MONEY AND BANKING
A perusal of Cuban history shows that within a few years after the
country was settled, questions in regard to the exchange value of its
moneys arose, which were not effectually resolved till the lapse of
nearly four centuries later, upon the establishment of the Cuban
Republic.
As with the other early Spanish colonies of the New World, the
circulating medium was at first solely metallic. A credit currency was
not suited to a primitive country, whose foreign trade was largely
clandestine, open to piracy and other perils, its lawful commerce being
limited to the port of Cadiz, Spain, under the monopoly of a board of
trade known as the “Contratacion de las Indias,” succeeded in 1740 by
the “Real Compania de la Habana,” till the English occupation in 1762.
The position of Cuba on the highroad between Europe and Latin America
made its harbors the Mecca of the Spanish fleets of those days. The gold
and silver mines of Mexico and South America poured their millions into
the Island after the year 1545, when the deposits of San Luis Potosi
were opened to the world, the volume of the output being brought to
Havana before distribution to Europe and other parts.
Instead of ships making the transatlantic journey alone as at present,
large merchant fleets, laden with immense treasure, were convoyed by war
vessels at long intervals, as a safeguard against filibusters and
buccaneers as well as to preclude possible competition.
In 1550 a monetary crisis occurred in Havana, owing to the failure of
the governor, Dr. Gonzalo Perez de Angulo, to enforce the provision of
the Spanish law, that the silver Real should be estimated at 34
maravedis, instead of 40 to 44, the commercial rate prevailing at Vera
Cruz, Santo Domingo, Cartagena de las Indias and other points near the
silver mines. The governor, actuated by private interests, claimed that
conditions in Cuba justified the same rate as in these places, and that
the legal rate of 34 to 1, if applied, would drain the country of its
silver stock.
These views were also expressed by travellers going from Mexico to
Spain, who were obliged to make a long stoppage in Havana, where their
money was exchanged, insisting that they should receive the larger or
commercial rate for their silver as in other places.
Not disposed to change his attitude in the matter, the Spanish King
issued a royal circular reasserting the legal rate of 34 to 1 for Cuba,
under a penalty of 100,000 maravedis, instead of 10,000 as fixed in his
former order, for each violation.
The sovereign mandate was complied with, as peace and policy required,
but this demand for a higher valuation of money in Cuba than in the
mother country is taken as the origin of the premium afterwards placed
on Spanish coin, with which the people of later times are familiar.
When in the year 1779 the Spanish gold onza was coined, its par value
was estimated at 16 pesos in Spain. But in Cuba it was shortly
afterwards taken to represent 17 pesos, or a premium of about 6%, which
it continued to hold until the repatriation of Spanish money a few years
ago. This premium was expected to keep gold in the country, at an excess
valuation, along with the annual output of $800,000 in silver coming
from Mexico, sugar and tobacco being exported from Cuba to North America
and Europe as an offset thereto.
[Illustration: LEOPOLDO CANCIO
Born at Sancti Spiritus on May 30. 1851, Leopoldo Cancio y Luna rose to
eminence as a jurist, economist and financier; and for many years has
filled the chair of Economics and Finance in the University of Havana.
As one of the founders of the Autonomist party he became a Deputy in the
Spanish Cortes after the Ten Years’ War. Under the Governorship of
General Brooke he was Assistant Secretary and under General Leonard Wood
he was Secretary of Finance, an office which he now fills in the Cabinet
of President Menocal. He was the author of the great monetary reforms of
1914.]
When the modern Spanish centen or alfonsino, and the French Louis or 20
franc gold piece, came into vogue, they were also admitted to Cuba at
the same ratio as the onza, namely a 6% premium or 17 to 18
approximately, to the detriment of Cuban industry and commerce,
throughout the course of the nineteenth century.
In the year 1868 Spain passed from a silver to a double standard,
adopting the peseta as the monetary unit, equal in weight and fineness
to the French franc and that of other countries of the Latin Union,
composed of France, Belgium, Italy, Switzerland and Greece by the
monetary conventions of 1865 and 1868. The Isabellan silver escudo,
adopted in Spain as the unit by the law of June 24, 1864, was thereby
demonetized.
But the Spanish peseta, consisting of gold or silver indifferently,
while circulating freely in Cuba along with French gold and American
currency in recent times till 1915, did not become the unit of value in
the Island. The Spanish gold dollar (peso oro Espanol), an imaginary
coin equal to five Spanish gold pesetas (of 24.8903 grains of pure gold
each) considered at a premium of 106, weighing 21.13 grains of fine gold
(as a result of the 6% premium), and circulating in the form of current
Spanish or French gold pieces, was taken as the standard. By reason of
such premium these coins were received in the country at $5.30 oro
espanol for the centen (25 peseta gold piece) and $4.24 oro espanol for
the Louis and doblon (25 franc and 25 peseta gold pieces of equal weight
and fineness), which values they held till the last of Spanish money
circulation in the Island.
The use of Colonial paper money in Cuba, during the wars with the
Spanish government, did not substantially lessen the demand for actual
coin, and it was not until after the Spanish-American War of 1898 that
new conditions arose which afforded credit and security for the
introduction of a composite system of currency.
When the American government was established at Santiago in 1898, one of
its first acts was to stabilize the currency of the eastern part of the
Island. United States money was forthwith adopted as the lawful medium
and Spanish silver was eliminated accordingly. In the provinces of
Havana, Pinar del Rio, Matanzas and Santa Clara, Spanish gold and silver
continued in use, along with French gold and U. S. currency, at varying
market quotations from day to day, until the adoption of a national
standard by the Cuban Congress under the law of October 29, 1914, by
virtue of which the Cuban gold peso, of weight and fineness similar to
the American dollar, was declared the unit, and United States money a
legal tender.
Under the authority of the Secretary of Finance, Spanish and other
moneys were shipped abroad from Cuba as follows
_Fiscal Year 1914-1915_ (ending June 30th):
United States $3,032,529.00
Spain 1,435,192.00
Canary Islands 66,000.00 $4,533,721.00
_Fiscal Year 1915-1916_:
United States 17,337,734.00
Spain 17,411,003.00
France 60,000.00
Canary Islands 38,300.00 34,847,037.00
_Fiscal Year 1916-1917_:
United States 317,253.00
Spain 24,332,707.00
Mexico 45,000.00
Canary Islands 13,240.00 24,708,200.00
Total, reduced to U. S. Currency $64,088,958.00
Of the above shipments, those to the United States were principally for
recoinage to Cuban gold of the new issue and were brought back later in
national coin. They also include $5,934,810.00 Spanish silver (value in
U.S. currency) sent to Spain between August, 1915, and June, 1917. This
delicate operation was affected gradually and in such a manner as not to
disturb the monetary or exchange values of the country. By June 1, 1916,
all conversions of accounts had been practically made to the new system.
As a result of the new monetary law and its regulations, the entire
supply of Cuban money was minted at Philadelphia, through the medium of
the National Bank of Cuba, the Government Fiscal Agents, in the
following quantities:
Gold Coins: $20 pieces $1,135,000
10 pieces 12,635,000
5 pieces 9,140,000
4 pieces 540,000
2 pieces 320,000
1 pieces 17,250 $23,787,250
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Silver Coins: $1 pieces 2,819,000
40¢ pieces 1,128,000
20¢ pieces 2,090,000
10¢ pieces 625,000 6,662,000
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Nickel Coins: 5¢ pieces 340,450
2¢ pieces 228,210
1¢ pieces 187,120 755,780
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Total Coinage $31,205,030
The above national supply of coin, together with perhaps twice the same
amount of U. S. currency in general circulation, has been found
sufficient for the country’s normal needs, and Cuba thereby
automatically becomes, in law and in fact, a part of the American
monetary system of the present day.
As the country exports the bulk of its products and imports most
articles of consumption and use, including machinery and implements, it
follows that Cuba is in normal times one of the highest priced countries
of the world, and under conditions due to the European War the cost of
living is enormous.
To move the country’s resources annually requires the use of millions of
dollars from abroad, which the banks obtain and circulate in legal
tender (which means United States money and Cuban coin) according to
local demands.
It follows, therefore, that the chief functions of banking in Cuba are
Discount, Deposit, Exchange, Collections, Collateral Loans, Foreign
Credits and the distribution of money throughout the country.
The principal banks serving the financial needs of Cuba are the
following:
The National City Bank of New York. Capital, $25,000,000.
Banco Español de la Isla de Cuba. Capital, $8,000,000.
Banco National de Cuba. Capital, $6,860,455.
Banco Territorial de Cuba. Capital, $5,000,000.
Royal Bank of Canada. Capital and surplus, $25,000,000.
The Trust Company of Cuba. Capital, $500,000.
Banco Mercantile Americano de Cuba. Capital, $2,000,000; surplus,
$500,000.
Banco Prestatario de Cuba. Capital, $500,000. (Makes loans on personal
property, approved notes, mortgages, etc.)