837.51/547: Telegram
The Representative on Special Mission in Cuba (Crowder) to the Secretary of State
[Received August 12—1:10 a.m.]
100. For consideration in the conferences now on in Washington I transmit the following:
The Department was advised in my despatch of July 2640 transmitting draft of two messages which President Zayas proposed to send and afterwards did send to the Cuban Congress, the views he entertained respecting the necessity for an interior and foreign loan and some of the terms and conditions of the latter. I am [was?] told that the consideration by the Cuban Congress of a proper loan statute would await all information the Gelabert Commission as to the terms and conditions which should be incorporated in such a statute. Much to my surprise there was presented yesterday in the Lower House complete projects of two statutes, one for an interior and the other for an external loan (English copies go forward in tomorrow’s mail41). I learned of this about noon and immediately got in touch with the President who gave me the following explanation: That in his opinion the present time was most propitious for dealing with this subject in the Cuban Congress and especially in the Lower House; that when the loan contracts were ready for consideration it would be a simple matter to modify [Page 717] the loan statutes and that it would be much better to proceed with the enactment of such statutes now, particularly in the Lower House, than to wait for a complete knowledge of the terms of the loan contracts and then begin a discussion of the loan statutes. In other words, that it was purely a matter of parliamentary tactics to be employed and not one of the difference of opinion between us as to what should be the final form of the loan statute.
The more essential provisions of the foreign loan statute which I have reason to believe will be speedily passed by the House are the following:
- 1.
- Full authority to the President to determine all the conditions of the foreign bond issue with the single exception of the period of the loan fixed by the statute at 30 years, but with the proviso that the President must stipulate that the whole of the loan may be amortized before the expiration of the 30–year period. Net proceeds of the loan fixed at 50 million. Security: (1) the good faith of the Republic for amortization and payment of the interest; (2) such revenues as may be specially designated by the President.
- 2.
- Proceeds of the loan to be paid into National Treasury and administered by a “financial commission of production” consisting of three members with prescribed qualifications which do not in terms exclude foreigners, all to be appointed and freely removed by the President.
- 3.
- The powers of the commission are defined in the broadest terms to include making of contracts, loans upon real estate, mercantile and industrial paper, crops, products fabricated or to be fabricated which would probably include sugar in storage; and “for purposes beneficial to the development of agriculture, industry, commerce, and the increasing of production and resources”. Commission to fix period of loans and rate of interest and admonished to “adopt all precautions to maintain prudent proportions between the amount loaned and the estimated value of the security”. Accruing interest to be paid into the National Treasury as general receipts and expenses to be provided for in the annual budget. There is no provision for the insurance [issuance?] of bonds by the commission.
- 4.
- The remainder of the statute is devoted to an increase of existing rates of taxation and imports exclusive of customs, and the establishment of new taxes. This part seems identical with the corresponding provisions of Gelabert’s scheme for an interior loan down to article 29 transmitted with my despatch of July 24th.42
Already I am in receipt of complaints that certainly explain why rates prescribed are excessive to the point of being confiscatory and [Page 718] the evidence multiplies that the scheme of taxes provided in the loan statute is not based upon an exhaustive analysis and study of the existing revenues and a revision upward of such of them as ought to carry the burden of the service of the new loan. I am very certain that no one connected with this Legation is in a position to estimate even approximately the revenue-producing qualities of the revision of the revenues proposed by them in this loan statute.