No. 170.

Mr. Bayard to Mr. Jacob.

No. 2.]

Sir: One of the first questions to be treated by you on your arrival at your post, is the recent action of the Colombian Government in imposing, under the fifty-third law of 1884, customs duties upon imports into the territory covered by the Panama transit, and especially into the cities of Colon (Aspinwall) and Panama, from the 1st of December next.

For your information I annex copy of the proclamation of President Nunez, of September 25, 1885, establishing the collection of duties as aforesaid, and also copy of a dispatch on the subject which has been received from Consul-General Adamson, No. 187, of October 10, 1885, with its inclosed article clipped from the Panama Star and Herald of October 10. This article presents in quite temperate language the objections to the proposed measure, as affecting the interests of the Isthmus which have grown up under the long regime of free trade there. With this we have little or nothing to do, although in view of the intimacy of our trade relations with the Isthmus, and the large investments of our citizens in business there, it may be proper to express doubts as to the wisdom of a measure which can only affect disastrously the prosperity of that district.

The thirty-fifth article of the treaty of 1846 between the United States and New Granada gives us, however, the right to call attention to the possible results of this measure, as affecting the unimpeded use of the Isthmian transit. The whole tenor of that article is that nothing shall be allowed to hinder the free transit of persons and goods passing over the Isthmus, from ocean to ocean, to countries beyond. It is stipulated that there shall be franchise of duties as to all merchandise so [Page 224] crossing, either by actual omission to collect the duties or by a drawback on re-exportation.

The original establishment of a free zone, embracing the ports of Colon and Panama and the transit route, was intended to accomplish the twofold object of developing the interests of the Isthmus and of leaving the transit absolutely free from any obstructive formality, such as the entrance into and exit from a customs cordon would almost necessarily involve.

It may be that the practical wisdom and foresight of the Colombian Government may successfully contrive and apply a revenue system at either end of the transit in such wise as to bear only on imports into Colombian territory without in any manner obstructing or delaying the guaranteed unintermpted through transit. The complex formalities usually attending bonded transit and re-exportation under drawback do not, however, afford much prospect that the through transit traffic will not seriously feel the burden of the new arrangements to be adopted, and if the operations of the transit be in any way hampered thereby, this Government would feel bound to regard it as a departure from the intent and letter of the treaty engagements in respect of such transit.

The question is naturally attracting attention and causing no little concern in this country. I transmit for your information copy of a letter of inquiry addressed to me by a mercantile house of New York, and of my reply.

You will take an early occasion to bring this matter of the free and unobstructed use of the transit to the attention of the Colombian Government, adding such arguments as your good judgment and discretion may suggest.

I am,

[Inclosure 1 in No. 2.]

Mr. Adamson to Mr. Porter.

No. 187.]

Sir: In my No. 179, of September 4, I expressed the belief that the elections for a President of this Republic to succeed Dr. Nuñez would not be held at the time fixed by the constitution, that an attempt to change the constitution would probably be made, &c., and intimated the probability that our Government might again be called upon to protect its interests here.

In my No. 182, of September 15, I noted another sign of the drift of Colombian affairs, as shown by the decree suppressing all newspapers throughout the Republic (from which, however, the Star and Herald of Panama obtained exemption). Since that time various official acts made public justify the opinions heretofore given by me.

In the Panama Daily Star and Herald of October 9 was published an impromptu address delivered by President Nuñez on the occasion of receiving news of the capture of the rebel flotilla, in which he says:

“Gentlemen, the constitution of 1863 no longer exists. Very soon the people Trill give themselves a new one, which will satisfy their true necessities and consult the inclinations of the great majority of the Colombian, people.”

On the 10th of September President Nuñez issued his decree No. 594, as per copy herewith, calling upon the governments of the several States to send delegates to a convention to be held at Bogota on the 11th of November to reform the constitution, and on the same date he issued an address to the people, giving the reasons for demanding said reform. It is believed here that the Government at Bogota has intimated to the civil and military chiefs of the several States the names of those persons who would be acceptable delegates.

The opinion is also generally entertained, that the projected constitution will abolish State sovereignty, and on this point all parties agree that the change is desirable.

[Page 225]

It is also supposed that the Presidential term will be extended from two years, as at present, to four or six years, and that the present incumbent will be his own successor. The friends of the national Government; further say that in all probability a narrow zone of this Isthmus, including the railway and projected canal lines, will be declared a federal district, to be governed by an agent of the central Government, assisted by a large military force, and that the seat of government of the State of Panama will be removed to David, in the department of Chiriqui.

These things have had, comparatively speaking, but little effect on the public mind, but within the present week the people of Panama have been startled by the publication of decree No 698, issued at Bogota on the 25th of September, establishing custom-houses on the Isthmus of Panama.

You may infer that this decree caused much feeling here by reading the editorial articles taken from the Weekly Star and Herald of this day, and remembering that said journal is only permitted to be published by the sufferance of the National Government, as stated in my No. 182.

Dr. Pablo Arosemena, who strongly opposes the proposition, was recently president of the State of Panama, and the committee appointed to represent the merchants is composed of men of the highest standing. On the part of both the Panama Railroad and the Interoceanic Canal Company it is claimed that the proposition is in violation of the rights conceded to said corporations.

If the Government persists in the enforcement of the decree it will certainly cause much ill feeling here, for it would touch the pocket of almost every adult male person in the State. As a prominent merchant feelingly remarked to me, “It would add $15 to the cost of a case of brandy.”

I do not deem it within the scope of my duties to discuss the foregoing matter more fully, and therefore respectfully submit what is herein written for your information.

I am, &c.,

[Inclosure 1 in inclosure 1 in No. 2.—Translation.]

Decree No. 594.

The President of the United States of Colombia, considering it necessary to assist the re-establishment of the constitutional régime, disorganized by the recent rebellion, and taking into account the written manifestations of public opinion as well as the antecedents of the constitution which is to be replaced, decrees:

  • Article 1. The governments of the States are called upon to send delegates to a national convention to be held on November 11 proximo, in the capital of the Union, to consider the measures which should be taken to reform the constitution.
  • Art. 2. The government of each State shall name two principal delegates, and three numbered substitutes for each one of these.
  • Art. 3. The delegates shall have a right to their daily expenses, the same as members of Congress.

Let this be communicated and published.

[Inclosure 2 in inclosure 1 in No. 2.—Translation.]

address to the people.

[From the Panama Daily Star and Herald, September 30, 1885.]

President Nuñez has issued the following address:

The President of the Republic to the Colombians.

The nation has just rescued herself, by her own prudent action, and thanks to Divine Providence, from an armed anarchy which made a last desperate effort to op-pose the advent and establishment of liberal institutions. With judicious firmness the government directed the defense of the society thus threatened with imminent disaster, and it has now to perform the duty of preparing the re-establishment of an altered constitutional regimen.

[Page 226]

The infidelity of the sectional governments of Antioquia, Bolivar, Boyaca, and Tolima on the one hand, and the acts of sedition which were committed at Magdalena and Panama on the other, virtually deprived the expressed regimen in those States of its proper force and effect. Santander may be said to have been in the same condition since the last months of 1884, in consequence of disturbances, apparently local, which occurred there in the middle of August, although the recognized representative of the legitimate Government, Dr. Narciso Gonzales Lineros, has not failed to exercise his authority without interruption throughout the State, in spite of the vicissitudes of war. The same cause has also prevented the voting for the President of the Union, which should have been decided on the 6th of the present month, and the election of members to the National Congress. In accordance with the precedents of the constitution, it has become indispensable to promote a reunion of the governments of the States, as the most natural method, under the circumstances, of reconstructing the shattered elements of the Union on well-defined principles.

The numerous and expressive manifestations which the municipalities and citizens of the Republic daily direct to the Government clearly indicate the necessities of the entire country in the present important epoch of our history. Reform is therefore sanctioned beforehand by the unequivocal will of the people. In undertaking the necessary task of formulating this will into written institutions, a task in which I invoke the protection of the All-Powerful, I am but fulfilling an imperious duty, contributing by my conscience and authority to the creation of a political order, free from dangerous fallacies, which may be susceptible of realizing that wished for development of our young civilization that has been unhappily so often interrupted. We find ourselves unavoidably in a constitutional interregnum, but in this interregnum no legitimate interest will suffer; for the severe prescriptions of the law of peoples will be applied with the sole object of the complete pacification of the country, in order that the great sacrifices which the victories of the national arms have cost may not prove to have been made to no purpose, and in order that prudential measures may speedily and effectively check the public misery which, after some years of social insecurity, already begins to assume alarming proportions.


[Inclosure 3 in inclosure 1 in No. 2.—Translation.]

proposed custom-houses on the isthmus.

To the civil anal military chief of the State of Panama:

I have been ordered by the national secretary of finances to transcribe for you the following decree, that it may be executed and profusely published on the Isthmus:

Decree No. 696, establishing custom-houses on the Isthmus of Panama.

The President of the United States of Colombia, in execution of the 8th article of the law No. 53 of the year 1884 on ways and means, decrees:

  • Section 1. From the 1st of December next, the custom-houses allowed by the law 53 of the year 1884 shall be established and begin to have their effect in the ports of Panama and Colon.
  • Sec. 2. By the aforesaid custom-houses the same duties shall be collected that are charged by the other custom-houses in the Republic as “importation duties,” with a reduction of 40 per cent.
  • Sec 3. The other regulations common to the other custom-houses will rule at the aforesaid ports. In accordance with this, the requisites of certifying the statements of cargoes (sobordos) and invoices, as enacted by articles 41, 43, 47, and 48 of the Fiscal Code, must be duly enforced in foreign ports from which merchandise is embarked.

  • The secretary of war, acting as secretary of finances:
[Page 227]

proposed custom-houses on the isthmus.

The public will read with surprise and regret the decree of his Excellency President Nuñez, which we publish in our English and Spanish columns to-day. If it could be carried into practical effect it would simply create a revolution in the fiscal policy of the Isthmus that would at once be disastrous to commerce and unproductive to the Government itself. The decree orders the establishment of customhouses in this city and Colon. Apart from the fact, that merchants and other traders on this Isthmus, and the consumers of imported articles also, have the right, sanctioned by time and a long-prevailing custom, to be exempt from imposts such as are now proposed, it would be indiscreet and display considerable unwisdom to insist upon so unconstitutional a change. In the first place, the revenues that would be collected would hardly pay the cost of initiating and keeping a large staff of officials; then the change would be most vexatious to merchants and embarrass commerce in every way to an extent that it is impossible to anticipate. In fact, it would inflict the death blow to all branches of trade, already fearfully depressed. Large direct taxes are levied in the shape of the monthly contribution, and to attempt to increase the charges to which merchants are already liable would be to consummate the ruin of the Isthmus.

We say it is impossible the decree can be carried into effect, for the reasons we have stated, and for others which will occupy our pen in a future article. All parties sympathize with the Government in its financial difficulties, but none are blind to the fact that the remedy proposed would simply amount to an aggravation of those difficulties, and lead to irritation and discontent. Every class of the inhabitants, as well as the importers, is interested in this important question, and it is to be hoped that united and respectful remonstrances will induce a reconsideration of the subject, and lead to a withdrawal of the decree, which is injudicious and unworkable. We did not exaggerate when in a former article we stated that the public opinion of the country was opposed to the reimposition of custom duties on the Isthmus, because the necessities and welfare of the inhabitants depend upon free transit, and opposition to the institution of custom duties has been known to exist for half a century.

Since 1835 the law of May 25 conceded to the districts of Panama and Porto Bello the privileges of free ports during the period of twenty years, when “there would be a canal or a railway existing,” and later, under the law of June 2, 1849, a decree was issued to take effect on the 1st of January following, abolishing the custom duties on the Isthmus without fixing any limitation as to time. At that time the contract for the construction of the present railway had already been agreed upon in Washington, on the 28th day of December, 1848, and the work was inaugurated in 1855, this measure having been decided upon on April 15, 1850.

Anyone who has considered this subject in the least will see the evidence of this in the manner in which the New Granada legislators were convinced that there was no way to reconcile the system of tariff duties through the customs with prompt and absolute free transit. The indispensable restrictions to avoid fraud as to the importations of merchandise must necessarily restrain, more or less, free transit, and would require a corps of employés, who would be so many more hindrances and absorb the revenue to be derived. Nor is it probable that without very high salaries responsible persons could be had to perform these duties in a country where the expenses of living are so very high.

The inevitable result of the restriction in the transit (in case the customs service should not prove to be merely an expensive formality) would be that our rivals would take advantage of these financial errors. The transcontinental railways would be the carriers of the merchandise which now goes through the Isthmus of Panama from New York to San Francisco, and by the Straits of Magellan that coining from Europe or the United States and proceeding to the South Pacific Republics, and vice versa.

To what extent merchandise and articles of consumption increase in Panama and Colon can easily be computed. These results are not understood in Bogota, and particularly by those who do not take the trouble to study this question. Nor is the fact that the railway freight charges are very high for those goods which, are destined to be consumed in the country, for the simple reason that there is no competition. Another reason is that the products of the country have diminished to a large extent; everything is imported, even articles of primary necessity. The farmers abandon the fields to escape conscription, or are attracted by the high wages paid by the canal company; and the cattle, at one time so plentiful on the Isthmus, are decreasing at an alarming rate, so much so that it is now necessary to bring them from Bolivar and the Cauca to supply the demands of the market.

From this we see also the impossibility of substituting another tax for the commercial contribution levied by the State since 1850. There is no production upon which to impose new taxes, and therefore the goods imported will have to meet both the State [Page 228] and national taxes. If any one should ask, How do we manage to pay for the goods imported? we would point out to him that the large and increasing amount of metallic currency which the canal company furnishes in payments to their employés enables us to do so. From this also results the high prices, which, if it does not injure those who receive remunerative wages, does affect those who live upon their limited incomes or fixed salaries.

We will conclude by appealing to the judgment of the authorities. The decree which establishes the customs tariff from the 1st of December (a limit somewhat short) has surprised the inhabitants of the Isthmus, because, although the law existed, it was considered too unreasonable to imagine that it would be carried into effect. The evils of which we complain consist not only in what we have stated, but also in something worse. The maritime communications are the only ones which the constitution reserved to the National Government, and if these had not been reserved, if the State of Panama did not have the high honor to be one of the nine States of the Republic of Colombia, the annual income which the nation receives from the railway would belong to her treasury, and also that which will be derived from the canal company. From this originated the fact that upon the suppression of the customs tariff the State of Panama obtained the right of taxing the mercantile interest to replace this revenue.

Having demonstrated that both cannot conjointly exist, nor can the State of Panama impose an additional tax, it follows that there is no reason why custom-houses should be established. There is not, in fact, a rational or prudent reason except with those who seek for an imperious measure which will tend to weaken rather than to strengthen the ties which unite the State of Panama to the other States of the Colombian Union. Let it be understood that the projected political reforms, especially if they interfere with the autonomy of this State, will not be calculated to better the political situation.

A very important meeting of the mercantile community took place at the rooms of the International Club on Wednesday afternoon to consider the decree of President Nuñez ordering the establishment from the 1st December ensuing of custom-houses on the’ Isthmus. The greatest unanimity prevailed, showing the deep interest taken in the subject by all parties. J. B. Poylo, esq., was unanimously called to the chair, and explained very lucidly the important object of the meeting.

Dr. Pablo Arosemena, being requested, reviewed the legal bearing of the case, and eloquently defended the rights of the State of Panama to a voice in so momentous a question as the present one. Quoting from the act of incorporation of the federation of Panama with the Union, he said that custom-houses could not be established without the acquiescence of the State of Panama. Further, he argued that article 7, of the contract celebrated with the canal company, distinctly provides that customhouse restrictions shall only be placed on goods destined for other portions of the Republic, and that from the commencement to the termination of the work, and during its continuance, the ports at both extremities of the canal shall be free and open to the commerce of all nations. [Loud cheers.]

Dr. Amador next addressed the meeting and expressed his entire disapproval of the establishment of custom-houses on the Isthmus. He spoke very emphatically and proved conclusively the great inconvenience such arrangement would create to commerce, and he further dilated on the utter impracticability of the proposed scheme. He said it would not be remunerative to the Government under any circumstance, and when he recalled the recollection of the recent disasters on the Isthmus, he was certain the change would extinguish entirely the lingering sparks of vitality still visible in the country. [Applause.]

After remarks from several other gentlemen, all of whom evidenced their cordial sympathy with the object of the meeting, and signified their alarm at even the possibility of the proposed change being carried into effect, Dr. Francisco Ardila said he was sufficiently authorized by the directors of the Canal Company to say that they would protect and defend the rights secured to them by the canal contract to the extent to which human power could do. [Cheers.]

A committee was then appointed to prepare a memorial to the President, pointing out the disadvantages spoken of, and the danger of the enforcement of the decree, and praying that it be revoked. The committee consists of J. B. Poylo, Paylo Arosemena, D. H. Brandon, E. L. Salmon, and Dr. Amador.

It was further resolved to telegraph to his Excellency the President, asking him to suspend the operation of the decree until the memorial adopted at the meeting shall be received by him and considered.

A vote of thanks to the chairman brought the meeting to a close.

[Page 229]
[Inclosure 2 in No. 2.]

Messrs. A. S. Lazarus & Co. to Mr. Bayard.

Sir: Noticing that the President of the United States of Colombia has issued a proclamation declaring that on and after December 1, 1885, import duties will be levied on imports into Aspinwall and Panama, we ask the favor of a reply as to whether this is not in contravention of treaties now existing between this country and that Republic.

Soliciting the favor of an early reply, we have, &c.,

[Inclosure 3 in No. 2.]

Mr. Porter to Messrs. A. S. Lazarus & Co.

Gentlemen: Your letter of the 26th instant has been received. You therein ask whether the recent proclamation of the President of the United States of Colombia, declaring that on and after December 1, 1880, import duties will be levied on imports into Aspinwall (Colon) and Panama “is not in contravention of treaties now existing between this country and that Republic.”

In response I inclose a printed copy of the treaty of 1846 between the United States and New Granada, now Colombia. You will perceive that the thirty-fifth article thereof stipulates that citizens of the United States shall have in the territory of the interoceanic transit—

“All the exemptions, privileges, and immunities concerning commerce and navigation, which are now or may hereafter been enjoyed by Granadian citizens, their vessels, and merchandise”; that this equality of treatment extends to the transit, and, further, “that no other tolls or charges shall be levied or collected upon the citizens of the United States, or their said merchandise thus passing over any road or canal that may be made by the Government of New Granada, or by the authority of the same, than is under like circumstances levied upon and collected from the Granadian citizens; that any lawful produce, manufactures, or merchandise, belonging to citizens of the United States, thus passing from one sea to the other, in either direction for the purpose of exportation to any other foreign country, shall not be liable to any import duties whatever, or, having paid such duties, they shall be entitled to drawback upon their exportation,” &c.

From this it is seen that there is no treaty obligation to make Colon and Panama free ports; that the guarantee of the treaty is limited to equal treatment of American goods with those of native Colombians or of the most favored nation, with an exemption from customs duties in the case of merchandise, &c., passing over the transit to countries beyond.

Should the collection of duties on imports into Colombia at Aspinwall and Panama be enforced in such a way as to hamper the stipulated free transit this Government would feel bound to complain.

I am, &c.,

Assistant Secretary.