837.51/643: Telegram
The Secretary of State to the Chargé in Cuba (Cable)
179. For General Crowder.
Your 135, November 16, 6 p.m.
In view of the positive assurances contained in the letter addressed to you by President Zayas on October 16, last,74 and because of the many constructive steps taken by the President since his inauguration which had led the Department to believe that Dr. Zayas viewed the crisis confronting the Cuban Government in the same light as does this Government, which has believed that the situation in which the Cuban Government finds itself demands the carrying out, without deviation, of the financial program advised by this Government and agreed to by that of Cuba, the Department cannot but regard the budget presented to the Congress by the Executive on November 15, as giving cause for real and well-founded alarm. In the first place, the presentation of a budget for over $64,000,000 for the fiscal year 1922–23 would seem to be in direct contravention of the assurances contained in paragraph 3 of President Zayas’ letter above referred to, in which he states:
“Prior to November 15, of this year, I shall present to the Congress the budget for the fiscal year 1922–23 and I shall limit the expenditures of that budget to $55,000,000, adding a sum not exceeding [Page 760] $5,000,000 for the payment of unforeseen expenses, and deducting from said superior limit of $55,000,000 any sums derived from the loans and diverted to budgetary uses.”
The Department appreciates the fact that the President states that he intends sending further messages to Congress, proposing the reorganization of certain services in order to effect further reduction in the budget for said year, but the Department cannot assume, at this time, that such reductions will be made effective by Congress. In the second place, if the President pursues the policy which his statements to you would seem to indicate, there can be no assurance that the expenditures of the Cuban Government, during the current fiscal year, will not total more than $70,000,000, since the obligations of the Government incurred during the first third of the current fiscal year are on a scale of yearly expenditures of $80,000,000, and the President proposes to incur obligations during the remaining twothirds of the current year on a scale of $64,000,000. All the information received by the Department confirms it in the belief that the revenues of the Cuban Government for the current fiscal year will not reach $50,000,000, and unless the Cuban Government is willing to make, at once, even more sweeping and drastic economies than originally contemplated, it will be confronted at the end of the current fiscal year with a greatly increased deficit.
Under these circumstances, the Department cannot see its way, at this time, to sanction the $5,000,000 loan contemplated by the Cuban Government, because of its obligations under Article II of the Piatt Amendment. The Department will be unable to approve this temporary loan (which must be regarded in the same light as the permanent exterior loan since it is to be repaid from the proceeds of the latter), until the Cuban Government makes evident its determination to adhere strictly to the program regarding which Dr. Zayas gave assurances in his letter of October 16, and from which the present policy of the Cuban Government would seem to diverge very greatly. In this connection, it is desirable to emphasize the fact that while, in paragraph 2 of his letter above referred to, the President states that he will take $50,000,000 as the minimum budget for the current fiscal year and demonstrate conclusively to the satisfaction of this Government, that any expenditures in excess of that sum up to the maximum of $65,000,000 was indispensable to the efficient operation of the Cuban Government, the President has not taken $50,000,000 as the minimum budget for the current fiscal year, nor has he made any effort to demonstrate to this Government that expenditures in excess of that sum are necessary. The Department awaits such explanation. Pending such report, the Department will be obliged to reply to the request of the Cuban Government for sanction of the temporary loan of $5,000,000, [Page 761] that since the expenditures contemplated for the current fiscal year, as proposed in the budget promulgated by President Zayas, will amount to at least $70,000,000 and that since this amount appears to exceed the maximum authorized in such budgetary legislation and will far exceed the probable revenues of the Cuban Government for the current fiscal year, it cannot sanction the advance loan.
The Department views the possible outcome of the present situation, unless the President is willing to take, at once, steps which will make it possible for this Government to sanction the temporary advance, with the gravest apprehension. Indeed, unless this temporary advance is obtained, it is possible that the credit of the Nation itself, because of its inability, in the near future, to meet the service of its already existing public debt, will be so impaired as to make the flotation of an exterior loan in the United States impracticable. The Department is confident that President Zayas will recognize the justice of the views of this Government as above indicated, because of the very frank and helpful spirit of cooperation which has existed during the past few months between his administration and the Department of State, and that steps will at once be taken to meet the objections of this Government.
You are authorized to communicate the whole of the foregoing, or such portions as you may deem expedient, to President Zayas, and the Department trusts that you will continue to keep it closely informed, by cable if necessary, of all developments in the present situation. The Department is unwilling to refuse officially and finally to sanction the proposed temporary loan until every effort has been made to induce President Zayas to meet the views of this Government.