The Chargé in Peru (Smith) to the Secretary of State

No. 440

Sir: Referring to the Legation’s telegrams of December 28, 3 p.m., December 30, 3 p.m., No. 1 January 1, 6 p.m., and No. 3, January 3, 10 a.m.,6 concerning a bill which was passed by the National Assembly December 26 providing for the confiscation of property of conspirators against the Government, I have the honor to report as follows:

The more radical elements of the President’s party and to some extent the President himself, deemed it necessary to provide themselves with some effective weapon against persons who, although not now residing in the country, might be plotting against the present Government. The preamble of the law as passed, reads: [Page 361]

“Whereas acts of rebellion committed to overthrow the present regime partake of the extraordinary seriousness of an attack against the new Constitution and the ignoring of the democratic reforms which the people have desired to sanction on their own account and through a plebiscite; and whereas the principal offenders who have taken refuge abroad must answer with their property for the public offenses [expenses] and damages which they have caused; etc.”

I am enclosing a full and careful translation of the law7 and it will be seen that its provisions are most drastic and far reaching. Article 3 was especially objectionable, as it provides that all sales, barters, partnerships, leases (whether long or short) and all covenants generally which the conspirators or rebels may have entered into since July 4, or may hereafter enter into either to evade this law or to escape the obligations therein provided, are null and void and invalid; the right to compensation of parties who have dealt with them in all good faith shall not, however, thereby lose force. Such private compensation shall be paid after those incurred in favor of the State by reason of conspiracy or rebellion have been preferentially covered.

A storm of protest arose in the opposition press and among the commercial houses, especially the banks. The Banco Italiano requested the Italian Minister to call upon the Minister for Foreign Affairs, as did the Banco Mercantil Americano request me to see him upon the same subject. As reported in my telegram of December 30, I called upon the Minister, and asked his opinion concerning the law in point. I found that he was bitterly opposed to it and was using his influence with the President to have the law changed so that it would not be retroactive in any respect.

The morning of December 30th the President called me to his office and asked me concerning the bill. I did not give an opinion, except to say that, as drawn, it might affect commercial interests, including those of American citizens. I explained to him that its features had been pointed out to me by the Acting Manager of the Banco Mercantil Americano, who was afraid that it would affect the bank’s transactions. The President explained to me that he would call a Cabinet Meeting that afternoon to go over the matter carefully and see what could be done.

As shown by the enclosed clippings,7 the bankers and commercial people made strong protests the same day and brought all possible pressure to bear upon the President to modify or change the law.

As reported in my telegram No. 1, January 1, 6 p.m. the President telephoned me on the morning of the 31st to come at once to the palace. He informed me that the meeting of the Cabinet had taken [Page 362] place and that it had been decided to eliminate the retroactive features of the bill and make it effective only from the date of promulgation instead of from the fourth of July last. While this was a concession on the part of the President and the radical members, it did not meet with the approval of the Minister for Foreign Affairs, Sefior Porras, who handed the President his resignation. This resignation was not accepted. During the day of January 2nd the President was in constant consultation with the different members of his Cabinet and with heads of the largest commercial and banking institutions. I was informed late last night by the Minister for Foreign Affairs that he believed the matter would be adjusted, and while not absolutely satisfied, still he would continue in office for the present, as he believed the whole question would eventually be settled in such a manner as to protect the commercial interests. In other words, he felt that the matter might be sent to Congress with recommendations to pass the bill to confiscate property of conspirators that have been declared or arrested, thus eliminating all retroactive features. See Legation’s telegram No. 3, January 3, 10 a.m.

I hope the Department approves my action in this matter. I desire especially to call attention to the fact that the President called me twice to his office, and I could not very well refuse to go. I have reported to the Department fully everything that occurred both by cable and in this despatch.

Wm Walker Smith
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