837.51/1566: Telegram

The Ambassadorial Cuba (Welles) to the Secretary of State

54. The Estimated regular budgetary revenues for the fiscal year 1933–34 amount to approximately $42,000,000. I have been advised by both the President and the Secretary of State that appropriations for the same period will be kept within $40,000,000.

A sincere effort to balance the budget has been and is being made by the Cuban Government. A large number of employees have been dismissed and salaries have been materially reduced with resultant hardship to a large number of persons. As a measure to relieve the distress thus occasioned, the Government departments are now working on a half-day basis, the official reason for this measure being that governmental employees may find outside part-time employment and thus increase in some small measure their income.

Total salary arrears to governmental personnel now amounts to $18,961,000. The judiciary has not been paid for 8 months; school teachers have not been paid for a much longer period. Even the highest ranking officials in the executive departments have not been paid for 5 months. No provision in the yearly budget is being made to meet these salary arrears and they are being added to the floating debt with no prospect whatever of adjustment.

The hardship and the discontent occasioned by this policy have been increased by the fact that the seigniorage profits of $4,000,000 which it is anticipated the Cuban Government will make from the minting of $6,000,000 silver coins contracted for with the Chase National Bank will be used in their entirety to meet the charges due the New York banks next month.

The strict Government censorship of the local press makes it, of course, impossible for the general reaction to be published but the bitterness of feeling engendered should not be underestimated. The general public believes mistakenly, of course, that the American banks are responsible for the maintenance of President Machado in power and now feels that at a time of unparalleled poverty and distress in Cuba all obligations of the Cuban Government to the American banking interests are being met in full while at the same time the Government is taking no steps whatever to alleviate distress here. The amount payable by the Cuban Government during the coming fiscal year to sinking fund charges on its obligations held in the United States, exclusive of the public works debt, amounts to $4,344,000. The postponement of the payment of sinking fund charges during [Page 571] the present crisis and the segregation of the amount involved solely for the purpose of applying such amount to personnel salaries in arrears would be extremely helpful. Any arrangement of this kind should, of course, be predicated solely on the definite commitment by the Cuban Government that such sums would be utilized solely for the purpose of paying off in part salaries in arrears of civilian (not military) personnel.

I beg to urge very strongly that you give this very important question your consideration with the hope that the President and yourself may deem it wise to ascertain whether the New York banking interests, including Messrs. Speyer and Morgan and Company as well as the Chase National and National City Bank groups, would not be willing to enter into a temporary arrangement with the Cuban Government providing for a limited moratorium on the sinking fund charges due during the coming fiscal year and presumably the fiscal year ensuing thereafter. In any discussion with the banking interests regarding this suggestion it will be necessary to bear in mind the fact that President Machado himself will not take the initiative in the matter. He feels that the strongest support which he has in his present position is the support given him by the American banking groups and he has further the conviction, which nothing will shake, that any default of obligations by his administration will make more likely the possibility of American intervention in Cuba. Consequently the proposed arrangement if made would have to come as the result of the determination by the United States Government that the measure is wise and necessary and would have thereafter to be proposed by the American banking groups as a concession due to the economic crisis in Cuba.

I beg to request that a copy of this telegram be sent to the President for his information.