No. 409.
Mr. Gibbs
to Mr. Evarts.
Legation of
the United States,
Lima,
Peru, August 27, 1877. (Received
September 20.)
No. 189.]
Sir: I have the honor to refer you to my dispatch
No. 167, of June 19, in relation to the finances of this country.
The government made several attempts to arrange finance, and had various
interviews with the directors of the associated banks, without coming to any
agreement. Matters were daily growing worse, and much excitement was caused
by the refusal of storekeepers and commercial houses to receive the bills
known as the “Meiggs Mission,” issued by the Public Works Company of
Peru.
In my dispatch No. 128, of February 5, I refer to this company; also in
dispatch No. 108, of November 21, I inclosed copies of Mr. Meiggs’s
proposition to finish the roads. The proposal was accepted, and he commenced
operations on the three roads referred to; also to work on the great tunnel
to drain the Cerro del Pasco; all these works to be carried on by what is
called the “Public Works Company” of Peru.
The government advanced bonds, and on the strength of them, by depositing the
bonds with the tribunal of commerce, the company made an issue of notes as
above referred to. The commercial houses, by refusing to take them, checked
Mr. Meiggs’s operations, and he directed a note with a proposition to the
government, which was accepted by a decree of the 17th instant. I inclose
copy of Mr. Meiggs’s proposition and the decree, from the South Pacific
Times of Callao.
This had the effect of creating an excitement in the money market. Exchange
on London went from 22d. per sol to 18d.; American gold from 130 per cent, premium to 160
per cent. Now the decree is looked at in a more favorable light, and
exchange to day is 20d. per sol and gold 140 per
cent. The feeling is that if the government carries out in good faith the
decree, financial affairs will be on a more stable basis, but to my view it
is hardly possible, as there is one great drawback—expenditures are more
than the ways and means; the outgo heavier than the income—and until economy
is practiced on one, and the other improved, no paper decrees will equalize
the difference.
All of the leading retail houses here in Lima held a meeting in reference to
the decree, approving of it, and passed resolutions to ask the government to
allow the free exportation of coined silver, now prohibited, and to prohibit
the exportation of silver in bars, now paying three per cent, export duty.
As silver coin is continually leaving the country and
[Page 713]
is the coin of the country by law, the
merchants argue that, if it had free egress, much would be reimported, and
if bars were coined, some of it would remain in the country.
I refer to my dispatch No. 108, of November 21, for information on
coinage.
I am, &c.,
[Inclosure 1 in No.
189.—Translation.]
The Meiggs emission.—Important decree of the
government on the subject of Meiggs’s notes and those of associated
banks.
[From the South Pacific Times, Tuesday, August 21,
1877.]
The following is a translation of the petition presented by Mr.
Meiggs:
Your Excellency: I, Henry Meiggs, railroad
contractor, respectfully submit to your excellency, that for the purpose
of carrying out the works with which I am intrusted, I made an
arrangement with the Public Works Company of Peru, of which I am
president, in virtue of which the said company gave me 1,030,000 soles
in paper, which I guaranteed by depositing 1,500,000 soles of the bonds
which your excellency had given me in payment, according to the contract
of February 3, 1877; and in order that the public might receive the
notes with confidence, I deposited the bonds in the consular tribunal,
and gave due notice to the public of said deposit.
On the strength of this guarantee the notes have circulated in this
capital and outside of it, with the full appreciation of the persons who
have received them. But in consequence of the supreme decree of 21st
February last, which varied the conditions of the treasury bonds, known
as the “Meiggs,” various persons have thought that the service of the
bonds, which I have deposited in the Consulate, might at some time be
deficient, and consequently the fear has arisen that the notes of the
public works company, guaranteed by said bonds, do not offer sufficient
security.
This fear has reached such an extreme, that at a meeting of the
merchants, held on the 15th June last, they compromised themselves not
to admit notes which were unprovided with the government stamp; and the
conflict has assumed such proportions that public works of the highest
importance, with the execution and realization of which I am intrusted,
are about to be completely paralyzed through the want of the necessary
funds to continue them.
The emission of special bonds having been depreciated through the
aforesaid supreme decree of 21st February, a depreciation which has
interfered with the carrying out of works of the utmost importance to
the country, and which has caused me irreparable loss, I find myself
compelled to have recourse to your excellency, making known to you that
having no funds at my disposal, for even the notes which I issued for
the sum of 1,030,000 soles have been rejected by the “Junta Comercial,”
in consequence of the depreciation previously referred to; and further,
taking into consideration that in the complete absence of resources, the
notes issued by the Public Works Company, having been rejected (as
already stated) after being put into circulation, and having no longer
any means of continuing the work suspended, for the reasons which I have
explained, I find myself, after making all sorts of sacrifices, under
the painful necessity of announcing to your excellency that from this
moment all the works will remain suspended if your excellency does not
at once come to my assistance in preventing the continuance of the
evil.
The credit of the supreme government is involved in this matter, as also
my personal honor and the future of the country.
As all that is required for the public works in actual operation is the
sum of 5,300,000 soles, I propose to make an emission which will save
the compromises of all concerned and will give to the supreme government
most advantageous results. The terms are the following:
- 1st.
- The undersigned will return to the supreme government the
5,333,333 soles 33 cents, which he received in, special bonds
for the railroad works of Chimbote to Yuramarca, of Cuzco to
Marangani, and of the Oroya to the mineral district of Cerro de
Pasco, as also for the drainage and mining works of the said
Cerro; and the supreme government will empower the undersigned
to emit through the Public Works Company, in notes payable to
bearer, the aforesaid sum of 5,333,333 soles 33 cents, in order
to repair the depreciation of the bonds.
- 2d.
- The 80,000 soles which the supreme government should furnish
me monthly for the service of the 5,333,333 soles 33 cents, and
which is to satisfy the delegation of the associated banks, will
serve for the monthly redemption of the emission which I
solicit.
- 3d.
- The supreme government will order that the said notes he
received in the custom-houses and other fiscal offices, and will
guarantee them so that they he admitted as current money.
- 4th.
- With the object of aiding the supreme government
disinterestedly, when its necessities may require it, I
compromise myself to furnish it the monthly sum of 100,000
soles, without interest, and for the term of one year. I
compromise myself equally to furnish to the supreme government,
during six months, the sum of 500,000 or 600,000 soles without
any interest.
Finally, at sixteen months from the date of the decree authorizing the
emission, I will furnish to the supreme government, on the most
equitable conditions, 150,000 soles monthly in hard money.
This petition, your excellency, is not only based on the considerations
set forth, but also on the conclusive order of the law of July 7, 1874,
by which the Executive is empowered to adopt any means whatever, in
order to prevent the suspension of the public works in hand.
With the foregoing and the hope that an end will be put as soon as
possible to the bad situation which renders the continuation of the
before-mentioned public works most difficult, I pray your excellency to
authorize at once the emission of 5,333,333 soles 33 cents in notes to
bearer, as being an indispensable and urgent necessity for the
prosecution of the public works.
Lima, August 11,
1877.
HENRY MEIGGS.
[Inclosure 2 in No.
189.—Translation.]
Decree of the Supreme Government in answer to the
foregoing petition.
Mariano Ignacio Prado, President of the Republic:
Considering:
- First. That there is neither unity nor uniformity in the
answers given by each one of the associated banks, respectively,
to the two projects presented to them by the government, with
the view of arriving at a combination or arrangement which might
in some measure lessen the difficulties of the situation;
- Second. That it is necessary to begin redeeming the paper in
circulation, substituting, as far as possible, sufficient coin
to re-establish the equilibrium in mercantile and other
transactions;
- Third. That the perturbation caused by the emission of
1,030,000 soles which has been made in notes by the Public Works
Company, guaranteed by bonds of the State, affects the character
of the government, and consequently compels it to protect
against loss the issuer and the holders of such paper;
- Fourth. That it is not possible to allow the paralyzation of
the railroad works contracted with Don Enrique Meiggs, and is
indispensably necessary and of recognized urgency that they
should be pushed forward to their completion, not only because
the government must fulfill its obligations, but because the
interests of the country require it, and especially those of the
departments in which said railroad are being constructed;
- Fifth. The government is fully authorized to this effect by
the law of July 9, 1875;
- Sixth. That at the same time that these results are obtained,
and as a means of making them more beneficial to the country, it
is desirable to put in movement some of the government bonds
which are at present suspended, without advantage to the State
or to the public;
I decree—
- Art. 1. The government assumes and
obliges itself to pay, in the form determined in this decree,
the authorized emission of the associated banks to the amount of
15,000,000 of soles.
- Art. 2. The notes of which
government assumes the responsibility, up to the amount
mentioned in the preceding article, will be distinguished by the
new official seal which will be put on each of them, by the
board of employees and merchants named for the purpose.
- Art. 3. These notes will be the only
ones admitted in the offices and establishments of the State,
municipalities, instruction, and beneficiencia.
- Art. 4. The state taking upon itself
the responsibility held by the banks of paying to the public the
value of their notes, the debt of the state to the said banks is
thus canceled for an equal amount to that represented by the
notes in actual circulation. The balance of the said debt, in
order that it be definitely canceled, will be paid to the
associated banks in bonds of the internal debt and out of those
which the said banks hold in deposit, according to the contract
of September 10, 1875, at the rate of eighty per cent., and the
government will receive the balance of the bonds forming the
said deposit, already mentioned, for the loan of 18,000,000 of
soles, it reassumes the
[Page 715]
rights which, according to said contract, it conceded to said
hanks, and it enters at once into possession of the
administration of the nitrate and of the sale of guano in the
Mauritius.
- Art. 5. The government being
released from the associated banks by this means, that is to
say, by the fulfilment of the obligation which it incurred in
the contract of September 10, 1875.
- Art. 6. The associated banks will
continue administering the nitrate under the same conditions as
fixed in their contract with the government, and they will also
continue, if it suit their interests, with the guano consignment
to the Mauritius, in conformity with the stipulations of their
contract, and in such case they will give from the product of
the sale of the manure 1,000,000 of soles annually in equal
monthly installments, and in specie, for the redemption of notes
as prescribed in Article 10.
- Art. 7. The government accepts the
proposal made to it by Mr. Henry Meiggs, under date 11th
instant, and consequently authorizes him to emit notes payable
to bearer to the amount of 4,303,333 soles, in order that, added
to the 1,030,000 soles which the Public Works Company issued and
has in actual ciculation without authorization, they form a
total emission of 5,333,333 soles, value of the special treasury
bonds given to Meiggs for railroad construction; applying to the
balance owing to Meiggs for work done, the difference resulting
between the rate of 75 per cent, at which the government gave
him the aforesaid bonds and the nominal rate at which they are
now recovered, and the government assumes the responsibility of
the payment of the notes which Meiggs or the before-mentioned
company may emit up to the stated sum of 5,333,333 soles, all of
which will be officially sealed, and will be admitted in the
offices and establishments of the state, of the municipalities,
and of the branches of instruction and beneficencia just the
same as the authorized notes of the associated banks.
- Art. 8. The government having made
itself responsible for the payment of the obligations of Meiggs
for the total sum of 5,333,333 soles 33 cents which are
represented by the bonds payable by the state to the latter on
their expiration, the said bonds will be gathered in and
canceled as being definitely paid.
- Art. 9. The means being thus
provided for pushing on the railroad works contracted for by Mr.
Henry Meiggs, it being understood that the notes emitted will be
solely for that purpose, the government will see to the active
prosecution of such works until their termination, and will hold
Mr. Meiggs responsible for any damages which the State might
suffer through the non-execution of those works.
- Art. 10. The government will apply
the following revenue to the redemption of the notes of the
associated banks and of Mr. Henry Meiggs, the circulation of
which it authorizes:
- 1st.
- One million of soles annually proceeding from the sale
of guano in the Mauritius, which will be furnished by
the government or the associated banks, if they continue
with the consignment.
- 2d.
- The sum which it is now paying to the banks for the
service of the loan of 18,000,000 of soles, and which
amounts, approximately, to 1,000,000 of soles per
annum.
- 3d.
- The 80,000 soles monthly, which Meiggs receives from
the associated banks for the contract of the 3d February
last for the service of the bonds given him by the
government.
- 4th.
- The value of the £12,000 which the banks are to
receive from the government, from the month of September
next, in payment of the loan made to it by them of
500,000 soles in specie, with the express stipulation
that they be applied to the redemption of notes.
- Art. 11. The redemption will take
place at the end of each month, beginning in September next,
applying in equal monthly proportions the funds designated in
the foregoing article. The redemption will take place before a
board composed of the president of the government audit
department, the director of the financial department, one of the
fiscals of the superior court of this district, the prior of the
consular tribunal, and two merchants, to be named each month by
the minister of finance. The redeemed notes will be destroyed in
one of the public squares of this capital and in presence of
said board.
- Art. 12. The surplus treasury bonds
will be exchanged, at the rate of 80 per cent., for titles of
the internal consolidated debt, out of those which may remain
disposable after making the payment to which part of them are
destined, in conformity with the present decree.
The minister of finance is hereby instructed to attend to the carrying
out of this decree and to its publication and circulation.
Given in the government house in
Lima on this 17th day of August, of the year
1877.
- MARIANO I. PRADO.
- José Felix Garcia.
[Page 716]
[Inclosure 3 in No.
189.—Translation.]
Mr. Meiggs in
answer to the foregoing decree.
His Excellency General Don Mariano
Ignacio Prado:
Your Excellency: The public works of the
country being threatened with complete paralyzation through the want of
funds wherewith to carry them forward, its commercial and financial
interests overwhelmed by a crisis of most difficult solution, I had
recourse to your excellency to solicit the means which, by averting
serious evils, would permit the prosecution of the railroad works and
the development of the national wealth.
The decree of your excellency, dated yesterday, has saved the situation;
and in addressing myself to your excellency to-day, expressing my
profound gratitude, it is not in the name of my own interests
compromised in the matter. Your excellency, with the honorable and loyal
views which characterize you, and in benefit of the fiscal interests and
of the future, has been pleased to frame a resolution which will be the
means of fecundating the soil in which the seed sown with so much
anxiety and sacrifice was threatened with destruction.
On asking from your excellency that which your excellency has decreed, I
have not been prompted by egotistical motives. Rooted in the country,
and with me all I possess, my sole desire has been, and is, to see
terminated the works intrusted to me, and in order to secure that
object, I shall, as heretofore, omit no sacrifice.
When the public works are once terminated; when, thanks to them, industry
and enterprise open their doors to all classes and fortunes; when the
nation commences to reap abundant fruits and to see itself once more in
the ranks of the richest and most productive, then your excellency’s
decree will appear as one of the most brilliant pages in the history of
your administration.
Meanwhile, with all the energy and constancy of which I am capable, and
inspired by the same confidence in the future which animates your
excellency, I shall redouble my efforts to terminate the works in the
shortest time possible.
Heartily desiring the well-being of your excellency, I reiterate the
sentiments of esteem and respect with which I subscribe myself, &c.,
&c.,
