Papers Relating to the Foreign Relations of the United States, 1921, Volume I
837.51/621
The Representative on Special Mission in Cuba (Crowder) to the Secretary of State
[Received October 24.]
Dear Mr. Secretary: Under date of October 17th, I transmitted a translation of President Zayas’ reply to my letter of October 10th, remarking in the letter of transmittal63 that I was retaining the Spanish original here but that a literal copy of the same would be forwarded in due course.
Having regard to the confidential character of this letter and its great importance, I have decided to send the original to the Department and retain here the copy.
Very respectfully,
President Zayas to the Representative on Special Mission in Cuba (Crowder)
My Dear General: I wish to acknowledge the receipt of your letter of the 10th instant64 in which you discuss the pending negotiations for a loan and the securities on which it must rest, including therein a revision of the taxes. Quite properly you point to the fact that my administration, without being responsible for the present financial crisis, has to bear all the responsibility of finding a way out. I note with great satisfaction the manner in which you define that crisis and I generally agree with what you say in that respect. I also agree with what I infer to be your point of view, namely, that a loan to help out the national treasury is one of the applicable remedies, and that a previous condition for the approval of the Government of the United States of a loan in accordance with Article 2 of the Treaty of July 2, 1904,65 and of the appendix to the constitution of Cuba, would be a definitive program of financial reconstruction affording adequate security both for the present and the future; that it will be easy to meet within the ordinary receipts and after paying the current expenses of the Government, the requirements of the public debt, and include the additional expense that may be authorized.
I take note with great pleasure of that part of your note in which you say, without any necessity for your doing so, that I must feel assured of your Government’s desire to lend to the Government of Cuba its aid and cooperation in undertaking to solve the very grave problems that are before it.
I have given careful consideration to the suggestions made by you in your letter of the 10th now before me, and in oral conferences, and I have prepared, as the outcome of my study, a statement of the financial constructive program that I have adopted, and communicate it to you for the confidential information of your Government:
1. The immediate flotation of a temporary loan of $5,000,000, being part of a permanent loan of $50,000,000, out of which the first named will be refunded. The said temporary loan will be applied to meeting the most urgent liabilities of my Government, including the balance of account of post office orders and the cost for a half-year, beginning with the date of the contract of that temporary loan of the service of the consolidated foreign debt.
[Page 751]2. With reference to the budget of the current year, you communicated to me your Government’s suggestions, namely:
“A definitive declaration in writing (for the confidential use of this Government—the Government of the United States—if he—I—so desire) that the budget that he is about to draw up, will not exceed $50,000,000, or otherwise I shall bring conclusive evidence to the Department that the Government of Cuba cannot be operated efficiently with less than an appropriation for that and all other purposes within the sum of $65,000,000 that he—I—may determine.”
With respect to that suggestion from your Government, you drew my attention to the fact that the Cuban Government, after receiving it, was considering a temporary loan which it would apply in part to the requirements of the foreign debt covering a period of six months following the date of the contract and other liabilities of the present fiscal year, which it is proper to include in the budget that is to be prepared in accordance with the pending legislative measures, and you suggested that no matter what amount of the temporary loan, and of the permanent loan to follow, was applied to the foreign debt and to the payment of budgetary expenditures of the year, it was to be deducted from the maximum of $65,000,000 mentioned by your Government, the difference standing as the limit of the budget for the current year; or in other words, all sums taken from the loans to meet the expenses of the budget were to be deducted from the $65,000,000.
I concur in your Government’s suggestion and in your remarks, and will immediately give my attention to preparing those data, taking the $50,000,000 as the minimum budget for the current fiscal year, communicating them to your Government, and offering conclusive and satisfactory proofs that amounts exceeding that sum are, in my opinion, indispensable for an efficient conduct of the Government, bringing down to the lowest possible limit by means of retrenchments that it is possible to make in the public service the total of expenditures for the current year, while always keeping it within the extreme limit above stated.
3. Before the 15th day of November of this year I shall lay before the Congress of Cuba the budget for the fiscal year 1922–23, and will limit the appropriations for expenditures to $55,000,000, adding thereto a sum of not more than $5,000,000 to meet unforeseen Government expenditures, and deducting from the said extreme limit of $55,000,000 whatever sum is taken from the loans and applied to expenditures of the budget.
4. As for the budgets of the following years of my Administration, I intend to take the course mapped out in Sections 2 and 3, [Page 752] and hope to draw up for those years lower budgets that shall not exceed the $50,000,000, and will not exceed the maximum stated in the 3rd Section except to meet urgent necessities, and when shown that the receipts are sufficient for a larger expenditure. A feasible way of fixing that highest limit would be to consider it necessary to have a reserve of $10,000,000, more or less, as suggested by bankers with whom I have conferred, as the proper thing for the solvency of the nation, which reserve could be utilized in unforeseen emergencies of the national life, and in reducing the public debt, preferably the domestic debt of 1905.
5. The constitution of Cuba is interpreted to mean that it is admitted that many of the appropriations are authorizations to pay up to certain amounts, but not orders to disburse the money. This is true, particularly with regard to expenses for representation and material. I am, therefore, empowered to reduce expenses, no matter what amount is appropriated.
If, on account of the falling off of the receipts counted on for the year, it should become likely that they will not suffice to meet the necessities of the public debt after defraying the appropriated expenses of the Government, I shall not hesitate in cutting down the expenditures even though the efficient action of the Government be injured thereby, except in the Health Department, which I shall keep fully organized, so that I may be assured of the prompt payment of interest on and amortization of the public debt. This is the course I propose to follow with regard to appropriations during my Administration, keeping up a margin of receipts over expenditures, and preventing, through my veto, the disposal of funds by a special law which would give cause to fear difficulties for the Government of Cuba in meeting the requirements of the public debt.
6. I have power to adopt another effective means of checking a possible falling off of the monthly receipts. I have in mind the increase that could be gathered in by the treasury by enhancing the proceeds of the lottery. The law confers upon me the power to raise the price of the tickets, thus increasing the receipts of the treasury, and I shall exercise that power if the receipts should fall so low as no longer to meet the expenses of the Government and of the public debts.
7. I have instituted, and will expedite a revision of the internal taxes, examining those that are in existence, and considering the possibility of increasing their proceeds, and of creating new taxes for the purpose of attaining through that revision and the revision of the customs duties to which I shall refer the reserve or surplus of $10,000,000, referred to in Section 4.
[Page 753]Inasmuch as that revision of taxes is mainly the work of experts, and inasmuch as it is to constitute part of the security for the new loan, I shall ask, by way of cooperating with the Government, for the services of a committee of experts to which I will call an American, if expedient.
8. I have also asked Congress to appoint a Mixed Commission to study a revision of the tariffs or customs duties to decide without delay upon the proper reforms, and although the appointment has not yet been made, some work has already been done by the Committee on Tariffs, of the Chamber of Representatives. In this matter intervention of experts cannot be omitted, and inasmuch as the mercantile relations of Cuba with the United States are so important, American experts should also be heard. Considering the imperative necessity of such a revision, and of the noteworthy increase in receipts that may be expected therefrom, I shall without delay entrust this work to a competent committee of experts, to which I shall add one American expert, or more.
9. Among other possible retrenchments it will be advisable to repeal the law of August 9, 1919, which admitted municipal judges to a judicial career, on account of the law failing to bring the results that we expected, and its repeal will mean a reduction of more than $1,200,000 in the fixed budget. I shall send to Congress a message on this subject immediately upon the beginning of the ordinary session of the legislature on the first Monday of November, and shall use my influence to secure a repeal of the law.
10. I shall try to have a law passed for a foreign loan of $50,000,000 in such way as to have the fullest powers delegated to me to fix and decide the terms and conditions of the contract, and the revenues to be offered as security, and also to determine the use of the proceeds of that loan, and the methods of administering it, the general plan of said administration and the exercise of the powers thus delegated being carried on by consultation and in accord with the Government of the United States.
11. I shall take action to have the present extraordinary session approve the bill concerning the “refection” of the sugar crop and in the immediately following ordinary session which will be opened by Congress on the first Monday in November, I shall further by every means at the command of the Executive the vote of the proposed banking law so that the banks now in liquidation may, when able to obtain the needed financial help, reorganize and be conducted as will the banks in existence, in accordance with that law which will prove a safeguard to public interests, and prevent the [Page 754] abuses of confidence of private banks that have had so much to do with bringing on the present industrial crisis.
The foregoing declaration will show to your Government that I have adopted, and am determined to follow the program that is a previous requisite for the new loan and for the reorganization of Cuba.
I am [etc.]