Memorandum of Conversation, by the Ambassador in Cuba (Beaulac)1

Participants: President Prío
The Ambassador

I told the President that the State Department was getting a lot of inquiries from people at home who were worried about the provision, in a Senate-approved bill, for setting up a government buying and selling agency in Cuba. I asked him whether the Government supported the provision.

The President said that he would like an agency of that kind to use in defense of the people’s interests. What he is particularly interested in is an agency which could be used to keep down the price of meat. Cattle growers withhold meat from the public during certain seasons (I think he meant during the dry seasons). He would like some device to force meat into the markets in order to keep prices down. This will be a problem just prior to next year’s elections.

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His Government has no intention of abusing the power it would have. It would not interfere with ordinary trade, either retail trade or importing and exporting.

The interests have distorted the nature of the bill and the dangers contained in it. They have said that while President Prío might not abuse the power the bill would give him, succeeding presidents might do so. He is willing to answer this argument by limiting the effectiveness of the provision to one year or two years. (I take it he is particularly interested in having it in effect during the electoral period.)

The President said that he did not insist on the provision and he was prepared to consent to its being taken out of the bill. However, he did not want to oppose the provision publicly because he wanted to reserve the right, during the electoral period, when meat prices go up, of saying, “I told you so. I tried to get congressional authority to keep prices down, but I was unable to.”

I told the President that I would speak to him with the same frankness that he had spoken to me. I said that, as a friend of Cuba, I was seriously concerned over the implications of the bill. I said that one of the great advantages that Cuba had over most other countries was the relative freedom to trade which Cubans enjoyed. You could still take a dollar into a bank in Habana and get a peso for it, and take a peso into a bank and get a dollar for it. That freedom, of course, was subject to abuse and was being abused. But the answer was not, in my opinion, government intervention or the setting up of government corporations.

I had just come from Colombia. President Gomez, with all his defects, had been doing a yeoman job in getting rid of the numerous and complicated government controls over Colombia’s economy, which had been one of the principal causes of the recent failure in Colombia’s democracy. It was disappointing to see that Cuba, with its precious freedoms still intact, was thinking in terms of limiting those freedoms.

The President said that he did not intend to do this; that his Government was on the side of liberalism in economic as well as political matters.

I told the President that, as he had suggested, I had read carefully his speech before the Auténtico Congress in which he had recommended an extension of economic activity in Cuba to permit employment of the chronic unemployed. I said that I assumed that there was no intention of compelling companies to take on more workers than they needed but that the idea was to provide work for additional persons by increasing production. The President confirmed that this was the case.

The President said that, as an indication of his desire that private capital intensify its work in Cuba, he was preparing to recommend [Page 1365] legislation which would provide lower taxes on income that was reinvested in Cuba. This he thought would be good for capital and good for Cuba.

I said that this was a most interesting idea. I said that it appeared to run counter to one of the recent acts of the Congress which declared undistributed reserves to be subject to a special tax. I said that I had been informed that the effect of this action of the Congress had been to require certain companies to sell a part of their properties in order to pay the tax. Several sugar mills had been sold or were being sold as a result of the tax, I had been informed. The reason sales were necessary was that the undistributed surplus, in the cases referred to, was not in the form of cash or liquid assets but had been reinvested in lands, buildings, irrigation, etc.—in other words, in just the sort of thing the President wanted to encourage.

The President said that there was a lot of deception in connection with the matter that I had referred to. American stockholders or potential stockholders in Cuban corporations had become disillusioned as far as the possibility of receiving dividends was concerned. The corporation device had been greatly weakened in Cuba, and this important instrument was not as valuable or as useful to Cuba’s economy as it used to be. The President said that investment of the kind I mentioned was not affected by the Congress’ action. I said that that appeared to be just the point, that it was affected.

The President said that tax evasion was a chronic and accepted thing in Cuba. Nobody ever went to jail for not paying taxes. All the wealthy families have their wealth tied up in non-taxable corporations. They were practically tax-free. All companies, particularly the Cuban companies, resorted to all sorts of devices to conceal profits and to control taxes.

  1. Enclosed with despatch 914, from Habana, December 4, 1951. Willard L. Beaulac was appointed Ambassador to Cuba on June 20, 1951; he arrived in Habana and assumed charge of the Embassy on September 6; and presented his credentials on September 20. Ambassador Beaulac succeeded Ambassador Robert Butler, whose mission terminated on February 10, 1951.