637.0023/23a: Telegram
The Acting Secretary of State to the Chargé in Cuba (Howell)26
67. Following note to the Cuban Government should be promptly prepared for presentation but you will not (repeat not) deliver the note pending receipt of further instructions from the Department by telephone:
“I have the honor to refer to the Ambassador’s letter to His Excellency, the President of Cuba, dated July 31, 1923,27 in which the Ambassador called attention to the necessity for allowing ample time in which to study the pending railway merger and port closing bill, commonly designated as the Tarafa Bill. My Government has now instructed me to supplement the considerations set forth in the Ambassador’s letter by laying before the Cuban Government the results of its preliminary study of what it understands to be the principal features of the proposed bill. This study is necessarily incomplete because of the limited time which has been available for consideration of the matter.
“In the light of this study, my Government has instructed me to point out certain provisions of the proposed legislation which appear objectionable and in some cases even confiscatory in the execution which they may, and doubtless will, receive.
“(1) The provisions regarding the closing of all ports, sub-ports or loading points, with the exception of those designated by the bill as national ports, and prohibiting in the future the designation of [Page 858] any ports as national except those to which the consolidated railways may extend their lines, is considered confiscatory of large property interests of owners of sugar mills, who, with the consent and cooperation of the Cuban Government, have constructed wharves and lines of railroad to authorized private ports for the purpose of exporting their product. Provisions of the proposed bill for permitting the use of private railways to private ports, notwithstanding the provisions which close such ports, in no wise prevent confiscation of the interests referred to, but even assist such confiscatory methods by prohibitively penalizing the mill owners in the use of their own property obtained at large expense.
“(2) The provisions of the proposed bill may constitute such a virtual monopoly of railroad transportation as to give to the consolidated railroad companies, which by the terms of the bill must include new lines constructed in the future in districts where the consolidated lines operate, so complete a control of the transportation facilities of the island that no other public service railroad can compete therewith. Such a monopoly would be detrimental to all persons depending upon railway transportation for the exportation of their manufactured or natural products. Particularly objectionable are those provisions of the bill, the language of which would seem to prohibit, even with the payment of the penalty provided for, the mill owners owning a private railroad to a national port, from using such private railroad when the consolidated railways operate a line from such mill to the national port in question.
“It should be understood that these observations do not refer to the general principle of consolidation of Cuban railroads but solely to the establishment of an absolute monopoly of transportation preventing present or future competition of railroads not members of the consolidation.
“(3) The provisions of the bill do not provide for an actual merger, but constitute a holding company with stock control of the member companies for the purpose 01 their operation. There appears to be nothing in the project which prevents over capitalization of such holding company with attendant evils, notably a probable failure to pay the dividend of 6 per cent which would prevent the accrual of the taxes provided for in the bill.
“(4) While the project provides that the consolidated railways shall make an immediate reduction of 20 per cent in the existing tariff for the transportation of sugar over certain distances, yet it specifically admits of individual agreement between the railways and the shippers as to charges for transportation in the future, with the proviso, however, that such charges shall not exceed those now existing. There being neither provisions for the publication of these private agreements, nor for their report to the National Railroad Commission, the Government will probably be unable to determine whether rebates are being given, or whether certain shippers actually are being preferred to others.
“I am, therefore, instructed to state that my Government confidently hopes that the proposed legislation, which would so vitally affect economic conditions in Cuba, and which is so momentous to American companies having investments of millions of dollars in [Page 859] that country, will not be enacted without affording an ample opportunity for the presentation of objections by all interested parties and for a full consideration of its probable effects.”
You may state orally and very informally in presenting the note that this Government has not presented its views on this matter previously because of the situation which has existed during the last week in Washington.28
- In July the Ambassador had been summoned to Washington for a conference with the Department; see Department’s telegram no. 63, July 28, p. 846.↩
- Not found in Department files.↩
- President Harding died Aug. 3; the funeral took place Aug. 10. Only routine matters were handled during the intervening week.↩