The Ambassador in Cuba (Gardner) to the Department of State

limited official use
No. 1525


  • Department’s A–488 of June 4, 1954.1


  • Proposed Subjects for Discussion With Economic Mission Which Cuba Plans to Send to Washington.2

The Embassy is undertaking immediate compliance with the instruction under reference as regards the contraventions of GATT.

In the meantime it respectfully suggests, for the Department’s consideration, additional subjects appropriate to the anticipated discussions. These are as follows:

1. Cuban Treatment of Debts as Distinct From Claims.

The Embassy appreciates that, beyond limited employment of good offices, little can be done vis-à-vis assistance to American firms and entities holding obligations against the Cuban Government on a current account basis, even though some of those accounts date back several years. However, the Embassy feels that debts and overdue accounts with the government, as well as claims, should be discussed with a view to ascertaining the arrangements that are to be made for their settlement.

As of now, for example, a problem has arisen, technical in nature, but very discouraging for those holding past due government accounts. One example will suffice. To illustrate this point the Isle of Pines Steamship Company has overdue accounts with the Cuban Government of approximately 200,000 pesos. Of this approximately 26,000 pesos correspond to shipping services rendered to different departments of the Cuban Government during the present administration, by the Isle of Pines Company. The Cuban Government is now willing to issue “pagarés” for the two fiscal years 1952–1953 and 1953–1954 to [Page 905] a total amount of approximately 6,500 pesos. They state that the remainder of the approximately 26,000 pesos corresponds to obligations incurred by the respective government departments or entities in excess of funds budgeted to those entities for that purpose. This, of course, leaves the companies concerned in a serious situation with, as of now, apparently no recourse beyond requesting the government to make additional appropriations.

Another case is that of the General Motors Acceptance Corporation, for the buses in service in the city of Santiago. The courts of Havana authorized re-possession. The officials of the city of Santiago did not permit it. The court order was subsequently reversed. The buses are still running and deteriorating rapidly without the operators making payments due. Treatment of this particular case will, of course, depend upon final decision of the General Motors Acceptance Corporation as to whether they wish us to include it or not. Since the Cuban proposal to send an economic mission is not public knowledge the Embassy will not approach the Company until it has word from the Department as to whether or not the Department feels that discussions of this particular type of case would be appropriate.

2. Restrictions on Rice Imports.

The Embassy does not feel that there is any prospect of the elimination of the individual licenses for the importation of rice. The Cuban position is: a) that under limited quotas import licensing is essential in order to avoid possibility of certain strong importers cornering the market on a first come first served basis. There are other practices, not appropriate for discussion, which also makes elimination of licensing improbable. The Department has already been informed of those practices.

Nevertheless the Embassy feels that it would not be inappropriate to put on the record our emphasis upon the necessity for prompt and orderly issuance of licenses at all times and the elimination to a degree possible of restrictions, within, of course, the quota limitations effective under the procedure established by the exchange of notes of December, 1952.3

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3. Hydrogenation Plant.

This particular case4 is at a standstill. The local company has the authority to go ahead. The executive is delaying and the Treasury at least has given verbal assurances to the Embassy that the local company will not be allowed to enjoy duty exemptions without deposit in guarantee of the full amount of those duties. This is their position even though the decree only requires a total guarantee of 25,000 pesos. As long as the situation remains as it is only uncertainty can prevail. The matter is a subject of constant irritation which may at any time serve as an instrument which could be used to advantage in attempted retaliation by interested parties in the United States, through efforts to reduce the U.S. import quota of Cuban sugar. The Embassy feels that in the forthcoming discussions the Cuban Government should be asked to take action and to expedite the final decision on this hydrogenation plant.

4. Telephone Company.

As the Department is aware the IT&T has been trying for years to obtain approval by the Cuban Government of new rates essential to the expansion program planned by the Company and essential to good service. It would seem appropriate for the Department to urge even to the point of obtaining an agreement with the Cuban Government that this matter will be expedited. In this connection, however, again not wishing to disclose the plans of the proposed mission, the Embassy has not approached the local manager of the Telephone Company. It suggests, if the Department agrees that this question is one appropriate, that it ascertain from the IT&T in New York its viewpoint as to whether the company desires this type of assistance at this time, or instruct the Embassy to do so here.

5. Seatrain and Car Ferry Services.

The renewal of the seatrain services to Cuba between New Orleans and Havana will depend upon certain actions of the Cuban Government. These actions would require as a minimum a revision of two decrees and one law-decree. These are Nos. 1 and 5 of January 2, 1947 and Law Decree No. 1304 of February 26, 1954. The ferry services can continue although not to their satisfaction, under the present regulations. The seatrains cannot renew its [sic] service without appropriate modifications. The Embassy believes that this is a subject appropriate to the anticipated conversations.

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6. Air Express Services at Rancho Boyeros.

This particular proposal is tentative and subject to further verification. On the basis of reports now at hand only two local trucking entities are allowed to accept air cargo at Rancho Boyeros. Individual importers are not allowed to send their own trucks or pick-ups. The charges for hauling air express from Rancho Boyeros to Havana, approximately fifteen miles, are reported to be substantially higher than those for shipment by truck or train from Havana to Santiago de Cuba, at the other end of the Island. The Embassy suggests that the Department may wish to consider whether or not, in view of its methods of operation, this type of monopoly in any way violates either our civil air agreement5 or our trade agreement.6

7. Henequen.

The henequen industry is sick, and the cordage industry is in a condition almost as bad. Some years back, a persistent rise in world quotations on the fiber, all the way up to 28 cents per pound, c.i.f. New Orleans, at mid-1950 highpoint, prompted the Cuban henequen workers to press successfully for a 20 percent wage increase and subsequently for a second 20 percent increase, thereby creating a situation where they enjoyed wages, on a year-round basis, higher than those paid on a seasonal basis to the sugar workers. When the fiber quotation sagged back to below 11 cents during 1953, the workers fought strenuously for continued pegging of wages at that high level, but eventually the Government allowed the plant-operators to restore the wage scale which applied prior to those two increases and which had ruled when the fiber brought about 12 cents. In recognition of the fact that the fiber now nets New Orleans price of hardly 9 cents, the Government has decreed that the local cordage industry must pay a special fee of 3 cents on every pound of its domestic sales, to form a fund for the augmenting of wages to the henequen workers.

Actually, this “solution” of the henequen problem has not worked satisfactorily with the consequence that strikes and threats of strikes and labor troubles are very common to the industry. Subject, again, to a desire on the part of the International Harvester Company, the only American entity engaged in the henequen industry of Cuba, the Embassy proposes that in these discussions, Cuba be urged to find a quick solution on a sound economic basis to this problem.

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8. Interpretation of Air Agreement.7

As the Department is aware the Cuban Government holds that lines certified to operate on route concessions granted in the air agreement are required to obtain prior permission before inaugurating changes in frequencies of services. In the case recently under consideration the Delta C&S were authorized, after hearings, to increase their service provisionally until February of next year, at which time the Cuban Government presumably reserves the right to force them to reduce their frequencies if study by the Cuban Government of traffic statistics covering the temporary period does not, again in the opinion of the Cuban Government, justify such extensive service. The points at issue are whether frequency is to be controlled: a) on an “a priori” or “ex post facto” basis and b) on a “unilateral” or “bilateral” basis. Possibly this will be decided before the mission goes to the United States. The Embassy feels, however, that if it is not decided by that time, it would be most appropriate for discussion then.

9. Accountants.

The problem regarding the right of foreign public accountants to practice their profession in Cuba is one of long standing.8 It came to a crisis some time ago, temporarily solved when those operating here accused of violating the law were given a sort of amnesty. This did not solve the problem. The two Cuban organizations of accountants, one formed of those who are graduates of the University and the other of those who are not graduates, have both strenuously opposed any participation of foreign accountants. Nevertheless, particularly during the last year and one half, efforts have been made by this government to find a solution. A year ago it was believed that a fairly reasonable solution was found which would permit American accountants to operate here on a basis of reciprocity. For various reasons, principally political, this agreement in principle has never been translated into law. The Minister of Labor9 has given assurances from time to time that this would be accomplished when the time is opportune. This constant delay will quite probably bring a crisis unless action is taken. In fact the recent death of the local manager of an American accounting company may force the issue when the company undertakes to send a replacement. The question is one that is aggravating and demanding of settlement and should in the Embassy’s opinion be appropriate for discussions with the Cuban mission when it visits Washington.

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10. Pharmaceuticals.

Prices—The Cuban Government, as is common in many places, fixes prices of pharmaceutical products. This Embassy has on numerous occasions urged action on requests for approval of increased prices in those cases where the cost in the United States has increased for just reasons. The Minister of Commerce has agreed on numerous occasions to take action on pending requests for these price adjustments. Not one has been adjusted. The Embassy feels that it is appropriate to insist that the Cuban Government take action in conformance with their own laws. Naturally the urgence is not going to be based on what price should be established but only that the pending and subsequent requests be acted upon with reasonable dispatch.
There are two other pending questions which may be appropriate to the discussions. One has to do with the insistence of the Ministry of Health that pharmaceutical importers employ a [sic] “responsible pharmacists”, and the other has to do with a recent onerous modification in trade mark registration procedures. Depending upon developments the Embassy will inform the Department at greater length should it decide to submit these as appropriate for those discussions.

11. Consolidated Railways.

Consolidated railways, in which U.S. holdings are substantial have solicited without avail equal treatment with the Government-owned Ferrocarriles Occidentales de Cuba as regards labor laws. It would seem appropriate to the Embassy that insistence on equal treatment could and should be made during the proposed discussions.

12. Inequitable Practices in Railway Purchases.

It is now reported that the Ferrocarriles Occidentales, S.A., have accepted French bids on six diesel electric locomotives at a higher price for a lower powered engine than American offers. This, in the Embassy’s opinion, represents not only unfair business practice, but probable violation of Article XVII of GATT. Regardless of the ultimate outcome of the present case, not yet certain, the Embassy believes that assurances should be obtained of fair competitive bidding on future contracts.

The Embassy will await word from the Department prior to formally informing the Foreign Office of the two subjects which the Department has already selected for discussion with the Economic Mission. It will [Page 910] do so informally upon the occasion of our discussion with them concerning contraventions of GATT.10

For the Ambassador:
Harold M. Randall

Counselor of Embassy for Economic Affairs
  1. The referenced instruction indicates that two of the subjects the U.S. Government would like to have discussed when the proposed Cuban special economic mission arrived in Washington were the status of private American claims against the Cuban Government, and taxes and duties on Cuban imports from the United States which allegedly contravened certain provisions of the General Agreement on Tariffs and Trade (GATT) (837.00/6–454).

    For text of the General Agreement on Tariffs and Trade, concluded at Geneva, Oct. 30, 1947, and entered into force for the United States, Jan. 1, 1948, see 61 Stat. (pts. 5 and 6), or TIAS No. 1700.

  2. The Cuban Government formally proposed to send a special economic mission to Washington to discuss economic matters of concern to the two countries on May 14, 1954. On May 28, 1954, the United States accepted the proposal (Instruction A–472, dated May 28, 1954, 837.00/5–2854).
  3. The referenced notes, exchanged at Habana, Dec. 17, 1952, and entered into force on the same date, establishing a method for determining Cuba’s annual rice import quota in connection with a GATT concession on rice, were transmitted to the Department of State under cover of despatch 963, from Habana, dated Dec. 17, 1952, not printed (837.2317/12–1752). The provisions of the December agreement required Cuba to announce each July 1 the basic quota of 3,250,000 quintals and also an initial supplementary quota equal to 66 percent of Cuba’s estimate of its remaining import requirements for the quota year; on the following Mar. 15 the Cuban Government was obligated to announce for importation after Apr. 1 any additional quota needed to satisfy annual import requirements. Documents pertaining to the operation of the rice quota system are contained in file 837.2317.
  4. The case involved the application in early 1952 by the Compañía Empacadora de Productos Nacionales y Extranjeros, S. A., for certain tax exemptions and duty privileges under Cuban Decree 2144 of Aug. 7, 1945, in connection with the proposed establishment of a plant for the hydrogenation of edible fats. No final decision was made in the case by the Cuban Government in 1954. Pertinent documents are in file 411.3731.
  5. For text of the Air Transport Agreement between the United States and Cuba, signed at Habana, May 26, 1953, and entered into force, June 30, 1953, see TIAS No. 2892, or 4 UST (pt. 2) 2837.
  6. Apparent reference to the exchanges of notes and memoranda, signed at Geneva, Oct. 30, 1947, entered into force on the same date, and operative Jan. 1, 1948, constituting an exclusive agreement supplementary to the GATT; for text, see TIAS No. 1703, or 61 Stat. (pt. 4) 3699.
  7. Documents pertaining to this subject are in file 611.3794.
  8. Documents pertaining to this subject are in file 937.711.
  9. Carlos Saladrigas y Zayas.
  10. In Embassy note no. 489, dated Aug. 23, 1954, presented to the Cuban Foreign Office on the same date, the United States suggested a tentative agenda for the proposed economic discussions comprised of items 1, 2, 3, 8, 9, and 11 described in this memorandum, and also alleged Cuban contraventions of GATT. A copy of the Embassy’s note was transmitted to the Department of State under cover of despatch 210, from Habana, dated Aug. 25, 1954, not printed (837.00/8–2554).

    In Foreign Office note no. 1185, dated Sept. 22, 1954, the Cuban Government proposed an agenda made up of the following topics: U.S. sugar imports; U.S. purchase of minerals for stockpiling purposes; reduction of import duties on Cuban cigars, fruit, and other products; possible measures to increase diversification of the Cuban economy; promotion of tourism; and the negotiation of a double taxation treaty. The Cuban note was transmitted to the Department of State under cover of despatch 302, from Habana, dated Sept. 22, 1954, not printed (837.00/9–2254).