Mr. Lord to Mr. Hay.

No. 128.]

Sir: Referring to my cablegram of the 5th instant, relative to the state of siege in this capital, I beg to say that the street disturbances or public disorders which caused the executive power, with the sanction of Congress, to issue a decree declaring this capital to be in a state of siege for six months, grew out of opposition to a bill for unifying the public debt.

During the present year there has been considerable discussion in the press as to the advisability of consolidating the public debt, which consists of some thirty loans bearing different rates of interest, into one loan with a uniform interest. In the progress of this discussion, it was not apparent that there was any serious objection to the adoption [Page 3] of a financial measure which should accomplish this object without increasing the public debt or pledging the customs revenue for its payment. While it was not positively known that a proposition was on foot looking to the unification of these loans having the approval of the Government, it was surmised—and it was intimated— that Dr. Cárlos Pellegrini, a leading senator, and Mr. Ernesto Tornquist, a prominent financier of this city, who were then in Europe, had been authorized by the Government to treat with its creditors and ascertain the terms on which a unification of the public debt could be effected. This supposition led to much talk and discussion concerning the terms and conditions which should form the basis of a measure of this character and also to some apprehension, quite freely expressed, that the opportunity afforded in dealing with such measure would be used for speculation to the detriment of the Government’s credit and interests.

When Congress opened its session in May last, there was a good deal of curiosity exhibited to know what the President would say in his message about consolidating the public debt and a good deal of surprise expressed that he should have made no mention nor reference to that subject. But, as Dr. Pellegrini had not returned from Europe to resume his seat in the senate, it was surmised that he was delayed on account of not having been able to arrange satisfactory terms, and to this fact the public attributed the President’s reticence to unification in his message. So the discussion went on growing more intense, but not heated.

About a month after the opening of Congress, Dr. Pellegrini returned to Buenos Ayres, resumed his seat in the Senate, and took part in its discussions, giving no intimation of nor making any reference to the subject of unification. As the finances were known to be in desperate straits and some remedy for their improvement considered to be of paramount importance, the belief still prevailed that some sort of scheme for the unification of the public debt would be proposed, notwithstanding the silence of Dr. Pelligrini and the reticence of Government officials. The consequence was that the press became more vigorous in its comments and criticisms on the action of the Government and the people more expectant and agitated.

At last the President sent a message to Congress recommending a bill for consolidating the public debt, the chief features of which bill were to be as stated: (1) The decrease of the service of the debt by $5,000,000; (2) the consolidation of the thirty existing loans into one, with a uniform rate of interest and an amortization, and (3) the payment of the balance of the ‘floating debt, maturing in this year and next, amounting to $18,000,000 gold. The public debt is about $385,000,000 and the unification bill included it and some other items, making the whole sum of $435,000,000. The bill provided that 70 per cent of the customs receipts should be turned over daily, not into the national treasury, but a certain bank designated by the creditors, to be applied to the obligations incurred. It will be seen, therefore, that the scheme for consolidating the public debt increased its amount and pledged a portion of the only gold revenue of the nation to meet its obligations. The bill was presented by Dr. Pelligrini in the Senate with a short speech in support of it. Without further discussion it passed the Senate with only two dissentient votes, and was sent to the House of Deputies, where it was referred to a committee, who reported favorably upon it.

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The bill was bitterly opposed by the press, and the hostility of the people began to manifest itself. The object of the bill was to improve the public credit. It was declared that no logic could demonstrate that an increase of the public debt combined with the mortgage of the public revenues could be a betterment of the public credit, nor, on the other hand, that the recovery of a lost credit could be achieved by mortgaging its revenues. * * *

The public mind was greatly agitated, and a spirit of discontentment began to manifest itself among the people. Some meetings were called for purposes of protest. The university students, numbering over 1,000, marched to Congress and presented a petition and protest, which was evidently written by some older head, and on their return were joined by a great crowd of the discontented, crying out “Down with the President,” “Down with the unification bill,” etc. This was the initiation of the disturbances. The President’s house was attacked, and it was rumored that he and his family took refuge in the Royal Hotel. The mob attacked Dr. Pellegrini, whom they met in the street, but he was rescued by friends, and then passed down Florida street, until they reached the office of El País, when they proceeded to smash its windows, not, however, without meeting with some resistance from the inmates of the building. Turbulence and disorder began now to spread and affect the peace and business of the city. The office of the Tribuna was also attacked, but without much damage. In the meantime the police were reenforced, and their efforts to disperse the crowd and restore order partially succeeded. The next day, however, a large and menacing crowd gathered on the plaza in front of the Government building, and, not dispersing at the command of the police, a charge was ordered of mounted police to clear the plaza and streets adjoining, and a collision took place in which shots were freely exchanged, wounding several and killing a few. The mob finally began to give way and, being hard pressed, to break into several bodies, and the police, being at the same time reenforced by firemen with Mauser rifles, succeeded in dispersing them and in partially restoring order, though the spirit, of rebellion and resistance against the constituted authorities was not entirely subdued.

At this crisis the President asked and Congress granted him authority to declare the city in a state of siege. Troops from the provinces were quietly brought into the city, quartered in barracks, and reviewed, ostensibly as a preparation for the usual ninth of July parade (independence day), but actually to preserve public order in the event their services should be needed. Sunday morning (July 7) opened on a comparatively quiet day. There were no large gatherings of crowds nor acts of turbulence.

The President is an able and conciliatory man. He had been popular with the people, who had shown him frequent manifestations of their favor and good will. He undoubtedly felt that popular sentiment against the unification bill must be appeased. On the 8th instant he sent a message to the Chamber of Deputies withdrawing the unification bill, which was awaiting its consideration. The Chamber immediately passed a resolution adjourning sine die the further consideration of the bill. This action is supposed to signify an entire change of the financial policy of the Government.

Still, there were those who thought that a hostile demonstration would be liable to occur on independence day, and great precautions [Page 5] were taken to forestall it and preserve the public peace. The President gave his customary banquet to the diplomatic corps and prominent officials of his Government on Monday evening, and on Tuesday (independence day) the same officials attended the Te Deum at the cathedral by his invitation and witnessed the review of troops from the balconies of the Government building. Everything passed off quietly, peaceably, and in the usual manner, except that the crowd of citizens was smaller as compared with former occasions and few cheers greeted the President.

As a consequence of the withdrawal of the unification bill, the minister of finance, Señor Enrique Berduc, tendered his resignation which was accepted by the President. The minister of agriculture, Señor Ezequiel Ramos Mexía, also resigned in consequence, it is said, of party ties connecting him with Dr. Pellegrini. The ministers of war and marine also tendered their resignations in order to give the President an opportunity to reorganize his cabinet, but they were requested to retain their respective posts.

The act of withdrawing the bill seems to have given satisfaction to public opinion. The state of siege still exists, but all evidences of turbulence and discontent have disappeared. The city wears its wonted aspect of peace, businesses pursuing its accustomed channels, and public order and quiet prevail.

With regard to the unification bill, I have never doubted but that the President was animated by an honest purpose and laudable zeal to better the condition of finances and maintain the public credit in his support of that measure, conceding that the bill itself was liable to serious objection. To sum up, it appears that the recent street disturbances and acts of violence in this city were caused by the press inveighing against the unification bill, and producing in the public mind the belief that it boded evil to the good name and financial credit of the nation, and that the action of the President in withdrawing such unification bill had the effect to allay popular passion * * *

I have, etc.,

Wm. P. Lord.