The proof of the poverty of Cuba is a scarcity of capital, manifest in many different ways. The difficulty, not to say the impossibility, of selling sugar plantations proves the scarcity of capital and at the same time the precarious situation of the sugar industry. The decrease in the price of property is a natural consequence of lack of disposable capital, and this is why the rate of money is so high; it can only be caused by lack of capital, and not of money, since scarcity or abundance of money has only a limited influence on rates of interest. Nearly all the banks established for the last twenty or thirty years in Cuba have disappeared, owing to the losses experienced by the gradual increase of the poverty of the country; the want of resources rendering it impossible to start these banks anew or establish new ones with Cuban capital.

A few years ago there were in Havana, besides the Spanish Bank and the Bank of Commerce, the Industrial Bank, the San José, the Alianza, the Maritime Security Bank, and the Caja de Ahorros (savings bank). Excepting the first two, all have stopped working, and if the two surviving ones have outlived the others, it is because the Spanish Bank enjoys official privilege, and because the Bank of Commerce, though compelled twice to reduce its capital, owns valuable property, as, for example, the Regla warehouses and the United Railroads, which property, if the Island were prosperous, would be worth several millions more than it is to-day.

It is almost incredible that, having such extensive relations with foreign countries, the condition of banks in Cuba should be so precarious, especially as the Island feels more every year the need of banking facilities, without which no modern country can prosper. Although not as important as regular banks, savings banks are a gauge of public wealth, since their object is to gather the economies of the working classes and create capital for the promotion of industries. The only savings bank in Cuba failed in 1884, ruining in its fall not only those who had deposited their funds, but also the shareholders; and to this day no other institution has been established to take its place, and at the present moment there is not a single public institution where money can be deposited in large or small quantities earning interest!

In foreign countries the thrift of the working classes is the corner-stone of new industries. Are there in Cuba any economies or annual profits that can be capitalised? The sugar industry, the base of Cuban wealth, yields to-day no profit save in exceptional cases. The tobacco industry since 1895 has been in a critical condition, and as all the other industries depend on these two, or are of comparatively limited importance, it may be said that work and capital yield no profit in Cuba at present; since either no profits are realised, or, if they are, they leave the Island. This aspect of the present economic situation of Cuba is of immense importance and not only explains the actual situation at this moment, but shows that the hope of improvement alone lies in the prosperity of these industries.

The history of banking in Cuba is sad with financial disasters. The only bank which has survived during half a century is the Spanish Bank of the Island of Cuba. This concern was originally chartered as the Spanish Bank of Havana, and although it was a private institution, owned by shareholders, the Spanish Government maintained the right of appointing the governor, and in many other ways controlled its actions. At various times this bank has itself issued bank bills, and at other times it has been the medium through which the Spanish Government endeavoured to circulate its own paper money. The notes of the bank itself, as already stated, have never been repudiated, though during hard times, as a result of the Ten Years’ War, the bank bills of the Spanish Bank were at a small discount. Sixteen years ago the Spanish Bank of Havana was reorganised and the name changed to the Spanish Bank of the Island of Cuba. At the present time this bank has no bills in circulation; the paper currency now valued at but a few cents on the dollar, which was issued during the war by the Spanish Government through the Spanish Bank of the Island of Cuba, is not regarded by the shareowners of the bank nor by the public as the issue of the bank itself. The history of these bills is briefly as follows: In order to meet the expenses of the last war, the Spanish Government arranged to issue $20,000,000 worth of paper money. As a security and partial fund for redemption of the same, the Madrid authorities deposited in the vaults of the Spanish Bank of the Island of Cuba $6,330,000 in silver against this issue. For a while this bullion, together with the mandate of the Spanish Government that these bills must be accepted as legal tender, kept the currency floating somewhat below par. The people of Cuba, however, had been deceived so many times in relation to paper money that they were suspicious of these bills from the beginning, and when in due course of time Spain gradually and dishonestly absorbed from the bank all silver upon which the paper money had been issued, the bills depreciated until they were absolutely refused in all business transactions. This entailed considerable loss, as the street railways and cabs of the city were compelled to take them in spite of this great depreciation in value. Finally, they were repudiated on all sides. A temporary value was given this paper by accepting ten per cent. in the payment of customs dues. This raised it up to twelve to fifteen cents on the dollar. Immediately upon the military occupancy of the United States the value of these bills fell still lower, and they are to-day worth but a few cents on the dollar, and are held chiefly by Government contractors and speculators.

Realising that a decided change would take place in banking as soon as the United States took charge of affairs, the shareholders of the Bank of Spain met some months ago in Havana and reorganised the bank, making it a private concern, and changing its by-laws so that it could do business as a private institution, untrammelled by Government interference.

Among other uses to which the Government of Spain put the Spanish Bank was that of a collecting agency for practically all taxes other than those of the custom-houses. The value of receipts for direct taxation that have been delivered for collection to the Spanish Bank of the Island of Cuba, from the fiscal year 1885-86, when this institution commenced the collection, with right of seizure, to 1894-95, both inclusive, actual amounts collected, deductions, and amounts pending collection as per vouchers, and accounts rendered to the Treasury by this institution, are as follows:

Fiscal Years.Face Value.Collected.Deductions
Pending
for which
Bank was not
responsible.		Pending
Collections.		Per cent.
of face
value
uncollected.
Pesos C. Pesos C. Pesos C. Pesos C.
1885-86 5,021,271.25 4,561,976.18 438,029.78 21,265.29 0.423
1886-87 5,240,651.50 4,655,776.10 547,435.19 37,440.21 0.714
1887-88 5,386,627.83 4,758,446.22 575,840.11 52,341.50 0.971
1888-89 5,316,367.75 4,694,829.26 549,628.25 71,910.24 1.352
1889-90 4,878,047.21 4,304,196.24 497,220.89 76,630.08 1.570
1890-91 5,336,611.25 4,659,477.26 571,994.17 105,139.82 1.970
1891-92 4,242,982.34 3,696,877.74 428,374.80 117,729.80 2.774
1893-93 5,357,928.97 4,635,278.61 572,890.51 149,759.85 2.795
1893-94 5,092,200.41 4,505,426.32 432,163.62 154,610.47 3.036
1894-95 5,163,321.70 4,421,631.99 534,492.41 207,197.30 4.012
51,036,010.2144,893,915.925,148,069.73 994,024.56

The above table gives a good idea of how this arrangement worked during normal times. There were two or three features in it, however, which were bad, and which the author is glad to notice that the United States Government in renewing the agreement of the Bank of Spain for the present fiscal year, that is, the year ending June 30, 1899, has obliterated. The Spanish Government paid the five per cent. on the receipts given the bank, and not on the money collected. This resulted in great abuses, because the delinquents during the years of war were fifteen, sixteen, and forty-three per cent. respectively. The punishment of delinquents has also been considerably modified by the United States authorities.