up the entire Cuban sugar harvest and pay the producers a fixed price of 4.6 cents per pound for their 1917 production . ( For context , the spot price had been over five cents per pound earlier in 1917 .)
This somewhat ham-handed approach to the Cubans and their sugar industry might have been the source of some grumbling among producers , but the fixed price still amounted to a bonanza for the industry . The boom spilled readily over into the government ’ s coffers , and President Menocal ’ s treasury announced in midyear 1917 that it had accumulated a surplus of over $ 8 million .
The incentive to increase sugar production was great , and large tracts of Cuban forestland were destroyed to grow sugar cane . The daughter of a Cuban tobacco farmer watched it all with some dismay . “ The great impenetrable forests were set aflame ,” she wrote . “ That most beautiful and fragrant tropical wood — cedar and mahogany and mastic and magnificent pomegranate — blazing in sacrifice to the frenzy to cover the countryside with sugar cane .”
Cuba ’ s expanded sugar production was considered a war-time expedient . “ The one really important achievement of Cuba in the war was in vastly increasing the output of sugar ,” concluded Cuba scholar Charles Chapman , “ which was an indispensable product for the allies .” The War Trade Board agreed to a price hike to 5.5 cents per pound in September 1918 , a 20 % increase over the previous year ’ s price but still some 40 % below the prevailing spot price . The four million tons harvested in 1918-19 thus brought the Cuban sugar industry some $ 440 million , a four-fold revenue increase over pre-war levels . Even as the money rolled in , Cuban sugar interests became aware that their American customers were re-selling the sugar in the United States for much more than the fixed price , and they began grumbling that the 6.5 cents per pound price set for 1919 was not high enough .
American and Canadian bankers could not resist the temptation to lend against this tremendous bull market in both quantity and price . Royal Bank of Canada lent aggressively in Cuba , but the National City Bank of New York was the leading lender . According to National City ’ s official history , the bank opened more than 20 branches in Cuba during this heyday , and their asset of choice to lend against was the sugar mills . They financed the
Cuban President Mario Garcia Menocal — an engineer and manager of one of the country ’ s largest sugar plantations — found little cause for concern in the increased sugar production of the mid-1910s .
mills ’ working capital , and they extended credit to mill suppliers .
The war had ended in November 1918 , but the damage done and the shortage of workers extended the shortages in sugar , as well as many other agricultural commodities . The beet fields in Europe remained torn up by the trench warfare , and farm workers were scarce . French beet factories totaled more than 200 before the war ; in 1919 , they totaled less than a dozen . European sugar beet production in 1919 was a mere 2.5 million tons , down almost 70 % from the levels of roughly eight million tons per year before the war . Russian agriculture was distracted and confused by the industrial chaos stirred up by its new revolutionary central planning regime , and Russian sugar beet exports largely dried up .
By late 1919 it was clear that the exigencies of war could no longer justify fixing agricultural prices below prevailing spot prices . American sugar beet producers joined with sugar cane producers to pressure the Sugar Equalization Board to discontinue its fixing of sugar prices . In November 1919 , the board relented , and sugar prices in the United States were set free .
The 1920 bull market in sugar prices that resulted has few parallels in financial history . The quote was 91/8 cents in mid- February and 11 cents by mid-March . It
Jose Lopez “ Pote ” Rodriguez was the largest shareholder in Cuba ’ s Banco Nacional and had $ 25 million in unsecured borrowings from the bank — money that was bidding up the prices of Cuban sugar-producing assets .
then jumped to 18 cents by mid-April and 19 cents in mid-May .
The money being rolled up by sugar producers began growing by leaps and bounds , and their bankers could hardly fail to notice . National City Bank found it difficult to resist the trend , and by the end of June 1920 the bank had almost 20 % of all the loans outstanding in the Cuban banking system . The expansion of credit spilled over into real estate . “ With every sugar planter demanding a town house [ in Havana ] and an opportunity for the conspicuous display of his good fortunes ,” wrote historian Leland Jenks , “ the Havana suburbs suddenly became an attractive speculation .” It was this ostentatious spending in and around the capital city that Cuban journalists began to refer to as the “ Dance of the Millions .”
However violative this spree of lending was to National City ’ s tradition of asset diversification — its total loans in Cuba tallied to over three-quarters of its capital — they showed more prudence than did the Cuban banks . The largest such bank , Banco Nacional , was lending freely against these sugar assets — and little else . Its largest shareholder , Jose Lopez “ Pote ” Rodriguez , had unsecured borrowings from Banco Nacional totaling some $ 25 million — money that was bidding up the prices of Cuban sugar-producing assets .
22 FINANCIAL HISTORY | Winter 2025 | www . MoAF . org