837.51/875
The Cuban Chargé (Padró) to the Secretary of State
Mr. Secretary: I have the honor to inform Your Excellency, in compliance with instructions from my Government, that the Cuban Congress has voted and the Honorable President has sanctioned a law which was signed on October 9, 1922, countersigned by the Secretary of Finance and published in the extra issue No. 16 of the Official Gazette of the Republic of Cuba,—a copy of same stamped with the seal of this Legation being sent herewith54—, by article 1 of which law the President of the Republic is authorized to issue bonds for an exterior loan for an amount not to exceed fifty million dollars ($50,000,000), payable in gold coins of the United States of America of the present standard and fineness.
This loan is to be contracted pursuant to my Government’s program for the solution of its economic difficulties, of which Your Excellency’s Government is aware. In the law whereby it is authorized, all the stipulations of article 59, paragraph 3, of the Constitution of Cuba regarding loans, have been complied with, and the purposes to which the proceeds of the bonds shall be exclusively applied are therein pointed out.
While the Honorable President of the Republic is empowered by article 8 of this legislative measure to pledge as special guarantee for the payment of the interest, expenses and amortization of the principal of this debt, and to bind and engage to said end the proceeds of whatever revenue and taxes at present in force he may deem necessary or convenient and should these proceeds—although destined to the service of other debts—reach such proportions as to allow their being applied to the purposes above expressed, he has in mind to pledge as special guarantee of this debt the surpluses of the special taxes connected with the loan that is known as Speyer’s [Page 1045] thirty-five million dollar loan ($35,000,000) estimated in the present Budget, (of which I send you herewith a copy stamped with the seal of this Legation) at $1,655,000, excess taxes that are now being collected and also the proceeds of the 6 percent tax on banks and corporations, estimated in the present Budget at $3,500,000, the collection of which is expected to increase. Both revenues are estimated at $5,155,000, and the Speyer’s contract authorizes the disposition of said surplus; therefore, supposing an amortization of thirty years in equal yearly payments, and reckoning on an interest as high as 6 percent, the annual sum that will be needed will not reach $4,700,000, there being left an ample margin of a security that guarantees still more the transaction that my Government desires to carry out.
To the end of providing adequately for the current expenses of the Budget and for making up the deficiency which in the ordinary revenues will result when from them are deducted the taxes subject to the payment of the public debt—the creation of which is authorized by the law to which I here refer—a 1 percent tax on sales and on the exchange or transfer of merchandise is created by article 10 of said law, its proceeds being estimated at $15,000,000, which will not only cover said deficiency but will go even much further, and, in anticipation of this, the President is authorized by a transitory ruling of the law in question to reduce it even to one-half percent, if, after the lapse of the time necessary to ascertain the amount of its production, this amount should considerably exceed the sums required for the object to which it is to be applied.
As, on the other hand, the national expenses have been reduced by recent successive readjustments to the annual sum of $54,852,102.11 authorized by the present Budget, it is evident that the ordinary revenues of the Government are more than sufficient for the payment of interest and the final amortization of this public debt, after meeting the current expenses of the Government.
That said revenues may be greater, if possible, than heretofore, the same law establishes that the Cuban Government, starting from the present fiscal year, may apply all the surplus of its revenues—after paying all annual expenses and leaving in the Treasury a suitable balance for the same purpose—to the amortization of its present debts in the order and under the terms stated in paragraph 2, article 3, of the said law.
In view of these circumstances and prior to carrying out this operation of credit that is projected with quite extraordinary guarantees in order to insure its immediate success under the best possible conditions in the money market, my Government desires to know if, in accordance with the stipulations of article 2 of the Permanent Treaty of Relations between Cuba and the United States [Page 1046] of America dated May 22, 1903, Your Excellency’s Government has any objection to make with regard to this public debt.
I take [etc.]