No. 92.
Mr. Hall to Mr.
Bayard.
[Extract.]
Legation of
the United States in Central America,
Guatemala, July 22, 1885.
(Received August 15.)
No. 394.]Sir: With my dispatch No. 156 of the 10th of August, 1883, I transmitted a
copy of a decree, dated the 4th of the same month, relative to the
construction of a railroad from the Atlantic coast to the capital of
Guatemala. The decree established a capitation tax of $40, the nominal value
of one share of the stock on all persons, foreigners excepted, whose incomes
or earnings were estimated at not less than $8 a month, the tax to be paid
in quarterly installments of $1 each.
The management of the work was intrusted to a board of three directors 5 they
organized and commenced their labors early in 1884, the board received the
quarterly tax payment, employed a corps of engineers to make the survey, and
entered into contracts for construction.
The enterprise progressed satisfactorily to all appearance for about a year;
the taxes were collected from the poorer classes; the wealthy were called
upon to subscribe for stock proportionate with their means; a respectable
sum was thus accumulated in the International Bank of
[Page 134]
Guatemala to the credit of the board, * * * to
be applied upon the first emergency to any pressing requirement. Very soon
after the death of Barrios, the balance remaining in bank was appropriated
for other purposes. The decree of the 4th of August, 1883, was revoked, the
tax was abolished, the board of directors dissolved, and the liquidation of
affairs of the railroad was turned over to the department of public
works.
Soon after the organization of the board of directors proposals to build the
road were presented by different parties, but the only contractors who have
attempted to carry out their engagements are Shea, Cornick & Co., who
are represented in this city by Dr. D. P. Fenner. They undertook the
construction of the first 60 miles of the road from the Atlantic
coast—westward. They have completed and have received payment for 12 miles.
In addition, there are 4 miles finished and ready to be received, and a
large amount of disconnected work which would be ready for reception in the
course of a few months. According to their contract they are to be paid upon
the completion of each one mile of the road.
Since the Government assumed the obligation of the late board of directors
matters have gone badly with the contractors; they appear to be absolutely
dependent upon prompt payment for finished work to enable them to pay their
workmen; a month’s, and upwards, wages are now due to 300 men, most of whom
are said to be American citizens, and the contractors have not even the
means of supplying them with food. The agent, Dr. Fenner, has appealed
ineffectually to the Government for payment of the money due; and at his
instance, as set forth in his letter to me, I have made known to the
President the situation of the contractors as regards their laborers, and
have urged upon him the necessity of his giving the matter his attention. *
* *
Upon receipt of a letter from the consular agent at Livingston, informing me
that unless relief by the payment of their wages were promptly afforded, the
laborers would be left destitute and without food, I called upon the
President again and insisted that of the sums due to the contractors an
amount sufficient to pay the wages due to the men and their passages to New
Orleans be supplied at once. The result was a promise of the payment of
$25,000 the next day. The promise was fulfilled two days later, and
yesterday the amount was forwarded to its destination.
At the interview referred to, I stated to the President that as regards the
terms of the contract with Shea, Cornick & Co. I had nothing to do; that
my mediation was solely in behalf of the laborers, who, it had been
represented to me, were exposed to destitution and sickness in the swamps of
the coast through the failure of the Government to fulfill its obligations
with the contractors, and that unless relief were furnished immediately, I
should be compelled to apply to my Government for a naval vessel to
transport the men to the United States.
The Government now proposes to rescind the contract upon equitable terms;
with that object they have appointed William Nanne, an expert in railroad
matters, to enter into negotiations with the agent of the contractors. It is
to be hoped that these negotiations will result in a satisfactory
settlement, and an absolute winding up of the affair. The Government is not
in a situation to fulfill its part of the contract, much less to build the
road with its own resources.
I have, &c.,
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[Inclosure 1 in No. 394.]
Dr. D. P. Fenner,
general agent of Shea, Cornick & Co., contractors of the
Northern Railroad of Guatemala, to Mr. Hall.
Sir: We wish to call your attention to certain
facts and occurrences which lately have taken place, seriously affecting
the interests of Shea, Cornick & Co., contractors for 62 miles of
Northern Railway of Guatemala.
In 1883 the Government of Guatemala issued a decree for a certain
contribution to be paid by nearly every citizen of Guatemala, at the
same time inviting subscriptions from foreigners as well as natives.
Each person so contributing or subscribing received corresponding shares
in the enterprise incorporated by the Government and known as the
“Guatemala Northern Railroad.” A president and board of directors were
appointed and duly authorized to receive and receipt for money paid in
by the shareholders as trustees, that the money should not be used other
than for the lawful purpose for which it was collected, i. e., to build the railroad.
The first collections demonstrated that the amount of money which could
be safely expected to be paid into the treasury would amount to about
$700,000 per annum.
The directors were further authorized to contract for building of part or
whole of the designed road, subject to the approval of the minister of
fomento.
In May last, 1884, Messrs, Shea, Cornick & Co., contracted with the
directors to build 62 miles from Puerto Barrios to Los Amates, at a
round sum of $30,000 per mile, equipped, and to be paid for, as shown in
specifications of contract, to be finished in two years and — months, it
being calculated that the receipts of the directors at that time would
be almost sufficient to pay for the work, leaving, however, a deficit in
the amount which might occur on the part of the directors before the
work was concluded; in view of this probable deficit, Shea, Cornick
& Co., allowed to be introduced into the contract a clause No. — by
which in case the funds of the contribution, or of the stockholders
would not be sufficient at any time to pay the contractors for work
actually done, and to be paid for as expressed in the terms of the
contract, that the directors should not thereby suffer immediately, but
that the road should be ipso facto, become
mortgaged to the contractors, who would continue work for three months,
charging 10 per cent, interest on such moneys as were due.
(It will be noted by you that the contribution was collected quarterly,
thus enabling the directors to have three months more time to pay than
Shea, Cornick & Co. had to build.)
Matters went on well enough for some time, and the contractors had made
their preparations to put on a much larger force than they actually had
at work, being specially encouraged to this by the favorable season, and
by the fact that the directors had on deposit in the bank about $600,000
in coin, as well as also having effected favorable arrangements in
England and the United States to purchase rails, locomotives, bridges,
&c, as per article No.— of contract.
The war preparations early in March necessarily made the contractors
circumspect in pushing the work by a much enlarged force, but no men
were discharged, and work was and has been ever since steadily
progressing.
Early in April the Government suppressed the contribution, the very basis
upon which the contract was founded, giving no notice to the contractors
nor making any provision to pay the contractors for work done or to be
done, and the Government appropriated to other uses the money in the
bank, and now the directors are abolished and absorbed into the
ministries of fomento and hacienda, no notice being given to us, thus
depriving us of having to do with the only legally recognized party of
the other part to our contract.
Up to this time we have graded, received, and been paid for 12 miles. We
have now another mile graded. The inspector was duly informed of this,
but deliberately passed by the work on his way to Puerto Barrios without
inspecting, thereby subjecting us to a long delay in receiving our
money, it being the clear duty of the directors to have an engineer on
the work to inspect as fast as our engineers give notice of
completion.
But we especially wish to call your attention to the fact that the money
which was in the bank has been seized and applied to purposes alien to
that for which it was collected, and that the source of revenue has been
abolished. We therefore declare that unless the Government make
satisfactory arrangements for payment for work to be done, that we
consider the Government has broken faith and the contract, and we think
that arbitration should be appointed to arrange for our damages and
losses.
* * * * * * *
[Page 136]
[Enclosure 2, in No. 394.]
Mr. Sarg to Mr.
Hall.
United
States Consular Agency,
Livingston, July 11,
1885.
Sir: * * * The situation of United States
citizens connected with the construction of the Northern Railroad is
becoming a very serious one. I do not pretend to analyze the claims
which Messrs. Shea, Cornick & Co. may or may not have against the
Guatemala Government, for payment of certain contract work; I confine my
action to respectfully representing to you the situation some 300
laboring men will be thrown into, if inside of a very few days, money
cannot be sent down from Guatemala.
I have seen and conversed with all of the subcontractors. They will be
able to continue feeding the men for only two weeks more from this date,
at the utmost, and will have to discharge
them if this term comes round without money having been received. They
have distinctly told me that no promise of money being paid at a later
date will enable them to hold out one day longer. These 300 men will,
without doubt, assemble here a few days after discharge destitute and in
distress. Many have applied to me for advice, and agree to leave their
claim for wages in my hands and return to the United States if
transportation is provided.
I would respectfully suggest that in case the foregoing supposition
should become a fact, that you empower me to provide food for such
destitute United States citizens, and to send them to the United States
on board of steamships running to New Orleans, at the expense of the
United States Government, establishing a preferential claim against
Messrs. Shea, Cornick & Co. for the amount of all such
expenditure.
There are no agricultural or other enterprises in this district that
could occupy one-fourth part of these men.
I will beg you to give your answer by telegraph.
I am, &c.,
JAMES F. SARG,
United States Consular
Agent.
