Mr. Foster to Mr. Bayard.
Madrid, July 25, 1885. (Received August 10.)
Sir: An important law was passed by the Cortes on the 6th instant, in regard to a general net-work or system of railroad construction in Cuba. By the “authorizations” voted last year by the Cortes (see my No. 233, of July 28, 1884), the ministry was empowered to modify the existing conditions for the construction of what is known as the Central Railroad of Cuba, but it was found that nothing could be accomplished by virtue of that authorization, and it was determined to pass a new law offering such advantages and conferring upon the minister of ultramar (the colonies) such powers as would secure the realization of this enterprise, which was felt to be one of the greatest needs of the island.
The lines to be constructed under this law cover the central and eastern districts or the provinces of Santa Clara, Puerto Principe, and Santiago de Cuba, and are to have an extent of 891 kilometers, consisting of eight lines or branches. The construction is to be commenced within four months from the date of the contract, and the entire work to be completed within six years. The Government guarantees the company 8 per cent, net profit upon the total capital invested, and the concession or charter is to continue for 99 years. The 8-per cent, guarantee will begin to run on each section which is completed, accepted by the Government, and put in operation, and is to be paid quarterly in gold. If the profits exceed 8 per cent, the surplus is to be divided equally between the company and the Government. The concession may be forfeited if one-fourth of the work is not completed in two years, or the half in three and a half years. The forfeiture having been decreed, the Government may grant a new concession under conditions specified as to the work done by the first company.
Within twenty days after the law is officially promulgated the minister of ultramar shall publish a call for proposals for the concession, to be presented within thirty days. This call shall set forth in full the terms or conditions upon which the concession is to be granted, and shall designate the maximum of the cost of construction upon which the 8 per cent, profit is guaranteed.
The proposals shall state (1) the reduction offered on the maximum [Page 738] cost upon which 8 per cent, is guaranteed; (2) other advantages offered to the Government over the published conditions; (3) the security or financial credit of those who sign the proposals. Before any proposal is received a provisional deposit of 1,000,000 pesetas ($200,000) must be made, and to secure the concession a definite deposit of 5,000,000 pesetas ($1,000,000) in cash or public bonds at the lowest quotations. For further details as to the provisions of this law reference is made to the text, which is inclosed herewith.
The language of the law is that “the Government” (el Gobierno) will guarantee the 8 per cent, profits of the company. This expression gave rise to a debate in the Senate on the meaning of the words “the Government,” and to remove any doubt it was proposed to substitute these words by either “the Spanish nation” or “the treasury of Cuba,” but the minister of ultramar objected to any amendment as unnecessary, stating that wherever in legislation connected with Cuba the words “the government” were used they had no other application or meaning than the government or treasury of Cuba, and that, in order to remove all doubt on the subject, when the public proposals were asked as contemplated by the law, the terms or conditions under which they were to be made would state explicitly that it was the treasury of Cuba which guarantees the 8 per cent, profits. The minister also made a similar statement in the Chamber of Deputies after the law had been voted. These declarations have given great dissatisfaction to some of the most active advocates of this enterprise, and grave doubts are expressed whether it will be possible to secure the proposals of responsible capitalists when the concession is offered to public competition.
On the other hand, it is claimed that in some way the guarantee of the national or Peninsula treasury will be obtained, audit is upon this understanding that a number of French, German, and English syndicates are reported to be preparing to make proposals.
The minister of ultramar informed me two days ago that the law had been signed by the King, but that it would possibly not be published for two months, as it was desired to postpone the time for receiving the proposals until a more favorable state of the money market.
I am, &c.,