With regard to the specific undertakings mentioned therein which involve
the Export-Import Bank, I quote a statement of the Federal Loan
Administrator, Mr. Jesse H. Jones:
“On your recommendation, and upon the proper undertakings and
fulfillment by Cuba of the conditions outlined in your
memorandum, the Trustees of Export-Import Bank will lend the
Republic of Cuba up to $4,000,000 for six months, with renewal
privileges for like periods up to but not exceeding two years at
an interest rate of 3.6% per annum, satisfactory legislation
authorizing such a loan having first been approved by the Cuban
Congress.
“The Trustees will give consideration to a loan application for
the rehabilitation of the Havana Waterworks if presented on a
sound engineering, commercial and legal basis. In addition,
applications for other beneficial self-liquidating projects will
be considered on their merits and in relation to the funds which
we will have for lending.
“Furthermore, the Trustees will give consideration to
applications for loans of a total amount not to exceed
$10,000,000 in connection with such self-liquidating projects of
agriculture development and diversification as may be
recommended by representatives of the Bank, Department of
Agriculture, Farm Credit Administration, and the Federal Reserve
System, in connection with appropriate Cuban officials.”
[Enclosure—Memorandum]
A Program of Economic Cooperation Between the
United States and Cuba
[Washington,] December 3, 1940.
a. scope of program
1. Fiscal System
a) Reorganization—
It is essential that a thoroughgoing reorganization of the fiscal
administration and reform of the tax system be undertaken at once by
a Joint Cuban-American Committee working principally at Habana. Such
a committee should include experts in all phases of Treasury
administration, as well as broad tax economists. It should begin its
work at once and, with assistance of previous studies of Seligman,
Magill, and Shoup,81 should be able to conclude its general
studies within three months. Thereafter a small group of
administration specialists should remain at least a year to carry
out fully the recommendations. The constitutional requirement that a
new organic law of the Ministry of Finance be enacted should
facilitate the adoption of satisfactory legislation.
b) Mineral Legislation—
One of the principal points made in the memorandum of the Cuban
Commission is the desirability of constructing highways to open up
mineral resources. Mineral development in Cuba is hindered by
antiquated mineral legislation as well as by lack of transportation.
It is suggested accordingly that appropriate experts, including one
or more on mineral taxation, cooperate with the Cuban Government in
connection with the general fiscal study.
c) Budgetary Problem—
The immediate budgetary problem should be speedily attacked. Reports
indicate that it would be possible to reduce expenditures by at
least 10 per cent without throwing any Government employees out of
their jobs.
d) Revolving Fund—
Upon a general 10 per cent reduction in budgetary expenditures and
the undertaking of fiscal reform, the Export-Import Bank would be
disposed to establish a short-term revolving fund credit of
$4,000,000 to the Republic of Cuba.
2. Agriculture
a) Reorientation—
The execution of a broad program of agricultural development is of
basic importance in the readjustment of the Cuban economy. The [Page 786] Department of Agriculture
is in general accord with the projects recommended in the Cuban
Memorandum but it is not prepared to comment specifically on the
feasibility or desirability of any particular item until a detailed
investigation has been made on the spot. Rice growing, tick
eradication, resettlement, reforestation, and irrigation projects
all appear to offer some possibilities of productive development
which further study may bring out.
b) Agricultural Credit—
Closely associated with a program of agricultural development and
diversification is the study of a suitable system of agricultural
credit. The establishment of agricultural credit institutions must
be considered in relation to the general monetary, exchange,
banking, and credit situation.
c) Recommendation—
It is recommended that the Department of Agriculture assign technical
experts to cooperate with the Cuban Government in the study of
appropriate agricultural development projects. It is also
recommended that experts of the Federal Loan Agency, the Farm Credit
Administration, the Federal Reserve System, and the Department of
Agriculture proceed to Cuba to consider, in cooperation with the
Cuban authorities, a plan of agricultural credit—this plan to be
correlated with a broader study of the entire Cuban financial
mechanism. The Export-Import Bank is prepared to give sympathetic
consideration to applications for loans of a total amount not to
exceed $10,000,000 in connection with such self-liquidating projects
of agricultural development and diversification as may be
recommended by representatives of the Bank, the Department of
Agriculture, the Farm Credit Administration, and the Federal Reserve
System, in conjunction with appropriate Cuban officials.
3. Public Works (Excluding Irrigation and Other Directly
Agricultural Projects)
The Export-Import Bank is prepared to consider the extension of
credits for the construction of productive public works such as the
Habana waterworks, other waterworks and sanitation systems,
highways, and certain tourist developments. It is prepared to
discuss the rehabilitation of the Habana waterworks immediately upon
the submission of a project which has been soundly worked out from
the engineering, the commercial, and the legal points of view, and
to take up other projects after careful engineering and commercial
analyses by competent Cuban and United States experts.
4. Monetary, Exchange, Banking,
and Credit System
It is recommended that a group of experts from the Treasury and the
Federal Reserve System, assisted by experts from Farm Credit and
Agriculture as to agricultural credit, cooperate with the Cuban
authorities, [Page 787] in a complete
study, largely carried out in Cuba, of the Cuban financial
mechanism, pushing forward from the preliminary discussions which
have taken place over three years. Such a study should include such
matters as the legal tender status of the existing currencies,
regulation of banks, exchange system, monetary reforms, new credit
institutions and so forth.
5. Sugar and Tobacco
a) Law 522—
It is essential that Law 522 be extended at once.
b) Commercial Arrangements—
Consideration should be given immediately to commercial arrangements
which might involve further concessions on sugar and tobacco.
6. Treaty of
Establishment
It is recommended that discussions be resumed at once in Habana.82
b. time schedule
I. First Period—Immediate
Action
- A.
- Cuba to
- 1)
- Reduce budgetary expenditures by 10 per cent.
- 2)
- Initiate negotiations for settlement of the Morris
claim and other United States claims.
- 3)
- Initiate congressional action for extension of Decree
Law 522, new law to remain in effect as long as United
States sugar quota plan is in effect.
- B.
- United States and Cuba to
- 1)
- Appoint joint committees, all to work in Cuba, and all
to report as soon as possible but no later than February
28, 1941, as follows:
- a)
- Fiscal reorganization, revision of the tax
system, including the mining code.
- b)
- Monetary, banking, exchange, especially
agricultural credits.
- c)
- Agricultural projects.
- d)
- Public works projects, including mining
development.
- 2)
- Resume negotiations of a Treaty of
Establishment.
- 3)
- Begin discussions of additional commercial
arrangements.
- C.
- United States
- 1)
- Upon the reduction in budgetary expenditures of 10 per
cent and the undertaking of fiscal reform, the
Export-Import Bank will lend the Republic of Cuba up to
$4,000,000 for six months, with renewal privileges for
like periods up to but not exceeding two years at an
interest rate of 3.6% per annum, satisfactory
legislation authorizing such a loan having first been
approved by the Cuban Congress.
- 2)
- The Export-Import Bank will give consideration to a
loan application for the rehabilitation of the Habana
waterworks if presented on a sound engineering,
commercial, and legal basis.
II. Second Period—Now to February
28, 1941
- A.
- Cuba to
- 1)
- Arrive at settlements of Morris claim and other United
States claims.
- 2)
- Adopt law extending Decree-law 522.
- B.
- United States and Cuba to
- 1)
- Four joint commissions to report.
- 2)
- Conclude negotiation of the Treaty of
Establishment.
- 3)
- Conclude commercial arrangements.
III. Third Period—March 1, 1941
On
- A.
- Cuba to
- 1)
- Ratify Treaty of Establishment.
- 2)
- Adopt legislation to make effective recommendations of
the four joint committees (e. g., organic law for the
Treasury Department, law establishing agricultural
bank).
- B.
- United States
- 1)
- Ratify Treaty of Establishment.
- 2)
- Export-Import Bank to give sympathetic consideration
to the extension, upon the adoption by Cuba of requisite
legislation, of appropriate financial assistance for the
execution of useful projects recommended by the joint
technical committees:
- a)
- Public works.
- b)
- Agricultural development.