Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-10-11
BY GERALD BRANDON.

HAVANA, October IL (N.ANA0.-
Cubas economic problem is the more
difficult of solution because it embraces
every phase of agricultural, commercial
and industrial activity Administrative
measures which have been tried by
President Machado and his several Sec
retaries of the treasury to solve the
problem are briefly outlined by critics
as follows:
/. Sugar crop restriction, which
failed to reduce the world surplus as
other countries increased their produc-
ton when Cuba restricted hers.
2. Floating of foreign loans to miti-
gate unemployment through an ambi-
tious program of public works The
motive of this measure was defeated, it
is contended, by the brevity of the
period of repayment, as we'll as by
alleged extravaganza in the expenditure
of the moneys received, which increased
the burden of this generations tax
payers unbearably they charge.
Tariff Is Criticized.
3. Establishment of high protective
tariff on all foreign articleG, including
raw material, thereby multiplying the
purpose of encouraging domestic
industry
During the last decade private for
tunes have dwindlsd, real property,
urban and rural has been mortgaged
to its limit, and there has been an
increasing number of business failures
due to the impossibility of collecting
accounts receivable from the inpover-
ished agricultural districts.
Sugar. Cuba's principal product, has
for many years been sold for less than
cost of production, the principal loss
being borne by the native Cuban plant
err who each year finds himself deeper
in debt to the American-owned sugar
mill that grinds his cane.
This does not mean that the mill is
the direct gamer from the planters
loss, although close study of the in
tricate system of interlocking d.
rectorates will show, it is said, that al
lied corporations control the banks that
finance the mills that sell Cuban raw
sugar to refineries owned by the same
group, at less than the cost of produc-
ton.
Special Tax Added.
Aggravating this condition came
President Machado's system of in
creased taxation, one item of which,
the public works special tax. has pro-
duced S18,00o,000 year for the last
five years. This was supposed to be a
panacea for unemployment through the |
construction of needed highways and |
public 1uildings. There was a promise |
of a nAlimum wage of $50 day.
The writer has seen men working on |
the central highway for so cents a To- |
hour cay; not as government employees, |
but FIR subcontractors, who in turn |
have subcontracted from influential |
politicians who have subcontracted from |
the original contractors.
What work had been done has been |
well .6one, but at high cost During his |
five years administration President
Machado has spent in addition to $780,
100000 of the ordinary budget, $50 ,000,-
900 derived from the public works spe-
cial tax, s80,00O.0oo borrowed from the
Chase National Bank Of New York and
$50 900 900 now owing to contractors for
work already performed. The aggre-
gate is $190,0o0,000. and 1t Is charged
by the opposition that honest appraisal
of the work accomplished would show
a shrinkage of at least so per cent, rep
resented by extravaganza and profits
taken by middlemen and political mag
mates.
Expensive Capitol Building.
An example, says Machados critics.
of lack of perspective displayed by the
administration is the Capitol Building.
not yet completed despite its $40, 000, 900
drain on the treasury. This is perhaps
the most luxurious public building in
Tile DtSlQG IL Tile OdpltOl dL
Washington pales into insignificance. |
Its upkeep will be half a million a year,
wherefore 1t will probably remain
vacant for long time, a monument
to what Cuban people consider a
criminal disregard of their best in
terests during the most difficult
economic depression in the history Of
the republic.
Cubas financial crisis, in addition to
its natural aggravation of the temper
OF the people, has a direct bearing on
the present political tension in that
prevention of the contamination Of a
new foreign loan seems TO be one of the
motives back of the impending popular
upheaval
The Machado government has negoti-
ated three loans during the past four
years, all of them through the Chase
National Bank, whose agent in Cuba is
Jose Emilio Obregon, son-in-law of
President Machado.
Profit for Underwriters.
The first of these transactions con-
sisted of the sale of the bank of
100000 Of public works certificates
bearing So per cent interest, which
were issued at 97l2. giving the under
writer's a commission Of one and a
half million dollars. The world in
vestment market was poor at the time,
GaAlO bAAC \AldoC Odllh " d. dDie 10 DlaCe
only one-third of these certificates, re-
tanning $40,000.ooo worth until later.
when they were exchanged for S40,-
600 900 in Cuban national bonds, which
in addition TO bearing the absolute
sanction and legalization of the
Cuban Congress, carried the added in
centive Of 5 per cent premium upon
maturity.
These bonds were part of an $780,
100000 loan, no other portion of which
found purchaser. They were issued
at IS, which means that the Chase
Bank received a cash premium of
S2,oo0.000 for exchanging them for the
previous far less desirable securities.
The remaining S40,0o0,ooo was later
put up as collateral for a Short-term
loan of s2o,o00,o00 at the interest rate
OF So per cent plus commission OF
] per cent.
In other words. the Chase National
Bank has lent the Cuban government
$76,300,0 600 for which it has received
securities of 100000, 900 par value, bear
ing interest at 5l2 per cent.
Financial Plan Opposed.
Opponents OF the Government call
this poor financing on the part of Cuba
considering that other Cuban govern
ment bonds bearing the same interest
rate are quoted above par. It is COM
monty stated that the American in
weston is not quite SATISFIED with the
legality Of the Machado bonds, which
would explain their unmarketability
and their present low quotation on the
New York market.
The last sec. 900 900 loan will mature
next March, and there is no money In
sight TO take 1t up. On the contrary,
the Cuban government has floating
debt of about 500 600 OnO renreSentino