Industrial Cuba Part 16

The peso....... $ 0.60 The medio-peso. .30 The peseta..... .12 The real....... .06 The medio-real. .03

"This value is a little less than the price of quotation to-day, but it is much more than it was a few months ago, but I do not think acceptable the use of any coin without a fixed, invariable value. Now, as the American currency and the American silver would stand at the par value, and, on the other hand, the Spanish silver is at the present quoted higher in Spain, there too would likely go a large quant.i.ty, if not all, Spanish silver coins; that nevertheless would not be objectionable, but rather convenient to both nations. Bronze or copper coins should be received just at half their face value; the _centavo_ for half a cent American gold, and the two-_centavo_ piece for one cent. But as this implies a change in the standard value of the Spanish gold dollar, which up to the present has been the basis of all contracts and dealings of the country, it will be necessary to fix a date to implant the new system, and that can be no other but the 1st of January next.

Hence, from that date all money transactions will be understood to be on the basis of American gold, with American currency; Spanish, French, and English gold at par value; American silver to be accepted also at its full value only in quant.i.ties not exceeding $5; Spanish silver at the stated rate, and foreign silver coin as merchandise.

"As for all contracts and stipulations in money matters standing at present to be fulfilled after the appointed date of the 1st of January, I believe it would be but right to be paid off with six per cent. discount, which would simply disinflate them, because they were made with the basis of gold coins which had six per cent.

premium; and discounting the same six per cent. when they were settled with coins whose said premium had been taken off, although the intrinsic value of which coins had remained unaltered during the time, would only be common morality and fair equity. Lastly, all those who would attempt to alter the value of money ought to be severely punished, according to the law of the country."

With these supplemental facts, the case is fully and impartially before the reader. To accept the proposition of the Havana bankers meant a continuation of the inflated value of ten per cent. To concede the proposition of Dr. Jover and the Santiago financier would reduce the inflation about six per cent., still retaining Spanish and French gold in circulation at a slightly increased value. (Dr. Jover even includes the British sovereign at $5.) The other and only remaining course would be to accept United States money at its full value for customs and taxes and the foreign coins at their intrinsic or mint value.

After carefully considering all these facts, the Honourable Secretary of the Treasury, Lyman J. Gage, prepared and submitted to the President the following order in relation to the future currency of Cuba:

"EXECUTIVE MANSION, WASHINGTON,

December 28, 1898.

"It is hereby ordered that on and after January 1, 1899, and until otherwise provided, all customs, taxes, public and postal dues in the Island of Cuba shall be paid in United States money, or in foreign gold coin such as the Spanish alfonsinos (centen) and the French louis, which will be accepted in payment of such customs, taxes, public and postal dues at the following rates:

Alfonsinos (25-peseta piece) $4.82 Louis (20-franc piece) 3.86

"That all existing contracts for the payments of money shall be payable in the money denominated in such contracts, and where French and Spanish gold shall be the stipulated money of payment they shall be received in their present decreed inflated values, _i. e._, alfonsinos (25-peseta piece) $5.30; louis (20-franc piece) $4.24, or in United States money at the relative value set forth in the above table, namely, $4.82 for alfonsinos (25-peseta piece) and $3.86 for louis (20-franc piece).

"It is further ordered that on and after January 1, 1899, and until further provided, the following Spanish silver coins now in circulation in the Island of Cuba shall be received for customs, taxes, public and postal dues at the following fixed rates in American money:

The peso $0.60 The medio-peso .30 The peseta .12 The real .06 The medio-real .03

"Bronze and copper coins now current in the Island of Cuba will be received at their face value for fractional parts of a dollar in a single payment to an amount not exceeding 12 cents (1 peseta).

"WILLIAM MCKINLEY."

[Ill.u.s.tration: FIRE DEPARTMENT, SANTIAGO DE CUBA.]

In signing and promulgating the above order, the currency question of Cuba has been settled for all time to come on a sound basis. In offering to accept for the present the Cuban peso or silver dollar for sixty cents, American money, the United States Government merely delays the migration of the coin to Spain. At this price it is profitable to ship them to Spain, but at fifty cents they would have disappeared so rapidly that a commercial disturbance might have followed on account of scarcity of silver dollars and fractional currency. It is not probable, nor is it a.s.serted that this adjustment can be accomplished without hardship to some debtors and a slight financial disturbance. It is not, however, apprehended that the trouble will be as great as some have antic.i.p.ated.

In Santiago the first step to absolutely sound finance was taken last summer and six per cent. of the inflation squeezed out. The business interests in that part of the Island were opposed to a continuation of the ten per cent. inflation, and merely asked of the United States Government that the several gold coins in circulation should be left at their face value. As one of the evils arising from disinflation, certain Cuban bankers put forward the fact that it will mean an increase of from four to ten per cent. in the wages of labour, which Cuban industries cannot afford. Such a result, if true, cannot be regarded as an evil, but, on the contrary, a benefit to the poorer cla.s.ses, whose condition in Cuba is deplorable beyond description.

In the iron mines at Santiago the large American enterprises have already adjusted themselves to the new conditions and are paying their labour seventy-five cents per day American currency instead of a Spanish dollar worth sixty-five cents in Cuba and only sixty cents in exchange for United States currency. The author, when in the mining districts of this province, heard no complaints, either from the proprietors or the labourers. Stress was laid in the arguments before the President and Secretary Gage upon the loss to the debtor who has borrowed on a fict.i.tious value and must pay the premium, and the unfortunate Cuban sugar-planter is especially singled out for sympathy. That the planter will suffer cannot be denied, but the advent of the United States into Cuba will lighten so many of his burdens that his condition is not without hope. All the customs duties on his imported food supplies, as will be seen in the chapter on the tariff, have been reduced, and many important commodities put upon the free list. The duty on his sugar machinery has been reduced to ten per cent. ad valorem; on his locomotives and railway supplies to twenty per cent.; and all along the line the taxes have been cut down. It is not probable that his land taxes will be collected during the present fiscal year, and the return of peace, establishment of law and order, and protection of property will immeasurably improve his lot. If, therefore, the sugar-planter of Cuba will gauge his present outlook by a glance backward and compare it with his condition last year at this time, he may face the new year with less gloomy premonitions as to his future than some of the testimony taken by the United States Government on the effects of disinflation would indicate. The action of the President, by and with the advice of the able financier at the head of the Treasury Department, will give Cuba a sound currency, which must be the foundation of her future fiscal prosperity.

The proof of the poverty of Cuba is a scarcity of capital, manifest in many different ways. The difficulty, not to say the impossibility, of selling sugar plantations proves the scarcity of capital and at the same time the precarious situation of the sugar industry. The decrease in the price of property is a natural consequence of lack of disposable capital, and this is why the rate of money is so high; it can only be caused by lack of capital, and not of money, since scarcity or abundance of money has only a limited influence on rates of interest. Nearly all the banks established for the last twenty or thirty years in Cuba have disappeared, owing to the losses experienced by the gradual increase of the poverty of the country; the want of resources rendering it impossible to start these banks anew or establish new ones with Cuban capital.

A few years ago there were in Havana, besides the Spanish Bank and the Bank of Commerce, the Industrial Bank, the San Jose, the Alianza, the Maritime Security Bank, and the Caja de Ahorros (savings bank).

Excepting the first two, all have stopped working, and if the two surviving ones have outlived the others, it is because the Spanish Bank enjoys official privilege, and because the Bank of Commerce, though compelled twice to reduce its capital, owns valuable property, as, for example, the Regla warehouses and the United Railroads, which property, if the Island were prosperous, would be worth several millions more than it is to-day.

It is almost incredible that, having such extensive relations with foreign countries, the condition of banks in Cuba should be so precarious, especially as the Island feels more every year the need of banking facilities, without which no modern country can prosper.

Although not as important as regular banks, savings banks are a gauge of public wealth, since their object is to gather the economies of the working cla.s.ses and create capital for the promotion of industries. The only savings bank in Cuba failed in 1884, ruining in its fall not only those who had deposited their funds, but also the shareholders; and to this day no other inst.i.tution has been established to take its place, and at the present moment there is not a single public inst.i.tution where money can be deposited in large or small quant.i.ties earning interest!

In foreign countries the thrift of the working cla.s.ses is the corner-stone of new industries. Are there in Cuba any economies or annual profits that can be capitalised? The sugar industry, the base of Cuban wealth, yields to-day no profit save in exceptional cases. The tobacco industry since 1895 has been in a critical condition, and as all the other industries depend on these two, or are of comparatively limited importance, it may be said that work and capital yield no profit in Cuba at present; since either no profits are realised, or, if they are, they leave the Island. This aspect of the present economic situation of Cuba is of immense importance and not only explains the actual situation at this moment, but shows that the hope of improvement alone lies in the prosperity of these industries.

The history of banking in Cuba is sad with financial disasters. The only bank which has survived during half a century is the Spanish Bank of the Island of Cuba. This concern was originally chartered as the Spanish Bank of Havana, and although it was a private inst.i.tution, owned by shareholders, the Spanish Government maintained the right of appointing the governor, and in many other ways controlled its actions. At various times this bank has itself issued bank bills, and at other times it has been the medium through which the Spanish Government endeavoured to circulate its own paper money. The notes of the bank itself, as already stated, have never been repudiated, though during hard times, as a result of the Ten Years' War, the bank bills of the Spanish Bank were at a small discount. Sixteen years ago the Spanish Bank of Havana was reorganised and the name changed to the Spanish Bank of the Island of Cuba. At the present time this bank has no bills in circulation; the paper currency now valued at but a few cents on the dollar, which was issued during the war by the Spanish Government through the Spanish Bank of the Island of Cuba, is not regarded by the shareowners of the bank nor by the public as the issue of the bank itself. The history of these bills is briefly as follows: In order to meet the expenses of the last war, the Spanish Government arranged to issue $20,000,000 worth of paper money. As a security and partial fund for redemption of the same, the Madrid authorities deposited in the vaults of the Spanish Bank of the Island of Cuba $6,330,000 in silver against this issue. For a while this bullion, together with the mandate of the Spanish Government that these bills must be accepted as legal tender, kept the currency floating somewhat below par. The people of Cuba, however, had been deceived so many times in relation to paper money that they were suspicious of these bills from the beginning, and when in due course of time Spain gradually and dishonestly absorbed from the bank all silver upon which the paper money had been issued, the bills depreciated until they were absolutely refused in all business transactions. This entailed considerable loss, as the street railways and cabs of the city were compelled to take them in spite of this great depreciation in value. Finally, they were repudiated on all sides. A temporary value was given this paper by accepting ten per cent. in the payment of customs dues. This raised it up to twelve to fifteen cents on the dollar. Immediately upon the military occupancy of the United States the value of these bills fell still lower, and they are to-day worth but a few cents on the dollar, and are held chiefly by Government contractors and speculators.

Realising that a decided change would take place in banking as soon as the United States took charge of affairs, the shareholders of the Bank of Spain met some months ago in Havana and reorganised the bank, making it a private concern, and changing its by-laws so that it could do business as a private inst.i.tution, untrammelled by Government interference.

Among other uses to which the Government of Spain put the Spanish Bank was that of a collecting agency for practically all taxes other than those of the custom-houses. The value of receipts for direct taxation that have been delivered for collection to the Spanish Bank of the Island of Cuba, from the fiscal year 1885-86, when this inst.i.tution commenced the collection, with right of seizure, to 1894-95, both inclusive, actual amounts collected, deductions, and amounts pending collection as per vouchers, and accounts rendered to the Treasury by this inst.i.tution, are as follows:

---------+-------------+-------------+-------------+------------+---------- | | |Deductions | |Per cent.

Fiscal | Face Value. | Collected. |for which | Pending | of face Years. | | |Bank was not |Collections.|value un- | | |responsible. | |collected.

---------+-------------+-------------+-------------+------------+---------- | Pesos C.| Pesos C.| Pesos C. | Pesos C. | | | | | | 1885-86 | 5,021,271.25| 4,561,976.18| 438,029.78 | 21,265.29| 0.423 1886-87 | 5,240,651.50| 4,655,776.10| 547,435.19 | 37,440.21| 0.714 1887-88 | 5,386,627.83| 4,758,446.22| 575,840.11 | 52,341.50| 0.971 1888-89 | 5,316,367.75| 4,694,829.26| 549,628.25 | 71,910.24| 1.352 1889-90 | 4,878,047.21| 4,304,196.24| 497,220.89 | 76,630.08| 1.570 1890-91 | 5,336,611.25| 4,659,477.26| 571,994.17 | 105,139.82| 1.970 1891-92 | 4,242,982.34| 3,696,877.74| 428,374.80 | 117,729.80| 2.774 1893-93 | 5,357,928.97| 4,635,278.61| 572,890.51 | 149,759.85| 2.795 1893-94 | 5,092,200.41| 4,505,426.32| 432,163.62 | 154,610.47| 3.036 1894-95 | 5,163,321.70| 4,421,631.99| 534,492.41 | 207,197.30| 4.012 +-------------+-------------+-------------+------------+---------- |51,036,010.21|44,893,915.92|5,148,069.73 | 994,024.56| ---------+-------------+-------------+-------------+------------+----------

The above table gives a good idea of how this arrangement worked during normal times. There were two or three features in it, however, which were bad, and which the author is glad to notice that the United States Government in renewing the agreement of the Bank of Spain for the present fiscal year, that is, the year ending June 30, 1899, has obliterated. The Spanish Government paid the five per cent. on the receipts given the bank, and not on the money collected. This resulted in great abuses, because the delinquents during the years of war were fifteen, sixteen, and forty-three per cent. respectively. The punishment of delinquents has also been considerably modified by the United States authorities.

The following table gives the receipts for direct taxation that have been delivered for collection to the Spanish Bank of the Island of Cuba from the fiscal year 1895-96 to 1896-97, both inclusive, actual amounts collected, deductions, and receipts pending collection up to December 12, 1898, as per data at hand in the Spanish Bank:

-------+---------------+-------------+-------------+-------------+--------- | | |Deductions |Pending |Per cent.

FISCAL| Face Value. | Collected |for which |Collections. |of face YEARS.| | |bank not is | |value un- | | |responsible. | |collected.

-------+---------------+-------------+-------------+-------------+--------- | | | | | 1895-96|$ 4,802,936.66 |$3,460,998.24|$ 579,002.52 |$ 762,935.90|15.88 1896-97| 4,589,735.08 | 3,283,286.51| 547,975.70 | 758,472.87|16.52 1897-98| 4,341,112.87 | 2,250,806.74| 223,119.47 | 1,867,186.66|43.01 +---------------+-------------+-------------+-------------+--------- |$13,733,784.61 |$8,995,091.49|$1,350,097.69|$3,388,595.43| -------+---------------+-------------+-------------+-------------+---------

This table and the one preceding it were prepared for the author by the governor of the Spanish Bank of the Island of Cuba and differ from the table prepared by the Spanish authorities which will be found in the chapter on the revenue of Cuba. In the report furnished by the officials, the face value of the tax receipts is given in one column and the actual amount collected in another, the third column showing, under the caption of "Total Delinquent Taxes," the amounts uncollected, without any explanation as to why they were not collected. The governor of the Spanish Bank in the two tables given above includes a fourth column, namely, deductions for which the bank was not responsible. The bank authorities claim that the amounts represented in this column were receipts which were not valid, inasmuch as they were claims in many cases upon persons dead and upon property which had been destroyed by fire. The governor of the bank thinks it an injustice to the bank to add these under the general head of delinquent taxes, without this explanation.

It is easy to enforce and collect the customs duties; but the collection of internal revenue taxes is a much more difficult matter. The United States authorities found, on coming into possession of the Island of Cuba, January 1st, that all the receipts of taxes for the present fiscal year were in the hands of the Spanish Bank of the Island of Cuba; that this inst.i.tution had not only six or seven branch banks in various parts of the Island, but also in the neighbourhood of 258 sub-district or collecting agencies. The bank a.s.sumed all the responsibility of these agencies, and it was decided to place in its hands for the present fiscal year this work, for the reason that it had all the machinery and there would be no loss in revenue. An agreement was entered into between the Spanish Bank of the Island of Cuba and the United States military authorities, and an order issued from Washington to the bank to make the collection, but the arrangement engendered such opposition among the Cubans that the order was revoked and the work was placed entirely in the hands of the American authorities under General Brooke.

CHAPTER XIV

PAYMENT OF INSURGENT SOLDIERS

The question of the payment of insurgent soldiers and of certain legitimate indebtedness incurred by the insurgent government has an important bearing upon the civil, if not the industrial reconstruction of the Island of Cuba. This matter was referred to a commission of Cuban officers, consisting of General Garcia, General Jose Miguel Gomez, Colonel Manuel Sanguily, Colonel Jose Ramon Villalon, Dr. Jose Gonzales Lanuza, Senor Gonzalo de Quesada, and Mr. Horatio S. Rubens, who acted as interpreter. This commission came to Washington in November for the purpose of aiding in the pacification of the people of Cuba. General Garcia unhappily was taken ill of pneumonia and died. This delayed the work somewhat and took from the commission one of its strongest members.

The commission had several informal interviews with the President, the members of the Cabinet, and finally with the author, who, as Special Commissioner for the United States to Cuba, took the testimony of these gentlemen and prepared a report on the subject for the consideration of the President and Secretary of the Treasury. The substance of this report is of permanent public interest, as it was the first official step towards the settlement of a question that must be adjusted before the entire Cuban army will disband and go to work. It also has considerable bearing upon the industrial future of Cuba.

The gentlemen comprising this commission were briefly informed by the author as to the work committed to him, namely, an inquiry into the economic condition of the Island of Cuba and the recommendation of such measures for the commercial and industrial reconstruction of that country as might appear advisable after impartially consulting all interests. They were told that so far as the United States was concerned, Cuba had won her economic and industrial freedom. That the work had been performed with scrupulous regard to the interest of the people of Cuba. That the aim had been the rehabilitation of its industries and the building up of the country generally with as little friction as possible. That in accordance with instructions received from both the President and Secretary of the Treasury the tariff of Cuba had been framed so that there should be no discrimination in favour of the United States, and that the same tariff laws would be applied alike to all countries, so that Cuba was now free to purchase her supplies in the world's markets wherever they were best and cheapest, and not compelled to buy in a dear market, as under Spanish rule. They were furthermore informed that hereafter the revenues of the country were to be used exclusively for the economical and honest government of the Island and that the largest portion would not be drained away to pay the enormous interest charged (aggregating $10,500,000) upon an indebtedness which had unrighteously been saddled upon a people already bowed down under the double yoke of war and debt. Lastly they were asked to state fully and frankly, as citizens of Cuba, their views on any subject bearing upon the reconstruction of Cuba.

In reply, these gentlemen said, in substance, that they were entirely satisfied with the course the Government of the United States had pursued in relation to these economic questions, and realised the fact that Cuba had become free, commercially and industrially. They then proceeded to discuss the important problem of how the existing transitory condition of the Island could best be changed to a permanent civil life, without friction in Cuba or trouble and annoyance throughout the United States. Their purpose, they avowed, was simply to co-operate with the United States toward the restoration of order, without which, in their opinion, there could be no reconstruction of industries and no return of prosperity. Their purpose was, they a.s.sured the author, to advise with the people of the United States, to the end that everything might be harmonious and that the people of Cuba might get to work as soon as possible.

Speaking for all the gentlemen above named, Colonel Jose R. Villalon said:

"The discharge of the army of Cuba is a very complex and difficult problem. It has to be done for humanity's sake, in one sense; those men who have been working and suffering have to be remunerated in some way. But that is not the only point of view. We have got to look towards the maintaining of order and we have got to give them compensation or gratification or a certain amount of money with which they can go back to their homes and their agricultural labours. In doing that we have a duty to our country so far as the Cubans are concerned, but, at the same time, it seems to me that it is a high political measure on the part of the United States to prevent now what would afterwards be very difficult to suppress. If we scatter these 30,000 men (approximately) throughout the country without any resources whatever--men who for the last two or three years have been accustomed to live upon the resources of the country or forage on the enemy and who are used to the hardships of the campaign--it will not be very difficult to foresee that in spite of the good nature and good disposition of the people these men will be forced to do what they do not wish to do by their nature. If the men are left as they are, with their present needs unsupplied, they will go to the woods and will be a source of disorder and brigandage, which will be very difficult for the United States to suppress; and for the sake possibly of saving a few million dollars now the nation will be obliged afterwards to spend many more millions, in addition to the sacrifice of many lives. It is an economic question. Unless something is done to relieve their needs the disorder of the Island will be prolonged indefinitely. As an example, I would call attention to the case of your Indians in this country, who now and then break away. In Cuba the condition will be worse, for there they would have the shelter of the woods, and besides the Americans would not be able to stand the climate as well as they stand their own. Ultimately, of course, they will succ.u.mb, but it will be at the cost of a great many lives and a great many millions of dollars.

[Ill.u.s.tration: MORRO CASTLE, SANTIAGO DE CUBA.]

"Besides, there is another thing; that if to-day we provide for their needs and restore order, it is the wish of every inhabitant of Cuba to contribute their share towards this. If these men are supplied now, they will not have the moral support of the people of Cuba should they not go to work; but the people of Cuba will see that they are punished. If, however, they had the moral support of the people of Cuba it would be difficult to punish them.

"There is another point, and that is with regard to the amount of money required. Although they have not said anything about this, nevertheless, there is a tendency to lessen this amount. We want to say that although the measure, in principle, will be very good, even if it does not attend to all of the needs at present; though it will be a moral obligation from ourselves to the United States, it will not solve the problem, because the sum determined upon is not enough. If the revenues of the Island of Cuba ought to be mortgaged to repay whatever advances they have received from the United States now, it will not be a very difficult matter to make this amount a few millions more."

The above gives a fair summary of the general tenor of the testimony taken, and it is believed fairly represents the views of these gentlemen. Testimony was also taken in relation to the payment of certain legitimate debts which, as these gentlemen felt, the good faith of the people of Cuba had been pledged to pay. On being asked the probable amount of this indebtedness, they said it was not in excess of $2,250,000 or $2,500,000. The first and most important matter and the one which, they insist, will have much to do with the pacification of the Island, is the payment of some sort of compensation to the impoverished Cuban soldiers. These gentlemen were asked if they had in their possession any estimate as to the number of soldiers, the length of service, and the amount of money necessary for the purpose they had in mind. An itemised account, they were told, would make a useful supplement to the interesting and instructive testimony given.

In compliance with this request, these gentlemen prepared and presented certain tables, with additional verbal testimony. This testimony was subsequently reduced to writing. It purports to be a statement showing the number of officers and privates of the Cuban army and their time of service. On behalf of Cuba, these gentlemen informed the author that had Cuba been recognised as an independent nation, their first duty would have been to pay all legal obligations contracted during the struggle for independence. They request that the United States, acting as trustee for Cuba, will give this subject a careful hearing and enable the people of Cuba to disband the army and complete the pacification of the Island.

They recognise the fact that $3,000,000 has been appropriated for a purpose similar to this, but regard it as inadequate. The figures submitted by these gentlemen, as representing the pay which the insurgent army, in their opinion, has earned, are somewhat startling.

The summary is as follows: