File No. 837.51/279a
The Secretary of State to the Secretary of the Treasury ( McAdoo )
My Dear Mr. Secretary: Doctor Patterson, Assistant Secretary of State of Cuba, and the Collector of the Port of Habana, have arrived in Washington on a financial mission. The Cuban Minister brought them to call upon me on Friday and expressed a desire to call upon you in order to discuss with you matters of finance in connection with Cuba’s economic needs.
The Latin American Division of this Department has, I understand, arranged for an appointment with you for these gentlemen through your private secretary, and before you see them I desire to put you in possession of certain information which I have received in regard to the financial and political situation in Cuba:
I
In view of the so-called Piatt amendment to the treaty of 1903 with Cuba, which reads as follows:
Article 2. The Government of Cuba shall not assume or contract any public debt to pay the interest upon which, and to make reasonable sinking fund provision for the ultimate discharge of which, the ordinary revenues of the Island of Cuba, after defraying current expenses of the Government, shall be inadequate,
the Department of State has, in the past, been consulted by the Cuban Government before any debt was contracted by it.
On July 13 the Minister at Habana cabled the Department that the Cuban Congress voted authorization for a $30,000,000 loan. As the Cuban Government had not informed this Government as to the proposed loan, in accordance with its practice, the Department cabled the Minister at Habana on July 19 to remind the Government of Cuba of the treaty provisions in regard to loans and its practice of submitting to this Government full data as to existing and proposed new indebtedness and as to revenues applicable to payment of principal and interest.
On July 24 the Minister cabled the Department that the President had vetoed the bill authorizing the loan on account of certain provisions which were not to his liking, and on the 28th a cable was received stating the Cuban Senate had passed the House bill authorizing the $30,000,000 loan, with an accompanying tax measure providing for interest and sinking fund, the bill to carry tax of one-quarter of a cent a gallon on molasses produced in Cuba.
On August 2, inasmuch as the Department was not in receipt of any information from the Cuban Government in regard to the loan, a cable was sent to the Minister asking him if he had received any statement from the Government relative to the matter. The Minister replied to this cable on August 8, stating that the above-mentioned Doctor Patterson left Cuba for Washington carrying all the data called for by the Department.
Neither the Cuban Minister nor the Assistant Secretary of State of Cuba, in their conversation with me, took up the details of the loan, [Page 299] but stated that they desired to speak to you about financial matters, as they were under the impression that the Treasury Department was kindly disposed towards arranging for a war loan to Cuba.
II
In connection with the matter of the loan, it is necessary to take into consideration the present political situation in Cuba.
The revolution which occurred in February of this year, and which may be considered to be at an end as an organized movement, although certain unrest still prevails in the eastern end of Cuba, brought in its train great destruction of property of foreigners and of Cubans and for which large claims will be presented to the Cuban Government. The entrance of Cuba into the war as an ally of the United States has occasioned her a considerable outlay of money for equipment of troops and repair and refitting of ships. For both of these reasons it would seem that Cuba would be in need of much greater funds than she now possesses.
Nevertheless, the financial and the political situations are so closely interwoven that I feel that no step should be taken in the present situation without the careful consideration and cooperation of the Treasury Department and the State Department, both on account of the provisions of the Piatt amendment and the political questions involved.
Two pertinent political questions are the settlement of the Cuban Ports Company matter and the payment of certain part of the claims of the Cuba Railroad Company against the Government for property destroyed in the revolution, in order to enable this company to put its road in condition to haul the sugar crop which is of such great importance to the United States arid to the Entente Allies.
The matter of the Cuban Ports Company, a corporation in which both American and British capital is interested, has been a most vexatious one for several years and a few weeks ago the Cuban Congress authorized the President of Cuba to make a settlement of the question, the President having expressed his desire on various occasions to make an equitable settlement of this matter if Congress would authorize him to do so.
It is felt that it would be particularly useful at this time if a settlement could be made of the Ports question, inasmuch as Cuba, Great Britain, and the United States are now all fighting side by side against the German Government, but this settlement may not be forthcoming unless certain pressure is brought to bear on the President of Cuba, possibly through the approval for a loan, in view of the fact that he has decided not to make a settlement himself but has appointed a commission to decide the case, certain members of which are openly known to be very hostile to the Ports Company.
In order that the Cuba Railroad may be in a position to haul the sugar crop it may also be necessary to make an arrangement with the Cuban Government before the loan is authorized for a monthly payment to the railroad of part of its claims. A payment of $300,000 per month for four months has been suggested by the company.
In view of the foregoing, I wish to suggest that a conference be held between the two Departments, after your meeting with Doctor Patterson, in order that the whole situation may be fully discussed.
I am [etc.]