Minister Sorsby to the Secretary of State.

No. 206.]

Sir: Referring to my No. 200, of September 14 last, relative to the commercial relations between Chile-Bolivia and Peru-Bolivia, respectively, I have the honor to report that on October 28 last the Bolivian minister at Lima, Peru, acting upon precise instructions from his government to that effect, notified the Peruvian Government that Bolivia had canceled or declared void the “treaty of commerce and customs” of June 7, 1881, together with several protocols based thereon (referred to in my No. 200, of September 14 last, as the treaty of October 26, 1878), and has definitely fixed the 31st day of December, 1905, as the final day of its operation or existence. The Bolivian minister also proposed that a treaty better adapted to the mutual interests of both countries should be substituted.

Replying to the Bolivian minister, the Peruvian minister for foreign affairs, his excellency Dr. J. Prado Ugarteche, protested strongly against the action of Bolivia, declaring said action to be abrupt and unjust; and further, that the Peruvian Government would not recognize the power of Bolivia alone and exclusively to determine the final period for the termination of the treaty and the protocols relative thereto. And his excellency expressed the hope that the sense of justice of a neighboring and friendly country, such as Bolivia, would not permit it to persist in maintaining a position which would oblige the Government of Peru, much to its regret, to discontinue the privilege of free transit.

Since June of the present year both countries have in vain sought to reach a mutual understanding with respect to the arrangement of the bases for a new treaty to replace that of June 7, 1881, and its respective protocols; and now, in the discussions with respect to Bolivia’s cancellation of the said treaty and protocols and her having fixed the 31st day of December of the present year for the termination of the same, it is understood that Bolivia has offered to make a concession by changing the date for the final termination of the treaty from December 31, 1905, to July 1, 1906, but that Peru refuses to accept the proposed concession and insists upon at least a period of one year, counting from January 1, 1906.

At this writing it seems probable that no agreement as to the bases for a new treaty will be reached within the period of time to which Bolivia may agree to prolong the life of said treaty of 1881, and that as a consequence Peru will impose a transit duty upon all cargo to and from Bolivia, commencing with the actual annulment by Bolivia of the treaty of 1881 and the relating protocols.

I have, etc.,

William B. Sorsby.