Papers Relating to the Foreign Relations of the United States, Transmitted to Congress, With the Annual Message of the President, December 4, 1876

No. 227.
Mr. Gibbs to Mr. Fish.

Legation of the United States,
Lima, Peru, July 13, 1876. (Received August 5.)

No. 76.]

Sir: I have the honor to refer to my dispatch No. 47, January 10, in relation to the financial affairs of this republic, that have not improved since then. Exchange on London may be called the financial test of the country. At that time exchange was 31d. to the sol; American gold, 47 per cent. premium; Peruvian gold, 31 per cent.; and silver, 19 per cent.; and exchange has been as low as 25d. to the sol; American gold as high as 90 per cent. premium, and silver 44 per cent. To-day exchange is 28d. to the sol; American gold 65 per cent. premium; Peruvian silver, 37 per cent.

The banks have made no attempt to resume specie payments.

On May 16 the President issued a call for an extraordinary meeting of Congress, of which I inclose copy and translation.

The reason for this action on the part of the government was supposed to be to force some of the owners of the nitrate of soda works in the south, at the great nitrate beds, to come in under the expropriation decree of December 14, 1875.

These works are important and very productive, the export from this republic in 1875 amounting to 722,950,194 pounds, or over 322,745 tons; paying into the treasury under the old export duty the sum of 1,572,608 sols 36 cents, at 30 and 15 cents per quintal. This large shipment was due to the fact that shippers expected an increase of duty and sent all possible out of the country.

The government argued that the immense exportation of nitrate interfered with the sales of guano, the great product of Peru, and by having a monopoly of the supply it would not interfere with the guano and they could fill the demand of the commercial world as wanted; whereas now, by the great supply and competition, it injured the sale of the guano and by that the treasury of the republic.

The export duty of 60 cents per 100 pounds, as per decree referred to, did not stop the supply, as I see by the report of February this year that 677,444 quintals were exported, that produced in duties 332,085 sols 88 cents; part of the above paying 30 cents per quintal.

According to statements from the press, 36 works, valued at 11,145,000 sols, had conformed to the expropriation act; and some 14 works, valued at 4,170,000 sols, had refused to enter into terms with the government.

On June 15 the Congress met as by call of the 16th of and the President opened it by reading an address, of which I send a transaction taken from the South Pacific Times of Callao.

The following was made the order of the day for discussion:

• Art. 1. Nitrate of soda exported to foreign countries from the ports of the republic shall pay 1 sol 25 cents per quintal export duty.
• Art. 2. In case that exchange on Europe be more or less than 40 pence per sol, the duty must be paid so as to be equal to said exchange.
• Art. 3. The government shall be authorized to reduce this duty to 40 cents at the same exchange of 40 pence per sol by giving one month notice, (discretionary.)

At the present rate of exchange the export duty would be equivalent to 1 sol 78 cents per quintal.

The debates in the Chamber of Deputies were lengthy and excited, the opposition charging that it was a useless despotic act, destroying a large business and throwing out a great deal of capital that had accumulated at the nitrate fields; useless because the fields of Bolivia were just as productive, and the act would be very beneficial to that country and in the end destructive to Peru; also that in the valuation made by the government commissioners great favor had been shown to some owners by overvaluation, and injury to others by the reverse.

In answer it was said that the fields of Bolivia had been farmed to one person, Mr. Meiggs, for a stipulated sum per annum, and that this government would have control over those fields, and that it was absolutely necessary for the treasury to have full powers over all the nitrate fields in Peru.

The debates in Congress were held up to July 6; when put to vote the decree was made law by 56 ayes to 33 noes, and the Congress adjourned on the 10th instant.

The banks have taken possession formally and assumed the administration of the nitrate works; the export is to be limited to 2,000,000 of quintals per annum, the banks to supply the payment to the expropriated owners and have the consignation abroad and receive 5 per cent. commission, they to receive 60 per cent. of the net produce of the nitrate if sufficient, the balance to be taken by the government for internal wants. This refers to the works under the former decree.

The deficit of the treasury for the fiscal year 1875–’76 is said to be 7,000,000 sols, and, if favorable loans are not made, calculated to be for 1877 and 1878 near 25,000,000. To meet this the government is making every exertion.

General Prado, the President elect, who went to Europe in March last as envoy extraordinary to make a loan, telegraphed on the 12th of June that he had been successful in contracting for 1,900,000 tons, on which the contractors were to advance about 5 pounds sterling per ton for working expenses, extraction, loading, &c., an advance of £700,000 per annum, interest account reciprocal, 5 per cent. excess to be paid former bondholders to consolidate five semi-annual coupons of old debt from January 1, 1876, bondholders not to receive any amount until the 31st of December, 1877.

This news created quite a stir in political and financial circles, all hoping for better times; but exchange remains about the same and the public treasury empty.

In connection with the foregoing, I will state that on the 27th of May parties officially announced, large discoveries of guano in the south of Peru, near Ignigui, of over 3,000,000 tons, and another person on the 3d of June officially announced another discovery of 1,200,000 tons in another part south.

I am, &c.,

RICHARD GIBBS.

[Inclosure 1 in No. 76.—Translation.]

[Extract from El Comercio.]

We publish the supreme decree summoning an extraordinary Congress:

I, Manuel Prado, constitutional President of the republic, in use of the faculty granted by the second paragraph of the ninety-fourth article of the constitution, decree:

• Art. 1. An extraordinary session of Congress will assemble on June 15 next.
• Art. 2. It will meet for the purpose of discussing the necessity of increasing the export tax on nitrate of soda.

The minister of government will see that this decree is duly executed.

Given at the government house, Lima, May 16, 1876.

• MANUEL PRADO.
• AURELIO GARCIA Y GARCIA.

[Inclosure 2 in No. 76.]

[Extract from the South Pacific Times, Saturday, June 17, 1876.]

opening of the extraordinary session of congress.

Early on the 15th instant the Plaza de Bolivia, in Lima, commenced to be thronged, in expectancy of the opening of the extraordinary session of Congress, and, notwithstanding the fact that the day was one of those which the Roman Catholic Church celebrates with more than ordinary pomp and solemnity, the assemblage was very large, even before its number became augmented by those who had attended the Corpus Christi procession, and who, having fulfilled their religious duties, were anxious to witness the assembling of the new Congress, either from a fondness for politics or a delight in sight-seeing. The troops were drawn up in line, and shortly before 3 o’clock the President drove up to the Congress Hall, at the door of which he was received by a deputation of senators and deputies, who escorted him into the speaker’s chair, from which he read the following opening address:

Honorable Representatives: Although my constitutional term of office is about to terminate, I have believed it to be of public utility to appeal to your patriotism and to convoke an extraordinary session in order to terminate a matter which conclusive reasons render every day more apparent in the new and positive basis of our national treasury.

Being an opponent of narrow-mindedness in public affairs, I have considered it my duty in the last days of my government, as it was at its commencement, to steadfastly work for the benefit of the country, and more particularly to complete the task which has fallen to my lot of preparing those means for future governments of which the want has rendered my term particularly difficult.

I shall not endeavor to impress upon you the importance of the matter upon which you are about to decide, since it has already formed the subject of debate in your sessions. Neither shall I explain the actual condition of affairs, because the report of the minister is prolix and complete.

I shall confine myself to simply stating that I am pleased to be able to say that the numerous and intricate operations which had to be effected in order to obtain a revenue from the nitrate of soda, as provided by the law of May 23, 1875, have been effected, in the opinion of the government, in a manner which has proved as favorable to the interests of nitrate-owners as to those of the treasury.

A great majority of the nitrate-owners have accepted the terms offered by the government for the purchase of their properties, while those who have continued to manufacture nitrate for their own account have received good prices for their produce, and the treasury has obtained from it a rental which has not fallen below your anticipations.

Facts have demonstrated the truth of the principles upon which your decision was based, and the results which have been obtained in practice clearly point out the further and more important ends to which we may aspire by insuring the success of the operations which are now being worked out. The minister of the treasury will submit to your judgment the reasons which induce the government to suggest the precaution it believes should be taken in order to produce the best results in favor of the national treasury and the public welfare.

Legislators, the patriotic zeal with which you have responded to the call of the government satisfies me that you appreciate the motives which have led me to convoke this session, but which are, nevertheless, of such a nature that many have placed them in doubt.

A government which is on the point of retiring after a term of office which has been by no means free from difficulties and struggles, and which, before its retirement, convokes the representatives of the nation in order to obtain an increased taxation, really offers a spectacle and example which is by no means common, and which patriotism and self-sacrifice can alone explain.

But I have thought that the present is a particularly propitious moment for the calm discussion of this question, since the citizen who assumes the initiative in it is about to leave the government, and the advantages which will result from it will all fall to his successor.

I trust, gentlemen, you will do honor to these sentiments, whatever may be the decision which your wisdom and patriotism lead you to form, and which I fervently hope may be that which is most suitable to the interests of the nation.