Papers Relating to the Foreign Relations of the United States, Transmitted to Congress, With the Annual Message of the President, December 1, 1879

No. 342.
Mr. Foster to Mr. Evarts.

Legation of the United States,
Mexico, January 28, 1879.

No. 874.]

Sir: I am constantly in receipt of inquiries from citizens of the United States as to the state of Mexican legislation regarding the construction of railroads, the sentiment of the people and present government of this country upon a railroad connection with the United States, and the probability and possibility of the latter rendering any aid by way of subsidy to such construction.

The Hon. Matias Eomero, the Mexican minister of the treasury, is now engaged, by direction of the President, in publishing in the Government Official Gazette a series of lengthy articles upon the financial, commercial, and political condition of this country, which is designed, as he states, to be a vindication before the civilized world of its disposition and ability to develop its great natural resources and invite foreign capital to aid in this work. A large part of his article has thus far been devoted to the question of railroads. But as it is only a partial and imperfect statement of the present condition of this subject, designed for circulation in the United States, and, in view of the repeated inquiries made to me as referred to above, I have thought it would be desirable to send to the Department a full statement of all the acts of the present Government of Mexico, with copies of all official documents relating to railroads, especially connected with foreign interests and concessions, in the hope that the information contained therein may be of some interest and value to our government and its citizens.

1. The first indication given by the present administration of the Mexican Government of its sentiment in regard to foreign railroad enterprises, and to foreigners, is found in the revolutionary “plan “or proclamation of General Porfirio Diaz, dated at Palo Blanco, March 21, 1876. In that proclamation he gives, among others, as reasons for “raising the standard of war against the government of President Lerdo,” that the country has been delivered to the English company with the concession of the Vera Cruz Railroad; attacks the Lerdo government for granting a charter, as it alleges, to the same company for a railroad to the city of Leon 5 states that “it has been agreed to sell the English debt to the United States, which is equivalent to selling the country to the neighboring nation”; and charges that the Lerdo government “rob us of our future and sell us to foreigners.” This proclamation is herewith transmitted in an extract marked inclosure No. 1.

2. During the progress of the revolution, General Diaz, from his headquarters in Oaxaca, issued a decree dated September 26, 1876, in which he declared “null and without any force and effect” certain specified contracts made by the Ledro government, and also “any contract which may result in any burden to the nation.” After the triumph of his revolution and the occupation by him of this capital, this decree was published in the first issue of the Official Government Gazette, and was understood to be in execution of the spirit set forth in the proclamation above referred to. At the time of the overthrow of the Lerdo government, a contract made by the minister of public works with the International Railroad Company of Texas, for the construction of a road from this city to the Rio Grande, was pending in the Mexican Congress. Upon the publication of said decree of nullification, the representative of said company, Hon. E. L. Plumb, considering that this publication rendered his contract of no effect, withdrew from the country, and the subject was never called up in the new Congress. It is due to the present government, however, to say that it has only in exceptional cases insisted upon the absolute abrogation of the contracts of the late administration, although in some cases it has required material modifications of them. The decree is herewith inclosed (No. 2).

3. The revolutionary proclamation of General Diaz denounced the contract made by President Lerdo with the Central Railway Company to construct a road from this city to Leon. In November, 1874, the Mexican Congress had granted a charter to certain parties for that purpose. A company had been formed, the surveys had been made for a large part of the distance, and the active operations of the construction were being pushed forward with commendable energy, when the revolution broke out and soon spread into the section of country where the work of construction was in progress. The result was that the workmen were in large numbers impressed into the opposing armies, the disturbed condition of that region paralyzed the efforts of the constructors, and the company was compelled to suspend its work. To this embarrassment was added another, to wit, the revolution had so impaired the credit of the country in Europe, where the company was placing its bonds, that it rendered the negotiation at that time impossible.

One of the first acts of the Diaz government, after its accession to power, was to declare, in December, 1877, the charter of this company forfeited, and it proceeded to collect the bond of $150,000 which the company had given for the faithful fulfillment of its contract. At this juncture, the principal member of the company, Mr. William Barron, a British subject, solicited my good offices in the absence of any diplomatic representative of his own government, to prevent the execution of the harsh measures decreed. My efforts were only partially successful, as the government enforced the forfeiture of the charter, including all the work done upon the road, amounting to about $80,000, and the payment to the government of $32,000, which the company had received for the lottery franchise. This subject with a statement of the reasons of the government for enforcing the forfeiture, was reported in full to the Department in my dispatch No. 524, of April 30, 1877, which is made inclosure No. 3, herewith.

4. Soon after the Mexican Railway Company (from Vera Cruz to the city of Mexico) was completed, on the 15th of March, 1873, the executive, with the full authorization of Congress, made a contract with said company, formally entered into by both contracting parties, with mutual concessions and considerations, by which a new tariff of passenger and freight charges was agreed upon, and a settlement or new arrangement of the subsidy due for the construction of the road was made. By the latter, the government agreed to pay to the company $560,000 annually for the term of twenty-five years.

At the first session of the Congress elected under the new government of General Diaz, and in execution of the programme marked out in the revolutionary proclamation appended hereto, a committee was appointed to report upon what measures were necessary to be taken in regard to the contract of tariffs of March 15, 1873. At the following session, in October, 1877, the committee submitted its report, and on the 9th of said month a bill or project of law was presented, which was, after observing the usual legislative methods of debate and readings, adopted on the 9th of November, 1877, by the unanimous vote of the chamber of deputies, and was sent to the senate. This bill authorizes the executive to stipulate for a reduction of the tariff under the contract of March 15, 1873, and if no arrangement can be agreed upon with the company, the bill expressly provides for rescinding the contract by legislative act, and sets forth a tariff of freights in view of that contingency. A copy is transmitted herewith, marked No. 4. This bill caused such a feeling of opposition on the part of the more intelligent and liberal of the public men of this country that up to this date the friends of the bill have not been able to procure its passage by the senate.

Reference has been made to the clause of the contract of March 15, 1873, which stipulates that the Mexican Government shall pay to the railroad company, in lieu of the subsidy due at the completion of the road, an annual sum of $560,000. The government of Mr. Lerdo was able to make this yearly payment until the revolution of General Diaz broke out in 1876, when, owing to the state of war into which almost the entire country was thrown, occasioning a disorganization of the finances and a large increase in the expenses, the payment of the subsidy was suspended about the 1st of March, 1876. This suspension has been continued during the period of the present administration, for more than two years and a half, notwithstanding the revolution terminated successfully more than two years ago, and in spite of the constant and persistent efforts of the company to obtain the contracted payments. The amount due the company from the government on this account at the end of last year was, say, $1,800,000.

5. Thus far I have referred to the executive and legislative acts as to railroad matters affected by the Diaz revolution. I come now to speak of the conduct observed in reference to new railroad projects.

On the 12th of November, 1877, the minister of public works celebrated a contract with William J. Palmer & Co., of the United States, for a system of railroads from the city of Mexico to the Pacific Ocean, and to the frontier of the United States, to connect with the railroad system of our country. A Translation of the material articles, and an abstract of the others of said contract or charter, are made a part of inclosure No. 5.

It will be noticed that this contract provides that the line from this city to the Pacific shall be first commenced, and that the line to the Rio Grande shall not be commenced until that to the Pacific is completed; and also that the line to the American frontier shall be commenced, not on the Rio Grande, but at the point on the line to the Pacific where the frontier branch leaves the Pacific line. The contract also stipulates that the company and all persons who may take part in it as bondholders, employés, or in any other character, “shall be considered as Mexicans in everything connected with the enterprise”; they cannot allege their foreign nationality, nor can they appeal to their government or diplomatic representative “even in case of a denial of justice.” These latter conditions as to nationality have been inserted in all railroad contracts proposed by the Mexican Government for years past, and in the opinion of American capitalists, present a serious impediment to the investment of foreign capital in Mexican railways. This contract was submitted to the Mexican Congress for its approval in November, 1877. No definite action was had, and it came up again in the session of April–May, 1878, when a strong opposition was manifested to it, in the course of which one of the leading members of the majority of that body, the Hon. Alfredo Chavero, made a notable speech, which will be referred to hereafter, opposing all railroad connections with the United States as dangerous to the independence of the country. While the contract was pending a law was passed authorizing the executive to contract with the governors of States for the construction of railroads within their respective State limits. Under this law the federal executive has made thirteen contracts for as many independent roads or branches, which form a serious impediment to the carrying out of any general system of trunk lines. The friends of the Palmer contract urged its passage, but in lieu and as a modification thereof the committees of industry, to whom the general subject belongs, introduced a bill on the last working-day of the session, which was passed immediately, by a vote of 115 to 12, authorizing the executive to contract for a railroad from the city of Mexico to the Pacific Ocean only, thus defeating the Palmer contract. This latter bill, of which I transmit a translation as a part of inclosure No. 5, was sent to the senate, but has not as yet received any definite action of that body.

The Palmer contract was again brought up, with the approval of the minister of public works, in the last Congress, which met in September last. But all the efforts of the friends of a railroad connection with the United States proved fruitless, as the joint committees to whom the contract was referred did not report till the last working-day of the session, December 14, 1878, and then only obtained leave to submit their report in writing, which has just within the last few days been made public. I send a translation of those parts of the report of interest to the subject of the present dispatch, as a part of inclosure No. 5.

It will be seen that this report, which is a unanimous one on the part of the joint committees, asserts: (1st) that the most important railroad for Mexico is an interoceanic one within Mexican territory; (2d) that the Palmer contract should be amended so as to require the road to the Pacific to be the main trunk line, to avoid being subjugated to the monopoly of an American company, to the serious danger of the national independence; (3d) that the contract should be so amended as to require the company not to construct lines parallel or in competition with the state railroads without the consent of the latter; and (4th) that the railroad towards the United States should not make a connection with the American system, but should be required to go to Tampico or Matamoros, and thus the communication with the United States would be by water. The report concludes that the objects had in view in making these amendments have been to free Mexico from being made a colony or kind of a dependency of the United States and to prevent the two countries from being united by iron bands, which latter would cause only the scorn and indignation of future generations.

Such is the past and present state of the Palmer contract or charter, which has been the leading American enterprise before the Congress of the Diaz government.

6. On the 12th of October, 1877, the minister of public works made a contract or charter with Messrs. Ferguson & Lynion, representing American interests, for the construction of a railroad from the Mexican seaport of Guaymas, in the State of Sonora, to the American frontier, to connect with the Southern Pacific Road in Arizona. A translation of the material parts of said contract is inclosed (No. 6). This contract was submitted to Congress for approval in October, 1877, but no definite action being had, it went over to the session in April–May, 1878. Here it encountered much the same opposition and fate as that of the Palmer contract just stated, and it failed to pass that body at that or the subsequent and last session, ending December 15, 1878.

I have been informed that Messrs. Ferguson & Lymon have abandoned the hope of securing the approval of Congress to the Sonora charter, and are now seeking to revive, through the minister of public works, an old charter granted to David Boyle Blair in 1875, which had lapsed from the disinclination of capitalists to accept its provisions.

7. The last contract made by the executive with American parties was that for the construction of a railroad across the Isthmus of Tehuantepec, in favor of Mr. H. H. Hall, in representation of a New York company, which contract was signed on the 31st of October, 1878, and immediately submitted to Congress, and of which a partial translation is inclosed (No. 7). This charter, although it was not open to the objections urged against the lines leading to the American frontier, met with such opposition that it failed to pass Congress, and is still pending in that body. A considerable majority of the Chamber of Deputies seemed to favor the measure, and the company hope to secure its passage at the next session.

8. On the 6th of December, 1878, the Mexican minister of finance signed and sent to Congress a conditional agreement with certain parties, having in view a new funding of the public debt and the construction of a railroad from this city to the Pacific Ocean, with branches. The instrument should more properly be termed bases for a future contract, as it in express terms binds no one but the parties who may hereafter enter into the arrangement. I have already transmitted a translation of the agreement with my dispatch No. 855, of December 10 last, with full explanation of its contemplated objects. As it has met with and will encounter serious opposition in this country, and as there appears almost no probability of its realization, I do not think it worth while to do more in this connection than refer to my previous dispatch on the subject.

9. One phase of the railroad connection between Mexico and the United States is illustrated by the sentiments developed in this country on account of a series of resolutions introduced into the Senate of the United States by Senator Morgan on the 8th of May, 1878, of which I inclose a copy herewith (No. 8). These resolutions breathe a most friendly spirit, and were designed to develop a better state of political and commercial relations between the two republics. The last of the series contemplated a “treaty for the protection and encouragement of such citizens of either country as should with the consent of the Government of Mexico build and equip a line of railroad from the city of Mexico to the Rio Grande.” These resolutions, being published in this city, were denounced by the press as “a proposition to establish a protectorate” over Mexico. I give an extract from the comments of the oldest and one of the most prudent and influential newspapers in this country, the Siglo XIX, in inclosure No. 8.

The same subject has been within a few days past referred to in an official paper, prepared by order of President Diaz, by Senor Romero, minister of the treasury, and published in the official government newspaper. Señor Romero states that Mexico would not consent to celebrate with any government such a treaty in regard to railroads as that proposed by Senator Morgan, and least of all with the United States. (See inclosure No. 8.)

10. One of the leading speeches delivered in Congress in May last in opposition to the Palmer contract was that made by Hon. Alfredo Chavero, a gentleman of long experience in public life, of education and intelligence, and one of the most prominent and influential members of the ruling party in Congress. This speech, while it attacks the financial responsibility of the company, maintains that “it is very poor policy, very injudicious to establish within our country a powerful American company”5 that “we should always fear the United States,” and that the contract ought to be rejected in order to avoid “a danger for the independence and the future of the country.” The speech is inclosed, marked No. 9. It is similar in sentiment to those which have frequently been delivered in Congress of late years by some of the most distinguished statesmen whenever the question of railroad charters to the United States has been under consideration. Additional significance has been given to this speech from the fact that at the opening of the next Congress, newly elected in September last, Señor Chavero was chosen speaker of the Chamber of Deputies; and in reply to the opening address of the President of the Republic, in the presence of the diplomatic representatives as invited guests, in replying officially to the President’s address, he referred to the action of the previous Congress in regard to the Palmer contract, and stated that subsequent events had shown the wisdom of that action.

11. To complete the foregoing statement it is proper to add an exhibit of the present financial condition of Mexico, in order to form an estimate of its ability to pay subsidies for railroad construction. This statement is appended, marked inclosure No. 10. From this it appears that the government owes a foreign debt of over $130,000,000; that it has pledged the entire available receipts of the custom-houses and repledged a part of them, to the extent of 60 per cent., to secure the payment of the interest and the redemption of the principal of that debt, but for nearly a generation past has not been able, owing to its financial necessities, to make effective those pledges or pay the interest; that the present receipts of the federal treasury are only 70 per cent, of the expenses; that the receipts are decreasing and the expenses are increasing; that it has suspended for nearly three years its subsidy to the only completed line of railroad in the country, and that it has a large domestic or interior debt of unknown amount.

The foregoing statement is submitted in the hope that it may in some degree furnish the information asked of this legation in regard to Mexican railroads and railroad charters and construction.

I am, sir, &c.,

JOHN W. FOSTER.

[Inclosures.]

1. General Diaz’s revolutionary plan.

2. Decree annulling contracts of the Lerdo government.

3. Forfeiture of Central Railroad charter.

4. Bill modifying tariffs of Mexican Railroad Company.

5. Palmer contract; bill for interoceanic road; and report of joint committees of Congress.

6. The Sonora charter.

7. The Tehuantepec charter.

8. Senator Morgan’s resolutions; comments of Mexican press; and opinion of Mexican Government.

9. Chavero’s speech.

10. Financial statement of Mexican treasury.

[Inclosure 1 in No. 874.]

General Diaz’s revolutionary proclamation.

[Extract.]

Camp of Palo Blanco,
March 21, 1876.

To the Mexican People:

Considering * * * that the country has been delivered to the English company, with the concession of the Vera Cruz Railroad, and the scandalous agreement in regard to tariffs; that the excessive freights collected have stagnated commerce and agriculture; that by the monopoly of this line the establishment of other lines has been impeded, causing thus a lack of equilibrium in the commerce of the interior, the extinction of all the other parts of the republic, and the most frightful misery in all parts; that the government has granted to the same company, under pretense of a railroad to Leon, the privilege of instituting lotteries, thus violating the constitution; that the President and his favorites have stipulated for the acknowledgment of the enormous English debt, in consideration of $2,000,000 paid to them through their agencies; that this acknowledgment, besides being immoral, is unjust, as Mexico has not been indemnified for losses caused by the intervention; that aside from this infamy, it has been agreed to sell that debt to the United States, which is equivalent to selling the country to the neighboring nation; that we do not merit the name of Mexican citizens, not even of men, if we consent that those persons shall remain at the head of the administration, who thus rob us of our future, and sell us to foreigners.

* * * * * * *

In the name of outraged society and of the vilified Mexican people, we raise the standard of war against our common oppressors, proclaiming the following plan:

* * * * * * *

PORFIRIO DIAZ,
(and others.)

[Inclosure 2 in No. 874.]

[From the Diario Oficial, Mexico, December 4, 1876. General Diaz’s decree nullifying contracts or Lerdo Government.]

Porfirio Diaz, general-in-chief of the national constitutional army of the United Mexican States, to its inhabitants:

Know ye, that in the exercise of the war powers with which the national will has invested me, I have thought proper to decree the following:

• Article 1. The contracts of lease of the mints of the republic are null, and without any force or effect, which Sebastian Lerdo de Tejada or his agents may have made, as shall also be other contracts which he may make in the future, whether they refer to these mints or to any other branch of the administration.
• Article 2. The obligations shall likewise be null and of no value which the so-called government of Sebastian Lerdo may contract with the bondholders of the English debt, in any negotiation which may be agreed upon with them or their agents relative to the recognition of said debt.
• Article 3. Any contract which may result in any burden to the nation shall also be null and of no force.
• Article 4. The signers of any of the contracts to which the preceding articles refer, and all the individuals who directly or indirectly participate in their celebration, shall be deprived of every right, shall be judged by military commissions, and punished as traitors to the country, with the penalty which belongs to that crime, without prejudicing the civil responsibility which they may incur to the treasury or to the private individuals who may be damaged by reason of any contract with the said persons.
• Article 5. The sales, mortgages, or agreements which the responsible parties referred to in this decree and that of August 28 last may pretend to make, in order to avoid the civil responsibility which they may incur, apparently disposing of the property which they possess, shall have no force or effect from the moment in which the military commission which may judge them imposes upon them any penalty. Let it be printed, circulated, and communicated to whom it pertains for its most exact observance.

Given in Oaxaca the 26th of September, 1876.

PORFIRIO DIAZ.

Luis G. Curell, Secretary.

[Inclosure 3 in No. 874.]

Forfeiture of Central Railroad charter and confiscation of property.

Legation of the United States,
Mexico, April 20, 1877.

No. 524.]

Sir: In the month of December last I was called upon by the English banking and business house of Messrs. Barron, Forbes & Co., of this city, in the absence of a British diplomatic representative, to interpose my good offices with the government of General Diaz to prevent, if possible, the forfeiture of the concession granted by the Mexican Government to the Central Railway Company, of which company this firm was the leading member; and if the forfeiture of the concession was not to be avoided, to use my influence to save the property of this house from confiscation or embargo, as a threatened consequence of the forfeiture of the concession.

The facts of the case, as I found upon investigation, were as follows: In November, 1874, the Mexican Congress granted to certain specified persons a concession to construct a railroad from the city of Mexico to Leon in the State of Guanajuato, a distance of near three hundred miles, with power to organize a company to carry out the concession. The company was organized in conformity with the law of concession, under the name of the Central Railroad Company, the said house of Barron, Forbes & Co. being the leading members thereof. A bond in the sum of $150,000 was executed for the faithful performance of the terms of the concession on the part of the company, and as a security for the bond the hacienda of Barron, Forbes & Co., in the State of Morelos, and the country seat of St. D. Antonio Escundon, another member of the company, were mortgaged to the government. In due time the company proceeded to make the surveys and commenced the actual work of construction. But the revolution, which finally triumphed in December last, having been inaugurated, the company claimed that on account of its existence it was impossible to comply with the stipulations of the concession in respect to the times fixed for the completion of a certain extent of the road, for various reasons, among which were the following: the formidable character of the revolution threatening the overthrow of the then existing government had greatly impaired the credit of the company in the foreign money markets; and the forced impressment for the opposing armies and the disturbed condition of the country having greatly raised the price of labor, made it difficult to procure workmen and paralyzed the efforts of the company. Application was accordingly made to the minister of public works for an extension of the time fixed for the completion of the specified extent of the road before the date specified. The application was not acted upon by the government until after the expiration of the date fixed for completion of the extent of road required; but when acted upon (within a few weeks after the date) the government granted the application of the company in full and authorized the extension of the time.

Since the overthrow of the constitutional government of President Lerdo, the present revolutionary government of General Diaz, without giving the company any opportunity to be heard, declared the forfeiture or caducity (caducidad) of the concession, and this declaration was soon after followed by the embargo of the hacienda of Messrs. Barron, Forbes & Co., and the other mortgaged property, and the same were placed in the hands of government receivers, with instructions to proceed by summary sale to realize the amount of the bond of $150,000 as the penalty for the failure to construct the extent of road specified in the time fixed by the concession.

In view of the fact that there was no official representative of the British Government in this country, and that I am accustomed in urgent cases to exert my good offices, when requested, in behalf of resident British subjects and interests, I consented to endeavor to modify the action of the government of General Diaz, especially as I was satisfied that the course being pursued was not only an injustice to Messrs. Barron, Forbes & Co., but prejudicial to the credit and material development of this country. I therefore called upon Mr. Vallarta, General Diaz’s minister of foreign affairs, and had a lengthly conversation with him in December, and have referred to the subject at various interviews I have had with him since that date.

The position assumed by the present government was that the action of the Lerdo government was void in attempting to renew the concession after it had expired by the failure of the company to construct the extent of road in the time fixed, and that that failure had forfeited the concession. I endeavored to impress upon Mr. Vallarta the bad policy of a new and revolutionary government declaring null and void the acts of a preceding government relating to contracts, especially with foreigners who are investing their capital in public improvements; and I called Ms attention to the fact that the company had made its application to the government for an extension of time, with the reasons thereof, some time before the time fixed had expired, and that if the government had neglected to give the application prompt attention, the company ought not to be punished for this failure on the part of the government. I also remonstrated against the hasty action of General Diaz’s government in declaring the concession forfeited without giving the company an opportunity to be heard, and in proceeding so summarily to embargo the property of Messrs. Barron, Forbes & Co. I regarded it as a violation of individual rights which was wholly unwarranted by any principle of law, and expressly so when the concession itself expressly provided, in its fifteenth article, that “when any doubt or question shall arise respecting the interpretation or compliance with any of the stipulations of the present contract, it shall be decided by the competent federal tribunals of the republic, and in conformity with the laws thereof.” Mr. Vallarta claimed that the fifteenth article did not confer upon the courts the right to decide upon the question of the failure of the company to comply with the requirements as to progress of construction of the work, which he claimed was an administrative function, and that the government, in declaring the concession forfeited, was clearly justified by the principles of the civil law, which was the basis of Mexican jurisprudence. To which I replied that I did not understand that party to a contract freely entered into could plead a general principle of the civil, common, or any other law in avoidance of the plain stipulation of the contract of such a character as the fifteenth article. I transmit herewith a printed copy of the law or contract of concession for your information.

The government persisting in its action, as heretofore stated, Messrs. Barron, Forbes &Co. applied to the federal court of this district for a writ of “amparo,” or injunction, against the proceedings of the government. In the mean time, however, they continued to bring to bear upon General Diaz and the minister of public works whatever influence they could command; and after much delay, negotiations, and expense they have been able to obtain the release from embargo of their valuable hacienda by recognizing the forfeiture of the concession, including all expenditures made upon the road, amounting to about $80,000, and the payment of $32,000 to the goverment, which it alleged the company had received for the lottery franchise granted in the concession.

The loss sustained by Messrs. Barron, Forbes & Co. has been very considerable, but they congratulate themselves that it has not been so great as the government at first threatened.

I am, &c.,

JOHN W. FOSTER.

[Inclosure 4 in No. 874.]

Bill for the modification of the tariffs of the Mexican Railway passed by the Chamber of Deputies November 9, 1877.

• Article 1. The executive is authorized to stipulate with the Mexican Railway Company for a reduction in the present tariffs that may facilitate the exportation of national products.
• Article 2. In case it does not succeed, the necessary measures will be taken to bring about the rescinding of the contract of March 15, 1873.
• Article 3. The basis for the reduction referred to above shall be the following:

  1st. National products destined for exportation shall be divided into first, second, and third classes, and the freights paid to the Mexican Railway from Mexico to Vera Cruz per cargo of sixteen arrabos (25 pounds each) shall be $3 for the first class, $2 for the second, and $1.25 for the third; and from intermediate stations rates in proportion to these quotas shall be paid, according to the number of kilometers passed over from the intermediate stations to the port.

  2d. The classification of the goods into the three classes stated shall be made in proportion to the value of each one of them; and consequently, cereals and all kinds of grain will be placed in the third class; cereals and grain whose value exceeds $20 per cargo being excepted from this rule.

  3d. An equitative reduction shall also be made in the rates paid at present by national products going to the port, even when not intended to be exported.

  4th. A similar reduction will be made on the freight of national products coming up the road, wherever they may come from; the rates to be calculated in proportion to the distance traversed.

  5th. The classification referred to in the second clause shall continue in force five years, and at the expiration of this term it will be revived with the mutual agreement of the department of public works and the railway company.

  6th. National products intended for exportation may remain as long as twenty days in the warehouses of the company without paying storage; after this they will pay the quotas fixed by the present regulations of the company for the first week.

  7th. Upon issuing regulations for the use of the wharf and steam-launches possessed by the company, the executive will see that such a use does not become a monopoly in favor of the company, that may injure the working class of the port or curtail the liberty of exporters to select any point for embarkation.

  8th. The executive is authorized to purchase the wharf in case the company shall not be satisfied with the conditions re-established for its use.

• Article 4. The agreement which, in accordance with these bases, or others similar to those, may be made by the executive, will be submitted to the approval of Congress? and will in no way affect the legislation at present before the tribunals, nor any of the other questions pending between the executive and the Mexican Railway Company.

Committee-room of the Chamber of Deputies, Mexico, October 8, 1877.

• BLAS ESCOUTRIA.
• FELIX ROMERO.
• G. ROSAS.
• ANTONIO CARVAJAL.

[The report was adopted on the 9th of November, 1877, by the unanimous vote of all the deputies present, 134 members. See Diario Oficial, November 14, 1877.]

[Inclosure 5 in No. 874.—Translation.]

The Palmer-Sullivan Charter.

Contract of the minister of public works with W. J. Palmer & Co. for the construction of a railroad from the city of Mexico to the Pacific Ocean, and to the Rio Grande.

Chapter I.

Article 1. The firm of W. J. Palmer, James Sullivan & Co., and the limited companies it may organize, are authorized to construct and to operate during ninety-nine years, a line of railroad and its corresponding telegraph from the city of Mexico to the Pacific Ocean, and to the Rio Grande. (Here follows a provision that the government may purchase the road at the expiration of ninety-nine years.)

Art. 2. The route the line shall follow from the city of Mexico to the Pacific Ocean shall be that which, being surveyed by the company and approved by the department of public works, may result the most convenient to place the capital of the republic in communication, either by means of the principal line or the shortest branches which may be practicable, with the cities of Queretaro, Celaya, Salamanca, Irapuato, Marelia, Guanajuato, Silao, Leon, Lagos, Guadalajura, and Toluea (in case the company which at present hold the concession for the line between the city of Mexico and that named last should not conclude it within the term stipulated in this new concession, or in case said company should make an agreement with W. J. Palmer, James Sullivan & Co.) and to establish communication from the city of Mexico to the Pacific Ocean, at any point of the coast from the port of Manzanillo to that of San Bias, inclusive, that may be selected by the company with the approbation of the deparment of public works. The branches which the convenience of the routes oblige the company to construct in order that none of the aforementioned places remain unconnected with the trunk line, shall be constructed, kept in order, and operated by it on the same bases as the principal line.

Article 3. The line to the Rio Grande shall branch off from the road to the Pacific at the point which, according to the surveys of the company approved by the department of public works, may appear most convenient, and shall follow the course which, in conformity with the same requisites, may appear most appropriate to place the capital of the republic in direct communication, either by means of the principal line or the necessary branches, by the shortest practicable route (and which branches the company is obliged to construct, keep in order, and operate on the same basis as the principal line), with the cities of Aguasealientes, Zacatecas, Dnrango, Chihuahua, San Luis Potosi, Saltillo, and Monterey, striking the Rio Grande in Chihuahua or anywhere else the company, after the necessary surveys, may choose, with the approbation of the executive, at which point the railway will make connections, if it is convenient and possible, with some other road of the United States.

Article 4 provides for the necessary surveys and report thereof to the department of public works.

Article 5. The work of construction on the principal line of railway from Mexico to the Pacific shall commence so soon as the plans of the first section of one hundred and fifty kilometers are approved, and within eighteen months, counted from the same date, one hundred and fifty kilometers of said line shall be completed. In each of the subsequent years, after the expiration of the eighteen months, there shall be constructed at least one hundred and fifty kilometers more.

Article 6. So soon as the necessary surveys shall be completed and the point on the Pacific where the railroad is to touch is determined, the work shall commence at that point. The construction of the line from the Rio Grande cannot be commenced until the completion of the trunk-line from Mexico to the Pacific, and then it shall be commenced exactly at the point of union with that of the Pacific.

Article 7. The trunk-line to the Pacific shall be completed within the term of five years, and that to the Rio Grande within the term of eight years, counted from the date of the promulgation of the present concession.

Article 8 provides for a premium or bonus if the two roads are finished before the time fixed.

Article 9 provides that the gauge of the road shall be three feet.

Chapter II.

Article 10. The possession and exercise of all the rights and concessions to which the present law refers, as well as the compliance with all the obligations which it imposes, will pertain to the company or companies which William J. Palmer may organize.

Article 11. That said company or companies which it may organize, and all the persons who may take part in the former or the latter as bondholders, employe’s, or in any other character whatever, shall he considered as Mexicans, in everything connected with the said enterprise within the territory of the republic. They cannot allege rights with respect to the interests or business relating to the enterprise, nor can they have, even when they allege a denial of justice, other rights or other means of enforcing them, in anything concerning the said enterprise, than those which the laws of the republic concede to Mexicans; nor shall they employ other proceedings than those established by the Mexican tribunals; the enterprise remaining, in consequence, deprived of all right of foreign nationality, and the introduction of diplomatic agents in business relating to it being forever prohibited.

Article 12 provides that, within three months after the acceptance of the required bond, $4,000,000 shall be subscribed, of which 10 per cent, shall be paid up; subscriptions to be opened in Mexico as well as abroad.

Article 13. The statutes or regulations of the company to be approved by the department of public works.

Article 14. The company to keep an office in Mexico with a resident directory of five members, two of whom to be appointed by the government.

Articles 15 and 16. An agent to be kept in the city of Mexico, and all questions to be settled by the Mexican courts.

Articles 17 and 18 relate to the bonds, responsibility of holders, and the property of the company.

Article 19. Right to connect with the other roads and manner of making connection with them.

Chapter III.

Article 20. Neither the contracting company, nor any other that may succeed it in the future, can at any time transfer, dispose of, or hypothecate the concessions of the present law, relating to the railroad, the telegraph, or the annexed property, or the shares that may be issued, to any foreign government or state, nor admit a foreign government or state, in any case, as a partner in the enterprise, and any stipulation that may be made in violation of this article will be null and of no value.

Article 21. Right to emit preferred bonds, execute mortgages and obligations, with the method of registering them.

Article 22. To aid the construction of the lines of railway and telegraph to which this concession refers, the government obligates itself to give to the company a subsidy of $7,000 for each kilometer of railroad constructed and approved by the department of public works, according to the terms of this law, without duplicating the subsidy in case the company should construct a double track. This subsidy will only be commenced to be paid when the company shall have constructed and put in running order the first hundred and fifty kilometers. After this it will be paid by sections of twenty kilometers completed and approved by the department of public works. The obligations contracted by the government will in no case extend to giving a subsidy for a distance exceeding a total of two thousand seven hundred kilometers, without embracing in this extent the Toluca line in the case already mentioned in article 2, nor that from Durango to the Rio Grande, the sections of which will be subventioned the same as the others at the rate of $7,000 per kilometer constructed. The subsidy will be paid by the general treasury of the nation; but if any general law should create a more favorable mode for the payment of subventions of railroads, this contract will be accommodated to it. The company can under any circumstances export, free of duties, sums equal to the amount of the subventions when they shall be due.

Articles 23 and 24. Concede a right of way of 70 meters in width and the free use and working of all public grounds and mines in their limit, specifying the method of appropriating private property.

Articles 25 and 26. Free importation of all materials and supplies of every description for the construction and operation of the railroad for the term of twenty years, and exemption from internal taxation for fifty years. The officers and employés to be exempt from military service.

Article 27. Responsibility of the company for wages and materials on account of sub-constructors.

Article 28. The company to provide docks, wharves, and warehouses at the termini of the roads for the convenience of foreign commerce.

Article 29. The first line of steamers that shall be established from the Pacific terminus to Australia, Asia, North, South, or Central America, shall be exempt from all port duties. Vessels loaded with coal, machinery, or supplies for said steamers shall enjoy the same privileges as shall also those bringing rails and other materials for the railroad. Vessels coming to Vera Cruz conveying the same material shall enjoy the same rights. These privileges shall continue five years after the line to the Rio Grande is finished.

Article 30. The government will not collect transit tax during the first twenty-five years after the conclusion of the different lines, but the company will be allowed to collect $1 for each passenger and each ton of freight making through transit. Passports for passengers will not be required.

Artice 31. The terms fixed in this contract will be extended in cases of fuerza mayor.

Article 32. * * * 3. Within six months, counted from the promulgation of this law, the company will deposit the sum of $300,000 in the Monte de Piedad, of this capital, or give as security for an equal amount solvent proprietors or merchants domiciled in the republic, to the satisfaction of the government, the deposit or the security being indispensable to the existence and validity of the concessions made in this law, and the company losing the stated sum in case of not complying with the obligations stipulated in article 5. * * *

Article 33 gives causes for the forfeiture of the concession.

Article 34 provides for an annual report to be made by the company.

Article 35. Tariffs * * * Passengers: first class, 3 cents per kilometer; second class, 2 cents per kilometer. Freights per kilometer: first class, 5 cents per ton; second class, 4 cents per ton; third class, 2½ cents per ton.

Article 36 authorizes the company to establish discriminating tariffs in favor of large amounts or great distances.

Article 37 authorizes a special tariff for baggage and exceptional goods.

Article 38. No increase of the tariff can be made without the approval of the department of public works, and then requires to be published two mouths before taking effect.

Article 39. Charges shall always be made on a basis of perfect equality.

Article 40. The dividing of the three classes of freight to be approved by the department of public works.

Article 41. Transportation for the government to be done at a reduction of 50 per cent, on the ordinary tariff.

Article 42. Mails to be carried free for twenty years.

A bill conferring upon the executive power to contract for a railroad from the city of Mexico to the Pacific.

[Extract from official debates of the Chamber of Deputies, May 29, 1878, page 450.]

[Translation.]

The first and second joint committees on industry presented the following amendment to the projected law under discussion relative to an interoceanic railroad (W. J. Palmer & Co.):

Sole Article. Authorization is given to the President of the Republic to the end that during the recess of the chambers he may contract for the construction and operation of an interoceanic railroad, with the understanding that the (other) contracting party will be obliged to avail himself of the concessions for lines conceded to the States, which will construct them themselves, or by means of the companies to which they concede such right; in order to do which, the executive will have to obtain the consent of the said States, and without being permitted the construction of parallel lines or lines in competition with the States.”

This bill being immediately taken into consideration, it was approved in general by 116 votes to 7, and in detail by 115 votes to 12; then being sent to the Senate according to the constitutional requirements.

[Translation.]

Report of the first and second joint committees of industry of the Chamber of Deputies upon the contract entered into by the executive of the union with James Sullivan, for himself and in the name of William J. Palmer & Co., for the construction and operation of various railroads from Mexico to the Pacific Ocean and to the River Bravo del Norte (Rio Grande).

preliminary notes.

Note No. 1.

On the 12th of November, 1877, the minister of public works of Mexico celebrated a contract with William J. Palmer & Co., of the United States, through their representative, Mr. James Sullivan, for the construction of a system of railroads from the city of Mexico to the Pacific Ocean and to the frontier of the United States, to connect with the railroad system of that country.

• Article 2d of said contract provides for the construction of the railroad from the city of Mexico to some point on the Pacific Ocean at or between the ports of San Bias and Manzanillo, passing through en route the cities of Queretaro, Celaya, Salamanca, Irapuato, Morelia, Guanajuato, Silao, Leon, Lagos, Guadalajara, and Toluca, or connecting the said cities with the main line by branch roads.
• Article 3d provides that the line to the Rio Grande shall leave the line to the Pacific Ocean at such point as shall appear the most convenient, after the proper surveys are made, with the approval of the minister of public works; that this line shall touch the Rio Grande in Chihuahua or such other point as the company, after the necessary surveys, may select, with the approval of the said minister; and that said line shall connect either directly or by branches the cities of Aguascalientes, Zacatecas, Durango, Chihuahua, San Luis Potosi, Saltillo, and Monterey.
• Article 6 provides that the line to the Pacific Ocean shall be commenced at the point fixed on said ocean immediately after the surveys; and that the line to the Rio Grande shall not be commenced until the line from the Pacific to the city of Mexico is finished.

Note No. 2.

This contract was submitted to the national Congress for its approval at its session in November, 1877. No definite action was had at that session of Congress. At the next session, in April-May, 1878, a strong opposition was manifested. During the pendency of the contract a law was passed authorizing the federal executive to contract with the governors of States for the construction of railroads within their respective State limits. Finally the contract of W. J. Palmer & Co. failed to pass, and in lieu thereof a bill was introduced into the Chamber of Deputies by the committees of industry on the last working day of the session and passed immediately on the same day by a vote 115 yeas to 12 nays authorizing the executive to contract for a railroad line from the city of Mexico to the Pacific Ocean only, and upon the express condition that arrangements must be made with the States with which the executive may have made contracts, and that in no case should lines he constructed parallel to the State railroads or in competition with them. A new Congress was elected in July, 1878, and when it convened in September last the contract of W. J. Palmer & Co. was, with the approval of the minister of public works, submitted to the new Chamber of Deputies. The contract was again sent to the Committees of industry of the Chamber of Deputies for examination and report. Notwithstanding the earnest and persistent endeavors of the friends in Congress of an international railroad to connect with the American system of roads, no final report could be obtained from the committees until the day before the adjournment, December 14, 1878, when it was impossible to obtain any action of Congress on the contract. The report of the committees has only been printed and made public within the last few days. Translations of extracts from said report are given below, embracing such parts of the report as relate to the 2d, 3d, and 6th articles of the contract referred to above and to the general subject of a railroad connection with the United States.

Note No. 3.

Upon reading the extracts hereafter given from the report of the committees of industry of the Chamber of Deputies it will be seen that the following points are made therein:

1st. That the most imporant railroad for Mexico, the most beneficial to its nationality, and the most convienient for commerce, is an interoceanic road, from ocean to ocean, within Mexican territory.

2d. That article 2d to the contract should be so amended as to expressly require that the line to the Pacific should be the main trunk, in place of the line to the Rio Grande, to avoid being subjugated by the monopoly of an American company, to the serious danger of the national independence.

3d. That the contract should be so amended as to require the company not to contact lines parallel with or in competition with those projected by the States, and with permission to obtain from the States the right of way or connection with their lines.

4th. That article 3d of the contract should be so amended as to fix the point where the branch line should leave the main trunk at or beyond Guadalajara; and that said branch line should only extend, in the direction of the Bio Grande, to Tampico, or at the farthest to Matamoros. The report states that if these modifications are not made, and a direct connection with the American system of railroads is permitted (as contemplated in the original contract) at a point not a Mexican seaport, the benefits to be derived from the railroad would be realized outside of Mexico and without profit to it. The report contemplates that the competition in Mexico of American commerce with that of Europe must be by water communication and not by railroad.

The report concludes by stating that the object which the committees have had in view in proposing the amendments to the Palmer contract referred to, which require the proposed railroad to be (1st) a purely interoceanic line, and (2d) which prevent its connection with the American system of railroads, has been to free Mexico from being made a colony or kind of a dependency of the United States; that only by a system of railroads confined to Mexican ports alone can the country advance with liberty and its independence be guaranteed; and never would the committees consent to having the two republics united by iron bands (a railroad), as by doing so they could hope for nothing but scorn and indignation from future generations.

The translation of the extracts from the report is as follows:

Mexico, January 28, 1879.

secretary’s office of the chamber of deputies of the congress of the union.

first and second joint committees of industry.

* * * * * * *

Referring to an interoceanic communication the committees say:

“The first attempts were made by Tehauntepec, as was natural, and even to-day this respectable chamber has pending the discussion of the last project; but as the most important road in our opinion is that which would pass from ocean to ocean through the center of the republic, touching at its most important centers of population, we think this is the most worthy of the care and attention of the legislative power of the union, as it is the most beneficial to our nationality, the most convenient for commerce, until the Tehuantepec canal is realized perhaps the shortest and safest, and finally would result in making Mexico the radiating center of universal commerce, at the same time developing its own commerce, as, being midway between Asia and Europe, it could realize this result at the least price, being in advantageous competition with all markets.

* * * * * * *

“With respect to article 2d, it is indispensible to make some observations of grave importance. The first that occurs is the simple consideration of its views, and is the following: Will the line from Mexico to the Pacific necessarily be a trunk line? It appears not, as the connection of these two points, according to the wording of the article, may he by means of a principal line or the necessary branches; so that in this part the fundamental idea of the concession specified in article 1st is departed from, making possible as a result the ambiguity that the line from the Pacific would come directly, not to the capital of the republic, but to some point which the company might consider convenient to its interests. The princial interoceanic communication, the true trunk-line, would result to be that which would afterwards be constructed in the direction of the Rio Grande, which is the straightest under this system; the greater part of the republic remaining, by the realization of this idea [cunningly involved by the wording of Article No. 2], at one side of the American trunk-line, as a species of appendix or tributary of secondary importance; and besides, the republic would be constructing through its territory, with its own money and its own elements, a direct interoceanic line for the United States of the North, and the so-called interoceanic road of Mexico would never exist solely and exclusively of and for this country. The second observation is also grave, as conceding the construction and operation of the branches to Queretaro, Celaya, Salamanca, Guanajuato, Silao, Leon, Lagos, Guadalajara, and Toluca, and these branches being united with those spoken of in article 3 in the line to the Rio Grande, would result in the government disposing of the entire system of railroads in the center of the republic, with serious damage to commerce, to the industries, and to agriculture, which sooner or later would be subjugated by the monopoly of a company whose principal interests are in the neighboring republic; and would also result in a serious danger to the national independence and autonomy, and the country being enveloped in a real network of iron would be deficient in elements for its real progress and in resources for its defense in case of necessity. The third and last consideration has, in our opinion, as much importance as the preceding ones, consisting in the fact that Mr. Sullivan’s concession, as it now exists, would kill the concessions which have been made to the States, because either there would be established by his company parallel lines, or they (the States) would be compelled to contract with Mr. Sullivan, or, finally, they would be cast aside by means of a general combination of interests which would be superior to the interests of the States; so that the result would in any case be that these enterprises could not exist, and that the money of the republic, with its own resources conceded to Mr. Sullivan by way of a subsidy or otherwise, would destroy the interests of the republic itself in the States, and close the door to all spirit of Mexican or European enterprise.

“For these reasons the committees are of the opinion that the conditions of article 2d should not be approved, unless amended so as to only embrace a trunk line direct from the most convenient point on the Pacific Ocean to the capital of the republic, touching the most important centers of population in its route, and with permission for the companies to afterwards make contracts with the States for the construction, right of way, or connection with their private lines.

“With respect to article 3d the same observations should be made in general as with regard to the foregoing, but there are others proper and especial with respect to the different points which it embraces. In the first place, the committees think, the existence of the trunk road from the Pacific to the capital of the republic being taken for granted, that the branching off of the line going to the north or northeast should not take place this side of the capital of the State of Jalisco (Guadalajara), a point by which doubtless it would have to pass in order to fulfill the requirements of the national interests, this being understood even in case the aforesaid trunk line should in the course of time have a double track; in the second place, the committees also think the line in question should go to Tampico or at the farthest (north) to the port of Matamoros; in the third place, that the company could also make contracts of connection, right of way, or construction with the States of Aguascalientes, Zacatecas, San Luis Potosi, and Nuevo Leon, which already have their own concessions, as the article being amended in this manner it would produce the results which the country expects to obtain by the construction of a road really interoceanic, and would place in connection our lines of mercantile communication at that point, without damaging either the material interests of the country or those of any kind, or those of the contracting company, which would have at the point selected communication in a Mexican port with the commerce of Europe and with that of the United States in its transit to India; the United States being able to enter into competition as to the value of European goods on account of the nearness and the facility for communication by water, that port being, as it would be, approximately half-way between the Asiatic and European continents, and having besides a facility for commerce with Mexico on account of the closeness of communication; otherwise the advantages of that great mercantile movement would never be for Mexico, as, if that interoceanic line should be diverted to any other point of our frontier in order to effect its communication with European commerce through any port not Mexican, all the profits of the mercantile transactions, of exchange and of the other operations of traffic, would be realized outside of our territory and without benefit to us.

* * * * * * *

“We must conclude by manifesting that the committees, being convinced of the immense importance of a road really interoceanic, all they have attempted to attain has been that the benefits that should; result remain definitely assured to Mexico, their country; the future of the nation is what they have endeavored to procure, and for this reason they hope their imperfections and errors will he excused with a goodwill; to free the country from becoming converted into a great colony, into a species of dependency, has been our aim; to consent to leave it forever united with real bands of iron, in order to hope for nothing but scorn and indignation from future generations, we could never have consented nor even imagined such a thing. The blessings that would result to Mexico by the construction of an interoceanic road on the soil of its territory, touching at its important “centers of population and terminating at its ports on the Atlantic and Pacific Oceans, would give as a result that our territory would become one of the centers of the commerce of the world, realizing the prognostications of the wise Baron Humboldt, that this great line would serve as the true base and foundation of the lines of the States, which only by contact with it could be formed and exist; that only by this system can the exportation of our tropical fruits be facilitated, equalizing the exports and imports, the only means by which our country can commence to advance with liberty, and constituting an epoch in which the agricultural, mercantile, and industrial development would have the beginning of true progress, and finally that once realized the great end of transit and traffic of a great part of the commerce of the world, through the center of our territory, our independence would be guaranteed in the most just, the most powerful, and the most indestructible neutrality—by that of the security and guarantees of the interest of the most powerful nations of the world; for these grave reasons, which require essential amendments of the contract, the committees conclude by submitting to the respectful consideration of the chamber the following proposition:

“With the amendments contained in the following report, the clauses of the agreement entered into between Mr. Sullivan, W. J. Palmer & Co., and the secretary of public works are submitted to discussion for its approval and amendment, in accordance with the prescriptions of the regulations.

“Hall of sessions of the Congress of the Union, Mexico, December 14, 1878.

• “IGNACIO TRUJILLO.
• “PEDRO COLL ANTES.
• “J. FLORE’S.
• “PABLO MACEDO.
• “WENCESLAO RUBIO.

(On the margin:) “December 14, 1878. By order of the committee this report is ordered to be printed.”

This is a true copy, to which I certify.

Mexico, December 16, 1878.

J. G. BRITO,
Chief Clerk.

[Inclosure 6 in No. 874.]

The Sonora Charter.

[From the Diario Official, October 20, 1877.]

Contract made by the minister of public works with Messrs. David Ferguson and Sebastian Camacho, representing Mr. Robert R. Symon, for the construction of a railroad from Guaymas to the north of the State of Sonora or Chihuahua.

• Article 1. Authority is given to Messrs. David Ferguson and Robert R. Symon, or the limited company which they may organize in or out of the country, to construct and operate a line of railroad, and its corresponding telegraph, from the port of Guaymas to the northern frontier of the State of Sonora or of that of Chihuahua.
• Article 2. The route which said railroad shall follow shall be that which, in view of the surveys made by the company, and approved by the department of public works, may be found most appropriate in order to place the port of Guaymas in communication with the city of Hermosillo, and continuing towards the north until reaching the point of the frontier already stated, the company being at liberty, if agreeable to its interests, to unite the principal line by means of the necessary branches with the cities of Ures and Alamos and connect it with some railway of the United States of North America, but without occupying the public roads.

Note.—It is required in subsequent articles that the surveys of the first 100 kilometers shall be completed within fourteen months and the remainder within twenty months from the date of approval of the contract.

The work of construction shall commence within twelve months from the approval of the first plans of surveys by the department of public works, and within twenty months from said approval 50 kilometers shall he completed from Guaymas, and each subsequent year 100 kilometers shall be constructed, until the entire line is finished.

The gauge of the railroad shall be 4 feet 8½ inches.

All the other articles of the contract not quoted below are similar in their provisions to those contained in the contract of W. J. Palmer & Co. referred to in inclosure No. 5, accompanying herewith.

• Article 12. Said company and all persons who may take part in it, either as shareholders, employés, or in any other character whatever, shall be considered as Mexicans in everything within the territory of the republic relating to the said enterprise. They cannot allege the rights of foreign nationality with respect to the interests or business connected with the enterprise, nor will they have other rights or means of enforcing them in anything referring to the said enterprise, not even when alleging a denial of justice, than those which the laws of the republic concede to Mexicans, nor can they employ other proceedings than those established before the Mexican tribunals.
• Article 22. To aid the construction of the railroad and its branches, wharf, telegraph, and other dependencies, to which this accession refers, the federal government obligates itself to give to the Limited Railway Company of Sonora, in the character of a subsidy, the sum of $5,000 for each kilometer of railway which it constructs. This subsidy will be paid to the company or to its agents by the general treasury of the nation in installments of $50,000 for each section of 10 kilometers of railroad, and telegraph constructed to the satisfaction of the department of public works and in conformity with the stipulations of this contract.
• Article 35. All foreign effects and goods only destined to cross the country by this road going to a foreign country and not for consumption in the republic will be free from all kinds of duties, as well as from all contributions and imposts of every class, for five years. The secretary of the treasury will fix the formalities which will be observed in the loading and unloading of the effects and goods at the two extremities of the said line and in their transportation by the railroad, to the end of preventing any fraud or abuse that might be committed during the transit through Mexican territory; but those formalities or precautions shall be such as not to tend to delay or embarrass the punctual and rapid dispatch and transit of the trains and goods, baggage and passengers, without prejudice to the right which the executive reserves to examine them at any point on the road.
• Besides the price stipulated in the tariff, the company will collect a maximum addition of $1 for each passenger and $1 for each ton of effects or goods making the whole transit across the country, and the company will collect this addition on account of the government, without cost to the latter, making the liquidation and paying the balance every six months.
• Article 36. * * * III. Six months from the date of the approval of this contract the company will give a bond, to the satisfaction of the government, for the amount of $50,000, this requisite being indispensable to the existence and validity of the concessions made in this contract, and said company losing the stated sum in case it does not construct the principal line from Guaymas to the frontier of Sonora or Chihuahua within the terms stipulated in articles 7 and 8.
• Article 40. So soon as the branches of the road are placed at the service of the public, the company shall fix the tariff of prices which are to be collected for the transportation of passengers, effects, &c., which cannot exceed the following:
  • Freight per ton.—First class, 10 cents per kilometer; second class, 7 cents per kilometer; third class, 5 cents per kilometer.
  • For the transportation of passengers.—First class, 7 cents per kilometer; second class, 4 cents per kilometer.

Mexico, October 12, 1877.

• VICENTE RIVA PALACIO,
  Secretary of Public Works.
• DAVID FERGUSON,
• For ROBERT W. SYMON.
• S. CAMACHO.

[Inclosure 7 in No. 874.]

Tehuantepec Railroad Charter.

Contract entered into between the department of public works, representing the executive of the union, and Mr. Eayden H. Hall, representing Mr. Edward Lamed, for the opening of interoceanic communications and the execution of hydraulic works on both coasts of the Isthmus of Tehuantepec.

Article 1. Authority is given to Mr. Edward Larned, or the company which he may organize, to construct a railway and its corresponding telegraph across the Isthmus of Tehuantepec, and to operate them during ninety-nine years, tinder the conditions expressed in this contract.

Article 2. The grantee obligates himself to deposit in the Monte de Piedad, of this capital, as a bond, within the terms of six months, counted from the date of the approval of this contract, the sum of $100,000 in Mexican silver coin. If, at the time above indicated, the company shall have constructed hydraulic works of the value of $200,000, or introduced railroad material of an equal amount, or constructed 26 kilometers of railroad, the subvention of which is equivalent to the sum already stated, the deposit may be substituted with $200,000 worth of mortgage bonds of the company.

Note.—The surveys shall be commenced immediately, and the work of construction shall be begun within four months after the contract is approved by Congress, and the entire road to be completed within three years from said date, at least 73 kilometers in each year. Privilege is conceded to the company to make all necessary improvements and hydraulic works at the bars and in the rivers and waters at the termini of the road.

The gauge of the road is to be 4 feet 8½ inches and either single or double track.

The other articles of the contract not quoted below, as to free introduction of material, organization of the company, and other matters, are similar in their provisions to those contained in the contract of Messrs. W. J. Palmer & Co., referred to in inclosure No. 5, accompanying herewith.

Article 8. To aid the construction of the railroad and telegraph line, the government, beside the stipulations contained in this contract, obligates itself to give to the company a subsidy of $7,500 for each kilometer of railroad which it constructs, and is approved by the department of public works. The government obligates itself not to subvention another enterprise for similar works on the same line for twenty years. The obligations contracted by the government will in no case be extended to giving a subsidy for a number of kilometers exceeding 300.

Article 9. This subsidy will be satisfied by sections of 5 kilometers, completed and approved by the department of public works, and paid as it falls due by the general treasury of the federation. But should any general law create a more favorable mode of payment, accorded to enterprises of this class, this contract will be accommodated to it. The company can, in any case, export, free of duties, a sum equal to the subventions, so soon as they are due.

Article 10. For the construction and operation of the railway and telegraph lines authorized by this contract a right of way of 70 meters in width along the whole extent of the railway is conceded. Of the public lands that may exist, the government gives to the company, besides the strip necessary for the road, half of the public lands that may be found within a league on each side of the railway throughout its whole extent; by public lands being understood only those lands not disposed of to individuals at the date of the approval of this contract.

Article 14. The company will be under obligation to construct and keep in order two coast-lights of the first class, of the most perfect French model, one in Coatza-coalcos and the other in the Upper Laguna, which must be finished within the limits fixed for the termination of the railroad; which lights will belong exclusively to the government. The company will establish, besides, under the same conditions, the lights that may be necessary to indicate the entrance to the ports.

Article 16. The company will be under the obligation to dredge that part of Coat-zacoalcos River which it intends to navigate.

Article 17. Power is granted to the company to collect tolls, transit dues, wharfage, storage, and any others for freight goods, transportation of passengers, and transmission of telegrams, but the tariff fixed by the company for the total of all these charges, only excepting that of storage, shall not exceed 5 cents per league for each arroba (25 pounds) of goods, one per cent, of the value of precious metals and jewels, it being understood that these figures are for the whole line. Passengers making the transit will pay 30 cents per league.

Article 22. The concession made to the company will continue in force ninety-nine years, counted from the date upon which the railway and telegraph are placed at the service of the public in their whole extent; during the first thirty years the government will receive by means of liquidation and monthly payments 12 cents for each passenger and 25 cents for each ton of goods making the transit of the whole line. The government in order to make sure of the correctness of the company’s accounts will have a representative with power to intervene in all the operations of the latter. The interest on bonds or the obligations that may be emitted will not be held as expenses of operation except in the part corresponding to the amount really invested in the construction of the railway and its dependencies

Article 24. * * * Tariff B.—For the transportation of passengers for each kilometer of distance and for each person transported: First class, one cent and a half; second class, one cent; third class, one-half cent. Tariff C—For freight per ton and each kilometer of distance: First class, five cents; second class, four cents; third class, three cents; baggage in passenger trains and explosives in freight train, 10 cents.

The company will be obliged to carry to any point on the whole line, free of expense, the letter and newspaper mail sent over it, dispatched by a proper officer receiving it and delivering it with due punctuality. It will also transport all products and effects belonging to the government for half of the tariff price. It will also transport, free of charge, the officers, troops, employés, or agents of the general government or of the States when traveling in the public service. It will likewise transmit free of expense by its telegraph line all the messages sent by the functionaries of the Mexican Republic or of any of the States thereof, relating to public business.

Article 31. The company undertakes to pay what may be legally and justly due of the loan made by Mr. Falconett to the Sloo Company, the government continuing free from all presenter future responsibility for this loan, as well regarding the present-enterprise as the former ones, without this diminishing the profits due it, of the products of the road.

Article 32. The enterprise to which this law refers is and will always be Mexican, and the company for the transit of Tehuantepec, even should it be organized abroad, will always be considered as now constituted in the Mexican Republic, as if it had been formed and organized in it, in accordance with Mexican laws, but if it should be thought proper to constitute separate companies under the company name that may be selected for each or several of the branches comprehended in the work to be executed, such companies may be formed and organized either in the republic or in the United States, in conformity with the general or special laws of the place where they are constituted, although they must always be comprehended in the dispositions relative to the principal company, and as dependent in everything upon the same exclusively Mexican, and consequently subject to the prescriptions of this contract, the present company being in everything responsible for the business as a whole for the subdivisions into which it may be divided.

Article 33. In virtue of the provisions of the foregoing article the company organized by Larned and any other that may succeed it, as well as all the foreigners and their successors who may take part in the enterprise, either as shareholders, employés, or in any other character whatever, will be considered as Mexicans in everything referring to said enterprise; they cannot allege in any case the right of foreign nationality respecting the business relating to the enterprise; they will only have in case of denial of justice the same rights and means of enforcing them in everything concerning the enterprise that the laws of the republic concede to Mexicans, and can only make good the rights to which they are entitled before the Mexican tribunals.

* * * * * * *

Mexico, October 31, 1878.

• VICENTE RIVA PALACIO,
  Minister of Public Works.
• H. H. HALL.

[Inclosure 8 No. 874.]

Senator Morgan’s resolutions introduced in the Senate of the United States, May 8, 1878.

Whereas the people of Mexico, animated with the love of free government which distinguishes the people of the United States of America, have long adhered to a republican form of government as that which is best suited to preserve their liberties, and have maintained their free republican institutions, under the embarrassment of the most adverse circumstances, with an honorable devotion to their principles, which merits the sympathy and regard of the American people; and

Whereas the most essential interests connected with the welfare and prosperity of the people of both governments in their various relations require that permanent peace should be maintained between them, and that confidence, good will, free intercourse, and liberal reciprocal advantages of trade and commerce should be established:

Resolved by the Senate (the House of Representatives concurring therein), 1. That in defining and settling by treaty the relations of the United States of America with the Republic of Mexico, it is just and expedient and in accordance with the interest which the people of the United States have in the maintenance of the right of self-government on this continent that the present boundaries between Mexico and the United States shall be guaranteed as permanent and inviolable.

2. That it is proper that both governments shall engage that the territory of each shall be protected against conquest by any power residing beyond the seas.

3. That it is expedient that liberal provisions shall be made by treaty to secure to the people of both countries the equal and reciprocal advantages of intercourse, trade, and commerce with each other, and that, to increase the advantages of such intercourse and to place upon a stable footing the peace and friendship of the two republics, it is expedient that such mutual agreements shall be entered into as will protect the borders of both countries from the predatory raids of bands of outlaws, and that persons who are citizens of either country residing in the other shall enjoy the rights of hospitality secured to the citizens of the most favored countries, and shall be free from all unlawful interferences with or arbitrary exactions and assessments upon their persons or property.

4. And it is also expedient to provide by treaty for the protection and encouragement of such citizens of either country as shall, with the consent of the Government of Mexico, build and equip a line of railroad from the city of Mexico to the Rio Grande, in the direction of San Antonio, or in Texas, to any point on the borders of the United States to connect with a line or lines of railroad at the boundary between the United States and Mexico, and to secure the safe transit of the citizens of each republic and their property over such line or lines of railroad within the territory of each republic, subject to such commercial regulations as shall from time to time be agreed upon by the respective governments.

Comments of Mexican press on Senator Morgan’s resolutions.

[From the Monthly Review of the Siglo XIX, June 29, 1878.]

The newspapers from the United States refer to two events which have produced a deep impression in this capital. * * * The other event is that which relates to a proposition presented to the North American Senate to establish a protectorate in respect to our country. * * *

The proposition in regard to a protectorate has a significance of another kind. For the present it is nothing more than the idea of a Senator, but it is impolitic and opposed to the favorable exit of the negotiations pending between the two republics. All that which in Mexico affects the sentiment of neutrality causes a prejudice against those who in any manner may succeed in offending.

Opinion of Mexican Executive on Senator Morgan’s resolutions.

[Extract from the reply of Sr. Romero, minister of finance, to Mr. Foster’s letter to Chicago manu facturers, prepared by order of the President.]

• 100. * * * Mexico could not celebrate a treaty with the United States nor with any other power by means of which she would consent that a foreign government might guarantee the fulfilment of a private contract made by Mexico for the construction of a work within her own territory. This would be equivalent to recognizing beforehand, and in a solemn and formal manner, her impotency to comply with the obligations which she might contract; and a nation which should commence by recognizing this impotency would merit no respect whatever from the civilized world, and for its own decorum ought to abstain from celebrating a contract which it itself knows it could not fulfill unless stimulated and obliged by the nation whose guarantee it should accept for the fulfillment of the agreement.
• 101. If the events be considered which have occurred between Mexico and the United States, concerning which notice will be taken further on, it will not appear strange, but on the contrary very natural, that Mexico has with the United States greater difficulties even than those encountered in treating with any other power for the celebration of a treaty of this kind.

[Inclosure 9 in No. 874.]

opposition to american railroads in mexico.

Speech of Hon. Alfred Chavero in the National Chamber of Deputies, May 22, 1878.

[The first part of the speech is an attack upon the responsibility of persons who apply for the concession, charging that they do not possess or represent the pecuniary capital necessary for the enterprise, which, owing to its personal character, is omitted.]

The argument which I am about to make has already been made on another occasion by a man as patriotic as Mr. Lomus, one of the most valiant men whom I have known, and who has also been very cowardly when the future of the nation has been under discussion. It is a pleasure for me to be a coward in company with such valiant men.

I think, sir, that it is very poor policy, very injudicious, to establish within our country a pewerful American company. Perhaps I should not venture to meet this question; but when I believe that I comply with my duty, although I fear for the good of the country, I have no fear of anything else. Let ine suppose that this company is exceedingly rich; let me suppose that this company is going to build the railroad for us in five years, in five days; then I tremble at this, because we are going to establish within our territory an American influence.

I do not fear to speak of the American question. In the Senate and in the Congress of the United States they talk of our questions, and they are neither more valiant nor have they a better right than we to consider them.

The United States have at the present time slight difficulties with us; the gentlemen deputies see that I am kind and call them slight. It is very probable that in the future they will continue to have them, that they may even have graver difficulties. The whole nation has seen the attitude taken by the United States upon the change of situation, and how much time has been consumed in the recognition of our government; and they did it, not from good will; and they did it, not as the result of our measures, but because a Senator named Conkling, an enemy of Mr. Evarts, in order to make war upon him, brought about the recognition of our government. And a question of internal politics, one of opposition on the part of Mr. Conkling and of adjustment on the part of Mr. Evarts, produced this recognition; it was neither kindly feeling nor the recognition of justice of our case which produced it.

It is necessary to speak the whole truth, and it is known that difficulties are pending.

In a former Congress a minister of foreign affairs of Mr. Juarez, who never had fear, presented these same observations, these same difficulties; there was no lack of deputies who called him a coward, and who said that in the United States the Republican party was in power, which was the friend of Mexico.

But we have seen during the administration of the Republican party that General Grant, our friend, did not hesitate to state in a message that the manifest destiny of the United States was to acquire territory. Very well; to-day things have changed; the Democratic party, our enemy, has such influence in the United States that it already has the ascendency and influences Mr. Hayes himself, and Mr. Hayes has given us no other proof of regard than the postponement of our recognition for a year and a half. But I desire to think that the United States are our best friends and not to doubt that Mr. Hayes has the desire to always preserve a good understanding with us; but are we Mexicans so inferior that we can see nothing but the present hour and have no thought for the future?

There are two severe laws in history, and these laws are not to be forgotten. The first is this: Border nations are natural enemies. A certain English writer said, “Happy Great Britain, that has no other frontier than the seas”; and without referring to history, but considering only contemporaneous acts, who despoiled France of a section of territory? The bordering nation, Germany. Who is invading Turkey at the present time? The bordering nation, Russia. Why are preparations being made for a war between England and Russia? For the border possessions of Asia, possessions of England and Russia. What war is there between Spain and Switzerland, between Italy and Russia? None. It is a natural law of history that border nations are enemies. They may appear to be very friendly in their relations, because one fears the power of the other on account of its superior diplomacy or of its peculiar policy; but at the bottom, naturally, in conformity with the laws of history, border nations are enemies.

And this is so true, gentlemen deputies, that at the present time we have no difficulties either with England, which we do not recognize, nor with France, with whom our relations are severed, nor with Austria, for whom we have shot an archduke; but we have them with the United States, the border nation on the north, and with Guatemala, the border nation on the south.

Hence, sir, the United States, according to the law of history, are naturally our enemy. What ought we to do? Be always strong, be always prepared, even in the moments of greatest friendship with them. Because we do not know what may come later on, what difficulties may take place. And will it be prudent in this case to place the enemy within our house? Is it bravery in a general to let the enemy get in his rear, or is it imprudence? And we are here, sent by the people, to be prudent, and to watch for their well-being and for their future.

There is also another law in history: Nations of the north necessarily invade the nations of the south. Let the history of the emigrations of the different races be read from prehistoric times, and the nations of the north will always be seen tending to conquer the nations of the south. Unfortunately, we do not need to recur to foreign histories; a rich part of our territory has become the prey of the United States; and we do not wish to learn, nor to open our eyes! Hence, if, in accordanse with the laws of history, we should always fear the United States, what are we to do? Strengthen ourselves. What are we to do? Unite ourselves. What are we to do? Progress, and progress in such a manner that there will be no danger for us not establishing within our territory an American company which will have a most powerful influence.

We have seen that a hundred leagues of railroad from here to Vera Cruz have given such influence to the English company that many times this very influence has been sufficient to decide the votes of the Chamber, and shall we be so insane as to consent to the establishment of an American influence by a company which will embrace the whole country, as the committee has said, all our sections and all our roads? What a powerful influence that would be! And could not this powerful influence be converted into a hostile influence? What would all the advantages which the railroad may bring to the States be worth then?

You, the deputies of the States, would you exchange your beautiful and poor liberty of the present for the rich subjection which the railroad could give you? Go and propose to the lion of the desert to exchange his cave of rocks for a golden cage, and the lion of the desert will reply to you with a roar of liberty.

We desire material improvements; we have approved of the general idea of the construction of the railroad; but we do not wish to subject ourselves either to the ridicule of granting this railroad to a company which has not the necessary funds, nor to a danger for the independence and future of the country.

For this reason, I pray you, gentlemen deputies, to reject the article discussed. The committees at the most offer you riches for the country; I beg you for liberty. [Applause of the deputies and in the galleries.]

[Inclosure 10 in No. 874.]

Financial exhibit of the Mexican Government.

foreign debt.

According to an official statement of the Mexican Government, made in 1862, and revised by Hon. Matias Romero, Mexican minister at Washington in 1865, its foreign debt was as follows:

Total British debts	$69,311,657
Spanish debts	9,460,986
French debts	2,859,917
Sixteen years’ interest, to 1878, at $2,760,022 per annum	44,160,352
Total European debts	125,792,912
To which is to be added:
American bonds 1865	2,746,620
American claims awards	3,075,123
Total foreign debt	131,614,665

On the European debt the government has not been able to pay a single half-year’s interest for twenty-four years, and on the American bonded debt it has never paid a single semi-annual dividend of interest since the bonds were issued. For the payment of the European debts the government has pledged the entire available customs receipts of its ports (see government statement of 1862, p. 322), and it subsequently pledged 60 per cent, of a part of the same customs to secure the American debt; but for nearly a generation these pledges have not been observed by the government owing to its immediate financial distresses.

estimates for 1879–’80.

On the 14th of December last the minister of finance submitted to Congress the estimates of the Federal Government for the next fiscal year, the totals of which were as follows:

Estimated receipts	$16,303,455
Estimated espenses	23,334,636
Showing a deficit of	7,031,181

The increase of the expenses over those of the last year is $1,585,000, and a decrease in receipts of $1,108,000.

The government owes, in addition to other overdue obligations, to the Mexican Railway Company, on its annual subsidy, on which it has defaulted for nearly three years, since March, 1876, the sum of, say, $1,800,000.

To the foregoing is to be added a large domestic or interior debt, a great part of which is still unadjusted, and the total amount of which is unknown even to the government.