Argentine navy, whereupon Argentina, not to be outdone, contracted for two war ships larger in size and perhaps more formidable at a like heavy cost in order to continue and maintain her naval superiority. The costly expenditures incurred on account of war and naval preparations is paralyzing industrial activity and commercial enterprise. Both countries are largely in debt and confronted with a deficit. Both have appropriated their conversion funds which had been set apart for a specific purpose, and which, it would seem, should have been preserved inviolable. Neither is able to make a foreign loan without paying a high rate of interest and giving guarantees to meet the additional expenses which their war policy is incurring, and both Governments know and their people know that the only remedy to which either can resort to meet existing financial conditions is to levy fresh taxes of some description, notwithstanding nearly everything that can be taxed is now taxed to the utmost limit. The weight of taxation already imposed bears heavily upon the energies and activities of the people. The outlook is not promising, business being dull, wage employment scarce, and failures frequent. With this condition of affairs confronting them, Argentina and Chile fully realize that their war policy is fraught with ruinous consequences to their credit, their Governments, and their people, and that the dictates of wisdom and common sense demand that some means should be devised of stopping costly expenditures.

In Chile as in Argentina, the British people own large and valuable property interests of various descriptions, much larger in the latter than in the former. * * * and they are anxious, even eager, to have a peaceful solution of pending difficulties, believing that its effect would be to relieve business depression and improve the financial condition of both countries.

Looking at this condition of things, it would be reasonable to suppose that Argentina and Chile would be in a favorable state of mind to listen to any suggestions having for their object the curtailment of expenses and leading to a better and more friendly understanding. The purchase of the two war ships by Chile, involving a heavy expense, was certain to be followed by a like increase in the naval force of Argentina, and this circumstance, in connection with those to which I have referred, seems to have led to the suggestion that the best way to stop further expenditures was for both countries to agree upon a mutual limitation of armaments.

It is supposed that the Chilean Government hinted to Mr. Lowther, the British minister at Santiago, that it would view with pleasure his intervention in favor of disarmament. Mr. Lowther, by letter, communicated this information to Sir William Barrington, the British minister in Buenos Aires, who at once tendered his good offices to the Argentine Government with a proposition for disarmament, embodying, it is said, the canceling of orders for the ironclads which the Argentine Government then had under consideration. It is understood that the Argentine Government refused to entertain this proposition. And, at this stage of the negotiations, it is also understood that the British Government had absolutely nothing to do with the proposition. These events occurred sometime between the 15th and 30th of April. In the meantime Mr. Concha, the Chilean minister, who had been on a leave of absence, returned to Buenos Aires and immediately placed himself in communication with the Argentine

Government and, as I understand, offered a proposition more restricted in its terms and to the effect that no further armaments should be made, and that the two countries should restrict themselves to those already ordered. At this time the Chilean Government had already ordered two ironclads, and it is supposed that, if the Argentine Government should accept the proposition to make no further armaments, Chile would have equal, if not greater, naval strength than Argentina. If this supposition is true, the Chilean Government was under a wrong impression, for the Argentine Government had already ordered the construction of two ironclads which would continue her naval

supremacy.

About this time General Mitre, who now stands high in the councils of the Argentine Government, wrote an article for La Nación, an influential newspaper, edited by his son, taking the ground that the Argentine Government should not interfere in Pacific coast troubles. This article exerted a great deal of influence, but considerable opposition was expressed to its views, as a lively feeling of sympathy has always existed here in favor of Peru and Bolivia since their war with Chile. The Mercurio, of Santiago, noticing this article, stated in substance that, if it should be the policy of the Argentine Government not to interfere in the affairs of the Pacific, it would open the road to good feelings and be a guaranty to better relations between both countries. The Chilean Government has always maintained that the Argentine Government should not meddle in the affairs of the West coast.

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*

Referring now to the negotiations pending, after the proposition for a limitation of armaments had been initiated as above mentioned, the British Government tendered its friendly mediation, and the negotiations since have been conducted by its respective ministers under its auspices, as appears in the Presidential message.

These are the facts and circumstances, as far as I am able to gather them, leading to the initiation and connected with the progress of these negotiations, which have been conducted with much reserve, rendering their ascertainment difficult. The result of such neotiations, which were temporarily interrupted by the death of Dr. Alcorta, are now awaited with much interest and curiosity.

The financial portion of the message fully sets forth all matters connected with the debt revenue, etc., and is decidedly optimistic in tone. The President evidently does not share the fears entertained by the people with reference to the financial condition of the country. This portion of the message has attracted a good deal of attention and provoked some criticism as to its statement. The President refers to the steps being taken toward the settlement of the boundary question, to the policy of the Government in favor of arbitration, and also refers in complimentary terms to the army and navy, and states that the ministry of agriculture intends to forward colonization and settlement of the country. Outside of the financial statement, there is nothing of particular importance in the message. The President has evidently held in reserve much that he would have more fully and definitely stated if the delivery of his message had come later.

As the message was so meager in its reference to the negotiations now pending for limitation of armaments, I concluded that it might be of interest to detail the facts and circumstances as I understand them. I have the honor to be, etc.,

WM. P. LORD.

Senators and Deputies:

[Inclosure. From the Standard, May 9, 1902.]

Extracts from the President's message.

I come to open your ordinary session under the sorrowful impression caused by the unexpected death of Dr. Amancio Alcorta, minister of foreign affairs, whose disappearance from among us has profoundly afflicted the whole country, which loses in him one of its noblest, most constant, and most disinterested servants.

The Republic is at peace with all sovereign states. The boundary questions have been already settled, or are in the way of being so, in the regular course established for the purpose in the respective conventions.

In order to draw closer our relations with the civilized world, and especially with the countries of America, we have celebrated several arbitration treaties which will, in due course, be submitted to you for consideration; and we have assisted at the second international congress, held in Mexico, all the States of the continent being there represented, and where the delegates of this country faithfully represented our international policy.

We have, in fact, a foreign policy sanctioned by a long tradition, in accordance with which we have invariably sought, either by direct agreement or by arbitration, a friendly settlement of all our differences and this policy has never been altered, even by the extreme exigencies of war or victory.

This invariable course of conduct should also have its influence in the pacific termination of all other differences, although they may arise from incidents or complications which, by arousing national sentiment and awakening natural distrust, force us to increase our military strength, as has happened on several occasions, putting the patriotism and vigor of the country to the test. No state has a right to consider this course in the light of hostility or offense, as it is simply dictated by selfdefense, considering the precedents on record, our respect for the independence of others, and the sentiments of justice and international fraternity which we have always endeavored to diffuse in this part of America.

We can thus consider at an end the last boundary question which we had with Chile, which was submitted by both sides to His Britannic Majesty for arbitration. A distinguished expert sent by him is now surveying the territory in dispute, and his report will precede the award on this last territorial question bequeathed to us by the colonial régime.

The just expectations of the two peoples directly interested in this long boundary dispute and those of the nations that have large commercial interests at stake in them will be sorely defrauded if, once the award is given, all distrust and uncer-" tainty do not vanish, and we can not have full enjoyment of the benefits of peace, thus reestablishing between the two countries the cordial and frank relations that should never be interrupted.

FINANCE.

The financial situation at the beginning of the presidential period toward the end of 1898 was difficult and complicated. At that time Congress passed a law authorizing the Executive to contract a loan of $30,000,000 gold, guaranteed by the proceeds of the alcohol tax and without specified limits of interest and amortization, voting a lump sum of $4,000,000 gold per annum to cover the service. The product of the loan was to cancel the floating debt.

The loan, however, was not carried through because the proposals did not satisfy the Government. Meantime, as it was indispensable to meet heavy obligations, a plan of unification of the public debt was laid before Congress, but I deemed it advisable to withdraw it, even after the sanction of the Senate had been obtained, in view of the opposition on the part of the public.

This plan having been replaced by the projects submitted to and approved of by you in the same year, the Executive has availed itself discreetly of the resources which accrued, thereby vanquishing the difficulties and attending to obligations which had their origin either in the past or proceeded from extraordinary circumstances. In order to appreciate with exactitude the actual situation it is necessary to consider the difficulties with which it was surrounded.

The revenue has been greater than in other years and greater than the estimates. The latter, according to the budget, were calculated at $62,300,000 paper and $37,991,718 gold, whereas the revenue returns were $62,341,306 paper and $38,244,638 gold, giving a surplus of $600,000 paper over the estimates and of $850,000 paper over the revenue of 1900.

The gold revenue for years past has shown almost a constant increase, but the paper revenue has fluctuated. The latter in 1897 stood at $61,000,000, dropped to

$50,000,000 in 1898, only to expand again to $61,420,000 in 1899, which figure has been exceeded in the last two years.

The budget fixed the expenditure for 1901 at $92,466,605 paper and $26,025,175 gold, and the expenditure effected was $23,835,847 gold and $91,160,225 paper. The surplus of gold revenue over the gold expenditure was sufficient to cover the deficit in paper and leave a net surplus revenue of about $4,000,000 paper.

By decrees of the Executive $380,327 paper was spent on post-office and telegraph service and on the Sociedad de Beneficencia de la Capital.

In the finance report you will find other data relating to sums paid in virtue of special laws.

The home consolidated debt on December 31, 1901, stood at $89,610,983 paper and $17,863,000 gold. But in the paper debt is included $8,200,000, served by the National Bank ($7,000,000) and by the province of Tucuman ($1,200,000). The gold debt is almost purely nominal, comprising $12,698,400 of the free banks law, which, held by the Banco Nacional, return neither interest nor amortization. As the Banco Nacional in liquidation is debtor of the National Government to a much larger amount, the Government can withdraw and burn these bonds, and it is advisable that this be done. In the gold debt also figures $1,514,500, served by the National Mortgage Bank.

It is shown, therefore, that the home debt of the nation really amounts to $81,410,983 paper and $3,268,000 gold.

The amortization effected during the year amounted to $7,689,500 paper and $74,500 gold, but as some bonds were emitted corresponding to withdrawal of national-bank shares and consolidation of floating debt, the reduction really on the year only amounts to $3,853,000 paper and $74,500 gold.

The foreign debt apparently on December 31, 1901, stood at $386,451,295 gold. In reality it is much smaller. In the above sum is included $46,487,468 gold. of which the service is paid by the provinces of Buenos Ayres and Santa Fe and by the Banco Nacional. Furthermore there is included $29,858,371 gold in bonds, the property of the nation. Besides this the provinces of Cordoba and Entre Rios contribute with the amounts specified by the budget to the service of their debts.

Discarding, therefore, these partial amounts which do not properly constitute a debt or national burden, it can be said that the total foreign debt of the nation is in round figures $300,000,000, which will be constantly reduced by regular amortization. The Executive has spared no effort to prepare and assure better credit for the nation, neglecting no economy which could be conciliated with proper administration and the exigencies of military organization. The service of our public debt has been most punctually attended to and will be continued as one of the most sacred compromises of the country. There are certain extraordinary items of expenditure which will require extraordinary appropriations, and the minister of finance will in due course lay before you the projects which have been prepared to this end. Every plan in this respect must be based upon the reduction, to utmost possible extent, of our ordinary expenditure. Our rule should be to suppress what is not necessary, to reduce even what is useful, and postpone what is not urgent and indispensable until the pressing difficulties of the moment pass.

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COMMERCE.

Every day sees our commercial and industrial action extending, in spite of various calamities. Our production in all its branches is increasing considerably and the sources of public wealth are intact. The balance of our commercial and industrial movement is always favorable. Our imports and exports in 1900 totaled $268,000,000 gold, and in 1901 they were $281,675,000 gold-say a round increase of $14,000,000 gold. In 1900 our exports were $41,000,000 more than our imports, and last year the difference was $53,700,000. Our exports in 1900 amounted to $154,600,000. year they were $167,700,000, an increase of $13,000,000.

Last

In the $167,700,000 are included our estancia products, more than $90,000,000— that is, $20,000,000 more than in the preceding year. And this increase is all the more remarkable since the exportation of live stock was necessarily reduced in consequence of the closing of British ports. On the other hand, frozen and preserved meat exports rose and the export of wool shows an increase of $16,675,000 gold over the figures of the preceding year.

The decrease in agricultural products is insignificant when compared with these figures. It is only $5,800,000.

If our wheat exports show a considerable falling off, the exportation of other grain shows an increase that almost makes up for the falling off in question. Our total agricultural exports were $71,596,000.

FR 1902, PT 1- -2

The returns for the first quarter of this year are not less favorable. Our exports and imports total $84,296,000, our exports being $29,000,000 more than our imports. In 1901 the surplus for the same period was not more than $17,000,000. It is noticeable, in this first period of the year, that our cattle products more than make up for the passing falling off in our agricultural products, and principally wheat, owing to the bad harvests in Cordoba, Santa Fe, and Entre Rios. Notwithstanding, there has been a very perceptible improvement in the value of other agricultural products, particularly linseed.

Our inland, fluvial, and coasting trade shows a healthy increase. In 1900 it was $50,221,000 gold. Last year this figure was $64,621,000 gold. The increase of our trade with the South is deserving of special notice, for this trade was in 1901 $4,160,000; that is, double the figures of the preceding year.

All these figures go to prove that the country possesses in its sources of expansion and development ample means to overcome those unavoidable crises to which young nations are exposed owing to their overconfidence in the vigor of their force and natural riches.

Of late years the Republic has been put to the severest tests in economic and financial matters and in affairs of an international character, and it has dominated them all or is doing so with prudence and energy.

The nation now rests on firm foundations and is easily recovering from the profound crises through which it passed, having acquired in them painful but useful experience for the future, for there is no evil nor public misfortune that does not teach an advantageous lesson. It was thought that the Argentine people had given itself up exclusively to commercial speculation, to the desire of lucre and gain, and that it had become enervated in those noble moral faculties that constitute the soul of a nation, but the threat or suspicion of a danger from abroad was sufficient to rouse it and to make it reveal all the energy and military strength which it is capable of displaying.

The economy of the country has not suffered from the great efforts made to acquire the armaments demanded by the circumstances.

Happily, it appears that a better and more cordial understanding will be established in our relations with the Chilean Republic, negotiations having been opened in Santiago through the friendly mediation of the British Government for the rational limitation of the armaments which are pressing on both countries with great prejudice to their credit and well-being.

The vigor of a people can be best appreciated in difficult moments, and as we have never weakened or retroceded in adverse circumstances, we ought to have more confidence than ever in the future destinies of the Republic.

With this conviction, and invoking the favors of Divine Providence for your deliberations, I declare open the legislative period of 1902.

SIR: I have the honor to inclose herewith, in copy and translation, the texts of the peace agreements entered into and signed at Santiago on the 28th ultimo by the representatives of Chile and the Argentine Republic. These documents are four in number, namely:

1. A political convention declaring the international policy of the two Republics;

2. A treaty of general arbitration;

3. An agreement for the reduction of naval forces; and

4. An arrangement for having the boundary line between the two