Minister Bowen to
the Secretary of State.
American Legation,
Caracas, January 6,
1905.
No. 378.]
Sir: I have the honor to inclose herewith
copies of notes exchanged with the minister of foreign affairs in regard
to the payment of the claims of the foreign bondholders.
My note to him was purely personal and written in great haste,
immediately after I had discovered that President Castro was
entertaining a proposition to add 130,000,000 to the diplomatic
debt.
The answer I received was so friendly in tone that I called at once upon
the minister of foreign affairs, and suggested that he should submit to
President Castro a plan for settling all pending questions with foreign
nations. I outlined the plan (copy of which I inclose), and this morning
he called on me and said that President Castro would authorize me to
propose it to you.
This afternoon he brought me a letter (of which I inclose herewith a
copy), and Which contains an unsatisfactory modification of my plan,
inasmuch as it ignores the settlement of the claims of the European
creditor nations. When I pointed out to the minister of foreign affairs
that defect in the letter, he said: “My letter to you should be regarded
as the first step.”
I then asked him whether President Castro intends to submit to
arbitration all of his pending disputes, including the asphalt case. He
answered: “Certainly.”
[Page 1011]
I then intimated that no arrangement could possibly be satisfactory that
ignored the right of the other creditor nations to have their claims
also submitted to arbitration. He answered: “We shall, of course, have
to take up that question when we hear that Washington desires it to be
settled.”
I then agreed to send a cablegram to you in regard to what had been done.
A copy of the cablegram I inclose herewith.
I have, etc.,
[Inclosure 1.]
Minister Bowen
to the Minister of Foreign
Affairs.
American Legation,
Caracas, January 4,
1905.
My Dear Mr. Sanabria: Word has reached me
from home to-day that the German and British bondholders wish
President Castro to agree to settle their claims by giving to them
about 130,000,000 bolivars in the so-called “diplomatic debt.” I
earnestly hope that President Castro will not consent to enter into
that agreement.
In the first place, as the claims of the bondholders were not settled
by the Washington protocols, the claims that were settled by them
should enjoy preferential treatment. The only proper way, in my
opinion, to pay the bondholders is to let them have 30 per cent of
the customs receipts of La Guaira and Puerto Cabello after the
claims of the allies and the peace powers shall have been fully
paid.
In the second place, by adding 130,000,000 to the diplomatic debt the
value of the French, Dutch, and Spanish holdings of that debt will
be diminished very greatly, and France, Holland, and Spain would all
have reason to complain that they had not been treated justly.
Finally, according to the existing law of Venezuela, as I understand
it, only 2,000,000 bolivars can be set aside per annum for paying
interest, etc., on the diplomatic debt. It is evident that with only
2,000,000 it would be impossible to pay interest on 130,000,000.
Please do me the kindness to present these personal views of mine to
President Castro, and believe me,
Yours, very sincerely,
[Inclosure
2.—Translation.]
The Minister of Foreign
Affairs to Minister Bowen.
Caracas, January 5,
1905.
Mr. Minister: I am charged by the
Provisional President of the Republic to say to your excellency as
follows regarding your letter of the 4th instant:
The Venezuelan Government has not yet made the agreement to which
your excellency refers, but it feels forced to enter into
negotiations with the bondholders of Germany and Great Britain,
etc., in conformity with the protocols which your excellency, as
representative of Venezuela, signed at Washington, and which say in
article 6 (see German protocol and British protocol).a
Moreover, the President while acknowledging what you state, that the
claims of the bondholders were not arranged by the protocols of
Washington, because they did not have to be, as they were recognized
as debts by valid agreements, previously made by the Venezuelan
Government, recognizes that the obligation exists in said article of
the said protocols. As to the opinion of your excellency that
preferential treatment be accorded to the claims of the allied and
peace powers, and the 30 per cent be afterwards given to the
bondholders, the Government of the Republic would have no objection,
if your excellency would aid Venezuela to make that arrangement, and
support our government if necessary.
The President states that if the claims of the bondholders are
reduced to the 130,000,000, which your excellency refers to in your
said letter, there would be no diminution in value of the French,
Dutch, and Spanish holdings, first, because of the diminution of
these holdings; second, because of the security; and third, because
the new diplomatic debt would be incorporated in the existing
diplomatic debt.
[Page 1012]
Lastly, the President would have to put aside, in order to conclude
the said new agreement with the bondholders, a sufficient sum of
money for that purpose, as it is true that the 2,000,000 bolivars
would not be sufficient to cover the interest and amortization of
the whole debt.
I am, etc.,
[Inclosure
3.—Translation.]
The Minister of Foreign
Affairs to Minister Bowen.
Caracas, January 6,
1905.
Mr. Minister: In connection with my talk
with your excellency last night I am pleased to inform you that I am
authorized by the Provisional President of the Republic to say to
you the following:
- 1.
- The Venezuelan Government being obliged in conformity with
Art. 6 of the Washington protocols to make an agreement with
the bondholders, and at the same time being obliged by the
same protocols to continue paying 30 per cent of the customs
revenues of La Guaira and Puerto Cabello to the allied and
peace nations, and mindful at the same time of its desire to
effect a satisfactory arrangement with all the creditors of
the Republic, the Venezuelan Government would not be
indisposed to fix at 5,000,000 of bolivars the sum which the
30 per cent would invariably yield and which by virtue of
the said protocols the government is obliged to pay in
twelve installments—a sum which, once the allied and peace
powers have been paid would continue to be paid in the same
proportion to the British and German bondholders. This
agreement could become effective in the fiscal year
beginning July 1.
- 2.
- The Venezuelan Government, desiring to maintain its good
relations with the United States, offers to make with the
United States an arbitration treaty for the solution of all
legal questions which, having legally acquired diplomatic
character, can not be settled by mutual consent by the two
governments.
I am, etc.,
[Inclosure 4.]
Plan proposed by Mr. Bowen.
- 1.
- Venezuela will guarantee that the 30 per cent of the revenues
of La Guaira and Puerto Cabello to be paid to the allied and
peace powers shall amount to the fixed sum of 5,000,000 bolivars
per annum. This agreement applies to the current year ending in
March, as well as to the future.
- 2.
- Venezuela will pay the British and German bondholders interest
and amortization out of the 30 per cent of the customs revenues
of Puerto Cabello and La Guaira after the allied and peace
powers shall have been fully paid, if the American Government
will induce the bondholders to accept this agreement.
- 3.
- Venezuela agrees to submit to arbitration all pending
questions between Venezuela and the United States, including the
asphalt case.
- 4.
- President Castro is ready and willing to submit to arbitration
all questions relating to claims.
(Note.—After a long talk about arbitration
with the minister for foreign affairs I decided not to ask for a
permanent arbitration treaty at present, but first to try to induce
the President to sign a protocol to arbitrate pending questions and
claims. I told the minister that it takes a long time to get a
treaty ratified, and that I did not believe you would be satisfied
with any proposition involving delay. Of course President Castro
prefers to negotiate a treaty.
