837.51/610: Telegram
The Secretary of State to the Chargé in Cuba (Cable)
165. For General Crowder.
Your 123, October 9, 6 p.m.; 124, October 13, 1 p.m.; and 125, October 17, midnight.66
The Department has today received from J. P. Morgan & Company a communication67 stating that the Company is prepared to proceed with the temporary advance of $5,000,000 to the Cuban Government to meet the Government’s urgent requirements and also to continue with negotiations for a loan of $50,000,000 and the adoption of the measures which Cuba is to take incident thereto, as indicated in the Morgan proposition transmitted in your telegram of October 9, 6 p.m., as soon as the President of Cuba has received proper authority from Congress to contract the $5,000,000 loan and as soon as the Company is informed of the sanction of the United States Government. The Company further states that it has not yet discussed with the Cuban Government any financial terms of the contemplated loan of $50,000,000 since these must depend upon market conditions, which are gradually improving, and also upon the confidence of investors in the future financial policy of Cuba. The Company assures the Department that its object in future negotiations will be to encourage the Cuban Government to take such constructive measures as will insure the future fiscal stability of Cuba. In conclusion, the Company states that in view of the fact that the Cuban Government has urgent need of funds to meet certain emergencies, it suggests that if the $5,000,000 loan is to be made for that purpose, it would be advisable to do so before Cuba’s credit is further jeopardized.
The Department, as you have already been advised, has been disposed to approve of this temporary advance to the Cuban Government upon the understanding that it would be regarded as a part of the permanent loan and would be reimbursed from it, and upon [Page 755] the understanding that the Cuban Government, as a condition precedent to the sanctioning by this Government of this temporary advance, as well as of the permanent loan, would be willing to obligate itself to carry out the constructive financial program already recommended by this Government. The Department approves of the interpretation of its instructions to you as stated by you on pages 11 and 1268 of your letter of October 10, to President Zayas. The essential feature of Cuba’s financial program must be the positive commitment on the part of the Cuban Government to maintain a certain fixed margin of receipts over expenditures. In view of the several commitments of President Zayas, reported by you in your cable of October 17, midnight, the Department believes this essential feature of the program is guaranteed and that the pledge of President Zayas that he will maintain a safe margin of receipts over all expenditures gives assurance that the ordinary revenues of the Cuban Government will be sufficient to meet the service of the proposed addition to the public debt of the Republic.
Upon this understanding, therefore, the Department will sanction the closing of the contract for the advance loan and will interpose no objections to the Cuban Government proceeding to continue negotiations for the flotation of the permanent loan. The Department will so advise J. P. Morgan and Company and will so reply to the Cuban Government when the contract is approved by the Cuban Congress and as soon as an official inquiry is received from that Government.