Papers Relating to the Foreign Relations of the United States, Transmitted to Congress, With the Annual Message of the President, December 4, 1883
No. 29.
Mr. Hall to
Mr. Frelinghuysen.
Guatemala, August 8, 1883. (Received September 4.)
Sir: I have the honor to transmit, inclosed, a copy of the Gaceta, the official newspaper of Costa Rica, of the 20th ultimo, containing the contract between Mr. Minor C. Keith, a citizen of the United States, and the Costa Rican Government, for the arrangement of its foreign debt and the completion of its Atlantic railway; a translation of the contract is also inclosed. The foreign debt of Costa Rica is estimated at about $18,000,000; the greater part of this sum arises from overdue interest. The principal was contracted in 1871 and 1872 with the object of constructing an interoceanic railway from Port Limon, on the Atlantic, to Punta Arenas, on the Pacific. A good part of the loan was spent in expenses of the negotiation and never reached Costa Rica; other sums, it is said, were appropriated* * * for other purposes than those originally intended. Mr. Keith, for himself or in the name of the company he proposes to organize, agrees to arrange with the foreign creditors for a reduction of the present rates of interest of 6, 7, and 8 per cent, to 2½ per cent.; after ten years’ payment of interest, the rate will be increased to 3½ per cent, per annum. To secure in part the payment of the principal and interest of the debt, the Government hypothecates the net revenues of the custom-houses of the Republic. These revenues were $440,000 in 1882, and will, no doubt, be increased considerably when the road is finished. The Government concedes to Mr. Keith or to his company the right of ownership for ninety-nine years of the railroad already constructed and to be constructed. Of theformer there are 71 miles of Atlantic Division, from Port Limon to Carrillo, in operation; of the Central Division, from Cartago to Alajuela, there are 26 miles in operation, and in the Pacific Division there are 13 miles, from Punta Arenas to Esparta. To connect the Atlantic and Central Divisions 30 miles of railway have to be constructed between Carrillo and Cartago, and to connect the Central and Pacific Divisions 50 miles of road are required between Alajuela and Esparta. It appears, therefore, that Costa Rica requires but 80 miles of railway to complete her interoceanic communications. The contract with Mr. Keith stipulates only for the construction of the 30 miles required to connect the Atlantic and Central Divisions.
In addition to the right of ownership of the railroad, the Costa Rican Government grants to Mr. Keith and his company 800,000 acres of public lands.
Eighteen months are allowed the contractor wherein to carry out the agreement. If the arrangement of the debt should not be completed in that time, the contract will lapse without penalty to either party. As proposals similar to the terms of the contract have heretofore been made to the Government by British and French creditors, it is believed that Mr. Keith will be able to carry it out successfully. In such event, the agricultural and commercial interests of the country will be greatly benefited.
The object of the Government is the completion, at any cost, of the 30 miles of railway, which will bring the capital and the most productive [Page 64] districts of the country into rapid communication with the Atlantic. Its realization cannot fail to contribute to the development of our commercial relations with that Republic.
I have, &c.,
Contract between Mr. Minor C. Keith and the Government of Costa Rica.
Guatemala, August 8, 1883.
The constitutional Congress of the Republic of Costa Rica decrees:
Sole Article. Approves and satisfies in every respect the contract for the arrangement of the external debt of Costa Rica, and the conclusion of the railroad to the Atlantic, celebrated between Licentiate Don Bernardo Soto, secretary of state, in the departments of finance, commerce, and industry of the Republic of Costa Rica duly authorized on the one part, and Mr. Minor Cooper Keith y Meiggs, citizen of the United States of North America, on the other part, in the city of San José, capital of the Republic, the 13th day of the present month, which, with the modifications, suppressions, and additions agreed to by Congress, reads literally as follows:
Bernardo Soto, secretary of state in the departments of industry, finance, and commerce, duly authorized by his excellency the President of the Republic of Cost a Rica on the one part, and Minor Cooper Keith y Meiggs, of full age, bachelor, contractor, citizen of the United States of North America and inhabitant of this capital, or the company that he shall legally form, on the other part, have agreed in celebrating the following contract for the arrangement of the external debt of Costa Rica and the conclusion of the railroad to the Atlantic.
1.
Keith, on his own, or on the behalf of the company which he may legally organize, and which in the future will be styled “the company,” engages to arrange the debt of the Government of Costa Rica, proceeding from the loans contracted in London by the representatives of said Government, namely, that of 6 per cent, first issue of May 8, 1871, and second issue of October 2, 1871, and that of 7 per cent, of May 2, 1872, reducing the rate of interest 2½ per cent per annum.
2.
In order to proceed to this arrangement with the creditors, a tribunal of arbitrators, composed of six individuals, shall be previously organized in London or other place, of whom three shall be named by the Government of Costa Rica, and three by the actual creditors or their legal representatives, and in case of equality of vote or disagreement, the tribunal shall name a third party, who shall decide the point or points in question; but if they be not agreed as to the nomination of the third party, he shall be drawn for by lots—out of four individuals named—two by those who form the tribunal on the part of the Government of Costa Rica, and two by those on the part of the creditors. This tribunal will have full and sufficient powers to decide the questions which may arise upon any one of the said credits, whether proceeding from the capital or tribunal, will occupy itself in the first place in qualifying the legitmacy of the different credits that appear against the Government of Costa Rica, proceeding from the debt, and to liquidate the capital, and interests, which is shown to the debit of said Government.
3.
Once the capital and interests of the debt are liquidated at 2½ per cent. per annum by the tribunal of arbitrators, the Government of Costa Rica, through the medium of an agent duly authorized, shall issue new bonds at the same rate of 2½ per cent, interest per annum, for the conversion of the old bonds of 6 and 7 per cent. It is understood that the interests on the capital shall be reckoned from the date on which they left off paying until the 1st of January, 1888. For the payment of the interests on the new bonds, the Government will recognize 12½ per cent. exchange.
4.
The Government of Costa Rica, through the medium of its agent, will also issue bonds of 2½ per cent., and at 50 per cent. of their nominal value, to pay the expenses [Page 65] which the conversion of the debt will demand, and for the payment of the amounts which, with their respective interests, claim the houses of Erlanger & Co., Knowles & Foster, and the council of foreign bondholders, proceeding from the sums advanced in cash to the Government of Costa Rica, with which the nation will recover, more or less, £1,000,000 in bonds, which said houses preserve as guarantee of their respective credits. It is understood that the legitimacy and amount of these debts should be known and adjudged by the tribunal of arbitrators.
5.
The form and redaction of the new bonds of 2½ per cent. before issuing shall be approved by the tribunal and the bonds authenticated with its seal and signed by the agent of the Government.
6.
The new bonds and their interests will he paid exclusively with the net proceeds of the customs duties of the Republic, and will not have any other guarantee or mortgage but the net proceeds of said customs duties. By the fact of the conversion of the debt, the mortgages which the Government of Costa Rica created as guarantee for the loans of 6 and 7 per cent., before referred to, are canceled; but as at present the proceeds of customs duties are applied to the amortization of the interior debt of the Government, the payment of the interests on the converted bonds will not commence till after the amortization of said debt.
The interest on the bonds, which should commence to be paid from the 1st of January, 1888, and forward, and should not be paid by reason of the interior debt not having been extinguished by that date, as also the interests which in part should be unpaid, because for full payment of same the net proceeds of the customs duties are not sufficient, shall be paid for successively in the following years, without, in either of the two cases mentioned, the capitalization of the interests unpaid.
7.
The Government of Costa Rica agrees not to burden at any time the new bonds of 2½ per cent., and further engages not to introduce modifications in the actual tariff of customs duties in such a way as to prejudice the mortgage created in favor of said bonds.
8.
In payment of the interests of the new bonds of 2½ per cent. the Government of Costa Rica will issue at the beginning of each year, commencing with the 1st of January, 1888, notes which will be called customs notes, for the total amount of the interests of each year. Said notes will be accepted in payment of the total amount of duties of imports and exports, and delivered to an agent of the company for sale. Payment of duties will not be received in money, or in any other manner, whilst the customs notes delivered to said agent are not realized, who in no case can demand a premium nor any commission for the sale of them.
9.
Ten years after having commenced the payment of the interests, the Government will add to the interest of 2½ per cent., which the new bonds receive, 1 per cent. per annum, calculated upon the capital, and destined to the amortization of same. The 1 per cent. before mentioned will also be paid from the net proceeds of the customs and guaranteed by the same.
10.
The payment of the exterior debt thus arranged, and with a view of finishing the railroad and supplying it with everything necessary, the company shall raise a sufficient capital, by means of bonds or in any other manner, which capital shall not exceed $6,000,000 in Costa Rica money, giving in mortgage for it the property acquired by virtue of this contract. The issue of these bonds shall hot be at less than 85 per cent., nor at a higher interest than 7 per cent. per annum, and their proceeds shall be deposited in the banking house which effects the loan. Said house will continue paying to the contractor or to the person or persons who undertake the construction of the railroad, according as the work proceeds, which will be verified by certificates issued by the engineer of the Government of Costa Rica and that of the company. The Government of Costa Rica takes no responsibility whatever for the capital which [Page 66] shall he raised by virtue of this clause, nor in the operations concerning it, and the interest shall he paid by the company from the proceeds of the railroad. From these proceeds so much per cent. shall be fixed by the subscribers towards the amortization of the capital.
11.
With the capital to which the foregoing clause alludes, the company will construct a railroad, which, leaving the borders of the river Reventazon on the Atlantic railroad, passes along the valley of the same river and ends in the city of Cartago. The grades of this line shall not exceed 3 per cent. in the tangent nor 20 degrees in the curves, and the materials used in said work shall be as good as the best used in the construction of the line from Limon to the town of Carrillo (before river Sucio).
12.
The capital of the new loan shall also be applied to repairs, improvements and preservation of the railroad between Limon and Carrillo, and between Cartago and Alajuela; the construction of the wharf, warehouses, stations and other necessary buildings for the service of the railroad, also for the purchase of permanent as well as rolling stock, and the complete furnishing of all the railroad, so as to render it fit for commercial traffic. The company engages, further, to transfer the station of Alajuela to a point not further than two hundred yards distant from the principal square of the same city.
13.
The company obliges itself to preserve in perfect state the line constructed between port Limon and the town of Carrillo, and to maintain a regular traffic, with the necessary trains, running between those two points at least every other day during the time of the concession to which the present contract refers; also engages to alter and preserve in a good, serviceable state the central line of railroad from the time it is delivered up, as expressed later on, and for the term of this concession. The company promises equally to preserve in a serviceable state for all the term of the concession the railroad between Reventazon and the city of Cartago, with the necessary trains running for conveyance between the city of Alajuela and Port Limon once a day during the first six months of the year, and at least every other day during the remaining months. On the central division of the railroad, trains shall run twice a day between San José and the cities of Alajuela and Cartago.
14.
The company engages to construct and keep in good repair the wharf, or necessary wharves, in the port of Limon, for which it can make a small charge to snips who come alongside of them; but the wharfage duty belongs to the Government, who will begin, receiving same as soon as the railroad works commence.
15.
The company may not charge more than $20, Costa Rican currency, per Spanish tons weight or measurement for the conveyance of merchandise imported or exported, whether from Limon to Cartago or to Alajuela, and intermediate points between these two cities, and vice versa. The local freight shall not exceed 20 cents per ton per mile. The company is obliged to carry merchandise mentioned in the clause in the order of preference of time in which they arrive at the railway stations.
16.
The company cannot charge more than 20 cents, Costa Rican currency, for each bunch of plantains for exportation, at whatever point of the line they may be received, nor more than $8, also Costa Rican currency, for conveyance to Port Limon for each ton of fruits, roots, vegetables, and woods; neither can it charge more than $5 for each horse or mule kind, $2,50 for each bullock or cow, and $1.25 for each sheep or smaller cattle.
17.
The company cannot charge more than 8 cents per mile for first, and 6 cents for second-class passengers. Children will pay half-fare, and those under two years shall ride free.
[Page 67]18.
The company agrees to carry free the diplomatic legations accredited to the Government of Costa Rica, and those of Costa Rica accredited to foreign Governments, to immigrants who come aided by the Government or companies authorized by same, their luggage and effects, the Government mails, troops, munition and garrison in relief. Government officials in commission will pay half-fare and the transport of effects or merchandise for account of the Government will be allowed a reduction of twenty-five cents on the tariff. The company will place especial trains at the service of the Government in urgent cases, whenever deemed so, on paying $50 for the cost of the whole journey. The company will have also a railway carriage styled “official” for the exclusive use of the President of the Republic, his secretaries of state, and other high functionaries. The company shall place on all the lines of telegraph established, or which maybe in future established, a special wire for the exclusive use of the Government, the keeping of which in good working order being for account of the company, and in cases of necessity the said company will transmit free of charge, by its own lines, the official messages of the Governments.
19.
The company engages to arrange the exterior debt, and to obtain the capital referred to in tip present contract within eighteen months from the ratification o this contract, to commence the construction of the railroad six months afterwards and to finish it in three years from the time the work is commenced. At the end of eighteen months, should the company not have have obtained the arrangement of the debt and capital, this contract shall be null and void, without attaching any responsibility to the contracting parties; it being understood that the Government in no case contributes to expenses of any kind which Mr. Keith may incur, the same being paid by him.
20.
The company which may be formed for the construction of the railroad shall be named “Costa Rican Railway Company,” with its domicile in the place where it is incorporated, and shall have a general agent resident in the Republic, with full powers to treat on all matters which may arise concerning it, and in the event of applying to the law, it shall be to the tribunals of the Republic of Costa Rica, and the questions raised shall be solved in conformity with the legislation of the country.
21.
The Government of Costa Rica grants to the company for the term of ninety-nine years, in full right the lines of railway constructed between Limon and Carrillo, between Cartago and Alajuela and that which is to be constructed between Cartago and the present bridge of the Reventazon, on the Atlantic Railroad, including the telegraphic lines, movable goods, buildings, with the lands on which they are built, and all the accessories which are to-day considered in the service of the railroad, or which in future may be constructed with the same object. From the moment the company commences working the section of railroad which is to be built, the lines already connected with their dependencies will be delivered up. The ninety-nine years referred to in this clause to commence from the time that the railroad between Reventazon and Cartago is in working order.
22.
The Government concedes to the company 800,000 acres of uncultivated lands, either on the borders of the railroad, or in whatever other part of the territory, at the company’s choice, with all the material wealth they may contain, as also the land for the construction of the railway and the necessary buildings, and all kinds of materials that may be necessary for the said work and which may be found on the; uncultivated lands in the whole extension of the railroad, besides two lots of those already measured of national property in the port of Limon, in order to build wharves, warehouses, and stations; all without any indemnification whatever. The measuring and all preliminary works for the division and distribution of the 800,000 acres of lands shall be for account of the company, the Government only extending free of all cost the titles of the property when necessary. The Government cannot establish territorial imposts upon said lands during twenty years; the lands which shall not have been cultivated or in any other manner used shall return to the possession of the Government without said Government making any indemnification whatever.
[Page 68]23.
The company can introduce free of customs duties permanent and rolling stock, and material for use in the construction, working, and preservation of the railroad.
24.
The company may freely transfer its rights to any person or company; but in no case can this contract be transferred to any foreign Government.
25.
If it should suit the Government to extend or prolong in any direction whatever the lines of railway already conceded, it can do so for its own account; but should the Government prefer to make concessions or contracts for it with any person or private company, the company shall have the preference on equal terms.
26.
The company shall have the entire management of the railroad and concession of lands; notwithstanding, the Government reserves to itself the right of inspecting the books and operations of the company.
27.
Free of all charge and without any indemnification whatever on the part of the Government, at the conclusion of the ninety-nine years, the lands which may not have been sold, with all the rights that the company may have in them; as also the railroad with all its branches, permanent and rolling stock, telegraph lines, and all their accessories, will return into the possession of the Government, all of which shall be in good order, since it is understood that after the ninety-nine years the company will not retain in the country, neither by reason of the railroad or grant of lands, any right proceeding from this contract. To this end the Government, ten years before the expiration of the ninety-nine years’ concession, will have a right to make a formal inspection of the line, its annexes, furniture, and material, and to exact of the company, if necessary, the repairs of all which may not be considered in good order for continuing the working of the railroad.
28.
The Government to receive from the company one-third of the ordinary paid-up shares, and for them shall have the right to one-third share of the dividends of the railroad. It will also have a right to one-half of the net proceeds of the cultivated or used lands, whether sold or let by the company during the term of concession of the railway.
29.
With respect to the dates mentioned in the present contract for commencing and concluding the railroad, should the company fail to comply with it as agreed, it shall pay, by way of a fine, $5,000 for the first month behind time, $10,000 for the second, and $20,000 for each successive month; unless said failure to comply were caused by superior force or by unforeseen circumstances.
30.
The railroad from Carrillo to Limon being actually rented to Mr. Minor C. Keith, and the Government being under the obligation to pay him for the various improvements that have been made, and may make on said line, and for the new materials and machine acquired for its equipment, as also the cost of the wharf in Limon; in case the time it is rented for should not arise at its conclusion it is understood that said renting being at an end by virtue of this contract, the amount which the Government should have to pay to said Mr. Keith for the aforementioned outlays shall be for the account of the company, taking into account the concession that the Government makes in all the lines, with its improvements and dependencies. The arrangement in this clause will be of no effect unless the contract is carried through.
31.
Whatever question may arise as to the interpretation of this contract, in respect to its execution and fulfillment, shall be decided without appeal by a tribunal of arbitrators and friendly umpires, composed of four individuals, two named by each party, and a third in case of dispute, who will be drawn by lots out of four persons [Page 69] named in like manner. Said tribunals shall meet in San José, Costa Rica, without prejudice to that agreed in clause 20.
San José, July 13, 1883.
Approve the foregoing contract in every respect.
Signed by his excellency the President of the Republic.
To the Executive:
Given in the session hall of the national palace, in San José, the 18th of July, 1883
President.
Vicente C. Segreda,
First Secretary.
R. Chavarria,
First Pro. Secretary.
San José, Costa Rica, July 19, 1883.
Put into execution and authorize the honorable licentiate, Don Bernardo Soto, secretary of state in the departments of industry, finance, and commerce, to obtain from Mr. Minor Cooper Keith y Meiggs his consent to the modifications, suppressions, and additions agreed to by the most excellent Constitutional Congress to the preceding contract for the arrangement of the external debt of Costa Rica, and the conclusion of the railroad to the Atlantic.
The secretary of state in the departments of industry, finance, and commerce,
Present in the office of the undersigned secretary of state in the departments of in dustry, finance, and commerce, of the Government of Costa Rica, authorized the foregoing decree:
Mr. Minor Cooper Keith y Meiggs, citizen of the United States of North America, affirms that he accepts the modifications, suppressions, and additions agreed to by the most excellent constutional Congress to the contract which he signed the 13th of the present month of July for the arrangement of the external debt of Costa Rica and the conclusion of the railroad to the Atlantic. In faith of which we sign each one of the two copies in which are stipulated the said modifications, suppressions, and additions.
(No. 47.)
The constitutional Congress of the Republic of Costa Rica, decrees:
Sole Article. Clause No. 9 of the contract celebrated between the honorable secretary of state in the departments of finance, commerce, and industry, duly authorized, and Mr. Minor Cooper Keith y Meiggs, the 13th of the present month, for the arrangement of the external debt and the conclusion of the railroad to the Atlantic, should, be understood thus: “Ten years after having commenced payment of the interests, the Government shall add to the interest of 2½ per cent. which the new bonds carry, 1 per cent. per annum, calculated upon the whole capital destined to the amortization of same. The 1 per cent. before mentioned shall be also paid out of the net produce of the customs duties and guaranteed by the same.”
To the Executive:
Given in the session hall of the national palace, in San José, the 26th of July, 1883.
Vicente C. Segreda, Secretary.
R. Chavarria, First Pro. Secretary.
Put into execution.
The secretary of state in the departments of industry, commerce, and finance,