On the occasion of my last visit to the President, February 22nd, he read
to me the tentative draft of his reply. I ventured to express regret
that he had thought it necessary to dissent in some measure from the
construction of Article 2 set forth in the American note, I stated to
him that I had had some discussion with the Department respecting the
note, knew in greater detail than was expressed therein the views
entertained by the Department, and asked to submit an amplified
memorandum on the question which he had raised.
He then handed me his tentative draft of reply and requested me to submit
my views. I succeeded in getting a translation of the same last night,
copy attached marked “A”, and sent him this morning the amplifying
memorandum, copy attached marked “B”, all of which is submitted for the
better understanding of the Department.
[Enclosure
1—Translation]
Draft of President Zayas’ Reply to the Secretary
of State
Habana
,
February 21,
1922
.
On the 18th instant I had the honor to receive through General E. H.
Crowder, Special Representative of the President of the United
States of America, your Excellency’s interesting communication dated
the 9th of the same month.
I am pleased by your Excellency’s appreciation of the improvement in
the economic condition of the Republic of Cuba, which had come to be
quite difficult, on account of abnormal and extraordinary
circumstances productive of existing analogous conditions in other
countries. Your Government, knowing perfectly the circumstances
under which I occupied the Presidency, can judge the intensity of
the efforts made to modify them, as has already been accomplished in
great part. It is fitting to recall at this point that phrase of
profound aptness: “To judge of the present, one should study the
past.”
Not for one moment have I doubted the friendly feelings of your
Government, and very especially those of your Excellency, toward the
people of Cuba and its independence and sovereignty; and I should
fall short of the truth if I did not recognize in the acts of the
Honorable President Harding, since he presides over that Republic, a
sincere desire to aid Cuba effectively in its difficulties, which
fortunately have now almost disappeared. Those feelings and this
desire have been constantly demonstrated by the conduct of the
distinguished Special Representative of President Harding, my
esteemed friend General Crowder.
I am, and have been, in complete accord in recognizing the necessity
for reducing the national expenditures, and increasing the receipts,
under the Budget; and, with the expedition permitted by the
observance of constitutional and legal procedure, the advisability
of maintaining efficiency in the public services, and respect for
created interests and at times for public opinion, I have succeeded
in reducing to less than 60 millions of dollars the expenditures
arising from the Budget, Special Laws and Presidential Decrees,
which amounted to more than 130 millions annually; and I shall not
delay in securing an increase in receipts through new taxes and the
revision of existing ones, in addition to the increase which is
already being produced in the ordinary revenues of the National
Treasury through the improvement of economic conditions.
Your Excellency suggests that during the past months it has at times
seemed that the Government of Cuba would have been able to obtain a
more effective help from the Government of the United [Page 1011] States, if it had
understood clearly that such aid was offered, not only through
friendly interest, but also by virtue of the rights with which Art.
II of the Permanent Treaty has invested the Government of the United
States. It is of concern to me to place on record that I have never
doubted the friendly interest, of extreme cordiality, of your
Government; nor do I fail to recognize the rights granted to it by
the Permanent Treaty of 1903; and I have not failed to see in the
attitude of your Government a spirit of friendship in exercising
said rights in some form.
In regard to these rights, I agree that Cuba, on obligating itself
under Art. II of the Permanent Treaty with the United States not to
assume or contract any public debt unless relying upon adequate
ordinary revenues for the payment of interest and amortization,
after covering its current expenses, recognizes that the Government
of the United States is authorized to judge whether such condition
is filled; and this authority implies that of requesting and
examining data on which to base judgment.
I agree also that in accordance with Art. Ill, the Government of the
United States is empowered to intervene in Cuban affairs in the
following cases:—(A) When independence is endangered, to preserve
it; (B) When an Administration which protects life, property and
personal liberty is attacked, to maintain it; (C) When Cuba does not
fulfill the obligations imposed upon the United States by the Treaty
of Paris, and assumed by the Government of Cuba, to enforce their
fulfillment.
Although from these articles of the Permanent Treaty there is not
derived the right of the United States to inform itself regarding
the maintaining of the ordinary revenues, and their relation to the
expenditures, it is possible to admit that for the purpose of
assuming or contracting a new public debt, it is essential to know
and to study this point.
I differ somewhat from your Excellency’s opinion, when your
Excellency states that a situation infringing Art. II of the
Permanent Treaty is created by the fact that the Treasury of Cuba
owes sums under various heads to employees, private individuals and
organizations. What this article prohibits is the assuming or
contracting of a public debt without fulfilling certain requisites,
and as long as the Government does not try to convert into public
debt the indebtedness to certain private entities, or does not try
to contract a loan for payment thereof, the occasion does not exist
for invoking Art. II of the aforesaid Treaty.
Furthermore, the item of indebtedness through lack of prompt payment
of the amortization and interest charges of foreign public debts has
now disappeared, for the Government of Cuba (and it is [Page 1012] the only one which has
so done) has paid to that of the United States the instalment due
for amortization and interest charges on the debt contracted as a
result of the war, and the arrears on the other exterior debts, and
the amount of future payments for a three months’ period is on
deposit.
Of the interior public debts, it is indeed true that about two
millions of dollars are owing; but payment thereof will begin within
fifteen days.
On May 12, 1921, I stated that I was pleased to utilize the valuable
and disinterested services which General E. H. Crowder was capable
of rendering in the resolution of many difficult problems which were
presented, on account of his great knowledge of our affairs, his
intelligence and his upright motives. I continue of the same manner
of thinking, inasmuch as, in fact, I have corroborated what I then
said, having received from General Crowder very useful suggestions,
and having observed at every moment his solicitous desire to aid the
Government of Cuba in resolving favorably its problems. Accordingly,
I have endeavored to have him furnished with all the data he has
desired, from all sources of information, and have listened with the
attention they deserve, to his suggestions and recommendations,
always prudent and concordant with his sincere purpose of
cooperating for the success of my administration.
From the above it follows that I have held no doubt as to the
authority which the Permanent Treaty grants to the Government of the
United States, nor have I ever doubted the excellent purposes of
that Government respecting Cuba, as regards her independence,
sovereignty, and moral and material interest; and it is by these
sentiments that I have always seen General Crowder, Special
Representative of President Harding, inspired; and I have the
highest opinion of said General, as I have previously stated; that I
have furnished, and shall continue to furnish to said Representative
of that Government information and data on everything he may
consider expedient or necessary for the fulfillment of his mission,
within the authority granted by the Permanent Treaty.
Your Excellency may be fully assured of the sentiment of affectionate
cordiality of the Cuban people toward the American people, which
sentiment I endeavor to make even more profound; and be assured as
well that my Government exerts itself to carry out its important
functions, and is grateful for the kind cooperation lent it by the
Government of the United States, which it considers a very capital
factor for the attainment of its purposes.
I repeat to your Excellency my sincere consideration,
[Enclosure 2—Memorandum]
The Representative on Special Mission in
Cuba (
Crowder
) to President
Zayas
Habana
,
February 24,
1922
.
I. Under date of February 9th, 1922, the Honorable Secretary of State
of the United States addressed to Your Excellency a note in which he
recounted what was not in dispute at that time, namely,
- (a)
- That the service of the public debt appears to be in
arrears for the period of about six months;
- (b)
- that current obligations, including the pay of the Army,
Navy, Police and several employees of all branches of the
Government were unpaid;
- (c)
- that there were likewise in arrears payments of accounts
for transporting the mails, for supplies of public
institutions like hospitals, and for the contraction [sic] of public works; and
- (d)
- that even the Government’s Treasury checks issued in
partial discharge of such obligations as are referred to in
item (c) were held by the banks
awaiting payment;
and announced the view that “such a condition of
affairs infringes Article II of the Treaty.”
II. In Your Excellency’s proposed rejoinder of which I have been
furnished a copy, it is stated to be your opinion that Article II of
the Permanent Treaty is not infringed by the fact that “the Treasury
of Cuba owes sums under various heads to employees, private
individuals and organizations.” As the position of my Government was
that all the items, (a) to (d) supra, collectively showed
infringement of said Article II of the Permanent Treaty, it is very
obvious that Your Excellency’s statement that Article II of the
Permanent Treaty is not infringed by the fact alone that the
Treasury of Cuba owes sums under various heads to employees, private
individuals and organizations, is not responsive to the contention
of my Government, and for that reason ought to be omitted.
III. I might well stop at this point with the observation that what I
have said disposes of and answers fully the question at issue in the
form it was presented by my Government. But as Your Excellency’s
proposed rejoinder seems to deny the right of the Government of the
United States to consider default in meeting current obligations of
Government in determining whether said Article II of the Permanent
Treaty has been infringed, I beg to invite attention as follows:
IV. Said Article II provides as follows:
“That said Government shall not assume or
contract any public debt to pay the interest upon which, and
to make reasonable sinking-fund provision for the ultimate
discharge of which the ordinary revenues of the Island [of
Cuba], after defraying the current expenses of the
Government, shall be inadequate.”
[Page 1014]
Having regard to the history of the Permanent
Treaty, as well as to the strict letter of Article II, the purpose
of said article is very plain. Briefly, it is to place the solvency
of the new Republic of Cuba under special guarantees. To this end,
the Republic of Cuba stipulated in said article with the Government
of the United States that it would not assume or contract any public
debt unless the “ordinary” revenues of the Island of Cuba were
sufficient,
- (a)
- to pay interest and make reasonable sinking-fund provision
for the ultimate discharge of the public debt, and
- (b)
- to defray the current expenses of the Government.
On the date of the American Note, namely, February
9, 1922, it is beyond dispute; First, that the service of the public
debt was largely in arrears and would have continued in arrears, had
not this service been met, not out of the ordinary revenues as
provided in said Article II, but out of an extraordinary source of
Revenue, namely, the proceeds of a new loan; Second, that current
expenses represented by sums under various heads owing to employees,
individuals and organizations were largely in arrears for varying
periods; and, Third, that the Treasury Statement rendered by the
Honorable Secretary of the Treasury for Cuba on June 20, 1921,
showed that the accumulated default in payment of current
obligations on May 20th of that year amounted to $36,000,000
definitely ascertained, and an additional $10,000,000 estimated but
not accurately ascertained.
V. In other words, there was failure on the part of Cuba to comply
with both stipulations (a) and (b) of the immediately preceding paragraph.
The special guarantees provided by said Article II of the Permanent
Treaty had failed. A plainer case of infringement of said Article II
could scarcely be presented.
Very respectfully,
