No. 394.
Mr. Christiancy to Mr. Evarts .

No. 18.]

Sir: Since my last dispatch of May 21 (No. 16), viz, on the morning of the 22d, the Chilian fleet (with the exception of the Esmeralda and Covadonga) appeared off the harbor of Callao and remained for several hours, when, without attempting anything, it sailed for the South, having, as is supposed, learned from some fishermen the previous departure of the first division of the Peruvian fleet (mentioned in my last). Their expedition to Calico had given the Peruvian fleet time to transport in safety a considerable part of their army here, with munitions and supplies to the towns along the southern coast of Peru—Mollendo, Pis-agua, Arica, and Iquique—and also to transport a part of the Bolivian army from Arica as far as Pisagua, and to form a junction of the Peruvian with the Bolivian army.

Since that time, and while the Peruvian and Chilian fleet were mutually ignorant of the whereabouts of the other, it is reported here, and I think correctly, that the Huascar (Peruvian) attacked and sank the Chilian steam-corvette Esmeralda at or near Iquique; and the steam frigate [Page 880] Independencia, chasing the Chilian Covadonga, and when on the point of reaching her (on her flight for the shore) ran aground or upon a reef, from which it was found impossible to get her off, and she was abandoned and burnt or blown up by the Peruvians themselves.

This is a serious loss to Peru, but does not, in my estimation, overbalance the advantages gained by Peru in this expedition to the South. But this may yet depend much upon what the Huascar may have been able to accomplish before the arrival there of the Chilian fleet, and upon her success in avoiding the Chilian fleet. But unless she waits too long she will probably easily evade that fleet, as it is composed of very slow vessels; and some of the Peruvian transports which went south have returned without seeing the fleet.

The effect of the war upon the finances becomes every day more disastrous. Exchange on England is now quoted at 16 pence per sole, and an American double eagle is worth to-day 62 soles.

I inclose a copy of the act of the Peruvian Congress passed for the purpose of providing ways and means by loan and taxes. This is taken from the South Pacific Times, but is translated with substantial accuracy.

I have, &c.,

[Inclosure 1 No. 18.—South Pacific Times.—Translation.]

Luis La Puerta, first vice-president of the republic, in charge of the executive power.

Whereas the Congress of the Republic of Peru has given the following law:

  • Article 1. Let a national loan be effected for the sum of ten million soles in current money of the republic, at the figure of eighty per cent., and eight per cent. interest per annum, with ten per cent. accumulative amortization.
  • Art. 2. The service of this loan will be effected at the termination of every quarter, beginning with the quarter expiring on the 1st of October, 1879, and the amortization will be made by lot and at par.
  • Art. 3. The amortization and interest funds will be guaranteed by the product of the capitation and income taxes, and the tax on the exportation of sugar, sanctioned by the present special Congress, and will also, as a subsidiary guarantee, be assured by the product of such national property as may be of easy appropriation.
  • Art. 4. The sale of the national property subject to the service of this loan will be effected at public auction, and the payment must solely be made in bonds of the loan authorized by this law.
  • Art. 5. The loan must be effected within the peremptory term of forty-five days from the date of the publication of this law.
  • Art. 6. If, at the expiration of the said term of forty-five days, the subscriptions should not cover the full amount of the loan, the actual issue of notes shall be increased in the proportion of the sum wanting to complete the eight millions which the loan will produce.
  • Art. 7. Let the committee appointed by the law of the 27th January last be empowered to deliver to the executive, in notes of the new issue, the complement of the eight millions to which the preceding article refers, and also to effect the issue and the service of the loan in the proportion subscribed; to which end the funds appointed by this law for said service shall be handed over to them.
  • Art. 8. The sum of one million eight hundred thousand soles out of the funds for the service of the loan shall be set aside for the payment of amortization and interest of the same loan, should it be entirely covered. If not, of this amount the necessary sum shall be applied to the service of the loan as far as covered, adding the remainder to the fund of amortization of the fiscal issue.
  • Art. 9. If the funds set aside by this law for the service of the loan should exceed one million eight hundred thousand soles, the administrating committee shall deliver the excess to the executive.
  • Art. 10. The two millions of soles in restamped notes, which the associated banks had in deposit for the exchange of the unstamped notes, and which the executive has been authorized to issue by the legislative resolution of the 13th instant, shall be considered as an integral part of the subsidiary issue authorized by this law, which in [Page 881] no case can exceed eight millions. Should the loan he effected in its entirety, the two last millions received will be used for the amortization of the two million of soles in notes referred to in the article.

Notify the executive, &c.,

President of the Senate, &c.

Therefore, I order the same to be printed, published, and received as law.

  • J. R. de Izcue.