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837.51/584: Telegram

The Representative on Special Mission in Cuba ( Crowder ) to the Secretary of State

112. Yesterday President Zayas sent me tentative draft of a conference committee report on budget bill, see my 106, August 19th. Bill as amended in conference limits governmental expenditure for the current fiscal year to 65,000,000 and provides that receipts over and above that amount shall be applied exclusively to payment of floating debt except the amount that may be necessary to meet interest and amortization of an additional foreign debt.

[Page 730]

On the basis of these amendments and the assurance given me and reported in said despatch [telegram] 106 that he would veto any special act of Congress which would appropriate the surplus to any other purpose than the extinction the floating debt, I anticipate Zayas will ask at an early date that the Department withdraw its request for veto of the budget bill. See your telegram of August 19 [18], 5 p.m., 146. I gather from this, cable will be read in connection with my despatch of September 7th and that Department is in agreement with the view therein expressed that the stable government which we are obligated to maintain in Cuba under article III of the Platt Amendment is as much imperiled by insolvency as by armed revolution and further that we have the authority and duty to intervene with preventive measures to maintain, as well as with remedial measures to restore, stable government. In this connection see Department’s 20, April 21, 1 p.m.,53 paragraph 1, and my 66, April 28, 8 p.m.54 In the past we have failed to exercise such authority and duty with respect to Cuban budgetary matters and this inaction is largely responsible for the financial ills of Cuba today. Our policy of noninterference has permitted extravagance and corruption to expand to the point of constituting a danger for the existence of the Republic.

Cuba has today about 50,000,000 of floating indebtedness and a large but as yet undetermined contractual indebtedness for the liquidation of which there are no available funds. The Department is aware of the great difficulty experienced by the Cuban Government in finding funds available for the settlement of its adverse postal money order balance. There is almost daily default on pressing current obligations of the Government, including sanitation, in which we have such a vital interest.

It is believed that inquiry of Speyer and Company and Morgan will reveal delays in meeting the service of the exterior debt which amount practically to defaults. The situation of Cuba is approaching insolvency and can be remedied only by the most rigid economy and the ruthless elimination of extravagance. Failure to adopt such a course will tend to aggravate or at least prolong the existing crisis.

An examination of prior budgets, see exhibits to my report of September 7th,55 shows that the cost of administering the Government here has advanced at a rate out of all proportion to the increase in population and service to be rendered.

In the light of these facts I venture to suggest when Zayas requests the Department to withdraw its opposition to the budget bill [Page 731]the answer should be one of firm insistence upon an affirmative showing that the Government cannot be efficiently conducted under the most rigid economies upon lesser amount, giving as reasons the facts recited above.

Unofficial but reliable reports reach me that Zayas is ready to cancel negotiations for any kind of loan, interior or exterior, believing that by that course he will be left free to adopt the kind of budget he desires. For this reason I think the Department should go as far as it feels it can go in basing our insistence for a lower budget primarily upon our treaty obligation to maintain stable financial government in Cuba with only secondary reference to the necessity for a lower budget as a condition precedent to securing our sanction for a loan.

Crowder
  1. Ante, p. 690.
  2. Ante, p. 692.
  3. Exhibits not printed.