fact that in its present condition the statistics show better health conditions than you would think simply from looking at it.

Senator MORGAN. As I understand, both the reports that will be submitted to us very soon provide for getting out into the Bay of Limon by a direct cut, leaving Colon 5 miles off to the side.

Mr. SHONTS. Five miles off to the side. We took that into consideration in determining on our plan for sanatizing it, so as not to put any more money into it than would be necessary to make it reasonably healthy during the time that the canal was being constructed, if this change of location was adopted.

Senator MORGAN. The difference in the health rate between Colon and Panama is a very remarkable thing, is it not?

Mr. SHONTS. Yes. To look at the two places you would think that Colon would be a much unhealthier place; but it is not.

Senator MORGAN. Have you ever considered this proposition-that Colon is healthier than Panama, because it is surrounded by sea water and Panama is surrounded by mud, whenever the tide goes out?

Mr. SHONTS. The tide goes out, leaving the mud there.

Senator MORGAN. When the tide goes out it leaves a mile or two or three miles of mud exposed to the hot sun, and all the vegetation that is swept in from the Pacific Ocean-sometimes rotten fish, shell-fish, and everything of that kind is exposed there, and that produces a malaria there which is not produced in Colon, because it is surrounded by sea water.

(The committee thereupon went into executive session, at the close of which an adjournment was taken until to-morrow, Wednesday. January 31, 1906, at 2.30 o'clock p. m.

ISTHMIAN CANAL.

COMMITTEE ON INTEROCEANIC CANALS,

UNITED STATES SENATE, Washington, D. C., January 31, 1906.

The committee met at 2.30 o'clock, p. m., in executive session. Present: Senators Millard (chairman), Kittredge, Dryden, Knox, Ankeny, and Morgan.

At the conclusion of the executive session Mr. R. P. Schwerin appeared before the committee and was duly sworn.

The chairman being unable to remain for the session, Senator Kit tredge took the chair as acting chairman.

TESTIMONY OF R. P. SCHWERIN, ESQ., VICE-PRESIDENT AND GENERAL MANAGER OF THE PACIFIC MAIL STEAMSHIP COMPANY.

The ACTING CHAIRMAN. State your name.

Mr. SCHWERIN. R. P. Schwerin.

The ACTING CHAIRMAN. Where do you live?
Mr. SCHWERIN. San Francisco.

The ACTING CHAIRMAN. What is your business?
Mr. SCHWERIN. Steamship operation.

The ACTING CHAIRMAN. How long have you been engaged in that business, and with what company or companies?

Mr. SCHWERIN. I have been vice-president and general manager of the Pacific Mail Steamship Company since 1893; I have been president of the Occidental and Oriental Steamship Company for six years; I have been vice-president and general manager of the San Francisco and Portland Steamship Company for more than a year, and vice-president and general manager of the Portland and Asiatic Steamship Company for a little more than a year.

The ACTING CHAIRMAN. How many years have you had experience in steamship business?

Mr. SCHWERIN. Since 1879.

The ACTING CHAIRMAN. I call your attention to a statement made by Mr. Secretary Taft on the 11th day of January, 1906, and read it

to you:

"Now, the Pacific Mail Steamship Company is running even worse. steamers than it ran before between Panama and San Francisco. The ports where it seems to make its money are the ports in Central America and Mexico, where it has agents who are really the factors for the coffee plantations and for the other products that are raised in those countries. These agents act as bankers for the planters and advance

them money, and in that way the company retains control of that business-charging. I have no personal knowledge about this, but if they pursue the policy that obtains in the Philippines they get most of the profit out of the crop.

"That is the business that is profitable to the steamship company, so when they get through business to San Francisco they are very slow and leisurely about taking it up. As a result these steamers, of very insufficient tonnage, have left (as Mr. Stevens told me yesterday or the day before) on the last four or five sailings with only a third of a cargo or with only half a cargo, leaving much more than a full cargo on the wharf at La Boca, where the steamers dock. We are therefore getting a glut of business as a result of the inactivity and the lack of desire on the part of the Pacific Mail Steamship Company to do that business, and the question which is presenting itself to us with a good deal of force is, What shall we do about it?"

I will ask you to state what the facts are regarding the situation and conditions at Panama which I have just called your attention to from the testimony of Secretary Taft.

Mr. SCHWERIN. In regard to that first portion that you read in relation to the Pacific Mail holding a certain influence over the coffee planters of Central America, by means of the device of acting as factors, I have to say that the Secretary has been misinformed on that, and he acknowledges that misinformation in a public letter to Congressman Littauer.

Senator DRYDEN. When was that letter published?

Mr. SCHWERIN. It was published in the Washington Post two days

ago.

Senator DRYDEN. Since his testimony here?

Mr. SCHWERIN. Yes; since his testimony here. I have a copy of it here.

(The letter referred to is as follows:)

"TAFT WITHDRAWS HIS PACIFIC MAIL CHARGE.

"Secretary Taft, in a letter to Representative Littauer, of the House Committee on Military Affairs, yesterday denied a statement he made at a recent hearing that the Pacific Mail Line was doing a banking business in Central America. The letter says:

"In my testimony before the subcommittee on deficiencies of the Appropriation Committee of the House, I made the statement that one of the reasons why another American line could not easily compete with the Pacific Mail Line in the business between Panama and San Francisco and intermediate ports was that the Pacific Mail Company had agents at the Central American and Mexican ports, and did, in a sense, a banking business or a factor business, furnishing capital to coffee and other planters to assist them in doing their business, and that this gave them a good will and a position of advantage which any other line would find great difficulty in wresting from them.

666

Though I did not intend to criticise the Pacific Mail for this method of business, it has been so construed in some of the newspapers of the western coast. I now have definite information that I have been misled in respect to the business of the Pacific Mail at Central American and Mexican ports, and that they do not do either a factor ɔr banking business at any of these ports, and never have.

"I am glad to withdraw this erroneous statement, which has been used to the prejudice of the Pacific Mail Line."

Generally, in regard to the balance of what the Secretary says, it appears to us that it is either a malicious statement tending to injure American interests, or else it is information upon which he was as ignorant as he was when he made the statement in regard to our acting as factor on the Central American coast and which he has now withdrawn.

The ACTING CHAIRMAN. What are the facts in regard to the conditions at Panama to which I have called your attention?

Mr. SCHWERIN. We are operating on the Pacific side nine regular steamers on a published itinerary which is approved in connection with the movement of the steamers with the Panama Railroad Company, operating on the Atlantic side. This itinerary has to be submitted to the Mexican Government and approved by them before we are permitted to operate in their ports, and is submitted to the approval of the Governments of Nicaragua, Costa Rico, and Honduras and accepted by them. The schedule is printed. It is rather a complicated schedule, and is drawn up to connect with the Panama Railroad Company's boats which leave New York, and which advertise us as their connections, sailing from Panama. It is absolutely essential that connection should be made at Panama with the Atlantic steamers in order that the passengers and freight and mail should be properly conducted across the Isthmus and delivered to the destination on the west coast.

We have been trying earnestly and with every endeavor on our part to fulfill our obligations to the port of Panama in receiving and deliving the freight as it should be received and delivered to our ports of call, but it has been absolutely impossible to perform this duty in a satisfactory way, and this, I am bound to say, is due either to culpable negligence on the part of the operating officers of the Panama Railroad or to total indifference on their part to their obligations as common carriers on the Isthmus of Panama.

The amount of cargo that has passed over that Isthmus for the last five or six years has run very close to 400,000 tons per annum, and that, over a link about 48 miles long, is quite a heavy tonnage.

At

Long before the Panama Railroad Company sold their interests to the Government, they had neglected to provide proper facilities, and there were difficulties between us in the days of our mutual contract, because they were very shy in cars and motive power. Really two years prior to the sale to the Government and the time the Government took over this property, the rolling stock and the power had run down to about as low an ebb as they could do the business with. the time the Government took over this property, the management of the railroad was passed into the hands of the Isthmian Commission, and along about the summer of 1904, while we were still operating with the Panama Railroad Company under our contract, things began to change from a regular, orderly system of handling freight from the Atlantic to the Pacific and from the Pacific to the Atlantic, over what might be called a rail bridge, and this began to give trouble, for, as a matter of fact, the whole route is really a steamship route, with this short railroad link in it.

Along in December the Panama Railroad people cut the wages of their employees at Ancon, working on the La Boca docks. That created trouble there, and the men who had been working on their

cranes-they had large electric cranes there on this pier-quit and left, and our labor generally follows the labor of the Panama Railroad Company. They work their gangs and we work ours. The result of that was that we are to day, after this trouble is all over, paying more wages than we did before, and so are they. That was the beginning of the congestion of freight at the Isthmus.

Then the statement went forth that the United States Government had purchased this property, and we were clearly given to understand that the United States Government had purchased this property for the purpose of using it to construct the canal, and that all commercial freight must take a secondary place to canal material. General Davis wanted to abolish the handling of commercial cargo entirely across the Isthmus. That was found impossible on account of the obligations which our Government assumed in the purchase of that property.

Senator MORGAN. Will you be kind enough to give a statement of what those obligations were that our Government assumed at that time?

Mr. SCHWERIN. As I understand them, Senator, the obligations were that the Isthmian route had to be kept open, under the Panama Railroad Company's franchise from the Colombian Government, as a highway for traffic.

Senator MORGAN. Was that an obligation entered into with the Panama Railroad Company or with the Panama Canal Company?

Mr. SCHWERIN. The Panama Canal Commission purchased the railroad company, and with it, as I understood, all their obligations-all the obligations under which the railroad company's franchise had originally been granted.

Senator MORGAN. Is there any paper in which these obligations are stated or expressed?

Mr. SCHWERIN. I have never seen it, sir. That has been standing.

my under

Senator MORGAN. Have you ever heard of a contract with the Government of the United States by which the Government assumes obligations in regard to the transmission of freight across the Isthmus by rail?

Mr. SCHWERIN. No, sir; but I have understood the obligations by which the franchise of the Panama Railroad was granted to New York gentlemen obligated that railroad to be kept open as a means of communication between the Atlantic and the Pacific.

Senator MORGAN. I am not aware of any contract between the Government and the Panama Canal Company, which owns the railroad and from whom we bought the stock, that they would do any particular thing with that property after they got it.

Senator DRYDEN. Do you mean that that was an obligation in their original charter?

Mr. SCHWERIN. Yes, sir.

Senator DRYDEN. And your contention is that the Government, in taking over that property, assumed the obligation which the private corporation was under?

Mr. SCHWERIN. Yes, sir.

Senator KNOX. The Government only took the stock. There has been no change in the corporate existence. You mean that it was a common carrier and had to continue to be a common carrier?

Mr. SCHWERIN. Yes; no matter who held the ownership.