Papers Relating to the Foreign Relations of the United States, 1918

File No. 837.51/326

The Assistant Secretary of the Treasury ( Rathbone) to the Counselor for the Department of State ( Polk)

Washington, October 17, 1918.

Dear Mr. Polk: I enclose to you herewith copy of a letter from the Cuban Minister to the Secretary of the Treasury, dated October 11, 1918, in relation to an advance in the amount of $7,200,000 which the Government of Cuba has requested of the Secretary of the Treasury in addition to the advance made last March of $5,000,000, being the first advance to the Cuban Government under the credit of $15,000,000 established in favor of that Government by the Secretary of the Treasury. By communications, dated respectively August 19, 1918, and September 9, 1918, the Secretary of State advised this Department in relation to the authority of the Cuban Government to borrow a second amount of $5,000,000 on account of said $15,000,000 credit. In the first of these letters the Secretary of State advised that he was of the opinion that this Department would be warranted in making further advances to the Cuban Government unless it should appear in the meanwhile that the expenditures of Cuba were not being kept within the actual or estimated revenues of the Island. In the second of these letters the Secretary of State asked that before this Department make further advances (other than the $5,000,000 advance then and now under consideration) under the said credit of $15,000,000, he be notified sufficiently in advance to enable him to ascertain whether or not the financial situation in Cuba would make a further advance legal and advisable. In view of the time that has elapsed since the receipt of these letters I am led to ask whether in the judgment of the Department of State the second advance of $5,000,000 under said credit can be legally made during the current month.

While the account set forth in the letter of the Cuban Minister enclosed herewith shows expenditures made and to be made aggregating $12,197,090.72, of this sum $1,500,000 is represented by the Series B bonds of the Government of Cuba, and does not therefore represent any past or immediate cash expenditure. In these circumstances, in the judgment of this Department a present advance of $5,000,000 to the Cuban Government will meet its immediate cash requirements in respect of the expenditures set forth in the letter of the Cuban Minister.

In a letter dated December 1, 1917,¹ the Secretary of State advised this Department that the American Minister to Cuba, under instructions from the Department of State, had especially recommended to the Cuban Government that a certain portion of the proposed loan from the United States Government, roughly in the neighborhood of $3,000,000, should be set aside for the purpose of establishing a credit in favor of the Cuba Railroad upon its guaranty to expend these moneys in the necessary improvements of roadbed and additions to their rolling stock and in repairing the damages done to the road during the last revolution. The account set forth in the enclosed letter shows that part of the relief extended to the Cuba Railroad by the Cuban Government was through the issue to it of the Series B bonds of the Cuban Government. I shall be obliged if you will inform me whether in the opinion of the Department of State the United States Government is under any obligation to see that any other or additional aid is given to the Cuba Railroad from advances made to the Cuban Government by the Secretary of the Treasury.

Referring to our conference of this afternoon, for the reasons there discussed it may become advisable for the Secretary of the Treasury to advance to the Cuban Government, in addition to the $5,000,000 advance now being arranged, a further sum of indeterminate amount—possibly $20,000,000 or possibly more—establishing so far as necessary credits in favor of the Cuban Government for the purpose of making such advances. As it may become advisable, for political, military, and financial reasons, that this advance when required should be made without delay, I take this opportunity of inquiring whether in the opinion of the Department of State the necessary formalities have been complied with so that the obligations of the Cuban Government in respect of advances in addition to the $5,000,000 advance now in contemplation, when executed by the Cuban Minister to Washington in conformity with the documents furnished to you, would be regarded by the Department of State as valid and binding internationally and will have its sanction.

I am [etc.]

Albert Rathbone

[Enclosure]

The Cuban Minister ( De Céspedes) to the Secretary of the Treasury ( McAdoo)

Washington, October 11, 1918.

My Dear Mr. Secretary: I am authorized and instructed by my Government to respectfully request a further loan of $7,200,000 of the credit of $15,000,000 made by the United States Government to the Republic of Cuba with which to aid in meeting her extraordinary obligations created by the state of war with the Imper al Governments of Germany and Austro-Hungary.

The first $5,000,000 received from the United States Treasury by the Republic of Cuba were turned over integrally to the Cuban Treasury (minus charges amounting to $20,000) to refund the sums advanced to the railroads and nor extraordinary war expenses incurred in partial payments of the various items included in my memorandum addressed to you.

Of the $7,200,000 now requested, more than five millions have been already advanced in a like manner by the Cuban Treasury, and are to be refunded to said Treasury to cover the deficit now naturally existent, clue to its having had to advance Payments, out of its ordinary resources for current expenses, of the extraordinary war obligations for which a loan was authorized by the law or July 31, 1917.

In the following account, that embraces the five millions received and the $7,200,000 I have the honor to request, you will observe that the Cuban Government has already advanced to the Cuba Railroad Company $3,000,000 and $690,000 to other railroads in order that they might be in condition to transport the last sugar crop, as interested by the State Department. I am sending you herewith a report issued by the Cuba Railroad Company in which they make known not only the financial aid given them but also the full protection that their property is receiving from the Cuban Government.

The account referred to above is as follows, according to the data sent me by the Secretary of Finance:

Advances to the Railroads

Cuba Railroad Company	$1,000,000.00
Ferrocarril de Cuba (owned by the Cuba Railroad Company)	500,000.00
Cuba Railroad Company (in bonds of the Series B, to be refunded to the Treasury)	1,500,000.00
Guantanamo Western Railroad Company	120,000.00
Empresa Ferrocarril de Guantanamo	60,000.00
North Coast Railroad Company (Caibarien to Nuevitas)	510,000.00
	$3,690,000.00

War Expenses

Repairs of the cruisers Patria and Baire and transport kydonia	240,724.92
Wireless for cruiser Baire and gunboat Mayari	8,754.30
War material for the Army and Navy	485,455.73
Establishment of Military Hospital	30,000.00
Reorganization of the Navy	434,044.00
War censure	214,493.32
Wireless stations, towers, telegraphic outfits, construction of lines	227,618.45
Reorganization of the Army	5,866,000.00
For the immediate requirements of the draft under the Obligatory Military Service Law	1,000,000.00
[Grand total]	$12,197,090.72

The Secretary of Finance has expressed to me the hope that the further advance now requested may be granted at the earliest possible moment, as the Cuban Government does not dispose of any other funds with which to pay these extraordinary obligations and the existent deficit is creating a very serious and embarrassing situation to the Cuban Government.

With the assurances [etc.]

Carlos Manuel de Céspedes

The Secretary of State to the Secretary of the Treasury ( McAdoo)

Washington, October 29, 1918.

Sir: I have the honor to acknowledge the receipt of your letter of October 17, 1918, relating to the advances by this Government to the Government of Cuba and enclosing a copy of a letter to you from the Cuban Minister, dated October 11, 1918, in reference to the sum of $7,200,000 which the Government of Cuba has requested you to advance at once.

In your letter you refer to communications from this Department, dated respectively August 19, 1918, and September 9, 1918, wherein you were advised that, in the opinion of this Department, you would be warranted in making further advances to the Cuban Government, unless it should appear in the meanwhile that the expenditures of Cuba were not being kept within the actual revenues of the Island, and were further advised that a second advance of $5,000,000, on account of the total credit of $15,000,000, was justified at that time. You now ask, in view of the time that has elapsed since the receipt of those letters, whether, in the judgment of the Department of State, the second advance of $5,000,000 under said credit can be legally made during the current month.

In reply to your inquiry you are advised that in the judgment of this Department, the Treasury Department is warranted in making further advances to the Cuban Government on the proposed loan to the extent of $5,000,000 at this time.

You also refer in your letter of October 17, 1918, to a letter from this Department, dated December 1, 1917,¹ advising you that the American Minister to Cuba had, under instructions from the Department of State, specially recommended to the Cuban Government that a certain portion of the proposed loan should be set aside for the purpose of establishing a credit in favor of the Cuba Railroad, and you ask whether in view of the account set forth in the letter to you from the Cuban Minister, dated October 11, 1918, showing that a part of the relief extended to the Cuba Railroad by the Cuban Government was through the issue to it of the Series B bonds of the Cuban Government, the United States Government is under any obligation to see that any other or additional aid is given to the Cuba Railroad from advances made to the Cuban Government by the Secretary of the Treasury. The information set forth in the account enclosed in the letter from the Cuban Minister has been confirmed by a cablegram received to-day from the American Legation at Habana, wherein it is stated that the President of the Railroad Company considers that the Cuban Government has fully performed its part. In the opinion of this Department, therefore, the United States Government is under no further obligation to see that the Cuba Railroad receives any other or additional aid from advances made to the Cuban Government by the Treasury Department.

The matter of the further sum, of indeterminate amount, possibly $20,000,000 or possibly more, to which you refer, is now receiving the consideration of this Department.

I have [etc.]

For the Secretary of State:

Frank L. Polk

Counselor

1. Ante, p. 314.
1. Ante, p. 314.