Papers Relating to Foreign Affairs, Accompanying the Annual Message of the President to the Second Session of the Thirty-ninth Congress
Mr. Burton to Mr. Seward
Sir: Besides the unauthorized agreements entered into in London by the late Colombian minister in Great Britain, General Mosquera, now President of this [Page 543] republic, treated of in my Nos. 249, 251, 252, and 253, he contracted a loan on behalf of Colombia of £1,500,000. This contract has been ratified by the congress with some modifications.
It is believed that these modifications are in effect an annulment of the contract, unless the object of those making the loan be to secure control of the Panama railroad, which is very probable. In case Colombia receive the loan, it requires no great foresight to predict that the consequences to the country must be sadly unfortunate. The American interests on the isthmus will be jeopardized in such event and for this reason I beg to call the serious attention of the department to the matter.
The Panama Railroad Company may find it to its interest to advance the net amount of the loan—about five million of dollars—and by this means secure what it has for years sought to achieve by other means. If the present opportunity should be neglected, the road is pretty sure to pass into English hands.
The thirty-five per cent. of the customs pledged by this contract puts eighty-five per cent. of this, the principal branch of the national revenue, in pledge to English creditors and beyond the control of the government, which seems to render it impossible for the latter to sustain itself The nation will be virtually bound hand and foot and delivered over to Englishmen. The whole of the other revenues of the government will not pay a third of its indispensable running expenses.
I enclose a copy of the contract, letter B of attachment A; the modifications of congress in Diario Oficial No. 682, XXVI; a translation of the modifications, B; a translation of the original contract, C; a synopsis of the contract, I; with other papers numbered from I to XXVI. These latter are of no interest to the department at present, but may become so, in view of events likely to grow out of the loan.
I have the honor to be, sir, your obedient servant,
Hon. William H. Seward, Secretary of State, Washington, D. C.
Loan lately contracted with Robinson & Fleming of London by President Mosquera, then Colombian minister to Great Britain.
The minister not having authority from his government to contract the loan, as President of the republic, he has submitted it to the congress for its approval. The terms of the loan are as follows:
1. Amount of the loan, $7,500,000.
2. At fifteen per cent. discount.
3. At six per cent. per annum interest, to commence running three months before the emission of the loan. The interest for these three months, $112,500. Interest payable semiannually in London.
4. The first year’s interest is to be deducted from the loan, deposited in a London bank, and the interest produced by the deposit to be applied as a payment on the principal of the loan.
5. The loan to be advanced as follows: Five per cent. when the loan is subscribed for; five per cent. when the certificates of subscription shall be distributed: ten per cent. monthly for each of the six months next thereafter; and fifteen per cent. at the end of seven months next after the delivery of the certificates of subscription.
6. The product of the loan, i. e., eighty-five per cent. of the seven millions and a half, minus the first year’s interest and commission to Robinson & Fleming, to be deposited in a London bank, (subject to the draft of the Colombian government, it is to be supposed,) and the interest arising from the deposit to be applied to the extinguishment of the loan.
7. The loan to be paid off within twenty years by the payment of interest and five per cent. of the principal annually.
8. The Colombian government to issue bonds for the seven millions and a half, which bonds Robinson & Fleming are to indorse.
[Page 544]9. The government will remit, at its expense, to London, in sterling money, six months before each semi-annual payment of interest falls due, a sum sufficient for the payment of the same, and the commission to the agent for making the payment.
10. The government pledges or hypothecates thirty-five per cent. of the custom-house duties of the republic: fifty-two and a half per cent. is already held in pledge by English creditors; fifteen per cent. of the revenues arising from the salt mines, and the national remainder in the Panama railroad.
11. The remainder in the railroad and part of the income from the salt mines having been heretofore hypothecated for a million loan obtained in London in 1864, known as the Buenaventura road loan, the government agrees to pay off that loan out of the present loan, so as to leave the salt mines revenue and remainder in the railroad free from the lien given to secure the road loan of 1864.
12. The loan, (seven and a half million loan,) i. e., its proceeds, to be applied to the internal improvements mentioned in a law of the republic of May 28, 1864, less a half million of dollars to be appropriated to the Buenaventura road. This law undertakes to create a general system of improvements which would ruin the country if attempted to be carried out. The law will be found in El Diario Oficial, No. 28, of June 1, 1864, heretofore sent to the department.
13. Robinson & Fleming have the right to appoint agents in the custom-houses to collect the thirty-five per cent pledged as aforesaid, and also to appoint agents to see that the product of the loan be applied to the internal improvements for which it is destined. These agents to be paid by the government.
14. Robinson & Fleming to receive six per cent. on the nominal amount of the loan for their trouble in securing it. This commission to be deducted from the principal.
15. Robinson & Fleming, who are to receive and pay out the sums necessary to extinguish the loan and the interest thereon, are to have one-half of one per cent. on the amounts thus received and disbursed for this service.
Synopsis.
| Amount of loan | $7,500,000 | |
| Discount fifteen per cent | $1,125,000 | |
| Six per cent. commission to Robinson & Fleming | 450,000 | |
| Six per cent. interest one year in advance | 450,000 | |
| The sinking fund (5 per cent) | 375,000 | |
| Commission to Robinson & Fleming for paying interest and principal | 4,125 | |
| 2,404,125 | ||
| Net amount raised or to be received by the Colombian government | 5,095,875 | |
See despatch to the department No. 217, for some observations on the finances and want of financial talent in this country, and compare them with the foregoing.
II.
Message of the President of the Union.
EXECUTIVE POWER OF THE UNION.
Citizen Senators and Representatives: I had the honor to give you a statement of the contract for a loan celebrated in England with Messrs. Robinson & Fleming, in accordance with the bases fixed by the law of May 28, 1864, and returned it to congress, as I had annexed for security one more hypothecation, that of the reserves of the Panama railroad.
The faith and responsibility of the government and of the nation being bound by reason of a legal mandate, it was not to be expected that this saving measure, the base of public happiness and foundation of a complex system of administration, should have the opposition that has been presented to combat my foreign proceedings, when competent judges in matters of finance have wondered that Colombia has been able to obtain this loan with better conditions than other nations, as Egypt, Turkey, Austria, and Brazil, and that the credit of Colombia has been sustained from my arrival in London, as may be seen from the quotations from the exchange of said city.
[Page 545]| It is said that the government will receive but $5,095,875, as fifteen per cent. discount is deducted | $1,125,000 | |
| Commission six per cent | 450,000 | |
| Sum | 1,575,000 | |
| To this sum add— | ||
| Interest of first year | $450,000 | |
| Five per cent. sinking fund for liquidation of principal | 375,000 | |
| One-half per cent. to the agents of this commission | 4,129 | |
| 829,129 | ||
| Total reduction | 2,404,129 | |
This mode of proceeding is incorrect. The republic receives actually and positively £1,185,000, or $5,925,000, which, at an interest of 7¼ per cent., produces $451,781 25, interest very common in Europe and an advantage not obtainable in Colombia. The republic by this contract pays six per cent. annual interest on $7,500,000, the sum of $450,000, or $1,781 25 less than 7 ⅝ per cent. of the money actually received in the loan.
The capital received commences to gain, according to the contract, an interest in the bank or banks in which it is deposited; and deducting from the $5,925,000 which they receive, $925,000, which is transferred at once to Colombia, leaves $5,000,000 gaining five per cent. or $250,000 annually. The republic, on the transfer of $925,000 for deposit in a bank and to form with it the support of internal improvements, will possess 4 per cent. premium, $37,000; that is to say, the republic will receive $962,000.
The payment of interests and the gradual liquidation of the first year is not a discount; it is an expenditure, as that of the $925,000 which is destined for internal improvements in the first year; and if this sum is reduced equally, the loan remains reduced to $4,170,875. And finally, when all is converted to internal improvements, “the republic has lost $7,500,000 and paid annually the enormous sum of $450,000 interest, and the gradual liquidation of five per cent.”
This mode of reasoning, citizen senators and representatives, is only proper to this opposition, passionate and systematic, which rises in the first days of my administration, when encharged with the government I find all the revenues pledged, claims drawn against the custom-houses exceeding $300,000, employés unpaid, the mortmain property in a dilapidated condition from bad sales, the income of the salt mines ruined, and a treasury debt of nearly two millions of dollars. In Europe I well knew this situation. However, I resolved to come and take charge of the government, because the nation called me to rescue it from the conflict in which it was met, since in my administration from 1845 to 1849 I inaugurated industrial improvements, as the president of congress indicated in his discourse of my inauguration.
Yes, gentlemen, I knew the situation of the country, but, feeling my powers, I believed that, relying as I ought to rely on a congress that represented at least the will of the States of Bolivar, Bojaca, Cauca, Cundinamarca, Magdalena, Santander and Tolima, I am sustained. As I was elected by a great majority after I had manifested how I understood the programme of the liberal party, which called me to power and filled the formulas of the democratic representative governments, the representatives of the people and the senators from the States have no other duty to express than the will of their constituents.
There are the United States and the Swiss Confederation among republican nations where the democratic representative system is known by practice. There alone, where the mandate abandons the programme presented, he is called to order and opposition is made.
That the deputation from Antioquia which represents the conservative party defends other opinions is not strange. That the deputation from the State of Panama which represents an opinion opposed to my election combats my ideas, does not surprise me. Although, by the message directed to me by the president of Antioquia, I have a right to believe that that people, filled with life and industry, are in accordance with my views of peace, union, and progress, and I am certain that the isthmus of Panama, country of my predilection, would have voted for me, if a revolution had not changed the vote of the people. The senators and representatives of this State know full well the deference that I must have for this country, worthy of better fortune, and which calls my attention under different points of view, economical and political.
Republican frankness is not consistent with the dissimulation of politicians who conceal their views, and I, as a republican, ought not to recur to that which is called machiavelism to govern, and I address myself to you with the loyalty of a tree man and friend of progress. Loans are ruinous where they are acquired for the ordinary expenses of the administration; but when they are converted to industrial pursuits which bring an augmentation of riches, and are a great benefit, then augmenting the production gives revenues to pay the interests of the money and as much per cent. for its liquidation. The United States, without the loans contracted in Europe, could not have attained the gigantic progress which has elevated this nation to a power of the first order. There is no occasion, gentlemen, to enter into a “polemica-economica,” [Page 546] because the axioms of the science of government teach that certain economical doctrines cannot be applied to the practice of public administration, in the same manner that national handicraft is unequal to industrial.
The loan obtained, congress has the facility to resolve the problem which I have given in another message, to wit: to meet the public expenses and evade national bankruptcy, or, better said, to remedy without imposing new contributions.
With the security of the loan, congress can ordain the issue of treasury notes as national money, with an obligation to receive for the payment of treasury dues and to meet public expenses, but leaving the commerce to fix the price of effects as also of gold and silver. These notes would be admissible in all the public offices for their nominal value, except in the custom-houses, whose dues would be paid in gold, to the end that commerce, by the necessity of acquiring it, would not depreciate the value of those documents.
To bring the first $925,000 for investment in internal improvements, one-half of the effective fund could be put in a bank of issue and discount and a European bank, whether the Bank of South America and Mexico or in another an equal sum, which I say to congress I have security to obtain. With this fund of $1,850,000 the government can ask the emission of another equal sum, hypothecating the revenues and changing the treasury for bank notes. In this manner the credit will rise, the country be saved from bankruptcy, peace be secured, and a new way opened for progress. With new and good roads production would be augmented, and in four years the $5,925,000 will give not only the 7⅝ per cent. it costs, but 12 per cent.
Moreover, with the creation of new industries by the facility of communication, the exportation from Colombia will not fall short of twenty millions in the next few years, and the importation will not be less than $25,000,000 with the credits; thus the 20 per cent. of the rights of the custom-houses will give $5,000,000 by importation, with which will be met the interest of the foreign and interior debt, and the expenses of the administration. Ten per cent. of the supposed right of consumption would give to the States $2,500,000 for their expenses, dividing among the base of the population calculated at 3,000,000, and would have a contribution by no means oppressive of $7,500,000, that is to say, $2 75 for each person, in the consumption of foreign merchandise annually.
If this project is adopted for the sale of the government interests in the railroad, means will be obtained to meet the hypothecations which they offer. A financial combination will give such credit that we will be able to undertake an enterprise of new regulations over our foreign debt, which will be reduced 33 per cent. at least.
The pressure of time and the necessity of addressing this message to-day does not permit me to extend it. Before the end of the session I will be able to give you a statement of the condition of the country, whatever may be required, and my ideas for its salvation.
I have confidence in Providence, that governs the world, in the good judgment of Colombians, and your patriotism, for assurances that if you give me the laws and authorities I have solicited, I will save the republic; for this I respond with my life and with my honor.
Bogota, June 1, 1866.
III.
Message of the Citizen President of the Union.
EXECUTIVE POWER OF THE UNION.
Citizen Senators and Representatives: It is now ten years since I presented to congress, as president of a commission of national credit of both houses, a report sufficiently extensive to prove the necessity of consolidating the public credit, and nothing could be obtained but the authorization which was given to the executive power to regulate the foreign debt, which was accomplished in 1861, when I, as provisional President, ratified the contract celebrated.
The authority I then exercised permitted me to give, on the 9th of September of that year, the fundamental decree of public credit, which, combined with the restoration of the mortmain property, was the most important measure adopted by my administration; and I, recalling what I said to congress as senator, which was the necessity of granting the law of public credit to save the country from bankruptcy, I gave the decree I have mentioned, which has already undergone some blows, and would prove futile if measures inconsistent with the system should be adopted. Therefore, as I said in the report alluded to, laws that disnaturalize documents of public debt are not laws of credit, but of discredit.
Well I knew, citizen senators and representatives, that the conflict in which the republic is found is what prompts the spirit of some senators and representatives to propose the projects [Page 547] which upon this subject flow in the houses. I am not ignorant of your laudable intentions; but not agreeing with your ideas and having the responsibility which the nation has imposed upon me in the public administration, and to report upon the actual situation of affairs of the Union, I see the necessity of giving to. congress a statement of the distressing situation of the country, as well as the laws I need in order to govern, already indicated in my message on the loan which can now be raised in England, in accordance with the law which authorized the executive power, and another ratified this year enumerating the new works which ought to be constructed.
Well could I have ratified that contract and carried it into effect if it had not one clause, the only one that in my conception should be submitted to congress, which is that to obtain the guarantee of the Panama railroad reserves, and the desire to submit to the consideration of Congress the offers of the contractors of the loan to increase it to one million eight hundred thousand pounds sterling. This loan is auxiliatory to the industrial associations and to construct roads and canals. With these foreign capitals, resources will grow which augment national riches, and proportioning at the same time increased interests to the borrowers, and an annual sum toward the liquidation of the principal. Thus is established the fractional credit upon the territorial credit of productive ground. A nation like Colombia, which has no great capital, needs to furnish it with its own credit, and congress has acknowledged the right to give these laws authorizing the executive power to contract loans, not to augment public expenses, diminishing the resources of the people of the country whose government obtains the loan, and this government is found obliged to contract new loans, extinguishing debts whose documents are worth nothing in the market, because the laws of the public credit have not been sustained. The nation has arrived at such a situation that it is necessary to declare bankruptcy or salvation with the only resource which can be presented under these circumstances, to wit: to maintain inviolable the laws of public credit; to approve the article of the contract of the loan upon the hypothecation of the railroad reserves, the only point discussible in the contract, as the rest is in compliance with the law; to authorize the issue of treasury notes to pay the foreign debt which now oppresses the treasury; to meet the ordinary expenses, giving at the same time the power to establish a national bank on the bases indicated in my former message. Then, gentlemen, without investing one dollar of the money of the loan in public expenses, it will be a service to the treasury; it will give force to the public credit; commerce will meet the facility to diminish its obligations and to adjust its capital; roads will be initiated, and finally the completing of the work of national prosperity will be arrived at, with the enterprises of dikes, canals, and railroads. And you, citizen senators and representatives, will be the liberators and saviors of the nation, giving the executive power the elements to regulate finance and national credit. Eight months from to-day you will be reunited to receive the report I must give conformably to article 66 of the constitution, (attribute 17 of the executive power.)
What are, gentlemen eight months in the life of the nation? Nothing; and well can you await my report which I will present then, in order that you may perfect the work which you now commence with the measures I have proposed. The position in which the executive power is found is very painful; the salt mines declining, the products of the emerald mines given away for three years, the income of the custom-houses compromised to pay three hundred thousand dollars, the decree on the use of the national forests virtually nullified, giving these which are immovable property to the holders of documents of wild lands, altering thus the law of public credit. The national executive committee of public credit have neglected their principal duties for the purpose of embarrassing the mortmain property, and this, by the little I have seen from official documents relating to this matter, have not been advantageous; they have made ruinous contracts, have sold national property at a loss; they have liquidated debts to contract loans, and the nation, as I have just said, will declare itself bankrupt, because it does not pay its debts nor salaries. There is not that complete order and regularity which the national service demands. In the mean time, instead of giving resources to the government, the situation is complicated with various projects of law called laws on public credit. In the senate chamber, the committee to whom was passed my message on the loan adopted the opinions of a paper of the opposition, inimical to the facts, and commenced to analyze the contract in its essence, without taking into consideration that I had done nothing but to comply with the law. Before noticing this report I have answered in my former message the force of its arguments, and it is very painful for me to know that the honorable senators of the majority of the commission pledged themselves to argue against the principles resolved by congress to raise a loan and to make allusions to resolutions inconsistent with the contraction of the loan.
Gentlemen senators and representatives, the public credit cannot last, nor Colombia appear as a nation, from what is said outside, that the republic cannot meet its expenses because it has pledged its revenue and prosperity, and can make no financial combination founded on the principles of science. It is not true, gentlemen, that $500,000 of the loan is destined by preference for the Buenaventura road. But a half million dollars will replace the $587,000 that the Murillo administration took to pay public expenses. Appropriating a part of this fund contrary to law, and as the loan cannot be entirely employed in the first year, the funds employed for different works will be re-employed conveniently by the common funds hypothecated actually. The 35 per cent., destined by the law for this loan, of the custom-house [Page 548] funds, with 37½ per cent. of the old foreign debt, are 72½ per cent. of the products of the custom-house, and 10½ per cent. of the Mackintosh debt, which is for its extinction, are 83 per cent., and leaves sufficient for expenses of collection and to pay the subvencion of Panama, not in the custom-houses but in the general treasury as offered by the convention of Rio Negro.
The administration will have paid in this year the dividends of the public debt with the same loan, and the increase of interest which the loan produces in Europe will give part of the amount necessary to make the payment of interest and gradual amortizacion.
I have already expressed in this message in what manner the money of the loan is to be used to increase the public credit, without diverting its funds in common expenses. If I should have been able to examine attentively the report of the committee, it would be easy for me to reply to all its charges; but my object is, citizen senators and representatives, to ask that you do not vary the laws of public credit, and that you sustain the action of congress in 1864 in order to raise this loan to increase the public prosperity, and assert as false before the face of the world that these laws were sanctioned only for the Murillo administration, as some representative said in full house that he believed you should not give to me the resources which would have been offered to the previous administration. Maybe the commission of the senate is in accordance with this representation, and prefers to sustain this idea rather than let the country be saved, with good loans on public credit and with the good benefits which a loan can produce, destined to increase industry and to open public roads.
Pardon me, citizen senators and representatives, if I am personal in this question. The health of the country and my honor are compromised. I ought to be frank and loyal with the representatives of the people. I have not said as much as I can say to prove the great danger that public tranquillity runs, because the discontent of those that combatted in opinion of the nation to elect me President is palpable, because I could save withouti mposing contributions, without falling back from the public faith, and without exercising discretional power.
Therefore the law and the will of the people is my motto.
José Maria Rojas Garrido, Secretary of the Interior and Foreign Relations.
Francisco Agudelo, Secretary of State for Finance and Internal Improvements and charged with the office of Treasury and National Credit.
Rudecindo Lopez, Secretary of War and Marine.
Bogota, June 5, 1861.
[Translation.]
Decree approving the convention celebrated in London on October 27, 1865, for the loan of a million and a half of pounds sterling.
The congress of the United States of Colombia decrees:
Article 1. The convention celebrated in London on October 27, 1865, between Minister Plenipotentiary Great General T. C. de Mosquera and Messrs. William K. Robinson, John Fleming, and George Fleming, for the loan of £1,500,000, for the exclusive object of encouraging internal improvements as provided for by the law of May 28, 1864, is hereby approved, with the following modifications:
1st. Article 5 is amended thus:
Art. 5. The contractors shall deduct the first year’s interest from the proceeds of the loan, and shall deposit it on the best terms in a London bank, to be designated by the executive power of the Union, that it may give interest for the government, while interest shall be added to the first year’s sinking fund for the payment of the principal.
2d. Article 9 is approved, modified thus:
Art. 9. The proceeds of the loan, minus the year’s interest and commission, shall be deposited at interest, on the best terms, in a bank or banks in London, to be designated by the executive power, and to be subject to the conditions of this contract. Whatever interest the deposit may produce to be placed to the account of the government, and applied to the payment of the loan and its interest.
3d. Article 12 of the contract rejected.
4th. Article 13 amended as follows:
Art. 13. It being understood that by the hypothecation of the reserves in the Panama railroad, the lenders shall not have power to oblige the government to sue them against its will, it is agreed that if the republic shall resolve to sell the said reserves, the proceeds of the sale shall be applied to the payment of this loan. If the republic shall not choose to sell [Page 549] the reserves, the net income or benefit accruing to the nation from the Panama railroad is included by this contract.
5th. Article 17 to read thus:
Art. 17. The proceeds of this loan, subject to the stipulations of this convention, can only be withdrawn by the government, and for the purposes mentioned.
6th. Article 18 amended by adding the following paragraph:
Until it be declared that the number of subscriptions mentioned in this article is completed, the government of Colombia shall in nowise be bound by this contract, neither shall it be liable for any bank deposit that may be made on account of this loan.
7th. Article 19 to read thus:
Art. 19. The said contractors shall receive as their commission £6 per cent. on the nominal amount of said loan, which commission shall be payable and deducted by said contractors from each of the sums which the government may receive from them of the bank deposits aforesaid. Said commission shall be in full of all expenses of whatever kind incident to the completion of this loan. If the loan be not raised, the government is to incur no expenses.
[Translation.]
Agreement entered into between his Excellency the Great General T. C. de Mosquera and Messrs. Robinson & Fleming of London.
An agreement made this October 27, 1865, between his excellency, the great general of Colombia, Señor Don Tomas Cipriano de Mosquera, envoy extraordinary and minister plenipotentiary of the United States of Colombia near her Britannic Majesty, who will hereafter be called in this writing his excellency of the one part, and William K. Robinson, John Fleming, and George Fleming, merchants and traders, of No. 21 Austin Friars, in the city of London, under the firm name of Robinson & Fleming, who will henceforth be called contractors of the other part. For that whereas his excellency above named applied to the said contractors to undertake to procure the issue in London of a loan of £1,500,000, in accordance with a law of said States approved May 28, 1864, which the said contractors have agreed to do on the terms and conditions hereinafter set forth, it has therefore been mutually agreed between his excellency and the said contractors as follows:
1. The nominal value of the loan is a million and a half of pounds sterling.
2. The issue will be at eighty-five pounds per cent.
3. The rate of interest on the said loan six pounds per cent. per annum, to be computed from three months before the date of its issue.
4. The interest to be paid semi-annually in money sterling, in London, the first payment to be made at the end of three months after the issue of the loan.
5. The contractors will deduct the first year’s interest from the proceeds of the loan, and deposit it in a London bank, to be named by the contractors, and approved by his excellency, in order that it may gain interest on the most favorable terms, on account of and for the benefit of said government, and the interest that may accrue on the deposit shall be applied as a sinking fund for the first year.
6. The payments of the loan shall be made as follows: Five pounds at the subscription; five pounds on the issue of the certificates of subscription; ten pounds one month next thereafter; ten pounds two, three, four, five, and six months after the issue of said certificates; and fifteen pounds at the end of seven months of the said issue.
7. The proceeds of the loans, minus one year’s interest and the commission, as herein expressed, are to be deposited in a bank or banks in London, to be named by the contractors, and approved by his excellency, that the same may gain interest on the most favorable terms possible, and which will be subject to the conditions of this contract. That which may accrue on this deposit shall be applied to increase the sinking fund and the payment of the principal.
8. Said loan must be reduced to par within twenty years, by a sinking fund of five pounds per cent. per annum. The manner of paying said loan shall be by annual warrants, before a notary public in London. The said government nevertheless reserves to itself the right to redeem or pay said loan through the contractors at any time within twenty years.
9. The said loan is to be represented by the bonds of said States, to be prepared by the contractors and his excellency, and for the amounts which said contractors may deem convenient. Said bonds are to be signed by his excellency, and countersigned by said contractors, in their characters as such.
[Page 550]10. The sum necessary to pay the interest each half year, and that for the annual payment on the principal, together with the half per cent. upon them to be paid to the contractors, as hereinafter set forth, must be from time to time remitted to the said contractors, and be in their hands in London at least six weeks before the payments are due, as herein expressed, free of expense to the contractors, and in money sterling or its equivalent.
11. The security for said loan is thirty-five pounds per cent. of the impost duties of the United States of Colombia, which his excellency in the name of said States and their government specially hypothecates for the due payment of said loan and the interest thereon.
12. Said contractors shall have the right to appoint special agents in the various parts of said States where said duties may be paid, who shall receive and collect said thirty-five per cent., the expenses of said agents to be paid by the government of said States.
13. As an additional security for the payment of said loan, his excellency offers in the name of said government, subject to ratification by the congress of said States, to obtain which ratification at its next session his excellency binds himself to use his whole influence, the hypothecation of the reserves or remainder of said government in the Panama railroad, according to the existing agreement between the government and the Panama Railroad Company; and, besides, his excellency binds himself likewise to procure the hypothecation of fifteen per cent. of the proceeds of the salt mines, which remainder and fifteen per cent. are at present pledged as security for the existing loan of £200,000, contracted by said government or States through the London and County bank.
14. His excellency agrees and binds himself further, that the said government shall consent that the balance of said loan of £200,000, after it shall have been provided for and secured, shall be paid, to the satisfaction of said contractors, out of the proceeds of the present loan, in order that the said reserves in the railroad, and fifteen per cent. of the revenues of the salt mines, shall be held as securities for this loan, they being now in hypothecation for said loan of £200,000.
15. It is expressly agreed that the present loan shall be applied only to the objects specified in a law of said congress approved May 28, 1864, and to insure which, the product of said loan, minus the said sum to be paid to said contractors, as hereinafter stated, and minus £100,000 to be placed subject to the order of the government, as hereinafter expressed, is to be deposited in bank as already declared, that it may be employed according to the provisions of this contract.
16. The said sum of £100,000 is to be held subject to the order of the government, and will consist of the first proceeds of this loan, for payment by the government to the Buenaventura Road Company, in conformity to the law of May 28, 1864.
17. Said contractors shall have the right to appoint, at the cost of the government, special agents, who shall have the power to see that the products of this loan be applied exclusively to the objects of internal improvements or public works specified in said law of May 28, 1864, or any other law to the same end which the congress of said States may enact. The proceeds of this loan, subject to the dispositions of other parts of this contract, can only be withdrawn for the objects mentioned.
18. Said contractors offer to procure subscriptions for said loan, on at least for half the nominal value thereof, before offering it to the public. which subscriptions, nevertheless, shall not be obligatory until the contractors shall declare that the total amount of the loan is satisfactorily arranged by subscriptions.
19. The said contractors shall receive a commission of siz pounds per cent. on the nominal value of said loan, and which commission is payable and shall be retained by the contractors out of the first products of said loan. Said commission shall be in full of all expenses incident to said loan, whether it be subscribed for or not.
20. The interest and principal of this loan shall be paid through the said contractors, who will receive one-half of one per cent. upon the amount thus paid by them.
In testimony whereof the parties hereto sign their names.