When Castro first gained power, the American business community had not been particularly concerned about the shifts going on in Cuba. Instead, their perception was that the Cuban economy was structurally resistant to fundamental change.
This understanding was encapsulated in the comment of one New York banker who said:
Anybody who gets in there rides a gravy train. No matter how radical he might be, the way things are done will make him turn conservative . . .
Castro had not expressed open hostility either to the US government or to private business interests. In fact:
American Ambassador Earl Smith describe[d] the rebels as ‘friendly and courteous,’ surprisingly capable in preserving order among the populace and exhibiting not the slightest anti-American sentiment. An American banker confesse[d]: ‘The way their troops have behaved so far certainly throws dust on the fear that they are a bunch of Communists.’ Another Yankee businessman exclaim[ed], ‘They’re just nice kids.’
Consequently, during 1959, companies went ahead with their investment plans. American net direct investment of $63 million during that year was even larger than it had been in most of the years since World War II.
As 1959 ended, however, Cuban leaders were more open about their determination to seek a diversification of trade links, an attitude that was making the US increasingly nervous.
From his earliest days in power, Castro had asserted his belief that Cuba could only be “fully independent and achieve social and economic development” if the government was able to broaden the island’s trade patterns. Thus the government sought Soviet economic support.
In fact, some have argued that the Cubans deliberately radicalized their revolution in 1959 in order to win Soviet economic aid. Consequently, there was growing American dismay that larger numbers of the Cuban Communist Party, the Partido Socialista Popular (PSP) were moving into government positions.
By early 1960, US officials and businessmen were beginning to show alarm over the course of events in Havana.
In February 1960, a Soviet trade delegation arrived in Havana and a Soviet – Cuban pact was agreed upon:
According to the terms of the pact, Cuba agreed to sell 425,000 tons of sugar to the Soviet Union in 1960 and 1,000,000 tons in each of the following four years. Soviet goods, including 6,000,000 barrels of oil annually, would constitute 80 percent of the payments: the remaining 20 percent was to be paid in convertible currency. The Soviet Union also granted Cuba a loan of $100,000,000 at 2.5 percent annual interest for the purchase of Soviet – bloc machinery and material. It also agreed to provide technical assistance for the construction of plants and facilities. In the United States, the trade pact was viewed as an open invitation for the extension of Communist influence in an American sphere of influence.
The Soviet visit was followed by the arrival of an East German trade mission. In late March, Poland signed a trade agreement with Cuba.
Several weeks later, Cuba and the Soviet Union resumed diplomatic relations which had been suspended since 1952.
The guarantee of alternative markets for sugar exports and the promise of economic assistance strengthened the government’s position against internal opponents and foreign opposition. It also provoked a confrontation with the United States.
In May, Cuban authorities ordered Standard Oil, Texaco, and Shell to refine Soviet petroleum. On June 7 the companies refused, in part, because the $600,000,000 the Cuban government owed the oil companies now exceeded the value of their facilities.
Three weeks later Cuba nationalized foreign refineries.
In retaliation, in July 1960, Cuba’s sugar quota was cut from the US market when Eisenhower cut Cuban sugar imports by 700,000 tons, the balance of the quota for 1960. He then fixed any future quota at zero. This move was devastating because, under normal circumstances, Cuba sold an average of 3,000,000 tons of sugar each year to the United States, at “prices that had been kept artificially high by laws designed to protect the high – cost US producer.”
On July 9, four days after the United States had suspended the sugar imports, the Soviet Union announced its decision to purchase the full quantity cut by the US, a move that was not based on need because the Soviet Union itself produced large quantities of sugar. This was followed by an announcement from the People’s Republic of China to purchase 500,000 tons of Cuban sugar annually for the next five years. In December 1960 the Soviet Union and several eastern bloc countries agreed to take the balance of Cuban sugar. After 1961, the Soviet Bloc and China absorbed the bulk of Cuba’s sugar harvests. In 1961, for example, they bought 4,891,000 tons out of a total harvest of 6,464,000 tons.
However, even though the agreements with the Soviet bloc and the Chinese eased Cuba’s problems in the short – term, they created additional challenges.
Because payment for sugar was made primarily in barter, the purchases worsened Cuba’s ability to trade in the world marketplace. This was because the Soviet – bloc states paid only 20 percent in convertible currency, an action which made it more difficult for Cuba’s trade to remain diversified.
Photograph by Lisa Reynolds Wolfe.