six-months period April 1 to September 30, 1946. The United States will also support Cuba’s request to the International Emergency Food Council (successor to the Combined Food Board) for allocations from areas other than the United States of 80 million pounds of rice for the same period. This will give Cuba, if Cuba procures the amount allocated by the International Emergency Food Council, a total of 450,000,000 pounds of rice for the rice crop year which began on October 1, 1945 and runs to September 30, 1946, including a small amount of rice of advanced licensing that was granted prior to October 1, 1945.

From October 1, 1946, to September 30, 1947, the United States will support a request to the International Emergency Food Council by Cuba for 400,000,000 pounds of rice from United States sources and for not less than 50,000,000 pounds from other sources. If there is no International Emergency Food Council during this period, the United States will guarantee Cuba 400,000,000 pounds from United States sources. The United States will further assure Cuba that it will cooperate in an effort to enable Cuba to procure such amounts of rice as may be allocated to Cuba from other than United States sources.

Lard: Unfortunately, the lard situation, due to foreign relief programs and insufficient supplies, is so serious that the United States can only guarantee Cuba 60,000,000 pounds for the calendar year 1946. [Page 804] The United States will endeavor to assure this supply in approximately equal quarterly amounts. The United States also guarantees Cuba this amount for 1947, but will meet with representatives of Cuba late in 1946 to discuss the prospects for 1947, and, if it is possible, will increase the amount for 1947.

Edible Oils: The United States guarantees Cuba 10,000,000 pounds for the calendar year 1946 and it is contemplated this will be supplied by soybean oil. A like amount is guaranteed as a minimum for 1947, but the situation will be reviewed at the end of 1946 as in the case of lard.

Tallow: This commodity is also seriously short and the United States can only guarantee such amounts as are allocated Cuba from the United States by the International Emergency Food Council for the calendar years 1946 and 1947. At present this allocation is 13,664,000 pounds for 1946 from both United States and foreign sources. In case there is no International Emergency Food Council in 1947, the United States representatives will meet with representatives of Cuba and, in the light of the situation then existing, will decide the amount of tallow that can be provided Cuba during the year 1947.

Malt: This commodity is also in short supply and the United States Government is unable to guarantee Cuba more than 100,000 bushels for each of the second, third, and fourth quarters of 1946. The prospects for 1947 can be mutually reviewed late this year and attempts will be made to increase quarterly quantities for 1947.

Fertilizer: No quantity or type of fertilizer can be guaranteed by the United States, but, with the great need for sugar in the world, Cuba can be assured of the best efforts of the United States Government to assist it in meeting its fertilizer requirements.

I should appreciate receiving from Your Excellency a reply indicating that the understandings set forth in this note are shared by Your Excellency’s Government.

Please accept [etc.]

[File copy not signed]
Chargé d’ Affaires ad interim
  1. Copies of Cuban Government Decree No. 1615, July 16 (published in Official Gazette No. 164, July 17) were transmitted to the Department with despatch 1910, July 18, not printed.
  2. Not printed.
  3. A copy of the Cuban Government’s reply (note no. 794 of July 22) to this note was transmitted to the Department with despatch 1956, July 29 (837.61351/7–2946). According to the despatch, the Cuban note followed closely the text of this note except in respect of the paragraph on sugar legislation where the Cuban Government’s reply, in translation, read as follows:

    “Following the rule of not changing the sugar regulations with respect to the 1946 crop, especially as regards the distribution of quotas, my Government acted in anticipation of the sales agreement that was being planned regarding the 1946 crop by promulgating Decree no. 325 of February 15, 1946, in article 2 of which it is provided that the distribution of the 1946 crop shall be made in accordance with Decree-Law no. 522 of January 18, 1936, as it is in force under the terms of Law no. 20 of March 21, 1941, the Sugar Coordination Law and other legislation in effect. The regulations as regards the 1947 crop my Government hopes to be able to promulgate as soon as possible and in accordance with the same principles, should there be no provision of law that is in conflict therewith.”