No. 94.
Mr. Osborn to Mr. Evarts.

No. 107.]

Sir: General Urbina, an Ex-President of Ecuador, has been here a few weeks on a special mission from his government in the interest of peace, and left this morning for Lima. On his way down the coast General Urbina had an interview with Presidents Prado of Peru, and Daza of Bolivia, at Airca, which resulted in his being informed that Peru and Bolivia would consent to a cessation of hostilities and an arbitration of the matters in dispute upon the condition that the status quo ante bellum should be restored, and should continue pending the [Page 179] arbitration. In an informal interview which I had with the minister of foreign relations yesterday, he informed me that this condition would not be agreed to by this government. Said he, and truly, I believe, “a ministry which would consent to this now could not stand a day.”

He added, however, that Chili would consent to arbitrate, leaving the status quo as at present, and with an understanding that if the dominion of the country in dispute should be determined to belong rightfully to Bolivia, Chili would pay therefor the price which the arbitrator might fix. I judge that this is the proposition with which General Urbina goes to Lima to-day.

What the other governments will say to it now is more than I dare to venture an opinion upon.

Since the first interview of General Urbina with Presidents Prado and Daza the allies have met with quite a severe loss in the destruction of the Independencia, one of the Peruvian iron-clads, and it is possible that their demands touching the status quo may be somewhat modified.

From the beginning I have believed that, if the Chili troops should succeed in capturing Iquique before an arrangement could be reached, it would be difficult to induce Chili to consent to withdraw therefrom until she should be indemnified for expenses in the war $ and this opinion I still entertain. The proposition which I assume General Urbina carries, is, I doubt not, made in good faith, but it is made with the surroundings of to-day. There is here a strong party urging upon the government greater energy in the prosecution of the war, and one of the movements demanded is the capture of Iquique. President Pinto is exceedingly conservative and disposed to “make haste slowly,” but public sentiment is pressing him forward, and has just made it necessary for him to change the commander-in-chief of the army. There is a very general demand for an aggressive campaign, and I think I venture little in predicting that, before the receipt of this dispatch, a part of the army now at Antofagasta will have effected a landing north of Iquique. I know that a forward movement has been determined upon, and the government anticipates a severe and bloody battle.

In the conversation referred to the foreign minister volunteered some expressions touching the choice of an arbitrator, if that point shall be reached. While the Emperor of Brazil would be satisfactory to Chili, the government expects, I am led to believe, that the President of the United States will be requested to assist the belligerents in the arrangement of their difficulties.

Business in all its branches is at a standstill, and I can see nothing but universal bankruptcy in a long continuance of the war.

Some few months since the government, after failing in all efforts to secure a loan, issued six millions of paper notes. This is about exhausted, and I apprehend that ere long a new issue will be made.

The extraordinary expenses growing out of the war are not much short of two millions a month.

To provide the necessary funds for expenditures abroad, a decree has just been issued by the Executive requiring that all import duties shall be paid in silver or its equivalent in bills on Europe. This was made necessary by the great decline in the value of paper money exchange on London, which, rated at about 40d. for the dollar at the commencement of the war, has advanced to 28d.; or, putting it in another way, the American gold dollar, which was worth a few months since a dollar and a quarter in this money, now commands a dollar and three-quarters.

By the New York papers which came to hand by the last mail, I see that there has been some newspaper discussion growing out of a telegraphic [Page 180] dispatch from Berlin indicating an intention on the part of the German Government to interfere in this controversy.

These articles have been generally copied and commented upon by the Chili press, and I have yet to see an expression of dissent from the views entertained by our leading journals regarding the ability of America to arrange her difficulties without assistance from the other side of the Atlantic. The Ferro-canil, the leading newspaper of the country, has quite an able editorial on the subject this morning, in which it rejoices that the opportunity occurred for an expression of opinion upon the part of the American press regarding the “Monroe doctrine.”

Public sentiment here now seems to be decidedly averse to European interference in any contingency.

I have, &c.,