agement. If this cannot be done, then some other control should be
created. As the report of the White Mission states: "A poorly ad-
ministered central bank or stabilization fund would add greatly to
the difficulties that already exist." When I informally mentioned
to the Prime Minister, Dr. Saladrigas, that honest and competent
management was a sine qua non for the successful operation of the
proposed bank, the only assurance he could give me, that there would
be such management, was that Dr. Oscar Garcia Montes, until re-
cently Minister of the Treasury, and Sr. Eduardo Durruthy, of that
Ministry, would be the top executives of the new institution for at
least five years....
  As the Department is aware, honest and competent administration
in Government-controlled organizations has been and is a rarity in
Cuba. The new system by law will be politically controlled through-
out. Therefore, on this country's record, it would seem overly opti-
mistic to hope for a "superior administration". Without such an
ad-
ministration there is at least an even chance that there will be costly
mistakes, difficulties and possibly illicit practices which may be dis-
astrous in many directions. To launch a fundamentally important
new system under these conditions is, to say the least, hazardous.
  (6) As the report of the White Mission states, "care should be
taken to protect the (member) banks against loss of principal on
their subscriptions to the central bank". Aside from the very serious
problem involved in obtaining a competent and honest administration
for the bank, the capital investment-and for that matter all other
assets-might be imperiled by:
  (a) Over borrowing by the Government in times of duress. Under
strain, political influences have played havoc with central banks in
such places as Chile, and the history of Cuba gives no encouragement
that conditions would be any better here. For instance, here there
are no really important national banks which could exercise a bene-
ficial restraint on the central bank.
  (b) The volume and potency of corruption in Cuba induces the
fear that illicit influences will endeavor to milk the institution for
selfish ends. So frequently do attempts of this nature arise here that
the Embassy has to be eternally vigilant to protect our interests
against the effects of these evil practices. A most recent example is
the maneuver to alter the promedic price of sugar. (See my despatch
No. 311 of July 3, 1942.64)
  (c) The draft law limits the total amount of loans which the bank
may have outstanding to the Government at any given time to 10
percent of the average of the current and the last preceding year's
budgets. However, it is pertinent to observe that, based on the
present budget of 89,000,000 pesos, the Government could borrow up
to 8,900,000 or 78 per cent in excess of the paid-in capital of 5,000,000
pesos for the new institution. Moreover, the temptation would be
  4 Not printed.



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