Papers Relating to Foreign Affairs, Accompanying the Annual Message of the President to the Third Session of the Fortieth Congress, Part II
Mr. Plumb to Mr. Seward.
Sir: An important debate took place in the Mexican Congress on the 20th instant, upon the subject of the payment of interest on their foreign debt.
The appropriation bill was under consideration, and the discussion was upon the question whether the appropriation relating to the foreign debt should be applied to the payment of interest or be used for the buying in of the depreciated principal. The latter course was determined upon by a vote of one hundred to twenty-one.
The debate was participated in by Mr. Iglesias, late minister of treasury, Mr. Romero, the actual minister, and Mr. Lerdo de Tejada, the minister for foreign affairs, who urged the policy that was adopted. The ground was taken on the part of the government, that with regard not only to the English and Spanish convention debts, but also the London bondholders’ debt, Mexico was not at present under obligation to pay interest, the conventions being at an end, as claimed, and the bondholders having treated with Maximilian.
Reference was also made in the debate to the debt lately contracted by Mexico in the United States.
In my dispatches No. 92 of the 23d of March and No. 103 of the 3d ultimo, I informed the department of the similar action that took place when the provisional appropriation bill was under consideration in the last session.
The present action of congress may therefore be considered as final.
The gravity of the questions involved in the action that has thus been taken, leads me to call the special attention of the department to the views expressed in this debate. A translation in full of the published report is inclosed herewith.
I have the honor to be, very respectfully, your obedient servant,
Hon. William H. Seward, Secretary of State, Washington, D. C.
Debate in the Mexican Congress upon the payment of interest on the foreign debt.
CONGRESSIONAL REPORT.
Session of the 20th of May, 1868. Mr. Zarco presiding.
Mr. Avila, secretary. The discussion of the appropriation bill will be resumed.
The appropriations relating to the public debt being read, were placed in discussion.
Mr. Fernandez Aguirre. I rise solely to ask the committee to state whether the debt contracted in the United States has been liquidated and approved by congress.
Mr. Mejia. The committee has not only approved all the appropriations proposed by the government under this head, but it has augmented them by the sum of $169,432 for auctions. With respect to whether the debts contracted in the United States have been approved, the minister of treasury can best give this information to Mr. Aguirre.
The Minister of Treasury. The debt treated of in the appropriation bill has previously been liquidated and approved, and the interest that it bears having to be paid in New York is the reason why the exchange and the expenses of commission that have to be paid to the person charged with its payment in that city are inserted. There is also another debt that is not approved nor liquidated, and for this reason it has been excluded from the appropriation bill.
[Page 476]Mr. Aguirre. I have called attention to this debt because I believe it was contracted during the war, in use of the extraordinary powers with which the executive was then invested; and as all of the acts of the government, emanating from those powers, are subject to revision, it appears to me that the debt referred to requires to be approved by congress.
Mr. Zamacona. Before the monarchical intervention came to disturb the march of affairs in the republic, laws had been decreed adjusting the public debt, and the conventions with foreign governments were then in the process of arrangement and payment.
Afterwards the holders of the foreign debt concluded other arrangements with the usurper, by which the amount of these debts was augmented. Both of these circumstances now make a new arrangement indispensable.
But this cannot be carried into effect except by congress, as it is one of its exclusive attributes, and to leave to the executive the initiative in so grave an affair is, in a certain manner, to abdicate its most august functions.
Congress cannot, I repeat, without abdicating its sovereignty, decree a gross sum for this object, without knowing, at least, if the bases are desirable that are to enter into a new arrangement, and if the manner of payment that is to be adopted is expedient. To vote the expenditure of three millions of dollars in a vague manner, without definitively expressing how it is to be employed, is not only to yield what constitutes the most sacred duty of congress, but may produce the greatest evils for the country.
With reference to the debt contracted in London, the government was authorized by the law of the 14th of October, 1850, to purchase that debt at the price it might have in the market. But it should be observed, that by the arrangements that the holders concluded with the usurper, the amount has been augmented in such a manner that this government cannot recognize it without a previous adjustment that shall clearly show what are the legitimate claims against the republic; and these are antecedents that render it indispensable that congress shall not yield the faculty that is conceded to it by the constitution.
The same should be said with reference to the diplomatic conventions, but this is still more clearly seen with reference to the interior debt.
The law of the 30th November, 1850, arranged definitively the questions relative to that debt, and in harmony with the law of the 14th of October of that year. I therefore ask the committee, are these laws still in force, or not? and is it proposed to repeal them, in the article of the appropriation bill now under discussion?
It is necessary to give to our financial system a regular and definitive arrangement; and if the power is left to the executive to dictate special and exceptional measures, each one of them will constitute an additional embarrassment in the way of the attainment of that important object.
The question being involved in these considerations, it is seen that the existing laws are opposed to the initiative of the government.
Mr. F. Mejia. The majority of the committee on appropriations had to differ, with regret, from the opinion of one of their esteemed members, Mr. Mata, in treating of the appropriation with reference to the cancellation of the public debt, as that gentleman desired that the sum of three millions of dollars that had been appropriated should be applied solely to the payment of the interest on the debt, when the committee desired that it should be applied to the buying up of the debt, by means of the systems of auctions decreed on the 30th of November last.
Besides, the special report of Mr. Mata added the sum of $219,987 to the three millions already agreed upon, in order to make up the precise amount of the interest on the said debts, including the convention debts and the floating debt. The reasons that have influenced the majority of the committee to ask that the three millions of dollars shall be dedicated to the payment of interest and the buying in of the debt at the same time, are the following:
That if, as is to be expected, and as our experience thus far in the few auctions that have been held has shown, the holders of the debts take part voluntarily in these sales, at the end of a few years we shall have cancelled a great part of our debt, with satisfaction to the creditors and with very great relief to the nation, and an end will consequently be put to the constant motives of difference with the nations of Western. Europe, and to the pretext for new reclamations and invasions.
In the judgment of the committee our government is not obliged to now pay in preference the interest upon the convention debts, because the treaties that united Mexico with the powers that recognized the intervention, and disowned the republican government, are to be considered as insubsistent.
Consequently the obligation that rested upon the national treasury does not retain an international character, nor can the terms of payment continue to subsist that were stipulated in an arrangement that has been terminated in consequence of that recognition. The government, therefore, is at liberty to fix the terms of payment as it shall think proper.
Why should we concede to the foreign creditors and holders of bonds of the English [Page 477] debt the subsistence of the contract embraced in the law of the 14th of October, 1850, when the same bondholders themselves haveinfringed that contract, treating of it and reforming it with the government of the usurper?
And this is so true that the English government itself has thought it dangerous to make any reclamation against the republic. Mr. T. Baring asked the minister of foreign affairs, in the House of Commons, on the 21st of February last, what were the relations with Mexico; and if any existed, what measures the government had taken to carry into effect the conventions.
The minister replied that no relations existed, in consequence of the act of the government of Mexico; but that the question of exacting a compliance with the conventions was of a very grave character, and one in which a hasty determination should not be taken.
For these considerations, and also the well-founded reasons which, in support of the modification proposed by the committee on appropriations, have been urged by Mr. Iglesias and other distinguished and able speakers who have preceded me in the debate, I insist in asking that the chamber will be pleased to approve the said modification, expressing the appropriation in one gross sum, in order not to leave place for the subsistence of a basis of capital and interest of each debt at a time when the republic is under the best of circumstances to secure great advantages in the future arrangements that it may have to make.
Mr. Zamacona: I ask the secretary to be pleased to read the laws of the 14th of October and 30th of November, 1850. Mr. Alcalde read them.
The minister of treasury, Mr. Romero. Mr. Zamacona has made two inquiries which I will answer. But, first, I may be permitted to call the attention of the chamber to another matter of much interest. Besides the appropriations relating to the payment of the public debt, the government proposed others in its first initiative, and with the permission of the chamber I will read the communication which accompanied them.
It was read.
It was proposed, therefore, that a sum should remain at the disposal of the government for the payment of orders already drawn against the treasury, and that have not yet been paid for want of funds, and of others which it will be necessary to draw in favor of creditors who are found in special circumstances, and for that reason have to be attended to by the government.
The government believes that some liberty should be left to it to make such payments, first, because it would be unjust to deprive the holders of the orders that have been issued of the right that they have to their payment; and, secondly, because in many cases it is absolutely necessary to attend with a certain preference to one claimant rather than to another for the reasons that I have already indicated.
With respect to what has been stated by Mr. Zamacona, I have to say that it is in accord with the ideas of the government.
But setting that aside, the committee assigned a million and eighty thousand dollars for the payment of the debt contracted in London, for it is unquestionably better to buy in the debt than to pay interest upon it. Mr. Mata, in his special report, assigned certain appropriations for the payment of the interest. The government would accept that idea; but the question of the debt being subject to new negotiations, it would prejudice their result. It is known that by arrangements made with the usurper that debt was augmented, and without a definitive arrangement the payment of interest would inevitably be upon what was due by the republic, and upon what it cannot recognize.
The English bondholders, recognizing the error that they committed, have had two meetings in London, and at the last they appointed a permanent committee, which has addressed to the government the communication I will read. The said communication is as follows:
“Mexican Bondholders’ Committee, “1 Copthall court, Throgmorton street, London, E. C., April 14, 1868.
“Sir: I beg reference to the letter which on the 24th December last I had the honor of addressing to the foreign department of your government, and to inform your excellency that since that date an important step has been taken by the bondholders in the appointment of a permanent committee, charged with the supervision of their interests and furnished with authority to negotiate terms for the adjustment of their claims.
“In the accompanying report of the proceedings of the public meeting at which this appointment took place, (copies of which I transmit for the information of President Juarez, your excellency, and the other members of the cabinet,) you will observe that the committee then selected comprises among its number members of the British Parliament, and other gentlemen of position and influence, and you will gather from this fact the weight and significance to be attached to the confidence and hope in Mexico expressed at the meeting; and I would specially call your excellency’s attention to the cordiality with which the observations the chairman made with reference to President Juarez and the members of his cabinet were received on that occasion.
[Page 478]“The good will of the bondholders has not, however, as you will perceive by the provisional committee’s report, presented at that meeting, (copy of which is also transmitted,) restricted itself to words alone, a memorial having been prepared by them for presentation to our government, praying her Majesty’s ministers to resume official intercourse with your country, and thus recognize the national character of the administration of which your excellency forms a part.
“While, however, it is with gratification that I bring these evidences of friendship for Mexico and esteem for yourself and the other members of President Juarez’s cabinet to your excellency’s notice, it is, I regret to say, also my duty to refer to the serious and wide-spread inconvenience, and, indeed, distress which the entire cessation of any payments of interest has brought upon the less affluent of the bondholders. And I am expressly directed to convey, on behalf of the committee, the expression of the hope that it may be in the power of your excellency shortly to aiford some measure of relief to a body of men who have given such material proofs of their confidence in the honor of Mexico and her government.
“With the view of aiding the attainment of so desirable a result, the committee are prepared at once to open negotiations with your excellency, either in this country, through an accredited agent of your own, or in Mexico, through the instrumentality of a delegate sent by them from this country.
“Trusting that, for the information of the committee, I may be favored on ah early occasion with your excellency’s views,
“I have the honor to remain your excellency’s most obedient, humble servant,
“WM. W. HOLMES, Secretary.
“His Excellency Señor Don C. Matias Romero, “Minister of Finance, Mexico.”
It is seen, therefore, that the holders of the debt are disposed to enter into arrangements, and if the chamber should declare that it is about to pay the interest, it would prejudice the question, and woulld nullify the advantages the government has a right to expect.
The opinion of the executive is that in no manner should the payment of interest be agreed to.
With reference to the debt in the United States, there would be no inconvenience in suppressing the appropriation relating to interest; and in so far as relates to the others they might remain the same as the English.
The government is also conformable to the stipulation of eight hundred thousand dollars for the floating debt, under the understanding that it is not to be obliged to pay interest.
Mr. Zamacona has said that the executive has sought to abrogate the faculties of Congress. This is not so.
Before resigning its extraordinary powers the government ordered these public auctions. Congress can annul that disposition, but until that is done the right is legitimate under which they are held.
The executive has desired that congress would take up the subject of the public debt, and would dictate regulations that should serve as its guide, as in this manner the executive would be relieved from a grave responsibility; but the time that remains to the chamber in which to terminate its labors is so limited, that although it should be dedicated exclusively to that subject no result could be attained.
With respect to the auctions that have been held, the government experiences satisfaction; more than a million of dollars of the debt has been canceled, and the debt has risen in price in the market, as before it was only quoted at twenty-five per cent., while now it is sold at forty.
Mr. Mejia. The committee assents to the appropriations proposed, but it does not believe that any sum should be fixed for the payment of interest, because it would prejudice pending arrangements.
In consequence it amends thearticle in the following form:
“For the cancelation and interest of the public debt, interior and foreign, $3,500,000.”
Mr. Zamacona stated that the object of his observations was not to place difficulties in the way of the patriotic arrangements proposed by the government. He then repeated his preceding remarks, and asked the minister of treasury if he believed that the laws of the 14th of October and the 30th November, 1850, were still in force, repeating also the reasons which led him to desire to have this inquiry answered.
The minister of treasury replied that it was in no sense prudent to make any declaration with reference to whether those laws were in force or not, because it would establish a very bad basis for future arrangements with regard to the public debt.
Mr. Prieto. In the observations of Mr. Zamacona there are two points to consider: The prerogative of congress to intervene exclusively in the adjustment of the public debt, and the establishment of a right, that of consolidating a debt and its interest.
After some remarks with regard to the English debt to prove that there is no good reason for its bearing that name, the debt being a national debt, and some observations [Page 479] with reference to there being no consolidated debt, he concluded, asking that the approval of the chamber should be given to the special report of Mr. Mata, in so far as relates to the appropriations now under discussion.
Mr. Mejia said that the committee had abstained from specifying any sum for the payment of interest, because such assignment would prejudice the arrangements that are had in view.
Mr. Iglesias. There is no doubt that it is the privilege of congress to attend to the adjustment of the public debt, as also it is a duty for it, as well as for the executive, to comply strictly with existing engagements; but in the present case, it is not possible to apply any determined sum to the payment of interest.
It cannot be said that the laws of the 14th of October and the 30th of November, 1850, are in force, and they are not because the holders of the English debt celebrated new arrangements with the usurper, and by that act itself prejudiced the legality of their credits.
It would be dangerous, on the other hand, to declare the validity of those laws, because in consequence of such declaration the English creditors would refuse to enter into arrangements that they are now disposed to accept.
With reference to the conventions, it is an undeniable fact that they do not exist, because in disowning the government of the republic, and treating with the usurper, those conventions were de facto terminated.
But the government recognizes the debt, and the manner of its payment will depend upon the new arrangements that may be made.
With reference to the manner of canceling it by means of auctions, it is asked whether, the payment of interest having been stipulated, the purchase at auction is not inconvenient. I believe that far from offering any inconvenience these auctions are very acceptable in every respect.
First, because in the auctions there is no compulsion; those attend who may believe it convenient to realize their credits, and the others do not; so that there is an advantage for the one who sells, because he realizes a sum that it is convenient for him to realize, and there is also for those who do not attend, because by the reduction of the amount of the debt that is upon the market, the higher will be its value, the proof of which is in the fact stated by the minister of treasury.
The Minister of Treasury. Mr. Zamacona has said that the payment that has been made of some of the floating debt, has been made through favoritism. I protest that neither the citizen President nor myself have issued an order in favor of any person, that could have the character of favoritism.
The minister of relations, Mr. Lerdo de Tejada. The payment of the interest cannot be made, because it would be lacking even in justice. I say justice, because with reference to the debt contracted in London it cannot be exacted that the law of the 14th of October should be declared in force, for the holders of that debt in treating with the usurper have incurred a grave prejudice, which requires a new arrangement.
There were but few of the debts under the conventions that bore interest previous to the conventions; all derive it from these, and the conventions being broken, the debts cease to bear interest also.
With reference to the form of payment of the Spanish debt, that now being made is the same that was stipulated in the convention for its payment, and consequently there is in this no offense on the part of the government.
Mr. Frias y Soto. If, as has been stated, with evident reason, an assignment for the payment of interest would prejudice future arrangements, what should we do? Why make this appropriation? I believe it will have the same result as if the payment of interest was agreed to. I ask, therefore, that the committee will withdraw it, or that it be voted down, and that the special report of Mr. Mata be approved.
Mr. Mejia. With respect to interest the amount is not known, nor is its payment binding. With regard to the capital it is a debt recognized, and which is subject to cancelation. On the other hand there are some items among the appropriations, the amount of which is known, and others not. With this I believe I have answered Mr. Frias y Soto.
Mr. Prieto insisted on his previous arguments.
Mr. Avila, secretary. Are there any others who desire to speak? Is it sufficiently discussed? It is.
Mr. Frias y Soto. I demand the ayes and nays.
Mr. Avila, secretary, read the amended article, and added, shall it be adopted?
The vote being taken, the article was adopted by one hundred votes against twenty-one.