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.

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

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:

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.)