No. 342.
Mr. Foster
to Mr. Evarts.
Mexico, May 4, 1878. (Received June 6.)
Sir: The Mexican Government owes a foreign debt amounting, approximately, to $130,000,000, the bonds representing it being mainly held by British subjects, but a considerable portion is also in the hands of Americans, Spaniards, and other foreigners. No interest on this debt has been paid for many years, and up to the present the government has failed to make any arrangement or adjustment of any kind with its foreign creditors. The natural result has been that the bonds have become so depreciated that they have no market value whatever. During the past year advantage has been taken of this depreciation on the part of the government by the purchase at private sale by the secretary of the treasury of a considerable portion of these bonds.
So far as publication of these transactions has been made, the purchase appears to have been entirely of the Spanish-convention debt.
Similar transactions were had in the years 1868 and 1869; and the official journal of the government, in contrasting the two operations, shows that in the former years the purchase of the bonds cost the government 18¾ per cent. of their face value, and that the purchases of the past year were at the rate of 4 per cent., claiming much credit for the present administration for the financial ability displayed in the recent “redemption” of the public debt, as it is termed, seemingly unconscious that its ability to purchase at a lower rate than in 1868 mainly grows out of the increased depreciation of the bonds, occasioned by the additional ten years’ default of the government itself.
The purchase of government bonds in 1868 was the subject of correspondence between this legation and the Department of State in that year (see Diplomatic Correspondence, vol. II, 1868, pp. 417, 433, 446, 455, 475), when the questions of morality, good faith, and sound policy were referred to, and the views then expressed need not now be repeated. In view of the fact that at that date none of the debt thus dealt with was contracted with the Government or citizens of the United States, and of the earnest desire then entertained by us to do nothing to embarrass the newly re-established republican Government of Mexico, Secretary Seward did not consider that the United States were called upon at that time to protest against such transactions.
It appears, however, from the recent publication of the purchases made in 1868 and 1869, that they did include certain bonds sold and held in the United States, known as “Carbajal bonds.”
[Page 549]These purchases were probably made by the Mexican Government after Mr. Seward wrote his dispatch of May 13, 1868, and the existence or knowledge of that fact might have modified its tenor. As the purchases of the past year do not embrace any of the bonds sold or held in the United States, the event may require no action on the part of our Government at present. Should I, however, receive information that the class of bonds sold and held in the United States are so treated, I will not fail to advise you. I inclose a copy of the official journal referred to above, containing a full statement of the transactions.
I am, &c.,