Mr. Rodriguez to Mr. Olney.1

The undersigned, envoy extraordinary and minister plenipotentiary of the Greater Republic of Central America, has the honor to address His Excellency the Secretary of State, informing him that, as several bills relative to the construction of an interoceanic canal through Nicaragua have been for some time pending before both Houses of the American Congress, his Government recently instructed him to examine them and to make, under certain conditions, suitable representations to His Excellency the Secretary of State.

The undersigned has consequently examined said bills, which are five in number, to wit:

Three introduced in the House of Representatives, one by Mr. Mahon, December 3, 1895, another by Mr. Doolittle, and the third by Mr. Barham, both the latter having been introduced December 6, 1895.

Two introduced in the Senate, one by Mr. Perkins, December 30, 1895, and the other by Mr. Morgan, June 1, 1896.

All these bills take it for granted, with minor differences of detail, that the American Government is to take an important part in the enterprise, and that it is to furnish the money necessary for the construction of the canal by the Maritime Canal Company of Nicaragua, whose constitution and organization they essentially modify.

Unfortunately, the undersigned observes that the provisions of these bills are at variance, both generally and in matters of detail, with the stipulations of the contract of April 24, 1887, between Nicaragua and the company aforesaid, from which contract the company derives its existence, and which is the basis of its enterprise.

That contract stipulates in its eighth article that the concession therein provided for shall in no case be transferable to Governments or to foreign public powers, and article 53 provides that any contravention of this stipulation shall entail a forfeiture of the contract. As it can not be denied that the bills to which the undersigned has reference—although they do not expressly say so—effect that transfer most fully, making the Government of the United States of America the absolute owner of the enterprise and of the canal and its rights, the result to which they inevitably conduce is the forfeiture of the contract.

Article 47 of that instrument provides that the company shall undertake, at its own expense, the final surveys of the ground and the location of the line of the canal by a commission of competent engineers, two of whom are to be appointed by the Government of Nicaragua, and the aforesaid article 53 provides that a failure to comply with this stipulation shall entail the forfeiture of the concession. The bills, however, [Page 375] provide that the canal shall be constructed under the surveillance of the Department of Engineers of the Army of the United States of America, and according to its plans, and that three engineers shall be designated by the President for that purpose, who shall make the explorations and estimates. This provision likewise conduces to the forfeiture of the contract.

The people of all nations shall be invited to contribute the necessary capital to the enterprise.

Of the capital with which the company shall organize, and which it proposes to distribute among the different countries interested in the enterprise, there shall be reserved at least 5 per cent for the Central American Government and citizens that may desire to subscribe.

These provisions of article 7 of the contract are antagonized by the bills which distribute the capital of the enterprise among the United States of America, Nicaragua, Costa Rica, and the company.

The capital stock of the final company shall be composed of shares, bonds, or obligations of any other kind, in such proportion as it may deem convenient.

This is another provision of the ninth article. The bills, however, fix the amount of the capital stock in shares, of which they dispose in such a way that they are of no use for the work of the enterprise, as they ought to be, according to the intent of the contract. For the work of the enterprise the bills create bonds, which must thus be converted into capital stock or be left out of the contract. The undersigned need not here point out the infractions which the bills involve.

According to article 10 of the contract, the board of directors is to be composed of persons at least one half of whom shall be chosen—by the company, of course—from the promoters who may yet preserve their quality as such. The bills organize the board of directors with eleven members, eight of whom are to be appointed by the President of the United States, in different capacities, one by Nicaragua, one by Costa Rica, and one by the canal company. The difference between this provision and the stipulation referred to could not be more marked than it is.

Among the benefits which Nicaragua reserves to herself, in consideration of the valuable privileges and rights which she surrenders, is 6 per cent of the shares, bonds, certificates, or such other obligations as the company may issue with a view to raising the capital. Now, notwithstanding the fact that the company has made several issues, it has not fulfilled this obligation; and as the bills say nothing on this particular point of shares, bonds, certificates, or other obligations which were to be issued and have not been issued in favor of Nicaragua, these securities would probably either be lost in the new form of the enterprise or would be liable to troublesome and tedious litigation.

Two of the bills in question have already been reported by a committee, so that they may finally exclude the others; nothing, however, is established in them with regard to the shares that would belong to Nicaragua; and it might happen, owing to this, that Nicaragua would get none at all.

If the company were to issue a hundred or a hundred and fifty million dollars’ worth of bonds in order to meet the cost of the work, which bonds, as I have already remarked, would have to be considered as capital or be left out of the contract, Nicaragua would be entitled to her 6 per cent in virtue of the stipulation above referred to; but the bills leave no door open to such a possibility, nor do they allow her any participation in the issue which is to be made in order to pay for the work already done.

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The company, by article II of the aforesaid contract, has contracted the solemn obligation to construct at its own expense within the term of three years, reckoned from the commencement of the work upon the interoceanic canal, a navigable canal between Lake Managua and the navigable part of the Tipitapa River, near Pasquier, of sufficient dimensions to admit of the free passage of vessels drawing 6 feet, and of 150 feet in length. That term expired a long time ago, but the company, notwithstanding the most earnest solicitation, has made no pretense of meeting that obligation, or of definitively adjusting the compensation which it ought to pay in order to be discharged therefrom. The bills establish nothing on this other point, and Nicaragua’s rights in this matter might thus be annulled in consequence of their silence.

By the plan involved in the new form which the bills devise for the enterprise the present company is extinguished and nothing remains of it in its relations with the enterprise save the shadow of a personality represented by a vote in a board of directors of 11 members; while in its relations with Nicaragua it may always claim full personality as the holder of the concession, although having none of the means necessary to enable it to meet its obligations.

Finally, it is to be observed that, while the bills contravene and set at naught stipulations of the contract, they do not state whether the remaining ones still remain in force or not, although among these latter there are very many which are of no great importance to Nicaragua in particular and to Central America in general.

The undersigned is convinced of the good faith of the gentlemen who have introduced these bills in both Houses, and of those who advocate their passage. He takes, moreover, pleasure in stating that he recognizes these efforts as the result of the legitimate interest which they feel in behalf of the construction of an interoceanic canal, in which the confederation that he represents is quite as deeply interested. And in calling attention to the serious objections enumerated, which would render these efforts nugatory, the only object that he has in view is to protect just rights, which he thinks are menaced by the bills aforesaid.

It seems evident that the company is unable to raise money to fulfill its contract unless the United States of America furnish it therewith, and since that contract excludes the possibility of attaining that result, the undersigned, having been duly authorized to do so, proposes to his excellency the Secretary of State that the two Governments—relying upon the favorable disposition of the Government of the United States of America—shall come to a direct understanding on the subject, on the basis of the Zavala-Frelinghuysen treaty, with such modifications as maybe agreed upon, and endeavoring to reach a just arrangement with the Maritime Canal Company of Nicaragua, so that it may renounce a concession whose conditions it is unable to fulfill.

The undersigned, in thus obeying the instructions of his Government, avails himself, etc.,

J. D. Rodriguez.
  1. Sent to the Senate, January 22, 1897.