No. 462.
Mr. Phelps to Mr. Frelinghuysen.

No. 36.]

Sir: I recently stated to you that some mystery attached to the movements of the Chilian force in occupation of Ayacucho, it having failed to perform the part assigned to it by Mr. Aldunate. Reports now reach us that, after suffering considerabble loss from the Indians, it has evacuated Ayacucho and is retiring to the sea-coast.

General Cáceres at once occupied the city with a formidable force of Indians, and is supposed to have arms for 2,800 men, but all reports now are enveloped in much doubt.

I find it necessary to correct a supposition presented in my No. 9, to the effect that the Indians, because of PieroIa’s position, might be regarded as adherants of lglesias. Caceres has lived amongst the Indians, speaks their language, and has acquired great prestige with them. He is now said to have issued a proclamation declaring himself to be the lawful ruler of the country since the flight of Montero, threatening those who disregard his rights with the punishment of traitors, and avowing his determination to continue war against Chili and Iglesias, so long as he has a rifle.

His history presents him as a man very likely to pursue his purpose. I have been unable to secure a copy of the proclamation or even to see one, but two very reliable men assure me that copies of the paper [Page [730]] are in this city, and that a circular to the diplomatic corps will soon be handed me.

Should these reports be confirmed, and Cáceres adhere to the programme, the situation is indeed complicated and critical.

The abandonment of the interior by the Chilians will leave Caceres in control of all the central departments and of all of Cuzco, except the city itself, which is now, or soon will be, occupied by Chilian force proceeding from Arequipa, by which route Cuzco is approached by railroad to within twenty-five leagues, this remaining distance being in a country favorable to marching men. So far as I can learn, Peru is secured to Iglesias, but the occupation of the city of Cuzco will not secure political control of the department so long as Caceres is opposed to the Iglesias government and continues active hostility.

I am surprised by this course of Caceres. It has been well understood that he was ill supported by Montero, and believed in a course very different from that which kept a large force inactive at Arequipa. The people now are Indians, who will adhere to him, and to make war upon him would be like our Apache wars, only the mountains here present greater difficulties than those of New Mexico and Arizona.

The Government, so far, has not been able to put down the guerrilla chiefs in the coast departments, and will be unable to contend with Cáceres.

Such being the situation, I see no reason for a change in the attitude of the United States. The difficulties arising are in the nature of those of which Mr. Aldunate made light when here; but they are serious, and when the impecunious condition of the Government is considered,* * * it will be seen that the difficulties are great, and I think I may say Mr. Novoa himself is not sanguine.

Chili would seem to have desired to stifle the child of her own creation by fastening upon it in the peace treaty a condition of payment of 300,000 (?) soles per month towards the expenses of the force at Choril-los. It is understood that by some means 70,000 soles were paid towards the payment due for the first month.

Then, at Mollendo, where the exports now embrace the accumulated products of several years during which that section has been blockaded, and the export dues are consequently very valuable, Chili has established its officials and claims the receipts.

It is not pleasant to present such an outlook for General Iglesias, for I entirely believe in his integrity of purpose and like him personally. Nor do I despair of the final success of his peace measure. I do, however, consider his position a perilous one.

What Cáceres can propose to himself beyond adding to the misfortunes of his country I am at a loss to comprehend, and I earnestly trust that the information now had may prove to be false.

I have, &c.,