837.51/1567: Telegram

The Ambassador in Cuba (Welles) to the Secretary of State

62. My telegram No. 54, and the Department’s instruction No. 11.11 President Machado desires the Chase and City Banks to agree that the Cuban Government, after the payments due next month have been made, use the revenues from the public works taxes to pay interest [Page 572] on the $40,000,000 bond issue and upon the $20,000,000 gold treasury obligations (contractors credit) and then from the $40,000,000 authorized but unissued public works bonds pay the bankers any amortization of principal of the $20,000,000 bankers credit. There appears to be valid legal reason why the gold treasury obligations should not receive any payment of interest or amortization ahead of the bankers credit. The President has intimated that if the bankers will not agree to his proposal he may use the authority given him by Congress to declare a moratorium in connection with these credits.

For the reasons expressed in my telegram No. 54 and also because of the fact that the Cuban Government again wishes the bankers to buy up $1,250,000 of outstanding first lien certificates and hold them until they can be amortized out of public works revenues during the next 2 or 3 months, and that, should the bankers refuse to do this, the Cuban Government will be placed in an exceedingly embarrassing position June 30 when the next payments are due, I believe the President’s implied threat to be sheer bluff.

The reason for the President’s insistence is due to the fact that of the gold treasury obligations of $20,000,000 approximately $1,500,000 have been purchased for speculative purposes by individuals close to the President and approximately $5,500,000 are held by the Compañía Cubana de Contratistas in which those chiefly interested are Messrs. Augustus Alvarez and Rodolfo Arrelano both of them intimately connected with the President.

For the Department’s information, I understand that remainder of these obligations are held as follows: Warren Brothers in portfolio $9,400,000; First National Bank of Boston $700,000 in like manner; retirement fund $1,400,000; insurance companies $1,500,000.

In any consideration given to this subject by the Department I trust that the views expressed in my telegram No. 54 will be borne in mind. Concession of this character by the bankers should in my judgment be made solely in order to enable the Government to relieve acute distress by paying civilian salaries in arrears and not to make probable a speculative profit for the political adherents of the President. Furthermore, I am particularly desirous that no concessions of any character be made to the Cuban Government until a final decision has been reached by the President regarding a solution of the political problem.

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

  1. Instruction not printed.