Memorandum by the Deputy
Assistant Secretary of State for Inter-American Affairs (Mann) to the Assistant
Secretary of State for Inter-American Affairs (Cabot)[1]
CONFIDENTIAL
[WASHINGTON,]
March 23, 1953.
Subject:
Request by Representative of
Freeport Sulphur Company for Appointment to discuss Nicaro
Several weeks ago Mr. Spruille Braden[2] asked me to
arrange an appointment with you for himself and Mr. Langbourne Williams,
President of Freeport Sulphur Company, to present the views of the company
regarding the operation of the nickel plant wholly owned by the United States
Government at Nicaro, Cuba, after you had had an opportunity to familiarize
yourself with this situation.
This memorandum summarizes the principal
developments with respect to Nicaro since late 1950, with particular emphasis
upon the objections and interests of Freeport Sulphur. Officers of the Bureau
amiliar with the background will be glad to amplify this summary if you should
wish.
Freeport operated the plant under contract with the
United States Government during World War II and until its closing in 1947 as
an uneconomic enterprise. Freeport owns the nickel‑ferrous ore deposits
now used by the plant and receives a generous royalty from the present
operator. Freeport itself did not compete in 1950 for the right to operate the
rehabilitated plant, but American Smelting & Refining Company, an
unsuccessful bidder, had made an arrangement with Freeport to give it a half
non‑controlling interest in the proposed operating company in lieu of
royalties.
Freeport has been critical of the award of the
operating contract in January 1951 to the Nickel Processing Corporation
organized and then controlled by the Dutch Billiton company, but having a
minority Cuban participation. It has criticized both the principle of Cuban participation
and the reputation of one of the Cubans having an interest in the participating
Cuban company. It has expressed resentment over the criticism by the then Cuban
Government (expressed in a letter[3] from then President Prio to ex‑President
Truman urging Cuban participation) of labor relations during its operation of
Nicaro during World War 11. Freeport has indicated it now is itself interested
in operating Nicaro, and would like to bid for the privilege on an equal basis
with other interested parties. It is undoubtedly influenced by the increase in
the market price of nickel, the continuing demand for defense requirements, including
stockpiling, and the development by the United States Government of additional
ore reserves in connection with a projected expansion of Nicaro with consequent
reduced dependence upon Freeport ore.
The General Services Administration was given the
responsibility in 1950 to rehabilitate and bring back into operation the Nicaro
nickel plant in order to meet defense needs for this critical metal. In early
1951 it awarded the rehabilitation contract to the Frederick Snare Corporation
and the operating contract to the Dutch Billiton company, which had in General
Services' opinion submitted a better bid than the only other bidder, the
American Smelting & Refining Company. The Munitions Board had certified
these two companies and a third which did not bid to be competent to operate
Nicaro. General Services approved the arrangement by which the Billiton
Company organized the Nickel Processing Corporation to operate Nicaro and gave
a minority participation in the ownership and direction of the company to both
a Cuban group and the National Lead Company. It subsequently approved in May
1952 the sale by Billiton of its interest to National Lead and the Cuban group,
leaving National Lead with 60 percent ownership and management control. Finally
in February 1953 General Services confirmed a five‑year management
contract with the Nickel Processing Corporation to extend to mid‑1957.
The Department of State, while recognizing the legal
responsibility of General Services for the operation of Nicaro, has had an
active and continuing interest in this activity. The Department recommended
that the letter of October 7, 1950, from President Prio of Cuba to President
Truman, which stressed the advantages of Cuban participation in Nicaro, receive
a non‑committal reply and be referred to the agencies responsible for
selection of an operator. The Department subsequently, communicated to General
Services in late 1950 the desire of the Cuban Government, repeatedly affirmed
to our Ambassador in Habana and by the Cuban Ambassador in Washington, for
Cuban capital and management participation in the reactivated Nicaro plant. In
communicating the Cuban Government's views, the Department emphasized that it
endorsed no particular Cuban group, but recommended serious consideration by
General Services of Cuban participation in principle provided it was on a bona
fide, business‑like basis.
In July 1951 the Department informed General
Services, which had consulted the Department, that the Department perceived no
objection to General Services approval of the arrangement negotiated by the
selected operator with the only Cuban group interested in participating in the
ownership and management of the operating company. Since 1950 the Department
and Embassy Habana have continually helped to facilitate the rehabilitation and
operation by securing Cuban Government cooperation, such as granting customs
exemptions and port privileges, admitting foreign technicians and resolving
labor disputes. We have continued to assist in a projected program for plant
expansion by securing Cuban Government approval of ore exploration on public
lands and a Cuban Government commitment for comprehensive tax exemptions.[4]
Nicaro reached full production in July 1952 and is
producing nickel oxide at the rate of 27.5 million pounds per annum. The
operating company is committed to research in the further development of nickel
production and the reclamation of cobalt. The United States Government invested
32 million dollars in the original plant and 12 million dollars in the
rehabilitation, and for your confidential information, has in prospect an
expansion program which would cost about 43 million dollars and would increase
plant capacity by about 75 percent.
The Batista Government like the Prio Government
wants Nicaro to continue as a permanent Cuban industry. It is willing to grant
tax exemptions and other privileges because Nicaro is a non‑profit United
States Government‑financed industry, contributing to hemisphere and free
world defense and to the Cuban economy. The Cuban group which purchased
participation in the operating company was sponsored by the Prio Government,
and its initial spokesman, Inocente Alvarez, was close to Prio and does not
have the confidence of the Batista Government. The Batista Government informed
us in July 1952 that it viewed the Prio letter as irregular and as having no
validity, and that the United States Government need not feel obligated by it.
The Batista Government refused, however, to send another communication to the
United States Government to overcome the effects of the Prio letter, as
requested by a Freeport representative, and took the position that the
operation of Nicaro is a United States responsibility. Furthermore, the Batista
Government has indicated it does not wish to disturb the existing arrangement
under which Nicaro is operated with Cuban participation. A prominent pro‑Batista
lawyer, Oscar Garcia Montes, was secretary of the Cuban participating company
when established .and is now one of the two Cuban directors of the operating
company. General Services Administration states the Cuban participants have
been very helpful in the Nicaro operation, especially in labor relations and
development of new ore reserves.
The Freeport representatives may attack the General
Services Administration for decisions disliked by Freeport. In commenting upon
their statement, it is recommended you emphasize General Services' statutory
authority and responsibility for Nicaro and stress the Department's limited
interest and contribution. It may be advisable to affirm that the Department
recommended that General Services consider the desirability of Cuban
participation, because the Cuban Government strongly urged it and because the
Department approved participation by Cuban nationals in principle. In such
case, you should emphasize that the Department recommended no particular Cuban
group.
The Department made no objection to the approval by
General Services of the arrangement negotiated by the selected operator under
which a Cuban corporation composed of Cubans genuinely interested in Nicaro for
several years and possessing knowledge and experience useful to the operating
company, purchased a 20 percent participation. If the approval of this
arrangement should be attacked because of the interest of Alberto Inocente
Alvarez, ex‑Cuban Minister of Commerce, Minister of State and UN
representative, because of his alleged private immorality and venality in
public office, you might comment that he was not a shareholder of the Cuban
corporation when first organized and has not, so far as is known, been actively
connected with the direction of the operating company, or had any contact with
United States Government officials in connection with the operation of Nicaro.
You may inform the‑ Freeport representatives that a high official of the
Batista Government assured the United States Ambassador in June 1952 that it
has nothing against Freeport Sulphur.
[1] Drafted by Mr. Wellman.
[2] Ambassador to Colombia ( 1939‑1942), Cuba
( 1942‑1945 ), and Argentina ( 1945 ), and Assistant Secretary of State
for American Republic Affairs ( 1945‑1947 ).
[3] Dated Oct. 7, 1950, not printed.
[4] in telegram 470, from Habana, dated May 11,
1953, Ambassador Beaulac informed the Department of State that President
Batista had signed a decree granting broad tax exemptions for the Nicaro project
(837.2547/5‑1 153).