IN

CHAPTER XVIII

HOW THE REVENUE WAS SPENT

IN dealing with expenditures, the factors become more certain quantities than those present in the forecasting of possible revenue. The money collected from Cuba, whether it was $26,000,000 or more, has all gone, and nothing was found in the treasury when the United States forces took possession but numerous evidences of promises to pay, records of receipts given by the Government for goods not paid for, and debts of all kinds, including the salaries of a large number of the minor officials. The first and most important item of expenditure is, as has been said, for sovereignty expenses, and aggregates a sum exceeding $22,000,000. These expenses are subdivided as

follows:

I. Interest on Public Debt and General Expenses..$12,574,709.12
II. State Church, and Justice..

329,072.63

5,896,740.73

1,055,136.13

2,645,149.98

$22,500,808.59

The largest single item in these expenditures is that of the interest on the public debt and general expenses, which aggregates $12,574,709.12. Of the total, about $10,500,000 undoubtedly found its way to Spain to pay interest and sinking-fund payments on the enormous debt which Spain had saddled upon Cuba. There has been much controversy over this debt, and as the discussion has ended by the

American Peace Commission insisting on Spain's assuming the debt, and thus freeing Cuba forever from the legal obligation, a brief review of the subject will be of interest to the reader. Owing to the fact that Cuba has been, until United States occupancy, a colony without personality and without real representation, the question of the public debt was never properly settled. The Spanish Government, the Cubans contend, arbitrarily burdened the Island with the weight of the whole war debt of 1868-78. The Cubans have rightly taken the ground that this debt was Spanish, not Cuban. As a matter of fact, the Spanish Government, during the insurrection of 1868-78, never admitted that there was any war in Cuba, affirming, on the contrary, that the trouble was only a disturbance limited to some parts of the Island, and that the immense majority of the population of Cuba were loyal Spaniards. The conclusion to be drawn from this official fact and from its assertion by the Government was that Cuba was not bound to pay the expenses of that revolt. A somewhat similar instance occurred in the Peninsula at the same time. The Carlist War was likewise a very serious disturbance spread over some important provinces of Spain. The cost, however, of that war was not charged to the revolted provinces, but was considered a national debt. Besides, there are some items which have been held as forming part of the Cuban debt, which by no means can be accepted as such. Thirty or forty years ago Spain sustained war with Mexico, San Domingo, and Peru, the cost of those three wars having been charged to the Cuban Treasury, which, since then, has annually paid the interest thereon. In 1878 or 1879, a general liquidation of Cuban accounts took place, in which the" Banco HispanoColonial" of Barcelona assumed a very important position. Probably the cost of the three above-mentioned wars (in Mexico, San Domingo, and Peru) and some other accounts were then settled.

Not even the smallest part of the whole debt has been employed in any kind of Cuban improvement. A memo

randum prepared by the Cuban planters and addressed to Madrid in 1894 thus referred to the debt:

"This debt has its origin in the extraordinary expenses of the civil war (1868-78), and it has since been increased, first by the administrative demoralisation which is so evident to all those who live in Cuba, and which has been so well described in the Cortes by ministers and by representatives belonging to all political parties; and secondly, by the deficits originating in the fiscal laws, the first object, or aim, of which has been (particularly since the year 1882), more than the regulation of public expenses, to secure an excessive protection to the Spanish industries. And, so formed, the public debt, which, as well in the years of insurrection as in the years of peace, has enriched so many people, represents the ruins of the war, the disorders of the public administration, and the injustice of the fiscal laws."

During the discussion of the Cuban debt by the Peace Commission in Paris last autumn, the Economiste Français contained an article by Paul Leroy Beaulieu, proposing an arrangement or compromise, with the bondholders, of part of the Cuban debt (about $140,000,000). The author of the article admitted that Cuba was not bound to pay the cost of the last insurrection (of 1895-98). As the Economiste Français represents the interests of the French public and of the great French banking houses that have largely invested in Cuban bonds of the issues of 1886 and 1890, the inference to be finally drawn from the above-mentioned article is rather in favour of Cuba. If Spain thus lent her guarantee, she did so in obedience to a necessity and as a business convenience, in order to prop up her colonial and commercial system. The Spanish nation believed that her domination in Cuba would be lasting, and that the remote danger of being called upon to pay the Cuban debt was more than compensated by the enormous amount of wealth which she drew every year from the colony.

If, instead of extorting, yearly, millions of dollars, the Government of Spain had applied the superabundant re

sources of the Island to the extinction of the debt, it is certain that in 1895 the whole of it would have been paid off. It may unquestionably be asserted that Cuba has, in many ways, from 1878 to 1895, spent enormous sums of money, millions of dollars, in payment of debts not really her own, -but with this difference, namely, that the whole of the money lost to the colony, instead of going to redeem the outstanding Cuban bonds, has been spent in Spain, either in a reproductive way, or otherwise. The amount in Spain of the manufacturing, commercial, and agricultural riches, dwelling-houses, and even palaces, country villas, and other investments, representing Cuban wealth which has been transferred without any return, is incredible. The magnificent fleet of steamers of the Transatlantic Company enters into this category. At the same time, the unhappy Cubans who produced that wealth suffered want and went into bankruptcy; for the Spanish exactions absorbed not only the profits of Cuban industries, but also a part of its gross production, and in that way encroached on the industrial capital of the Island. The encroachment was shown and evinced by the accumulation of public and private debts in all forms. The productive classes of Cuba have always, though in vain, protested against the injustice of having this burden thrown upon the treasury of the Island, which, as is shown above, has been compelled to pay more than $10,500,000 every year for the interest and sinking fund of this unrighteous debt.

The debt which was, so far as Cuba is concerned, wiped out by the American Commission in Paris must have amounted to over $500,000,000. From a variety of rather scrappy data, obtained by the author in Havana, a brief statement of the Cuban debt has been made up. The debts of the Cuban Treasury before the war can be reduced to five.

First: Spain's debt to the United States.

Second: Redeemable debt of 1 per cent. per annum and 3 per cent. interest.

Third: Annuity debt.

Fourth: Mortgage notes of 1886.

Fifth Mortgage notes of 1890.

The first debt, $600,000, is an engagement made by Spain and signed in Madrid on the 17th of February, 1834, to pay the United States the amount specified; it was confirmed by the minister of the Spanish Treasury in a royal order, dated April 8, 1841, ordering the payment to be made by the Havana Treasury.

The second and third debts have been almost entirely converted into mortgage notes.

The fourth debt: by a royal decree of May 10, 1886, 1,240,000 notes of 500 pesetas each (about $124,000,000) were issued, redeemable by quarterly drawings and paying six per cent. per annum interest.

The fifth debt: by a royal decree of the 27th of September, 1890, 1,750,000 mortgage notes of 500 pesetas each (about $175,000,000), were issued, redeemable at par by quarterly drawings, and paying five per cent. per annum interest.

The notes of these last two emissions are placed in Paris and London, and the redemption and interest thereon are payable in gold or its equivalent. They are guaranteed by the customs, post-office, and stamp revenue of the Island of Cuba, and the direct and indirect taxes, and besides by the Spanish nation. Besides, during the last war, the Spanish Government made an internal loan against the Cuban Treasury of 400,000,000 pesetas ($80,000,000) and another one of 200,000,000 pesetas more ($40,000,000), guaranteed by the Spanish customs. The floating debt, caused by the war expenditure and payments of current appropriations in Cuba, was not less than $100,000,000. These are not exactly official statements, and yet they were obtained personally by the author from official sources, and come close to the mark. Tabulated, we have this: