10 T II E C U B A R E V 1 E W 



HAVANA CORRESPONDENCE 



October 2^?l•(l, I'.tiio. 



FINANCIAL CRISIS: On this siili.jcct niucli could 1m' writton. The ultimate crisis 

 was l>ruu;.'lit ahout, no douht, as a result of the i)ercei>tiliic fall in the jn-ice of sujrar 

 and the fact that such large quantities of sugar were sold in the United States from 

 all over the world. \Mien the price of sugar rose during the first months of the year 

 lOliO a huge wave of prositerity swept the Island and money was plciiiil'iil licyond the 

 dreams of avarice. As a result the merchants imported large quantities of merchandise 

 of all classes as prices were high and business was enjoying a wonderful prosperity. 

 Luxuries wen- purchased on an unprecedented scale — especially jewelry and automo- 

 biles—and credit was extended on a very generous scale. Real estate took a boom and 

 prices soared to tlie highest level known in the history of tiic Island. Cane colonos 

 oxi'hangcd hands many times and each purchaser took a handsome profit from the deal. 

 Ciiy real estate went wild and building sites were .sold for vast sums which, a year 

 ago, were considered low priced property. 



AI)out this time, owing to credit restrictions in tlic I'nited States, prices in the 

 North l»roke anywhere from ten to thirty per cent., and it was generally believed that 

 sweeping reductions in prices were imminent. The port congestion here in Havana 

 had not permitted the merchants to lay hands upon their new stores of merchandise 

 that had been purchased when prices were at their highest level and the banks of the 

 Island were gradually restricting their credits also. Distiu'bing rumors cropped out 

 here an<l th«»re, but the optimism which had secured such a firm hold upon tlie pul)lic 

 of the Island would not permit of serious consideration of the subject of an end to 

 the highly iirosi)erous times. AVhen, however, it was generally understood that the 

 American refineries were offering sugars at constantly lower prices, the American 

 hohleis of this article began to realize that immediate sales would have to be effected 

 if they were to extract their splendid profits. Sugars began to offer freely but the 

 American refiners had large stocks of raw sugar on hand and were themselves begin- 

 ning to take a loss on their transactions. There was no demand and the sugar had to 

 be sold at a loss. 



It was at this juncture that the bubble burst. On Friday, Octuljer 8th, rumors 

 were afloat that th(> smaller banks of the Island wei'e not in good condition to with- 

 stand losses on sugars. On Saturday, October 9th, the Banco Internacional de Cuba, 

 the Banco Esi>anol de la Isla de Cuba and the Banco Nacional de Cuba experienced 

 serious runs which resulted in the closing of the doors of the Banco Internacional de 

 Cuba. Tiie situation was deemed serious and the heads of the various banks affected 

 held a hasty conference with President Menocal, and a moratorium was declared to 

 exist until December 1st in order to give the banks of the Island time for considci'ation 

 as to what means would be used to meet the crisis. Under this moratorium active 

 accoxuUs coulil be drawn against only to the extent of ten per cent., while savings 

 deposits could l)e drawn on to the extent of twelve per cent. All banks of the Island 

 joined the moratorium on Monday, October 11th. 



The innnediate effect of the suspension of payment by the banks was a complete 

 cessation of all business. Construction stopped and vast numbers of laborers were 

 discharged from their work. Assurances that the banks would have no difficulty in 

 meeting all demands made upon them were given much publicity and the minds of the 

 pul»lic in general were eased to a great extent. Large sums of cash began to arrive 

 by express and continue to do so even today. The President of the National Bank of 

 Cuba, Mr. W. A. Merchant, left immediately for the United States to arrange for large 

 sums of money to meet the crisis and al.so for the financing of the coming sugar crop, 

 and it is understood that the result of his endeavors are that a group of American 



