517. Memorandum From the Assistant Secretary of State for Inter-American Affairs (Rubottom) to the Acting Secretary of State1

SUBJECT

  • U.S. Sugar Legislation Required for Economic Action Against Cuba

Discussion

Our policy objective with respect to Cuba is, in the last analysis, that the Cubans themselves should regain effective control of the formulation and implementation of Cuba’s foreign and domestic policies and that they should exercise control in a manner compatible with U.S. security and other vital interests.

It is evident, however, that the policies and programs of the Government of Prime Minister Fidel Castro have not been freely decided upon by the Cuban people and that they now present serious dangers to U.S. security and other interests throughout Latin America.

The tactics which we are employing to help the Cubans regain effective control may be said to be entering a third phase. The first phase—which covered the early months of 1959 and included such actions as the recognition of the Castro Government, the appointment of Ambassador Bonsal, and Castro’s trip to the U.S. —was designed to test any possibility that the moderate group then existing within his following might gain the ascendancy. In this testing phase, our misgivings about Castro were confirmed, as he and his extremist lieutenants [Page 912]rejected cooperation with us and held to an increasingly radical and anti-American course in their domestic and foreign policies. The test, nonetheless, had to be made not only to confirm to ourselves but also to Cuban and Latin American opinion that Castro once in power was unwilling to cooperate.

During the second phase, our tactics have been to maintain a public posture generally described as a “policy of restraint.” The purpose has been to place squarely on Castro the responsibility for deteriorated Cuban–U.S. relations and for economic, social and other dislocations within Cuba. At the same time, with steadily increasing emphasis we have countered Castro’s anti-U.S. accusations, discreetly channelled facts about Cuba and Castroism to the other American Republics and made clear our own position on Cuba—notably in the statements of the President on January 262 and in the reply delivered on behalf of the Chilean students.3 These moves, in addition to safeguarding the United States reputation for firmness and dignity as well as for restraint, have been intended to encourage moderate elements in Cuba and to develop Latin American support for the U.S. position which would be especially needed if OAS consideration of the problem becomes feasible and desirable.

Although there is yet no strong and unified opposition movement, the position and actions of the United States in this second phase have contributed to the development of a climate in which Cuban moderates are rapidly not only becoming disenchanted with the Castro Government but beginning to organize and otherwise manifest their opposition more effectively than previously. In addition, the continuing economic hardships faced by the Cuban urban and agricultural working classes despite Castro’s promises and the atmosphere of confusion and disruption attendant on his reforms have created at least some degree of popular disillusionment, although perhaps half of the Cuban people still support Castro.

The third phase, which we are now rapidly approaching, will require that the United States use judiciously selected economic pressures at those points where Castro’s domestic and international policies have weakened Cuba’s economic structure in order to engender more public discomfort and discontent and thereby to expose to the Cuban masses Castro’s responsibility for mishandling their affairs. A field in which this could most effectively be done is in the field of foreign exchange. Cuba remains heavily dependent on imports while Castro’s policies are bringing Cuba’s foreign exchange position to a point where action on our part would have disproportionately large effect in disrupting the economy in ways that would be brought home [Page 913]quickly to the consuming public. Cuba’s dollar reserves have been brought to dangerously low levels by arms purchases, military adventures, mismanagement, flight of capital, and discouragement of private capital. Tourist receipts on the order of $75 million have practically vanished and foreign creditors, faced with unpaid bills, are moving toward business on a strictly cash basis. The cost of living and unemployment are both mounting at a time when the economy is being decapitalized. Measures taken by the U.S. to reduce Cuban dollar earnings, with appropriate action with regard to their consistency with our international obligations, could have an important effect were it not [now?] on a large scale.

In addition to these tactical considerations, National Security [Council] policy for Latin America4 stipulates that if a Latin American state should establish with the Soviet Bloc close ties of such a nature as materially to prejudice our interests, the United States should be prepared to diminish or suspend governmental economic or financial cooperation and take other political, economic or military actions deemed appropriate. In the light of the Soviet-Cuban Trade and Aid Agreements, of the Mikoyan-Castro pledge of cooperation in the UN and of the other evidences of increasing Bloc-Cuban ties and of growing Communist influence, Cuba now clearly falls within the provisions of this policy stipulation.

As we enter into this third phase of our tactics, it is important that the Executive Branch have the discretionary and flexible authority requested in the Administration’s proposed sugar legislation, at least when the Congress is not in session. This may soon be needed to take from Cuba at least part of the premium now accruing to that country on sugar exported to the United States. In any event, should the present legislation merely be extended it would be tantamount to guaranteeing Cuba unrestricted access to the U.S. market on present terms irrespective of what Castro does. Should it subsequently be decided to use the Congressional authorization with a view to intensifying Cuba’s foreign exchange crisis, assist in the effort to obtain compensation for expropriated U.S. owners, or for other reasons bearing on our Cuban policy, I believe that American public and Congressional opinion would support such a move and that, if the injury to Cuba’s permanent interests were not disproportionately large, it would be quite defensible internationally. Politically, Cuba’s five-year deal to sell five million tons of sugar at the lower world market price and with only 20% payable in convertible currency, which Castro has highly praised, places us in an excellent position to point out that we do not [Page 914]even seek “equal treatment” with the Soviets since even a complete elimination of the U.S. premium would still leave Cuba with convertible currency as the proceeds of its sales to this country.

The President included a reference to the need for enacting a Sugar Act in his legislative message to Congress5 and it is understood that Congressman Cooley, Chairman of the House Committee on Agriculture—who has been reported as hitherto opposed to granting flexible authority to the Executive Branch—now plans to have his Committee act on sugar legislation this week. His present position is not known, but it remains important to the attainment of our objectives in Cuba that the Executive Branch have the power to act with respect to Cuban sugar imports.

Recommendations

It is recommended

1.
That you signify, as a basis for the development of Departmental positions and for discussions with other parts of the Government, your agreement that the time has now come for considering the application of selected economic pressures on Cuba and inform the NSC of this decision at its next discussion about Cuba.
2.
That, at the next discussion of the Cuban situation in the NSC, you emphasize the importance of obtaining appropriate sugar legislation and invite the participants to take appropriate action in their Congressional contacts and presentations to obtain it.6

  1. Source: Department of State, Rubottom–Mann Files: Lot 62 D 418, Sugar 1960. Secret. Drafted by Mallory and Hill and concurred in by L, E, H, and S/P.
  2. See Document 438.
  3. See footnote 2, Document 505.
  4. Presumably a reference to NSC 5902/1, “United States Policy Toward Latin America,” February 19, 1959; the text is scheduled for publication in volume V.
  5. Reference to the President’s May 3 special message to Congress; see Public Papers of the Presidents of the United States: Dwight D. Eisenhower, 1960–61, pp. 385–394.
  6. Dillon’s stamped signature and the date, May 11, appear in the “approve” spaces on both recommendations on the source text.