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

412. Memorandum of a Conversation, Department of State, Washington, December 22, 1959¹

Washington, December 22, 1959

SUBJECT

• Protection of American interests in Cuba

PARTICIPANTS

• Representatives of National Foreign Trade Council:
  • Mr. H. Harvey Pike, President, H.H. Pike & Company, Chairman, NFTC Cuba Committee
  • Mr. G.P. Gardner, Chairman, United Fruit Company Mr. H.B. Sargent, President, American & Foreign Power
  • Mr. H.W. Balgooyen, Director of Council and Executive Vice President, American & Foreign Power
  • Mr. Emilio Collado, Treasurer, Standard Oil Co. (ESSO) Mr. John Akin, Secretary of NFTC
• Department of State:
  • Acting Secretary Douglas Dillon
  • ARA—Lester D. Mallory, Acting Assistant Secretary
  • L—Eric H. Hager, Legal Adviser
  • ARA:REA—Harry R. Turkel, Director
  • ARA:CMA—Edwin E. Vallon, Deputy Director
  • U—Dixon Donnelley
  • ARA:CMA—Robert A. Stevenson, Cuban Affairs
  • ARA:CMA—George O. Gray
  • E—Carl Norden

Mr. Pike informed the group that the Cuba Committee of the NFTC has held many meetings since Castro’s advent to power in Cuba. He said it is concerned about the loss of liberty to the Cuban people and other abuses, but at this meeting wished to discuss the property rights of Americans. He asked Mr. Balgooyen to present the Cuba Committee’s views.

Mr. Balgooyen said that the Committee felt that if Castro stays in power, all American investments in Cuba are doomed. He is also fearful of the Communist direction of the Government, with agrarian reform, expropriation, taking of private property, and the loss of personal liberties, all of which parallel the pattern followed in China, Czechoslovakia and Poland. He is especially fearful that the example of Cuba might be followed in Latin American, African and other countries throughout the world. There is also a real and growing concern for the welfare and safety of American employees in Cuba.

He said the Committee takes the position that, without evidence that Cuba is going to pay and without any strong evidence that the United States is going to take any actions,

(1) they want to make clear their concern regarding the effect of Cuban events on all Latin America,

(2) they wanted to present a specific resolution adopted by the National Foreign Trade Council last month, and

(3) they hoped after the presentation of their proposal that Acting Secretary Dillon might be able to tell of any plans the Department may have dealing specifically with the Cuban problem.

Mr. Balgooyen said that the Council felt that there is a growing disrespect throughout the world for property rights and contractual obligations. Also they sense that the feeling seems to be growing that there is no disposition on the part of the United States Government to give adequate protection to American investment interests abroad, although the United States Government has encouraged American capital to invest in foreign countries. He said that in addition to a concern for investment the NFTC, in a civic sense, is alarmed at the invasion by Communists of the labor movement in Latin American countries, and the infiltration of Communists in the press and in colleges and universities. He said the Council feels convinced that the Communists have almost complete control in Cuba.

Mr. Balgooyen stated that a proposal of the NFTC at the Forty-Sixth National Foreign Trade Convention held in New York, November 16 to 18, 1959 had been approved by the 2000 delegates of the Council and that the Board of Directors had given its approval to the policy set out in the resolution. Of the $27 billion which Americans have invested abroad, he felt the $19 billion invested in Latin America is endangered. He said there is a broadening concept of the right of eminent domain to include nationalization and redistribution of wealth which constitutes one of the greatest threats of our time. He said the Council feels that it is the responsibility of the United States to take whatever steps it can to ensure that this does not occur without prompt, adequate and effective compensation.

Mr. Balgooyen said the Council feels that a broad statement of policy should be issued by the United States Government, covering, not just Cuba, but the whole field of private investment abroad.

(Mr. Balgooyen then read from the recommendations of the 46th National Foreign Trade Convention, as follows):

That the Government of the United States recognizes the right of any sovereign nation to manage its internal affairs as it sees fit, including the right to take property within its jurisdiction for a well-recognized public purpose; but that it firmly maintains that all rights, sovereign or otherwise, are coupled with reciprocal obligations, and that the right to take private property for a public use is coupled under international law with the corresponding obligation to provide prompt, adequate and effective compensation; that it is therefore the policy of the United States that no agency of the United States Government shall lend, grant or give public funds or economic assistance to any government or to any agency of a government which expropriates, or in any other manner takes possession of the property or property rights of a United States citizen, or of a corporation owned or controlled by citizens of the United States, without payment of prompt, adequate and effective compsensation; or which persists in dishonoring the contractual rights of such citizens or corporations.

Acting Secretary Dillon said the problem has two aspects: (1) what we do about Cuba, and (2) the general effect on other parts of the world. He said the Department has felt, as a basic policy, that in preserving our interests in Cuba we must be careful that we don’t actually strengthen Castro without accomplishing our objectives and that we don’t provide increased sympathy for Castro among other countries, particularly in Latin America. The Department shares with the NFTC the same concern and the same goals with regard to Cuba, and it is only a question of the best means, from the standpoint of overall U.S. interests for achieving them. He expressed a doubt as to the efficacy of a broad statement of the sort recommended by the NFTC and suggested that certain planned actions on our part rather than such a statement might have a much greater effect. He added he does not believe that the Cuban action has reached the point of affecting our interests throughout the world or that there is the feeling that Cuba is getting away unscathed.

Mr. Dillon pointed out that Congress during its last session added to the Mutual Security Act a provision prohibiting the extension of assistance to any country which failed to give suitable compensation for expropriated property. From a practical point of view this policy applies to all government loans except for those of the Export-import Bank. This policy could be played up in speeches being given by Government officials.

Mr. Gardner reported that his Company’s people report many Latin American Governments are completely fed up with Castro and are asking how long the U.S. is going to stand by. Through his appeal to people, he can cause pressures that some governments cannot stand.

Mr. Sargent reported that regarding American & Foreign Power’s claim against the Brazilian state of Rio Grande del Sul, he had called on the Brazilian President (by an appointment worked out with the British Ambassador) but that their claim is still before the court where 23 judges are writing separate opinions on the appraised value of the property.

Mr. Collado reported that there is a gradual erosion of his company’s position in Cuba arising from taxes, currency transfer controls, labor agitation and other extreme demands. The Government is not releasing pesos to pay for their crude imports; the sugar industry is asking for petroleum products on credit; Cubana Airlines hasn’t paid for months. Castro has developed the technique of going over the heads of government to the people and this is a big problem—he has influence with large segments of the people. ECLA has put together a good “facade” with regard to the need for government planning and control of economics and the deficiencies of private foreign investment. Its staff work on government ownership has been very good. A real and vigorous effort is necessary if we are to counteract this trend which did not begin with Castro although he has given it impetus.

It was asked if the United States position would not be supported by some other Latin American countries (and not only with reference to action through the OAS).

It was asked if any consideration is being given to answering the erroneous accusations that are being made by Castro. Mr. Collado said that his company has had recommendations that its stockholders start a ground-swell of grass-roots opinion directed at Congressmen. He said some of the “best written” letters urged a cut in Cuba’s sugar quota. Mr. Balgooyen said this would be a mistake and that we do not want to do permanent damage to the Cuban economy. He added, however, that unless something is done to let stockholders and Congress know that steps are being taken by the Government, it will be difficult to keep Congress from taking undesirable action. Mr. Dillon agreed that this is a real problem to which the Department is giving active thought and expects soon to begin certain careful steps which will make it evident that the U.S. is determined that its investors will be fairly treated. Timing is, of course, a factor which must be considered most carefully.

Mr. Collado said that talking about protection alone would be bad, but that the U.S. position must be put on a higher plane relating to the benefits to be gained from private foreign investment. We should take a positive line—should sell the real good which we know lies in a free, capitalistic economy. He expressed his personal view that there is little the U.S. can do to prevent the situation in Cuba from getting much worse; that it will run its course in two or three years and then maybe a modus vivendi can be worked out.

Mr. Dillon informed the group that the Department will help in every way possible concerning any particular problem individual companies might have. He said that the Department is working on developing a specific program as far as Cuba is concerned. Mr. Pike stated that they would be glad to do anything individually or as a group that they can do.

Deputy Assistant Secretary Mallory informed the group of the visit of the President of the American Chamber of Commerce of Cuba, Mr. Ken Campbell, to inform appropriate officials that the Chamber requested the U.S. Government to take all steps to protect American property rights in Cuba, but recommended against any reduction in the Cuban sugar quota.

Mr. Turkel told the group of the Department’s position with the sugar people. The Department plans to recommend that Section 202 be amended to permit the President to revise the quotas, but in order to prevent doing permanent damage to Cuba and creating permanent rights in other countries, to require the President to fill any reductions by buying sugar at world market prices. It is hoped this can be used in negotiations. A tax idea is a difficult one, but, if every effort to solve the problem by negotiation fails, the United States would have no recourse but to impose a tax from which to pay for expropriated properties.²

1. Source: Department of State, Secretary’s Memoranda of Conversation: Lot 64 D 199, December 1959. Official Use Only. Drafted by Stevenson and George O. Gray.
2. In a December 22 memorandum to Rubottom and others in ARA, Mallory noted that following this meeting, Dillon asked him to stop in his office for a talk. Dillon praised a paper prepared by Wieland (apparently Document 406) and told Mallory that very soon the timing of the steps recommended by Wieland had to be determined. Dillon referred specifically to the concerns expressed by Vice President Nixon at the last NSC meeting about public and congressional opinion toward U.S. Latin American policy. When Dillon requested his observations, Mallory suggested that either the Secretary of State or the President make a declaration of U.S. “solidarity with and such help as we could give” regarding capital formation within the Latin American countries, and a statement concerning the U.S. attitude toward expropriation. Dillon suggested that it would be “desirable to get on with the thinking and formulation of some program of this sort”. (Memorandum by Mallory; Department of State, ARA Deputy Assistant Secretary Files: Lot 61 D 411, Policy 1959)