As victors in the Spanish-American War the United States in January 1899 took over the administration of Cuba and established a U.S. military government which ran the island's affairs until May 1902. Cuba had been devastated by the war. Almost 300,000 people had been killed, one-tenth of the population, and there was much famine and ruin. The stated purpose of the U.S. military government was to prepare the Cubans for republican self-government, restore order and organization to the island affairs, and promote recovery from the war. In December 1898, President McKinley stated the military government would remain in Cuba until there [was] complete tranquility in the island and a stable government inaugurated.
Yet there was little consensus among Americans about the future of Cuba or the United States' proper role in the island's affairs. Some believed that America should pursue an expansionist policy represented by men such as Theodore Roosevelt and William Randolph Hearst, while others opposed actions that might be construed as empire building.
Due to the destruction of plantations and mills and other ramifications of the war, the Cuban economy was in shambles. It seemed a proper time for United States businesses to come South and invest in an island so desperately in need of a boost. But others pointed out that the purpose of the war had been to secure independence for Cuba and granting American business a free hand could jeopardize that independence. For this reason, the U.S. Congress in March 1899 approved the Foraker Amendment, which prohibited the U.S. military government from granting concessions or contracts to U.S. businesses. Senator Foraker and his supporters feared that if intensive U.S. capital investment was permitted, the United States never would be able to let go of Cuba. It was in this context that the Cuba Company entered the picture and became an important business presence until the Castro Revolution in 1959.
It was clear to businessmen and investors that largely undeveloped but fertile eastern Cuba had excellent possibilities for development. Spanish shipping interests had always fought proposed extensive railway construction into that part of the island for fear of competition and by 1898 only 100 miles of track had been laid in this immense area. It was obvious that large-scale railroad construction to link Havana with eastern Cuba was critical to Cuba's future development. North American businessmen in search of profits were quite willing to undertake such a task.
One of those businessmen was Sir William Cornelius Van Horne, the founder of the Canadian-Pacific Railway. Born on February 3, 1843 in Illinois, Van Horne spent most of his life linked in various ways with railroads. Beginning at the age of fourteen as a telegraph operator for the Illinois Central Railroad, he held other positions with the Michigan Central Railroad, the Chicago and Alton Railroad, the St. Louis, Kansas City and Northern Railway, and the Southern Minnesota Railroad. Van Horne ultimately became general superintendent of the Chicago, Milwaukee, and St. Paul and in this capacity clashed with James J. Hill, the founder of the Great Northern Railway. Hill was so impressed by Van Horne's abilities that he recommended him to the directors of the Canadian Pacific Railway who were seeking someone to oversee construction of their transcontinental line, which was completed under Van Horne's direction in 1886. He also served the Canadian Pacific as its general manager, vice president, and president. Failing health forced him to resign from the presidency on June 12, 1889 and he accepted election as chairman of the board of directors and member of the executive committee. Finding himself unsuited to this reduction in activity, Van Horne soon turned his interests to other railroad and industrial ventures.
He had been considering the possibility of building a railroad in British Guiana, but after a visit to Cuba in 1900 he turned his attention to construction of a 300-mile railroad through Cuba's eastern provinces. On April 25, 1900, in New Jersey, the Cuba Company was incorporated with an authorized capital stock of $68 million divided into 160 shares each with a par value of $650,000. Some of the well-known early stockholders were such financiers as Samuel Thompson, E.H. Harriman, Grenville Dodge, Thomas Ryan, William and Henry Whitney, Jacob Schiff, Lanman Bull, E.J. Berwind, August Belmont, Anthony Brady, and James J. Hill.
It would seem that the Foraker Amendment would prevent the Cuba Company from fulfilling its goals. But Van Horne was fortunate that the second military governor, General Leonard Wood, who had opposed the amendment, was willing to interpret its provisions loosely. Wood ruled that while the military government could not grant concessions to the Cuba Company, there was nothing to stop the company from purchasing land and right-of-ways through private contracts.
With enthusiasm and energy, Van Horne purchased 300,000 acres and began railroad construction from Santa Clara in central Cuba to Santiago, some 356 miles away. He also purchased the Sabanilla and Moroto Railroad, which ran from Santiago to San Louis. The Santa Clara-Santiago line was completed in 1902 and work began on other lines in eastern Cuba. In September, 1902, Van Horne created the subsidiary Cuba Railroad Company with $10 million common stock and transferred all railroad business to this new company.
As Cuba moved from military rule to self-government, the Cuba Company quickly expanded operations. In 1904 it raised $ 4 million to develop sugar plantations and mills. The first plantation and mill, Jatibonico, was completed in March 1906 and work began on a second plantation called Jobabo, which was near Marti. By 1907, the Cuba Company consisted of 300,000 acres of land, town-sites along the railways, the terminal town of Antilla plus the buildings there, the plantations and mills at Jatibonico and Jobabo, and the entire stock of the Cuba Railroad Company, assets totaling approximately $10 million.
Throughout the next seven years the company expanded its railroad lines in eastern Cuba to serve the area's sugar plantations. It also enlarged its own plantations and invested in hotels. With the outbreak of World War I, its holdings gained value with the collapse of the European beet industry and the Allies' need for sugar. In 1915, Van Horne died and day-to-day management became the responsibility of the new President, George H. Whigham.
The company maintained good relations with Cuban governments throughout the period and paid healthy dividends on its stock until the revolution of 1917, when the Liberals revolted against the conservative Menocal government. Much of the rebel activity took place in eastern Cuba. The Cuba Company estimated that it lost about $4 million in potential profits and destruction of cane and property. It received $ 1 million in compensation from the Cuban government and unsuccessfully demanded more money for several years.
In January 1918, in order to avoid paying taxes in both Cuba and the United States, the directors of the Cuba Company formed a Cuban corporation, Compania Cubana, and transferred ownership of the sugar plantations and mills to this new company. The Cuba company then distributed to its common stockholders the common shares of the Compania Cubana as dividends. Therefore, both companies had the same stockholders. For practical purposes, the Compania Cubana was considered a subsidiary of the Cuba Company because the Cuba Company owned all the stocks and bonds of the Compania Cubana except the common stock, which was owned by the same persons who owned the common stock of the Cuba Company. So in 1918, the actual Cuba Company (not the subsidiaries) retained 102,000 acres of undeveloped land, the Bartle and Cristoles Railroad spurs, and the Van Horne plantations. The Jobabo and Jatibonico operations and townsites were transferred to Compania Cubana. The subsidiary Cuba Railroad Company operated all the railway properties. Also, the company purchased the Comaguey and Nuevitas Railroad company and placed its stock under the Cuba Railroad Company.
In 1921, Herbert Lakin took over the presidency of the Cuba Company. Four years later he supervised a major reorganization of the Cuba Company whereby the Cuba Railroad Company was consolidated with another operation, Cuba Northern Railways, to create the Consolidated Railroads of Cuba. The Cuba Company essentially became a holding company with these major interests: investments over $ 1 million in land and railroad lines under the Cuba Company; Compania Cubana, which owned the sugar plantations, mills, and other properties; Consolidated Railroads of Cuba, which now owned the common stock of the Cuba Railroad Company; the Cuba Railroad Company; and Cuba Northern Railways.
The Cuba Company continued as a holding company for these varied interests for the next thirty-four years. It owned, through its subsidiaries, plantations, mills, unimproved land, hotels, 3,000 miles of railway, and steamships, and , from its inception, had substantially influenced Cuban economics and politics. Finally, in 1959, after Castro's rise to power, the stockholders of the company approved the Plan of Liquidation and Dissolution of the Cuba Company, thereby ending a sixty-year period of intense North American business activity in eastern Cuba. The Cuba Company played a major role in transforming eastern Cuba into one of the premier sugar-producing areas of the world.