20 THE CUBA R E F I E Tf 



Economic Conditions in Cuba 



Paul L. Edwards, Acting Commercial Attache, Habana, Januarj^ 23. 



Government External Loan 

 The completion of negotiations by the Cuban Government for the flotation of a 

 $50,000,000 external gold loan is an event of great importance in the economic histor>' 

 of Cuba. Bids were submitted to the Cuban Secretary of the Treasury on January 12 

 by three strong American syndicates. The award went to the group headed by J. P. 

 Morgan & Co., at 96.77 — a price considerably higher than was generally anticipated. 

 A part of the proceeds of this loan is already available, and the remainder is expected 

 to be available shortly. No time will be lost in applying the funds to the purposes 

 already authorized, and the beneficial effect on business and general morale is already 

 being felt in a marked degree. 



Apportionment of Proceeds of Loan 



While about $8,000,000 of the loan will be required to take up funded obligations 

 of the State, and about $9,000,000 will be employed to reconstitute a special fund in 

 the Treasury which had to be drawn upon in emergencies of the past two years, the 

 remainder (about $31,000,000) will, for the most part, be placed in circulation in a 

 few weeks. It has been variously estimated that between $60,000,000 and $100,000,000 

 in cash is being hoarded in private vaults, owing to the general loss of confidence in 

 the safety of bank deposits and security investments. With the return of prosperity 

 following upon the loan, it seems likely that much of this hoarded money will also 

 be put into circulation. This will naturally have a cumulative effect in making 

 possible the settlement of outstanding accounts of the past two years. This situation, 

 when considered in connection, with the fact that the outlook for the sugar crop of this 

 year is excellent, and that prices are being sustained at a profitable level, makes the 

 prospect of a return of general prosperity most hopeful. 



The actual expenditure of the proceeds of the loan will be carefully supervised. 

 Up to $9,000,000 will be paid out for salaries, wages, pensions, etc., due before July 

 1, 1922. 



WTiile the sum of $6,000,000 will immediately be made available for the con- 

 struction, repair, and continuation of public works, the manner in which this will be 

 expended can be determined only after the status of old unfulfilled contracts for such 

 work (amounting to about $20,000,000) has been defined. It is expected that this 

 information will soon be obtained. The amount available from the new loan will be 

 spent on waterworks, roads, hospitals, and highways, and will be apportioned among 

 the various provinces on a basis of population. It is expected that a considerable 

 portion of this sum will be used in highway construction. 



The remainder, or approximately $17,000,000, will be employed to settle depart- 

 mental obhgations due before July 1, 1922. In \dew of the care which is being 

 exercised in examining and auditing these obligations, this portion of the loan will find 

 its way into circulation at a much slower rate. The exact amount of these obligations 

 is not known. Up to December 29, 1922, a total of 4,735 claims under this heading 

 had been filed, aggregating $16,883,667, while by January 18, 1923, only $543,520.73 

 had been actually approved for payment. 



Revival of Business Activity 



Since July 1, 1922, the current budgeted expenditures have been met by current 

 revenues; and, in fact, the revenues collected during the first six months of the fiscal 

 year, that is, up to December 31, 1922, totaled $29,218,000, as compared with an 

 original budget estimate of $28,253,000 for that period. 



While there is every indication that obligations left over from the financial crisis 

 of 1920-21 will to a considerable extent be liquidated during the coming year and that 



