File No. 837.51/322
The Cuban Minister ( De Céspedes) to the Secretary of State
My Dear Mr. Secretary: I beg to call your excellency’s high attention to the favorable situation disclosed by the various statements [Page 332] of the Department of Finance of the Republic of Cuba which I have had the honor of presenting to the State Department.
Notwithstanding the considerable extraordinary expenses that the Cuban Treasury has been called upon to face during the last fiscal year, ending June 30, a balance to the credit of that Department results from its accounts for 1917–18, largely superior to the likewise favorable balance of the previous year.
The expenses legally established by the budgets have been duly attended to and the products of our tributary system have enabled the Government to make important advances to the railroads, cover many extraordinary war, naval, and police expenditures, and fulfil its general financial obligations.
Worthy of special mention is the fact that the Interior revenues alone—among which the taxes established by the law of July 31, 1917, are permanently included—have produced over $10,500,000 without reaching their complete liquidation for the year. The customhouse duties have not abandoned their tendency to produce higher revenues, the upward trend of these contributions having been maintained.
In the new budget for 1918–19, as has been set forth in detail by the Secretary of Finance of Cuba, the provisions necessary to meet the interest of the $30,000,000 loan authorized by the law of July 31, 1917, are comprised among the items of the permanent or fixed budget, according to the second paragraph of Article 59 of the Constitution of Cuba, that are virtually preferential among all the expenses of the Republic. The returns shown by the taxes established by said law amply provide for all such payments as are constitutionally required of them, and, as ordinary taxes, they are all of a nature to justify the presumption of still greater returns for the future.
For your excellency’s information, I might say that after the expenses included in the permanent or fixed budget, come those of the general budget for the current year, and successively, all other expenses that may be authorized by Congress in the order stated by the Secretary of Finance.
It is to be noticed that in our system the expenses voted in the annual fixed and general budgets must be paid out of the national revenues with preference to all other payments, and that a penalty is attached to the application to other purpose of the revenues voted for said budgets.
The funds required by acts of Congress increasing national expenditures or providing for special disbursements are taken from the surplus funds of the Treasury not affected to other attentions, and should such expenditures be established as regular services, it is invariably legislated that they be paid from those unaffected funds and made to figure in the budget of the ensuing year, which may, of course, reduce or suppress them altogether when the reduction or suppression does not infer legislative or administrative reforms of another order, according to Article 60 of the Cuban Constitution.
This has enabled the Government to increase the expenses wherever necessary without recurring to income taxes up to this moment or affecting the soundness and constitutionality of our finances, and, on the contrary, maintaining and safeguarding the preferential character [Page 333] of interests and amortization of our various loans, as also insuring the current expenses of the Government. Within this system, as is shown by the data submitted, the Government has attended to a great many of the extraordinary expenses made necessary by the war; but it was, above all, with the object of not injuring the sound financial situation of the Republic, and in view of the expenses that certainly would and did occur after the declaration of war, that authority was given for the thirty million Treasury bond issue of which the United States Government has already taken $5,000,000 as security for a loan of $5,000,000, which was granted by the United States Treasury to the Cuban Government, out of a credit of fifteen millions made to the Republic of Cuba.
Whatever the Cuban Government’s future obligations may be in the war with the Imperial German Government and the Imperial Government of Austria-Hungary, the idea that they will exceed our financial capacity should not be entertained nor could it be considered, however great our will to serve may be, as our participation in the war must, constitutionally, be limited by our effective or available resources after taking care of our foreign and domestic loans and the current requirements of our own Government, as set forth in the budget of the Republic. Under these conditions and those already exposed, the existing guarantees of every kind, both legal and financial, should be more than sufficient to establish the perfect security of the bonds authorized by the law of July 31, 1917.
I am able to point out, however, as an illustration of the economic policy of General Menocal, that he has recently vetoed certain laws increasing the salaries of public officials and employees, with the object of maintaining the expenses of the Republic within a prudent limit that will allow Cuba to meet her obligations with the United States and her other allies in the war, in accord with her desire to cooperate and relative power to do so, and that those laws were vetoed notwithstanding the fact that said increase would have not been so insupportable due to the growth of the revenues, as it was effectively discounseled, at this time, by a spirit of high prevision.
For further information on these subjects, I pray to refer your excellency to the memorandum furnished by the Secretary of Finance to the United States Minister in Habana.
With the assurances [etc.]