Foreign Relations of the United States, 1952–1954, The American Republics, Volume IV

837.2547/3–2353

Memorandum by the Deputy Assistant Secretary of State for Inter-American Affairs (Mann) to the Assistant Secretary of State for Inter-American Affairs (Cabot)¹

confidential

[Washington,] March 23, 1953.

Subject:

• Request by Representative of Freeport Sulphur Company for Appointment to discuss Nicaro

Several weeks ago Mr. Spruille Braden² asked me to arrange an appointment with you for himself and Mr. Langbourne Williams, President of Freeport Sulphur Company, to present the views of the company regarding the operation of the nickel plant wholly owned by the United States Government at Nicaro, Cuba, after you had had an opportunity to familiarize yourself with this situation.

This memorandum summarizes the principal developments with respect to Nicaro since late 1950, with particular emphasis upon the objections and interests of Freeport Sulphur. Officers of the Bureau familiar with the background will be glad to amplify this summary if you should wish.

Freeport interest in Nicaro

Freeport operated the plant under contract with the United States Government during World War II and until its closing in 1947 as an uneconomic enterprise. Freeport owns the nickel-ferrous ore deposits now used by the plant and receives a generous royalty from the present operator. Freeport itself did not compete in 1950 for the right to operate the rehabilitated plant, but American Smelting & Refining Company, an unsuccessful bidder, had made an arrangement with Freeport to give it a half non-controlling interest in the proposed operating company in lieu of royalties.

Freeport critical of General Services’ Operation of Nicaro

Freeport has been critical of the award of the operating contract in January 1951 to the Nickel Processing Corporation organized and then controlled by the Dutch Billiton company, but having a minority Cuban participation. It has criticized both the principle of Cuban participation and the reputation of one of the Cubans having an interest in the participating Cuban company. It has expressed resentment over the criticism by the then Cuban Government (expressed in a letter³ from then President Prio to ex-President Truman urging Cuban participation) of labor relations during its operation of Nicaro during World War II. Freeport has indicated it now is itself interested in operating Nicaro, and would like to bid for the privilege on an equal basis with other interested parties. It is undoubtedly influenced by the increase in the market price of nickel, the continuing demand for defense requirements, including stockpiling, and the development by the United States Government of additional ore reserves in connection with a projected expansion of Nicaro with consequent reduced dependence upon Freeport ore.

General Services the responsible Government Agency

The General Services Administration was given the responsibility in to rehabilitate and bring back into operation the Nicaro nickel plant in order to meet defense needs for this critical metal. In early it awarded the rehabilitation contract to the Frederick Snare Corporation and the operating contract to the Dutch Billiton company, which had in General Services’ opinion submitted a better bid than the only other bidder, the American Smelting & Refining Company. The Munitions Board had certified these two companies and a third which did not bid to be competent to operate Nicaro. General Services approved the arrangement by which the Billiton Company organized the Nickel Processing Corporation to operate Nicaro and gave a minority participation in the ownership and direction of the company to both a Cuban group and the National Lead Company. It subsequently approved in May 1952 the sale by Billiton of its interest to National Lead and the Cuban group, leaving National Lead with 60 percent ownership and management control. Finally in February 1953 General Services confirmed a five-year management contract with the Nickel Processing Corporation to extend to mid-1957.

Department of State Activity in Nicaro Operation

The Department of State, while recognizing the legal responsibility of General Services for the operation of Nicaro, has had an active and continuing interest in this activity. The Department recommended that the letter of October 7, 1950, from President Prio of Cuba to President Truman, which stressed the advantages of Cuban participation in Nicaro, receive a non-committal reply and be referred to the agencies responsible for selection of an operator. The Department subsequently communicated to General Services in late 1950 the desire of the Cuban Government, repeatedly affirmed to our Ambassador in Habana and by the Cuban Ambassador in Washington, for Cuban capital and management participation in the reactivated Nicaro plant. In communicating the Cuban Government’s views, the Department emphasized that it endorsed no particular Cuban group, but recommended serious consideration by General Services of Cuban participation in principle provided it was on a bona fide, business-like basis.

In July 1951 the Department informed General Services, which had consulted the Department, that the Department perceived no objection to General Services approval of the arrangement negotiated by the selected operator with the only Cuban group interested in participating in the ownership and management of the operating company. Since 1950 the Department and Embassy Habana have continually helped to facilitate the rehabilitation and operation by securing Cuban Government cooperation, such as granting customs exemptions and port privileges, admitting foreign technicians and resolving labor disputes. We have continued to assist in a projected program for plant expansion by securing Cuban Government approval of ore exploration on public lands and a Cuban Government commitment for comprehensive tax exemptions.⁴

Nicaro a Producing Defense Plant

Nicaro reached full production in July 1952 and is producing nickel oxide at the rate of 27.5 million pounds per annum. The operating company is committed to research in the further development of nickel production and the reclamation of cobalt. The United States Government invested 32 million dollars in the original plant and 12 million dollars in the rehabilitation, and for your confidential information, has in prospect an expansion program which would cost about 43 million dollars and would increase plant capacity by about 75 percent.

Attitude of New Cuban Government to Nicaro Operation

The Batista Government like the Prio Government wants Nicaro to continue as a permanent Cuban industry. It is willing to grant tax exemptions and other privileges because Nicaro is a non-profit United States Government-financed industry, contributing to hemisphere and free world defense and to the Cuban economy. The Cuban group which purchased participation in the operating company was sponsored by the Prio Government, and its initial spokesman, Inocente Alvarez, was close to Prio and does not have the confidence of the Batista Government. The Batista Government informed us in July 1952 that it viewed the Prio letter as irregular and as having no validity, and that the United States Government need not feel obligated by it. The Batista Government refused, however, to send another communication to the United States Government to overcome the effects of the Prio letter, as requested by a Freeport representative, and took the position that the operation of Nicaro is a United States responsibility. Furthermore, the Batista Government has indicated it does not wish to disturb the existing arrangement under which Nicaro is operated with Cuban participation. A prominent pro-Batista lawyer, Oscar García Montes, was secretary of the Cuban participating company when established and is now one of the two Cuban directors of the operating company. General Services Administration states the Cuban participants have been very helpful in the Nicaro operation, especially in labor relations and development of new ore reserves.

Recommendation

The Freeport representatives may attack the General Services Administration for decisions disliked by Freeport. In commenting upon their statement, it is recommended you emphasize General Services’ statutory authority and responsibility for Nicaro and stress the Department’s limited interest and contribution. It may be advisable to affirm that the Department recommended that General Services consider the desirability of Cuban participation, because the Cuban Government strongly urged it and because the Department approved participation by Cuban nationals in principle. In such case, you should emphasize that the Department recommended no particular Cuban group.

The Department made no objection to the approval by General Services of the arrangement negotiated by the selected operator under which a Cuban corporation composed of Cubans genuinely interested in Nicaro for several years and possessing knowledge and experience useful to the operating company, purchased a 20 percent participation. If the approval of this arrangement should be attacked because of the interest of Alberto Inocente Alvarez, ex-Cuban Minister of Commerce, Minister of State and UN representative, because of his alleged private immorality and venality in public office, you might comment that he was not a shareholder of the Cuban corporation when first organized and has not, so far as is known, been actively connected with the direction of the operating company, or had any contact with United States Government officials in connection with the operation of Nicaro. You may inform the Freeport representatives that a high official of the Batista Government assured the United States Ambassador in June 1952 that it has nothing against Freeport Sulphur.

1. Drafted by Mr. Wellman.
2. Ambassador to Colombia (1939–1942), Cuba (1942–1945), and Argentina (1945), and Assistant Secretary of State for American Republic Affairs (1945–1947).
3. Dated Oct. 7, 1950, not printed.
4. In telegram 470, from Habana, dated May 11, 1953, Ambassador Beaulac informed the Department of State that President Batista had signed a decree granting broad tax exemptions for the Nicaro project (837.2547/5–1153).