Foreign Relations of the United States, 1958–1960, Cuba, Volume VI

363. Memorandum of a Conversation, Department of State, Washington, September 24, 1959¹

Washington, September 24, 1959

SUBJECT

• Meeting with American Sugar Interests Regarding the Situation of Their Properties in Cuba

PARTICIPANTS

• William F. Oliver, President, American Sugar Refining Company
• John A. Nichols, President, Cuban American Sugar Company
• B. Rionda Braga, President, Francisco Sugar Company
• Michael J.P. Malone, Manati Sugar Company
• Frank G. Brown, Jr., V.P., Punta Alegre Sugar Corporation
• Sam H. Baggett, V.P., United Fruit Company
• Philip Rosenberg, President, Vertientes-Camaguey Sugar Company
• Warren Lee Pierson, Director, Vertientes-Camaguey Sugar Company
• W. Huntington Howell, First V.P., West Indies Sugar Corporation
• Lawrence Crosby, Vice-Chairman, Atlantica del Golfo Sugar Company
• Mr. Murphy—G
• Mr. Mann—E
• Mr. Rubottom—ARA
• Ambassador Bonsal—Embassy Havana
• Mr. Wieland—CMA
• Mr. English—L/C
• Mr. Kwiatek—L/C
• Mrs. Mulliken—REA
• Mr. Callanan—CSD
• Mr. Stevenson—CMA

In the absence of Mr. Murphy, who was detained at a meeting with the President, Mr. Rubottom opened the meeting. He referred to the useful conversations on this same subject which had been held last May² and said that in view of the many developments since that date it had been agreed with Mr. Crosby that another meeting for the purpose of exchanging views would be mutually beneficial—particularly with the presence of Ambassador Bonsal.

Mr. Crosby, speaking for the American sugar interests in Cuba, expressed his thanks for the earlier meeting and stated that the Department’s note to the GOC² was a very able statement of the American investor’s case. The reply of the GOC³ to this note, on the other hand, he considers to be rather discourteous and not satisfactory. It amounts, in essence to a declaration that “necessity knows no laws.” Until now he has agreed with the Department that a reply to the Cuban note would not have been useful. However, since the Santiago meeting of the Foreign Ministers he has seen signs of an easing of tensions in Cuba and now, as we approach the deadline for sugar quota legislation, the U.S.-Cuban Sugar Council is of the opinion that a reply, in firm language, might be useful. In his view any reply should reiterate the preoccupation of informed and serious-minded persons that the Cuban agrarian law in its present form will have a serious adverse effect on sugar production. Mr. Crosby and his associates are convinced that the law will not work, but will result in a growing paralysis of the Cuban economy. The U.S. should in his opinion be thinking in advance and planning having in mind the contingency of the Castro regime. The American sugar industry considers that the exemption of at least the cane lands from the law is a necessity. Other lands present no real problem—they are not a serious matter. The delay in the application of the Agrarian Law to cane lands is of no real significance and serves only to draw attention from the fact that a fundamental problem remains to be resolved.

Mr. Rubottom thanked Mr. Crosby for his frank presentation and his expressions of confidence in the officials and policies of the Department. He informed the group confidentially, that a further note on agrarian reform is in preparation to be delivered soon. In summary he stated that the policy of the Department with regard to Cuba has been: (1) to seek to convey to the GOC and the Cuban people that the U.S. is sympathetic to many of the goals of the revolution as we understand them to be, i.e. an end to corruption and graft, a higher standard of living and an end to unemployment, more and better education and the abolishment of illiteracy, etc. As Muñoz Marín has said, this Cuban revolution may well contain “elements of greatness”; (2) to seek not to build Castro into heroic proportions until we know with certainty what he is trying to do, and with this thought in mind to avoid denigrating his regime and his person so as not to add a martyr’s halo to his bag of attractions; (3) to do nothing which might seem to Castro to constitute assent or acquiescence to acts harmful to American investment, but rather to indicate clearly and firmly that the U.S. expects reasonable, prompt and effective compensation in case of expropriation.

Ambassador Bonsal next spoke to the group stating that there can be no doubt in the minds of the Cubans of our position on compensation. Prior to his recent departure from Habana he had informed both the Cuban Minister of State and the President⁴ that our position on compensation remained as stated in our note of June 11 and that a further note would be presented upon his return. Referring to Mr. Crosby’s concern about the effects of the agrarian law on production, he noted that this feeling is widely shared also by Cubans and may well prove to be a constructive, positive factor in the picture. He doubts that the Cuban people are developing suicidal tendencies. The agrarian law contains impracticabilities and in the Ambassador’s opinion, Castro’s presently asserted uncompromising course may yet be subject to change. The note which the U.S.G. expects soon to present will not be made public by the Department in the thought that our best hope in this difficult situation is to try to appeal to the more responsible elements around Castro which perhaps we have a better chance of doing in an atmosphere of non-public excitement. In his many conversations with important Cuban officials, including Castro, on the subject of agrarian reform the Ambassador stated that he has emphasized the following points; namely, (1) the necessity for just compensation; (2) the falseness of the notion that there is something inherently wrong in being a big company operating in Cuba; (3) the positive role of American capital in Cuba and what it has done to make jobs and create wealth for Cuba (He noted that this concept is not popular with the “hot-rod” revolutionists, but it will ultimately have the weight which truth always has. In this regard he suggested that the American companies try to develop relationships within the GOC and seek to give a picture of their operations, making use of persons who have a vested interest in their continued operations.); (4) the fact that he is well aware of various things happening to American companies, particularly when there are arbitrary actions without legal basis. (In these cases he expects to take positive actions of protest.) In conclusion the Ambassador observed that a line of thinking is developing in Cuba which takes into account the role of American interests and, hopefully, may ultimately lead to a greater flexibility more adapted to the realities of the situation.

Mr. Oliver said that speaking for his company which is both a producer of raw sugar in Cuba and a refiner in the United States he is faced with long-range problems which may be adversely affected by actions taken in response to the short range problems. Regarding the danger to the supply situation for the American consumer, he feels that sufficient sugar can be obtained from various sources other than Cuba should Congress decide to punish Cuba through the sugar quota. He stated that he had heard that Assistant Secretary Mann had recently agreed with the domestic beet-sugar growers that a weapon should be given to the Executive in the form of authority to revise quotas in the national interest if the need arises. He wished to emphasize that there are no secrets in the sugar business and that Mr. Mann’s point of view will soon be widely known in Cuba. He wonders if the American people will demand something further. In his view the GOC will not modify its law, and this has been confirmed to him by a well-informed Cuban, Mr. Fernandez Grau.

Mr. Rubottom observed that we have not used, nor desire to use, the term “punish” with regard to Cuba. However, the United States may have to consider other sources of supply and new sources cannot be developed overnight. Mr. Mann stated that he concurred with Mr. Rubottom’s remarks. He feels it unwise to talk in terms of punishment or retaliation. However, at this time it is not realistic or desirable to subsidize a Government engaging in extraordinary acts harmful to American interests. When the Executive goes to Congress with its recommendations on sugar legislation a flexible posture will be needed, showing an ability to deal with future circumstances. Mr. Mann knows no reason why the Executive, under these circumstances, should not fix quotas. He asked if anyone there had any better ideas. Mr. Oliver said that he had not meant to question the merits of Mr. Mann’s proposal but wished merely to point out that it will be recognized as being done for a reason—this fact will be known. Mr. Mann remarked that Mr. Shields of the Beet Sugar Growers Association had come to a recent meeting of this group with a suggestion almost identical with his own. However, he wished to state that he is happy to share with Mr. Shields praise or censure as the case may be.

Mr. Baggett expressed his pleasure at Mr. Rubottom’s comments. He considers that the agrarian reform in Cuba will have far reaching effects if it should become a pattern for other countries in Latin America. The low valuation of property and payment in I.O.U.’s, if it spreads, will force the United Fruit Company out of business. This Cuban attitude posses a serious problem for all investors in Latin America. He agreed that we should not make a hero of Castro, but observed that he will be one in any case if he gets away with his agrarian reform as it stands. He is glad that the Ambassador will be presenting another note and approves of the timing and that it is best not to publish it although its contents will soon get out in his opinion. As he sees it Mr. Mann expects fireworks on the Hill, and he needs his special clause to dampen it.

Mr. Mann said in summary of his views (1) that without change the old Sugar Act could not get through Congress; (2) that to encourage Congress to take a bite from Cuba is not desirable; and (3) that we should avoid the above by putting ourselves in a position to reduce the Cuban quota if it is in the national interest. He referred to the growing and rampant nationalism all over the world and said that the United States cannot in his opinion refrain from seizing such means as it has to protect its interests; otherwise we must brace ourselves for attacks of this nature from every quarter. Mr. Nichols queried whether it was contemplated that the new clause might affect the 1960 crop.⁵ Mr. Mann replied that we are in the process of trying to establish a common front with all segments of the industry before going to the Hill and that the question has not been finally determined. Mr. Crosby observed that in order to be prepared to cope with any situation the power should be made available for immediate use. Mr. English remarked that when the Sugar Act came up for renewal in 1952 there was an amount of $900,000 outstanding in old claims against the GOC. Congress on this occasion refused to grant the Cubans a quota until these claims were settled and the Cubans paid up.

Mr. Rosenberg referred to his several conversations with Ambassador Bonsal and the Ambassador’s suggestion that he consider the possibility of developing relations with the more moderate elements in the GOC. His company has tried to do this but it has proved impossible. Those they have talked with have suggested that the American companies suggest some plans for alleviating their own difficulties. In Mr. Rosenberg’s opinion these persons recognize the impracticability of many of the law’s provisions and the difficulty of getting financing, but he questions their good faith. He believes they are merely trying to soothe the fears of the Americans hoping they will continue to invest and maintain production. In his opinion they are merely being kept in the death chamber awaiting execution day. Unless Castro is convinced, there is no hope of change; and these moderates have no rapport with Castro. He said that Cuba will have an ample crop in 1960 but a considerably shorter crop in 1961—probably 20% less for his own company which has 6,000 American stockholders. His company has stopped fertilization and new planting. He sees no reason to support financially a hostile Government and doesn’t want to sit and suffer waiting for the executioner’s sword to drop. Rather he wishes that the U.S. Government would explain to Castro in frank terms just what he is doing and what he may expect as a result. He estimated that the sugar crop in 1961 might drop to 3,800,000 tons.

Messrs. Malone, Rosenberg, Nichols, Braga, and Howell then described in some detail a series of harassments and illegal acts to which their mills and plantations in Cuba have been subject. Mr. Braga reported that his managers feel that hostile forces are closing in on them; that the INRA officials are watching the American firms like a cat watches mice. He said that he is not criticizing the Department but by Cuba we will we judged. If Castro succeeds unchallenged no respect for contracts will follow throughout the area. Mr. Howell agreed with him, declaring that the situation is desperate and that they are being nibbled to pieces. Mr. Nichols declared that agrarian reform is only a part of the gloomy picture and cited the arbitrary wage increases to labor, the decrees affecting utility rates, new tax laws and general arbitrary treatment.

Mr. Rubottom asked if anyone in the group had considered, or tried to initiate, negotiations on his own behalf. Mr. Crosby replied that there is no hope of trying this with Castro or INRA unless Castro is convinced that he cannot get away with his present course. The mill owners need to be in a position of strength before they can negotiate. Public opinion in the United States is highly critical of Castro now which is a keg of dynamite for him—he should be warned. Castro doesn’t believe that the U.S. will cut the Cuban quota to protect the interests of its investors.

Mr. Murphy⁶ noted that there are various factors in addition to sugar which the U.S. Government must consider in its relations with Cuba, e.g. Guantanamo, the utilities companies, Latin American opinion, etc.. He is confident that Ambassador Bonsal is trying to manipulate the situation to our best overall advantage. Castro, of course, seems genuinely to believe the things he says and with a man like this the question of how tough to be is a matter of timing. Castro has his own brain trust it seems—men like “Che” Guevara, and Raul Castro who certainly do not inspire trust on our part.

Mr. Wieland observed that no matter how useless it may seem, the American companies can help us by making such constructive efforts on their own behalf as may be possible. He asked them to consider, “what can you do in the way of constructive, progressive steps within reason?” As the Ambassador makes such approaches to the GOC as he can on behalf of the American companies it might well be important that the GOC not be able to say that the companies have made neither protests or suggestions on their own behalf. Several company representatives indicated that they will give further consideration to this possibility even though heretofore such action has not seemed feasible. Mr. Nichols said that his company had spoken with Minister of State Roa and had told him that unless something is done to improve the situation of the company there is not much the company could do to be of assistance to Cuba in line with Roa’s desires.

Mr. Murphy thanked the representatives of the sugar companies for their patience and cooperative attitude and said that the Department desires to work closely with the group in our mutual interest.

1. Source: Department of State, Central Files, 837.235/9–2459. Limited Official Use. Drafted by Stevenson and cleared with Wieland and Rubottom.
2. See footnote 3, Document 313.
2. See Document 318.
3. Document 321.
4. See Document 360.
5. Note: The present Sugar legislation runs through December 31, 1960. [Footnote in the source text.]
6. Mr. Murphy joined the group about 10 minutes before the end of the meeting. [Footnote in the source text.]