No. 27.
Mr. Logan to Mr. Frelinghuysen .

No. 284.]

Sir: Under cover of this dispatch, I inclose a copy of the Gaceta Oficial of Nicaragua, of March 11 ultimo, which contains the contract of that government with Monsieur A. P. Blanchet. I also inclose, marked No. 2, a translation of the same, which, having been hastily made to catch the mail, may contain some unimportant errors.

My dispatch No. 280 informs you of the execution of this contract. A careful reading of Articles 25 and 27 will show you that the rights of the American Company have been expressly guarded. For your fuller understanding of the matter, I make a brief résumé as follows: Article 14th of the American concession stipulates that the company shall construct a canal of certain dimensions between the lake of Managua and the navigable part of the Tipitapa River, within the term of three years from the beginning of the interoceanic canal work. Upon the completion of this short canal, the government is to take possession of the work, and thenceforward pay all expenses of maintenance, operation, &c., while the American Company is to have the unrestricted right of free use during the life of their concession.

When the American Company failed to begin the work within the specified time, and it became apparent that the concession was about to lapse, the Government of Nicaragua began to cast about for means to canalize the Tipitapa River, which connects the lakes of Nicaragua and Managua. The deepening and widening of this river, now too shallow for navigation, would insure interoceanic communication through Nicaragua. Small vessels could ascend, it is claimed, the San Juan River from San Juan del Norte on the Atlantic, and passing through the above-named lakes by the canalized river would reach the small port of Leon Viejo, on the western shore of Lake Managua. From thence there is soon to be completed railroad communication to the port of Corinto on the Pacific.

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The government could hardly be blamed for wishing to accomplish an end of such importance, and preliminary negotiations had been had with Monsieur Blanchet for the construction of the canal before the late visit of Captain Lull to Nicaragua. When the latter arrived, he found no difficulty in getting an extension of the original concession, modified, however, as stated to you in my No 280. The sum of $200,000 stipulated by the government is ostensibly for the purpose of meeting the expense of a repurchase from Blanchet.

However, as you will perceive, the American concession is carefully protected in the Blanchet contract, so that no prejudice to American interests can result therefrom.

I have, &c.,

[Inclosure in No. 284.—From the Gaceta Oficial of Managua, Nicaragua, March 11, 1882.—Translation]

Law ratifying the Tipitapa Canal contract.

The President of the Republic to the inhabitants thereof:

Know ye, that Congress has ordered the following:

The Senate and Chamber of Deputies of the Republic of Nicaragua decree:

Singular. Let the contract be ratified which was celebrated by the government on the 6th of the current month, by means of the special commissioners, licentiates Don Miguel Brioso and Don Modesto Barrios, with Señor Aristides P. Blanchet, for the excavation and operation of a canal of sufficient size for navigation between the great lake and that of this city, in the following terms:

Article. 1. The Republic of Nicaragua concedes to Señor Blanchet, and he accepts the exclusive privilege for the opening, construction, and operation of a canal sufficient for navigation between the lake of Managua and that of Nicaragua, with the object of forming a company for construction and operation, which Señor Blanchet shall organize according to the terms of this contract.

The canal shall have:

The width, depth, and water sufficient for the passage at all times of the largest ships that can navigate the Lake of Nicaragua.
The locks indispensable for its use, the dams, walls, and other works that may be necessary, of the size and strength required in the regular and constant navigation of a canal with locks.
The works necessary to prevent the canal from making leaks prejudicial to the neighborhood, or that in any other way might cause a drainage of water from the Lake of Managua to such an extent as appreciably to lessen the volume of its waters.

The company shall not be obliged, in case of the construction of the great interoceanic canal, to give to theirs the dimensions of a great maritime canal.

The state declares the work of the canal to be one of public utility.

Art. 2. The duration of the present privilege will be fifty years, counting from the day the canal may be opened to navigation.

The present concession, with all its tolls and advantages, shall be the object of an executary concessionary company, and the expression Blanchet refers to it each time it is used in this contract.

This concession shall be transferable only to the executary company which Señor Blanchet organizes, and in no case to any foreign government or foreign public power; neither shall Señor Blanchet cede to any foreign government any portion of the lands conceded by this contract; but he may do so to the aforesaid company, to private persons, or to another company, with the same restriction.

Art. 3. The company shall be organized under the forms and conditions generally adopted by this class of societies.

Art. 4. The capital of the company shall be composed of shares, bonds, and whatever other titles in the proportion it deems expedient.

The emission and transfer of these titles shall be exempt from all stamp or other duties or imposts established or to be established in the republic.

Art. 5. Señor Blanchet shall have the period of one year in which to commence, and one year more in which to finish the canal, counting from the day of the ratification of this contract, extendable six months more in case of unforeseen circumstances or acts of God which might justify such extension.

The works will be deemed to have commenced when Señor Blanchet is proved to [Page 38] have brought into this country materials for the enterprise of the value of eight thou sand dollars, or when said materials are discovered to be upon the way.

Art. 6. The canal and its works must be kept in good condition for service and be thus delivered to the state, when the term of the concession ends.

Art. 7. All the expenses of survey, construction, conservation, and operation of the canal shall be paid by the concessionary company, without any money or other kind of subsidy or guarantee of interest on the part of the Goverment of Nicaragua, or any other charges than those specified in the present concession.

Art. 8. It is undertsood and stipulated that, in respect to the navigation of the Lake of Nicaragua and the river San Juan, the rights acquired by Señor F. A. Pellas in the contract of navigation celebrated with the government and ratified on the 16th of March, 1877, are reserved.

Art. 9. The necessary areas of ground on the main land as well as in the lakes and islands for the construction of the canal, for the deposit of the materials proceeding from excavations and clearings, for the necessary spaces occupied by the spread of waters after the making of dams in the beds of rivers, and for all the necessary drainage, also for tanks, dikes, spaces at both sides of the locks, light-houses and signals, stores, edifices and workshops, as well as those that may be necessary to the routes of railroads for the service, and ditches of the same nature, for the transportation of materials at the base of the work, and for the supply of the canal—in fine, all the lands and places necessary to the operation and execution of the canal shall be placed by the state at its disposition, under the following conditions:

The lands belonging to the state, to the extent that maybe necessary, will be placed at the disposal of the company without any indemnification whatever; with regard to those of private individuals, the expropriation shall be made by the state, in the same proportion and extent that may be necessary to the company, provided that the latter ask for it for its own use and for reasons of public utility, it being understood that the indemnity due to private owners of lands so expropriated shall be paid by the company.

In all that relates to expropriations which may be made, the company shall enjoy all the privileges and immunities which by legislation or custom is reserved to the state, so that it will not be obliged in any case to pay more than the state itself would under similar circumstances.

From the day on which the present concession maybe ratified by Congress, the public lands embraced in those which may be necessary for the construction of the canal cannot be alienated, neither can they be leased to the prejudice of the company.

Art. 10. In case the company should desire to occupy temporarily during the construction of the canal any lands not included in those designated in the preceding article, it shall not be required to pay any indemnity therefor if the said lands belong to the state; and the latter shall not sell nor dispose of them in any other way, except with the reservation of the right of the company to such temporary occupation, the limit of which shall be that of the execution of the work of the canal.

Should these lands be private property, the company can occupy them, previously indemnifying the owners according to the laws of expropriation; provided always that such occupation in either of the two cases be absolutely necessary,

Art. 11. The company shall have the right to the use, in the construction, appointment, and operation of the canal, of the wharves belonging to the state in both lakes without paying any recompense therefor.

For its own use, and that of the ships passing through the canal, the company can construct in said lakes, and where they find it convenient, such wharves and piers as they judge necessary, provided that these do not interfere with any public interest.

Conforming to the rule adopted, the state, on the other hand, can use these wharves and piers in its own service without being subjected to any payment therefor, but on condition of not interfering with the business of the company; in case, however, it should be necessary to exceed the term and space fixed by the rule, it must give previous notice, in order that the company may make the necessary dispositions to this effect.

The company shall pay no duties for said establishments constructed in the waters of the lakes and affluent rivers.

Art. 12. The company will have the right to execute over the whole extent of the canal at the entrances of the lakes and over the whole extent of the lands conceded by articles 9 and 10, the works of inception, embankment, excavation, dredging, &c., and in general all works of whatever nature which may be and which it may deem useful to the establishment and supply of the canal, its operation, conservation, and maintenance.

It is especially authorized to execute on the course and banks of the river Tipitapa and the estuary Panaloya and their affluents, as well as on the tributaries of the lake of Managua or currents of water which can be united and utilized by drainage to the lakes, the systems of dikes, rectifications, &c., and in general all works which the engineers of the company may consider indispensable to the execution, supply, navigation, [Page 39] and operation of the canal; and especially to assure at all times, and above all in times of drought, an abundant supply of water for the lake of Managua and for the canal, and, consequently, also for the lake of Nicaragua and the river San Juan, the company shall have the right to drain, by means of a trench or other works, the whole or part of the waters of the river Matagalpa, which, under the name it takes farther from the Rio Grande, is a direct affluent of the Atlantic through the Masquitia into the Rio Grande or Viejo, which runs in a line parallel to the first, which falls into the lake of Managua at the bottom of the bay of Mabota.

It is understood, nevertheless, that the company cannot divert rivers or interrupt their course, or do in them any other work that may be prejudicial to the interests of any town or vicinity without a previous understanding with the government, and that, in regard to injuries which such works or analogous ones cause to private persons, the company must always indemnify them therefor.

Art. 13. The company shall also make similar works, should it think them necessary, in the lakes at the mouths of the canal, to assure in them easy navigation.

Art. 14. The embankments, refills, and dikes, when they shall be formed at the mouths of the canal and on the rivers Tipitapa and Panaloya, by the deposit of materials taken from the excavation of the canal, shall belong to the company during the concession.

Art. 15. The company shall have the right to take the lands belonging to the state, for the construction, operation, and conservation of the canal, in such number of lots and at such points as shall be fixed by agreement with the government without paying therefor any indemnity or compensation whatever, all classes of materials, and especially stones, woods, lime, volcanic matter, the juice of the rubber tree, for making tubes, apparatus, and other appliances; in a word, all natural, mineral, and vegetable products which may be necessary for the construction, operation, and conservation of the canal and of the establishments and implements indispensable to the work, such as houses, mess-rooms, ships, rafts, &c., making clear to all the right of the company to take said materials from the nearest and most convenient points for their extraction—all this under the same conditions as those that apply to the state and to any other legitimate operator.

Art. 16. The concessionary company shall have the right to establish on the line of the canal and its dependencies for the promotion, administration, and operation of the work, all the telegraph and telephone lines that it may judge expedient.

Art. 17. In case the company should be able to utilize the waters of the canal and its dependencies for the irrigation of plantations, gardens, and streets, or for supply, conducting them to places which may not have them, or as motive power for the use of private individuals, it shall have the right to receive, according to the tariff which it establishes, a tax proportional to the quantity of water furnished as motive power, for irrigation, and supply; but this tax cannot be exacted from those proprietors who may incidentally benefit by the waters that the company may be obliged to take through their lands unless they solicit it.

Art. 18. The company shall be exempt from all forced loans and military service in time of peace and of war. Its foreign agents and employés shall also be exempt from direct contributions, forced loans, and military service during the time they may be in the service of the canal; but they will pay the contributions established by law in case thay should acquire real property.

Art. 19. The company will also be exempt during the period of the concession, in peace and war, from all kinds of imposts on the original property which it acquires in virtue of this contract, and every species of direct contribution or whatever other fiscal tax, relative to the property and to the use of the canal, its edifices and constructions, which belong to it in all its extent, including also the lands conceded to the company for all the period of the privilege.

This immunity is not transferable to those who may buy the original properties of which the company can dispose by virtue of this concession.

Art. 20. For the good administration of the canal and its dependencies and for its better execution and operation, the company will establish the necessary regulations, which shall be obligatory upon all persons who may find themselves in its waters or dependencies, under the sole reservation of respect for the rights and sovereignty of the state; it being understood that the company, in the exercise of the attribute which this article confers, cannot issue other orders than those necessary for the proper administration and management of the canal. These regulations and orders cannot be put in operation without first submitting them to the government in order that it may give them its approval.

Art. 21. The government shall give its protection, in accordance with the laws of the country, to the company, and to its engineers, contractors, employés, and operatives who may be occupied in the preparatory surveys of the ground and in the construction and operation of the canal.

Art. 22. The company can freely introduce immigrants to the lands arid workshops of the concessionaries, and all the employés and workmen, whatever may be their [Page 40] nationality, contracted for, or that come seeking employment on the works of the canal, or in the cultivation of the lands, under the condition that these employés or workmen submit to the laws in force in the republic and to the regulations established by the company.

The enjoyment of absolute freedom of worship the Government of Nicaragua guarantees to all, according to the laws of the country, and, as it does with the other inhabitants, opposes every hostile act, using therein all the means that may be in its power.

On the other hand, the company, its agents, and all strangers above mentioned will be required strictly to respect the laws and regulations which are in force in Nicaragua and especially the executory sentences of the tribunals, without conceiving in any case other rights than those the laws concede to Nicaraguans.

Art. 23. The contracts for work on the canal, and all those which relate to it, shall enjoy the privileges which the laws of the country concede to those of agriculture, provided that they be invested with the formalities the latter require in cases of this kind.

The contracts for work on the canal which the company may make in a foreign country shall be valid and legal in Nicaragua for the whole period of their stipulations, provided they are not contrary to the laws of the republic, and the duly-authenticated documents be presented to the proper authority in order that it may have a knowledge of them.

Art. 24. The company cannot bring merchandise into the territory of the republic for the purpose of trading in it without paying the customs duty established by law.

Nevertheless, with advice to the government, accompanied by the invoices required, it can import, free of customs duties or any other imposts, those articles which are. necessary for the works of the enterprise, such as are used for surveys, explorations of localities, construction, wear and tear, operation, sustenance, repairs, improvements to the canal, for telegraph and railroad service, and for the work in the shops which the company maintains in active operation; the said articles may consist of implements, engines, apparatus, coal, limestone of whatever kind, iron, copper, steel, and other metals, crude or manufactured, powder for mines, dynamite, or any other analogous article.

These things may be discharged, deposited, manufactured, and transported in or to whatever place they may be required free of all fiscal taxes. The ships which the company keep as tow-boats or others for the business of the canal shall be free from all imposts as well as the materials for their repair and their fuel.

The ships, tackle, and furniture, from whatever source they may be, which come for the service of the company, shall also be free from all imposts.

Art. 25. In compensation for the expenses of surveys, construction, operation, and conservation of the canal, which, according to the present concession, are at the charge of the company during the term of said privilege, it shall have the right to establish and receive for the passage of ships and vessels of all kinds through the canal and in the waters and ports pertaining to it, imposts of navigation, tonnage dues, pilotage, towage, storage, anchorage, light-house dues, harbor dues, wharfage, hospital dues, and whatever other similar dues according to the tariffs it establishes.

These tariffs may be modified by the company at any time under the condition that all alterations made therein shall be promptly communicated to the Government of Nicaragua, and in no ease can the company collect more than one dollar and fifty cents for each ton of weight or of measurement; and passengers shall pay as a maximum ten cents.

The rights of the Interoceanic Canal Company, conceded by article 14 of their contract, are reserved to that company.

The state of Nicaragua binds itself not to establish tonnage, anchorage, pilot, lighthouse, or any other kind of dues on vessels of whatever class they may be, nor on merchandise and passengers’ baggage in transit through the canal from one lake to the other.

Moreover, and in order to prevent all increase of expense and to favor navigation in the canal, the state engages, in its own name and in that of the municipalities along the shore, not to establish on the lakes any tax of navigation, ferriage, anchorage, storage in transit, or any other kind of tax on any ship which may navigate the route destined for the projected canal, nor on merchandise or travelers which it carries to the same destination.

In consequence of which, the state and municipalities along the shore cannot establish similar taxes, except on passengers and merchandise carried in these ships, when they shall not have to pass through the canal.

Art. 26. The faculty of receiving taxes from ships which may enter the canal pertains solely to the company, nevertheless the dwellers along the shores of the canal can travel around with their ordinary small vessels, provided they do so outside of the locks, without paying any tax and under the necessary condition that they prove it to be on their private business or for the working of their properties, and not introducing [Page 41] or dealing in merchandise or passengers destined to the lakes; in which latter case the taxes will he collected by the company.

Neither can the company collect any tax for traffic done by water in vessels not pertaining to it, from one shore of the canal to the other, coming from Choutales, Matagalpa, or Nueva Segovia to these departments, and vice versa.

Art. 27. In consideration of the importance of the services which the execution of this work will lend to the republic, and with the object of favoring immigration, the Republic of Nicaragua cedes in ownership to Señor Blanchet or to the company which he may form the quantity of fifty thousand manzanas (about 87,000 acres) of land belonging to the state, in separate lots of different sizes, and in such places as the company may select with the concurrence of the government.

The company shall be the definite owner of these lands as soon as it may have finished the work of the canal, but the state will put the company in possession of said lands as soon as it begins the work.

The measurement of the land will be made at the expense of the company and plotted in duplicate, and with a description which will serve to identify the locality; these, verified in succession and approved as correct by the government, will constitute the definite localization of each lot.

One of these plans and descriptions will be preserved in the archives of the state and the other will be retained by the concessionary.

This concession of lands shall not affect in any way those conceded to Señor. Don Aniceto G. Menocal by the contract of the 24th of April, 1880, even in case the said contract should become of no effect.

Art. 28. At the expiration of the term of fifty years, as stipulated in the concession, the republic will enter into possession, in perpetuity, of the works of the canal, dikes, light-houses, franchises, borders and spaces directly necessary for the operation of the canal and wharves, without having to pay any indemnity for this act of taking possession.

The ships of the company, gardens, fields, provisions of whatever kind, workshops, and floating and reserved capital, as well as the lands ceded by the state will be excepted from the operations of the previous rule.

Except the said lands and the floating and reserved capital, all the other objects last referred to can be acquired by the state at a valuation to be placed on them by appraisers.

Art. 29. The state of Nicaragua expressly reserves the right to become at anytime the owner of the canal before the expiration of the fifty years for which this concession is made.

This right the government will exercise upon paying to the company the value of the construction of the work and implements employed in it.

The government will pay the value of the expenses legitimately incurred by the company for the execution and operation of the work, according to their amount, which maybe proved by examination and comparison with the books of the company, or ascertained by appraisement, at the option of the government.

Upon the value which may result in one case or the other, the government will pay to the company a premium of thirty per centum, from which it will deduct a fiftieth part for each year run.

The government will give notice to the company of its resolution in this respect, one year in advance.

Art. 30. The state, in case of making itself owner of the canal, as provided for in the previous article, will respect and execute all contracts of lease, sale-purchase, and business made in good faith by the company in the administration of the canal, provided they be not directly or indirectly contrary to the stipulations of this contract or the prescriptions of the laws in force.

Art 31. This contract shall become of no effect: 1st, for failure on the part of the company to comply with whatever of the conditions in articles 2 and 5; and, 2d, if the business of the canal, after its construction, shall be interrupted for a period of six months, except by the acts of God.

The invalidation of the contract being declared by reason of either of these causes, the public lands ceded by this convention will return to the dominion of the republic in whatever state they may be found, without idemnification, even in case they shall have been built upon, excepting those lands which may have been alienated to private persons by the company, with the formalities prescribed by law.

Art. 32. Any question that may arise between the government and the company by reason of this contract shall be settled by a tribunal of one or two arbiters, named one by each party.

In case these two cannot agree upon a final decision they shall name a third, and if these three cannot agree, they shall name one of the presidents of the courts of justice of Leon or Granada, at the option of the company.

In this case the decision shall be given by three arbiters, constituting a majority of votes, with or without fresh information.

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Every decision must give the reasons of the resolution on all the points in question.

The decision given by the arbiters will be final, without right of appeal.


To the executive power.

Saloon of sessions of the Senate chamber.

  • A. H. RIVAS, P.

I, Aristides P. Blanchet, declare that I accept the present contract with the modifications which the legislative power has been pleased to make to accord it their ratification.


Therefore let it be executed.


The sub-secretary of the interior.