No. 68.
Mr. Scruggs to Mr. Frelinghuysen.

No. 127.]

Sir: In August last I reported that, according” to the representations of Br. Galindo, minister of finance, the Panama Canal Company had agreed to loan the Colombian Government a half million dollars for two years, at 6 per cent, per annum, “without security or guarantee,” and that this loan was quite independent of the $50,000 which the company had previously agreed to pay to the Government annually for the maintenance of a police force along the line of the projected canal. (See my Nos. 91 and 103, Foreign Relations of 1883.)

Bills were drawn upon the company in Paris accordingly, but one of them (for 200,000 francs) has been protested, on the ground, that, as the half million loan was to include the $50,000 above referred to, the Government had already overdrawn its account. In reply to this Dr. Galindo now makes public a cablegram from M. de Lesseps, dated Paris, October 19 last, wherein it is admitted that the $50,000 was not included in the loan of half a million subsequently agreed upon.

The affair has created some excitement here, and, I may add, some anxiety on the part of the bank under whose indorsement the bills were negotiated. But it will probably end in the payment of the protested bill by the company, as it now has a special agent here trying to secure possession of certain waste lands on the Isthmus stipulated for in the Salgar-Wyse contract of March, 1878.

I have, &c.,