Foreign Relations of the United States Diplomatic Papers, 1941, The American Republics, Volume VII

837.51 Cooperation Program/57

The Secretary of State to the Ambassador to Cuba (Messersmith)⁴⁸

No. 421

Washington, January 11, 1941.

Sir: Reference is made to the Memorandum dated December 24, 1940 addressed to you by the Minister of State of the Republic of Cuba⁴⁹ regarding the general economic negotiations now in progress, and to correspondence and conversations between the Governments of the United States and Cuba over a period of time with respect to economic cooperation.

You are instructed to seek separate and private audiences, after your return to Habana and after the conclusion of agreement in principle between the Government of Cuba and the Export-Import Bank with respect to the financing of an extraordinary quota of 400,000 Spanish long tons of sugar and the extension of Decree-Law No. 522^49a regarding the distribution of quotas for the production of sugar, with the President of the Republic, the Minister of State, and the Minister of the Presidency. You will inform each of these officials orally and in strict confidence of the position of the Government of the United States with respect to further economic cooperation between the United States and Cuba, along the following lines:

1. The extension of sugar financing should assist immediately and significantly in meeting the crisis in Cuba’s most important industry and in maintaining the Cuban economy. This action evidences the cooperative attitude of the Government of the United States, and should contribute to the prestige of the present Government of Cuba.

2. The United States Government is prepared to enter into the other fields of economic cooperation which have been discussed in the past. Before it does so, it believes that the Cuban Government should by actual accomplishment give evidence of its often expressed intention of settling satisfactorily certain problems outstanding between the two nations and of carrying out certain essential and desirable measures. Among these are:

a) Immediate settlement of the Morris Claim⁵⁰ by negotiation with the claimants of a definite schedule of payments.

b) Examination and provision for eventual liquidation of other United States claims.

c) No further manipulation of the direct consumption sugar quotas prejudicial to American mills with refineries in Cuba.

d) Reform and reorganization of the fiscal system and administration. The Government of the United States is prepared, on request, to furnish fiscal and taxation experts to assist the Cuban Government in these matters.

e) Net reduction in actual budgetary expenditures by approximately 7,000,000 pesos per annum.

3. When the Cuban Government has by specific acts demonstrated to the satisfaction of the Government of the United States its intention to carry out completely the above program, the latter is prepared to undertake, at the request of the Cuban Government, any or all of the following measures:

a) Export-Import Bank credits for fiscal assistance and for the development of the Cuban national economy—The extent of such undertaking is indicated in the following excerpt from a letter of December 2, 1940 addressed to the Under Secretary by the Federal Loan Administrator:

“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.”

If the need of fixing in the requisite Congressional authorization of an upper limit to borrowing for development purposes is mentioned, you may point out informally that, as the ceiling on agricultural projects is set at $10,000,000 while the Habana Waterworks project has been estimated to require as much as $10,000,000 or $12,000,000, it would appear to be reasonable to fix a maximum borrowing limit for such purposes, including other beneficial projects which may be developed and approved, of some $25,000,000.

b) Technical assistance in connection with the development program—The Government of the United States is prepared, on request, to furnish the services of competent technicians to assist in carrying out the development program mentioned above. In this connection reference is made to the proposed agricultural survey of Cuba described in instruction no. 420 of January 11, 1941.⁵¹

c) Technical assistance in connection with monetary, banking, and exchange matters—The Government of the United States is prepared, if requested, to furnish experts of the Treasury Department, Federal Reserve System, and Farm Credit Administration to assist the Cuban Government in the preparation of a complete plan for the reorganization of the monetary, banking, and exchange systems, including agricultural credit. There would be no financial commitment at this time.

5. No observations have been received from the Cuban Government with regard to the proposal for a Treaty of Residence and Establishment which was submitted in March 1939.⁵² It is the opinion of the Government of the United States that negotiations for such a treaty should be carried to speedy conclusion, and it requests a prompt reply setting forth the detailed comments of the Cuban Government.

If the subject of the Memorandum of December 27, 1940⁵³ of the Minister of State with regard to the conclusion of a supplementary Trade Agreement limited to sugar, tobacco, and live cattle is brought up, you should state that the Minister’s memorandum is receiving the immediate and careful study and consideration of the United States Government in connection with surveys of related aspects of the entire program of trade agreements, and with particular reference to the bearing of the Minister’s proposals upon the problems involved in the expiration of the present general sugar legislation at the end of 1941 and the consequent necessity of considering the general sugar policy to be followed thereafter; you should add that a reply will be made as soon as such consideration is completed.

Very truly yours,

For the Secretary of State:

Sumner Welles

Under Secretary

48. At the Department of State for consultation.
49. Foreign Relations, 1940, vol. v, p. 788.
50. Promulgated January 18, 1936. The decree established standards for the production and export of sugar and authorized Government regulations; see Gaceta Oficial, Edicion Extraordinaría No. 13, January 20, 1936.
50. The claim of Fred A. Morris based on a decision of the Cuban Supreme Court providing compensation for land seized by the Cuban Government.
51. Not printed.
52. Not printed; preliminary negotiations for a treaty of residence and establishment were suspended in July 1939.
53. Not printed.