Cuba. Irrespective of who it was, he suggested that Van Horne develop an electrical transportation system for Cuba’s capital.
As they had in the past, the twin themes of transportation and money making had an irresistible appeal for Van Horne. Indeed, he was so excited by the prospect of making huge returns from a scheme to electrify Havana’s tramway system that he invited William Mackenzie, a corporate empire builder in Canada, and other associates from similar enterprises to form a syndicate to pursue one of the two transit concessions that were then available. To their chagrin, Van Horne and Mackenzie’s group lost the bitterly contested fight waged by several syndicates for both prizes. Nevertheless, Van Horne accepted an invitation to sit on the board of directors of one of them — the Havana Electric Railway. No sooner was he on the board than he learned from a prominent Cuban businessman that the company’s construction payment rolls contained the names of many fictitious workers. Van Horne immediately recommended that the matter be investigated. “The method of robbery referred to is not peculiar to Cuba,” he informed the company’s president. “We have to carefully guard against it even here in honest Canada.” Unfortunately, the Havana Electric Railway would soon attract a great deal of hostility on the part of American investors who resented its practice of selling stock to Cubans and Spaniards. As a result, Van Horne tried to hide his connection with the company and even refused the presidency when it was offered to him.
Before long, Van Horne became involved in a far more ambitious Cuban undertaking: the building of a trunk railway that would run along Cuba’s spine, linking the seaport of Santiago at the island’s east end with Havana at the west end. In doing so, it would reduce the travel time between the two ports from ten days to one. As the only trunk railway serving eastern Cuba, the railway would help to open up the country’s rich interior and generate wealth. This largely undeveloped interior contained extensive deposits of copper, iron, and other minerals as well as vast tracts of land suitable for cattle raising, the cultivation of sugar cane and tobacco, and the growing of invaluable groves of cedar, mahogany, and ebony.
It was Farquhar who got Van Horne involved in the railway. He had earlier formed a syndicate to pursue his dream and lined up a group of British investors to finance it. When they backed out, he began searching for another investor to replace them. One of the syndicate members, General Samuel Thomas, an ex-president of several American railways, had previously introduced Van Horne to Farquhar. In the spring of 1899, Farquhar approached Van Horne and asked if he would assume the leadership of the syndicate. He lobbied him vigorously, both when they met in New York and by letter to Montreal. Initially Van Horne resisted becoming involved because of the many problems he foresaw: the possible profit did not justify the risk; construction costs were prohibitive; there was an acute shortage of Cuban labourers; many years of “bushwhacking” would inevitably be involved in such an undertaking; and corruption seemed endemic on the island: “Cuba has a liberal supply of artistic liars,” he warned, “and several of them are interested in selling their railways.”
Still, Van Horne kept a sufficiently open mind on the subject to ask Farquhar to go to Cuba and explore the situation further. For months the project languished, only to be revived when the young entrepreneur returned to New York with a favourable report on Cuba’s outlook. Convinced that the time was ripe, he urged Van Horne to go to the island and take stock of the situation himself. Van Horne had just been elected to the board of directors of the Havana Street Railway, so he agreed and set out on his first visit to Cuba. It became a decisive fact-finding tour that opened a new and exciting chapter in his life.
Once in Cuba, Van Horne was struck by the poor railway system on the island. To serve a country equal in size to Pennsylvania, there were only eleven hundred miles of track, 90 percent of which radiated out from Havana. Additional track encircled the populous seaport of Santiago, but little more than a hundred miles of railway served the largest and richest provinces in the country — Santa Clara, Camaguey, and Oriente. For the most part, these sugar-rich eastern provinces, representing three-quarters of the island’s area, could be reached only by water.
Van Horne recognized that there were many drawbacks to doing business in Cuba, but at the same time he grasped the significance of the island’s unlimited resources and the prospects for development. He visualized a thinly populated, underdeveloped island transformed by the construction of a railway that linked Havana with Santiago and the city of Camaguey (then known as Puerto Principe), the largest city in the interior. In pushing the CPR through to completion, he had helped to transform western Canada. Perhaps he could now make things happen in Cuba. He had also fallen in love with the island and its people, and he was now prepared to ignore many of the drawbacks that had earlier discouraged him from embracing the railway scheme. He accepted Farquhar’s invitation to head up the syndicate.
The first hurdle he had to overcome was the Foraker Act. Enacted by the U.S. Congress in 1899, it prohibited the granting of franchises or “concessions of any kind whatsoever” to foreigners during the American occupation. As long as the Act was in force, any company that attempted to build a railway in Cuba would not have the power to expropriate lands for rights-of-way or to lay track across navigable waters, public property, or public roads. To further complicate matters, any railway project that Van Horne launched in Cuba would have to proceed without a subsidy or land grant. These obstacles alone should have been enough to discourage him from starting any railway venture in Cuba, but the aggressive Van Horne would never let bureaucratic rules stand between him and his favourite projects.
As soon as he had made up his mind to build the railway, he began to ponder ways to get around the Foraker Act — always with the goal of serving the best interests of the Cubans themselves. He thought perhaps that he could evade the provisions of the Act if individuals or a corporation bought separate parcels of private land and then built the railway along these strips. When he checked with a lawyer friend, he learned that there was nothing in Spanish law (which still operated in Cuba even under the U.S. military government) to prevent such purchases. With this assurance, Van Horne charged full steam ahead.
Van Horne was fortunate in having the support of the second U.S. military governor, General Leonard Wood. An army surgeon who had graduated from Harvard’s medical school, Wood believed that a railway was essential to make eastern Cuba accessible to the “civilizing” and “modernizing” influences of economic development and to form close ties to the United States. He therefore aided and abetted the undertaking after receiving assurances that it would benefit Cuba and not merely enrich a few wealthy individuals. Wood and Van Horne soon developed a close friendship.
In March 1900, Van Horne journeyed to Washington to seek the support of the American government. Luck was with him as President McKinley quickly approved the plans when the scheme was outlined to him. It would have been difficult for him to do otherwise because the construction of the railway promised immediate employment for large numbers of Cubans. And once completed, the line would serve as an indispensable catalyst for the development of Cuban resources.
Less than two months after his departure for Cuba, Van Horne was back in Montreal, working feverishly to set up a new company — the Cuba Company — to build the railway. He decided to approach only very wealthy friends and acquaintances, men who could afford to wait indefinitely for a return on their money and who could produce capital during difficult periods when funds and enthusiasm ran low. To ensure that control remained in such hands, he priced each share of stock at $50,000 and limited each shareholder to eight shares. He also inserted a penalty clause stipulating that shareholders who did not contribute an additional 40 percent of their investment when they were asked to do so would have to sell their shares. Unfortunately, recurring shortages of funds later caused him to regret he had not asked for more start-up capital.
To line up the necessary capital, Van Horne made a pilgrimage to New York, where he found himself “in the position of a small boy with his pockets full of bonbons, and all the shares [he] would not let go willingly were taken away from [him].” It seems that everyone he invited to purchase stock did so immediately. As a result, Van Horne had to ask some of the larger subscribers to drop
